Budget

Debating the Chained CPI

Flickr/The Survivor Woman/401(K)

Yesterday, I posted a piece that questioned the political and policy wisdom of President Obama’s latest offer for a budget deal. My qualms were vindicated when Speaker Boehner, rather than taking the widely leaked “progress” as a new common ground, went back to his starting point and offered his own “Plan B”. This left President Obama in just the position that he vowed that he’d be in again—“negotiating against himself.”

While You Weren’t Looking, Michigan Turned Into Texas

Flickr/CedarBendDrive

The Michigan legislature’s lame duck session is only three weeks long, but the state house didn't need more than 18 hours to move the state sharply to the right. During a marathon session Thursday and Friday, the state house passed a variety of very conservative bills on issues from abortion to gun control to taxes. You can’t say they’re not efficient. The state, which favored Obama by 9 points and has long been home to a moderate-progressive movement, may now have a set of laws that puts it on America’s more conservative end.

The Strange Republican Shift on Taxes

Flickr/401(K) 2012

There's been an odd change in Republican rhetoric in the last few weeks about taxes. As we all know, for a couple of decades now, particularly since George H.W. Bush went back on his "Read my lips" promise and agreed to a tax increase to bring down the deficit, Republicans have been uncompromising and dogmatic that taxes must never be raised in any form, ever. That's part of the pledge Grover Norquist has made nearly all of them sign—not just that rates should only ratchet down, but also that they will "oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates." With the bitter taste of defeat still lingering in their mouths, many have realized that there is going to be some increase in the wealthy's taxes. But to hear them talk now, you'd think that they don't much care how much people pay in taxes, so long as the top marginal income rate doesn't go up. Here's Karl Rove writing in the Wall Street Journal, explaining President Obama's nefarious plan to divide them:

But the president is now less interested in raising revenues than in raising marginal tax rates on top earners. He apparently believes that Republicans, in a weakened state and defending an unpopular position, might buckle on a central GOP tenet, opposition to any increase in marginal rates. That might kick off a Republican civil war, resulting in divisive party primaries in 2014 that leave the president's opposition even more weakened and produce more subpar candidates like this year's Republican Senate candidates in Indiana and Missouri.

So the "central GOP tenet" isn't opposition to tax increases, it's "opposition to any increase in marginal rates." That's like a baseball manager saying the point isn't whether his defense keeps the other team from scoring runs, it's just that they won't stand for homers.

Why Republicans Won't Get Specific

This squirrel sees right through you, McConnell. (Flickr/Californian Em)

A few years ago, somebody (forgive me for forgetting who it was) suggested that newspapers should have a daily feature called "Things That Are Still True," which would remind readers of important facts that are still important even if they haven't generated news in the sense of being new. In that spirit, during the current budgetary debate it's a good time to remember what I think is one of the three or four most enduring and important facts about American politics and public opinion. Almost half a century ago, Lloyd Free and Hadley Cantril argued that Americans as a whole were ideologically conservative but operationally liberal, meaning that in broad terms they like "small government," but when one gets specific it turns out they like almost everything government does, and want it to do even more of it.

This fact explains practically everything about how the Republican and Democratic parties set about appealing to voters. Republicans talk in broad, ideological terms about small government and free enterprise, while Democrats talk in much more specific terms about programs, whether it's Medicare or Social security or education or what have you. The problem Republicans have is that if you're going to govern, eventually you have to get specific.

Why Does Obama Want to Spend $8 Trillion on Defense?

United States Air Force

Washington is in a fiscal panic, yet surprisingly few people are asking an obvious question: Why in the world is the Obama administration proposing to spend $8 trillion on security over the next decade? Included in that giant sum is not just Pentagon spending, but also outlays for intelligence, homeland security, foreign aid, and diplomacy abroad. 

If the administration gets its way, security spending would account for a fifth of all government outlays over the next decade. Such spending would be roughly twice as great as all non-mandatory spending through 2022—a category that includes everything from NASA to Pell Grants and national parks. 

Mitch McConnell Doesn't Understand What the Debt Ceiling Is

Flickr/Gage Skidmore

Now that Republicans have pretty much resigned themselves to the idea that there is going to be some kind of tax increase for the wealthy, they're comforting themselves with the idea that come early next year, they'll still be able to reenact the lovely conflict we had over the debt ceiling in 2011 and hold the American economy hostage to their demands. President Obama has quite sensibly said that we ought to just get rid of the debt ceiling itself, since it serves no purpose and allows a party to engage in just this kind of economic blackmail if it's desperate and cynical enough. So Republicans are pushing back, none more so than Senate Minority Leader Mitch McConnell. But in the process, McConnell has revealed that he has no idea how the debt ceiling actually works.

What Raising the Medicare Eligibility Age Means

President Johnson signing Medicare into law in 1965.

After a campaign in which Republicans attempted to pillory Barack Obama for finding $716 billion in savings from Medicare (via cuts in payments to insurance companies and providers but not cuts to benefits), those same Republicans now seem to be demanding that Obama agree to cuts in Medicare benefits as the price of saving the country from the Austerity Trap, aka fiscal cliff. Oh, the irony! You'd almost think that they weren't really the stalwart defenders of Medicare they pretended to be.

And there are some hints that the Obama administration is seriously considering agreeing to raise the Medicare eligibility age from 65 to 67 as part of this deal. It's a dreadful idea, and as we discuss this possibility, there's one really important thing to keep in mind: Medicare is the least expensive way to insure these people. Or anybody, for that matter. In all this talk of the bloated entitlement system, you'd be forgiven for thinking Medicare was some kind of inefficient, overpriced big government program. But the opposite is true, and that's why raising the eligibility age is such a dreadful idea.

Republicans, Exposed

(Flickr/David Silver)

President Barack Obama’s persistence has managed to smoke out House Speaker John Boehner and the Republicans. Their just-announced plan for cutting the deficit is what we suspected: cuts in Medicare and Social Security; no higher tax rates on the rich; limits on tax deductions that would hit the middle class as well as the wealthy, but only raise half the revenue of Obama’s plan; and a lot of fudging with numbers.

The Republicans might as well be parading around with a sign that reads “Kick Me.” None of this stuff solves the real problem of getting a recovery going. If you believe that deficit reduction is required, it doesn’t even solve that. And the plan cuts into social insurance programs that are hugely popular, while Obama defends them.

It's Time to Kill the Debt Ceiling

(AP Photo/CBS News, Chris Usher)

There are a number of strange aspects to the negotiation/maneuvering/posturing now taking place between the White House and congressional Republicans about the Austerity Trap (a.k.a. fiscal cliff), but one that hasn't gotten much attention is the disagreement over the debt ceiling. As part of their initial offer, the White House included something I and other people have been advocating for some time: Just get rid of the debt ceiling altogether. The Republicans, particularly in the House, don't seem to be interested. But we should take a good look at how crazy their position on this issue is.

In an ordinary negotiation, each side has things it wants, while it dislikes some or all of the things the other side wants. A union wants higher wages for its workers, while the company doesn't want to pay the higher wages. You'd rather have your partner do the laundry while you do the dishes, but your partner doesn't like doing the laundry either. The White House wants to increase taxes on the wealthy, which Republicans don't like, while Republicans want cuts to social programs, which the White House doesn't like.

But the debt ceiling is something entirely different. In this case, what Republicans want is the ability to plunge the country into a financial catastrophe, making life miserable for who knows how many Americans. That's what they want. Seriously.

Explaining the Mortgage Interest Deduction

Biltmore House, where the mortgage is probably paid off by now. (Flickr/Steve and Sara Emry)

Something strange has happened in the past few days as we have approached the Austerity Trap (aka "fiscal cliff"). Suddenly, people are actually talking about the possibility of cutting back on the home interest deduction, a "gift," as Mitt Romney might call it, that dwarfs most others the federal government distributes (among tax expenditures, only the deduction for health insurance costs the government more). I continue to believe that there's just no way Congress is going to touch the MID, cherished as it is by so many. But I could be wrong, and this is a good time to brush up on where the deduction came from and what its consequences are.

Grover's World

Flickr/Donkey Hotey

Washington is full of advocates and lobbyists, working in organizations both large and small. The ones that we think of as the most powerful, like the AARP or the U.S. Chamber of Commerce, are huge operations with armies of people swarming Capitol Hill and deluging reporters with press releases. Then there's Grover Norquist. One guy (actually a guy with an organization, Americans for Tax Reform), with one issue, who has done such a spectacular job of bending Washington to his will that he has become a national figure. In the upcoming Congress, there will be 234 Republicans, 219 of whom have signed The Pledge, the promise never to raise taxes. In the Senate there will be 45 Republicans, 39 of whom have signed. The Pledge (you can see it here; it's all of 60 words) commits its signatories not only to "oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses," but also to "oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates." While a few Republicans have come out in the last few weeks to say they will consider reneging on The Pledge as part of a deal to avoid the upcoming Austerity Trap, this debate is still constrained to an extraordinary degree by Norquist and the rules he has set.

What Do Republicans Want?

(AP Photo/Jacquelyn Martin, File)

As we head into negotiations on the Austerity Trap (better known by the inaccurate moniker "fiscal cliff," which I refuse to use), there's a clear narrative emerging. This narrative has it that Democrats want to see taxes increase on rich people, which Republicans aren't happy about, while Republicans want to see entitlement "reform," which Democrats aren't happy about. So once everybody gives a little, and Republicans accept some tax increases for the rich while Democrats accept some "reform" of Social Security and Medicare, then we can have a happy ending.

The problem with this is that while the Democrats' position is quite clear—the Bush tax cuts should expire for income over $250,000—the Republicans' position is extremely vague, on both the tax side and the entitlement side. Let's take taxes first. A bunch of Republicans are being praised for their willingness to violate Grover Norquist's pledge to Never Raise Taxes In Any Way Ever Never Ever. Yet they're remaining steadfast that tax rates must stay the same, while allowing that maybe we can trim some deductions for the wealthy. As Steve Benen points out, some are acting like these Republicans are being generous for essentially taking the position that they support Mitt Romney's tax plan. Perhaps they're assuming that the wealthy will be able to cleverly evade any limitation on deductions, so it won't make a difference to their primary constituency. But in any case, we haven't heard them take a specific position. Are they proposing a hard cap on all deductions? Eliminating certain deductions while keeping others? We don't yet know.

Then we get to the price Republicans are going to want to exact for any agreement to stop the Austerity Trap, and this is where they're really vague. They want "reform" of entitlements. And what is "reform," you ask? Well, nobody ever says...

The Time Is Right to Get Rid of the Debt Ceiling

A much more attractive ceiling. (Flick/Richard Carter)

Kevin Drum has written a very helpful explainer on everything you'd want to know about the fiscal cliff/curb/staircase/trap, and near the end he reminds us that the debt ceiling is going to come up again early next year. "However, an agreement to raise the debt ceiling will almost certainly be part of the negotiations surrounding the fiscal cliff." Which is good, but I'd like to suggest that Congress go a step further. Instead of raising the debt ceiling, meaning we'd have to revisit the issue again in a year, why don't they go ahead and eliminate it once and for all?

Get Out the Union Vote

(Flickr/Wisconsin AFL-CIO/Justin Geiger)

Despite setbacks in several states, the American labor movement came out a clear winner in Tuesday’s elections. Most important, they played a key role in ensuring the re-election of President Obama, and contributed significantly to Democratic Senate victories in hotly contested races in Massachusetts, Ohio, Wisconsin, and Virginia.

Who's to Blame for the "Fiscal Cliff" Misnomer?

Flickr/su-lin

Now that the election is over, the next big item on the government's agenda is dealing with two sets of changes that are scheduled to begin at the start of 2013. The first is changes to the tax code: the Bush income tax cuts will expire, bringing rates back to where they were during the Clinton years, and so will the payroll tax cuts enacted as part of the 2009 stimulus package and later extended. The second set of changes is the "sequester," under which a series of rather dramatic cuts to government spending will take place. Collectively, these events are being referred to by everybody as the "fiscal cliff," a term that is both misleading and dangerous. Which got me wondering: Where did it come from? And whose fault is it?

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