Budget

Pretty Words, Dismal Economics

AP Photo/ Evan Vucci
AP Photo/ Evan Vucci President Barack Obama at a pre-kindergarten classroom at College Heights Early Childhood Learning Center in Decatur, Georgia last week. The president is traveling to promote his economic and educational plan that he highlighted in his State of the Union address. B arack Obama’s State of the Union address last week—which called for, among other things, universal pre-K and raising the minimum wage—offered a bold program for rebuilding the middle class. But the president’s continuing commitment to budgetary austerity makes these commitments hollow, if not cynical. And just as Obama and the Democrats paid the price in the 2010 midterm election for excess caution and conciliation, the results of tokenism are not likely to be pretty in the midterms of 2014. Obama's plans for rebuilding the middle class will cost money. Universal pre-K alone would require upwards of $20 billion a year. Unless the president cynically imagines token “demonstration” programs, job training...

The Return of the Balanced Budget Amendment

Flickr/Gage Skidmore
S enate minority leader Mitch McConnell says Senate Republicans will unanimously support a balanced-budget amendment, to be unveiled Wednesday as the core of the GOP’s fiscal agenda. There’s no chance of passage so why are Republicans pushing it now? “Just because something may not pass doesn’t mean that the American people don’t expect us to stand up and be counted for the things that we believe in,” says McConnnell. The more honest explanation is that a fight over a balanced-budget amendment could get the GOP back on the same page—reuniting Republican government-haters with the Party’s fiscal conservatives. And it could change the subject away from social issues—women’s reproductive rights, immigration, gay marriage—that have split the Party and cost it many votes. It also gives the Party something to be for , in contrast to the upcoming fights in which its members will be voting against compromises to avoid the next fiscal cliff, continue funding the government, and raising the...

The President's Dream State

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak President Obama at last night's State of the Union address B y any measure, President Obama’s first term was consequential. In four years, he signed an $800 billion stimulus program into law, laid the foundation for universal health insurance, secured new regulations governing the financial sector, repealed "don't ask, don't tell," and put the United States on the path back to economic recovery. For his second term, he has an agenda that’s just as ambitious and—reflecting the coalition that re-elected him—unambiguously progressive. Other than a de rigeur nod to deficit reduction—he mentioned “the deficit” ten times—the speech ticked off a litany of liberal policies: Universal pre-school, a cap-and-trade system to limit carbon emissions, a higher federal minimum wage (set at 9$ an hour, the highest it’s been since 1981), and billions more in new infrastructure spending to repair roads and bridges. That’s to say nothing of comprehensive immigration reform (with...

Jobs and Growth, Not Deficit Reduction

Flickr/Andreas Klinke Johannsen
C an we just keep things in perspective? On Tuesday, the President asked Republicans to join him in finding more spending cuts and revenues before the next fiscal cliff whacks the economy at the end of the month. Yet that same day, the Congressional Budget Office projected that the federal budget deficit will drop to 5.3 percent of the nation’s total output by the end of this year. This is roughly half what the deficit was relative to the size of the economy in 2009. It’s about the same share of the economy as it was when Bill Clinton became president in 1992. The deficit wasn’t a problem then, and it’s not an immediate problem now. Yes, the deficit becomes larger later in the decade. But that’s mainly due to the last-ditch fiscal cliff deal in December. By extending the Bush tax cuts for all but the top 2 percent of Americans and repealing the alternative minimum tax, that deal increased budget deficits by about $3 trillion above what the budget office projected last August. The real...

The Austerity Lobby Loses One

Flickr/Michael Pollack
Flickr/Michael Pollack A conference sponsored by Fix the Debt in Washington, D.C. takes place in January 2012. T he fiscal deal that raised taxes on the top one percent was a victory only for what it did not do. It did not cut Social Security, Medicare, Medicaid, or other public spending. Unfortunately, it merely put off the next round of jousting over fiscal issues to a time when Republicans will have more leverage. In what we might call Cliff One (tax increases for the rich), the status quo played to President Obama’s advantage. If Congress failed to act, taxes would go up on everyone. So the Republicans caved. But in the coming battles over Cliff Two (the debt ceiling) and Cliff Three (the $120 billion in automatic cuts known as the Sequester) the status quo favors the Republicans. If Congress fails to act affirmatively, the United States defaults on its debt, and highly deflationary spending cuts kick in automatically. President Obama might dispatch Cliff Two by invoking the...

All Hail Wall Street

Flickr/Wally Gobetz, Emmanuel Huybrechts
Flickr/Emmanuel Huybrechts I f the debate around the fiscal cliff and, particularly, the still-impending sequester demonstrates anything, it’s that Richard Nixon’s one plunge into economic theory—“We’re all Keynesians now,” the former president once said—still holds. Everyone acknowledges that laying off hundreds of thousands of government employees, including 800,000 civilian Defense Department workers, and stopping payment to government contractors will, by definition, destroy jobs, at least until the payments resume. It’s still Republican orthodoxy, to be sure, to deny that government spending actually creates jobs, but even they acknowledge that the cessation of government spending destroys them. Which illustrates that the problem with contemporary Republicanism isn’t confined to their indifference to empiricism but also their indifference to logic. Reasoning—either deductive or inductive—is either beyond them, beneath them or above them. A second Republican talking point called...

Give Barry a Break

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak President Barack Obama winks as he arrives to make a statement regarding the passage of the fiscal-cliff bill in the Brady Press Briefing Room at the White House. W hen President Lincoln suspended habeas corpus in 1862 (a couple of times, actually), he conceded the possible unconstitutionality of what he had done but concluded that since the move was necessary in a time when half the country was at war with the other half, he would take his chances with Congress, the courts, and history. The country’s current chief executive finds Lincoln comparisons disconcerting, but this is a case where he might pay attention, because his legal grounds for unilaterally raising the ceiling on the national debt in a time of congressionally inflicted crisis are no weaker than Lincoln’s and probably stronger. The latest furor over who should be paying taxes in this country is, as of 36 hours ago, over. This follows a presidential campaign in which the candidate who ran on...

Is the Fiscal Deal a Recipe for National Decline?

White House/Pete Souza
Now that the future revenue path is pretty clear for the next decade, I took another look at President Obama's 2013 budget , which projects spending and revenue through 2022 on the assumption—a correct one, it turns out—that taxes will only rise on the affluent. As I noted in an earlier post today, the White House projects serious cuts to domestic spending. These cuts wouldn't be necessary if the Bush tax cuts were fully repealed. So, in effect, President Obama has largely endorsed the fiscal priorities of his predecessor, with tax cuts forcing spending cuts. This may not amount to "starving the beast," but it is putting government on a conservative diet. I've written a lot about this historic capitulation already, so I won't say more. Instead, let me focus on another implication of letting the Bush tax cuts largely live on. The United States will not only cut spending over the next decade, it will also dramatically increase the national debt—adding $6.6 trillion in new debt by 2022...

The Endless Cliff

Flickr/Talk Radio News Service
Flickr/Talk Radio News Service B eyond yesterday’s narrow escape from the dreaded fiscal cliff are … more cliffs. President Obama and Congress averted one fiscal calamity of tax-hikes-for-all only to face even steeper cliffs—the sequester, the debt ceiling, the Social Security shortfall, ad infinitum . It is a fiscal Wizard of Oz, an extended odyssey with perils on every side. The question progressives are asking themselves this morning is whether President Obama settled for too little in the fiscal mini-deal, having traded away his best single piece of leverage—the automatic tax increase on all Americans scheduled to hit today unless Congress acted. Some, like our colleague Robert Reich, have argued that it would have been better to “go over the cliff”—let tax hikes briefly take effect on everyone, thus increasing pressure on Republicans—rather than to make this agreement. Mercifully, Obama backed off any “grand bargain.” The deal was a defeat not only for the Republicans but for the...

It's Not about the Deficit

Flickr/401(K) 2012
“It’s not all I would have liked,” says Republican Senator Lindsey Graham of South Carolina, speaking of the deal on the fiscal cliff, “so on to the debt ceiling.” The battle over the fiscal cliff was only a prelude to the coming battle over raising the debt ceiling—a battle that will likely continue through early March, when the Treasury runs out of tricks to avoid a default on the nation’s debt. The White House’s and Democrats’ single biggest failure in the cliff negotiations was not getting Republicans’ agreement to raise the debt ceiling. The last time the debt ceiling had to be raised, in 2011, Republicans demanded major cuts in programs for the poor as well as Medicare and Social Security. They got some concessions from the White House but didn’t get what they wanted—which led us to the fiscal cliff. So we’ve come full circle. On it goes, battle after battle in what seems an unending war that began with the election of Tea Party Republicans in November, 2010. Don’t be fooled...

Retrench Warfare

AP Photo/Alex Brandon
AP Photo/Alex Brandon Senator Mike Johanns, a Republican from Nebraska, left, walks with Senate Minority Leader Mitch McConnell from Kentucky to the Senate floor for a vote on the fiscal cliff early this morning. The Senate vote just before dawn in favor of a permanent tax hike on the top one percent defers virtually all of the other budget battles. Assuming the House follows suit today, it is up to President Obama and the Democrats to radically change the conversation. In the deal that the Senate agreed to, with only eight senators voting against, the Democrats won big in two respects. They forced the Republicans to raise taxes on the rich, and they took all spending cuts including in Social Security off the table—for now. If Tea Party Republicans vote against the deal and it passes the House with the voters of nearly all Democrats and a few dozen renegade Republicans, it could cost John Boehner his Speakership. But automatic cuts of $120 billion this year and $1.2 trillion over a...

A Lousy Deal on the Edge of the Fiscal Cliff

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak President Barack Obama speaks about the fiscal cliff in the South Court Auditorium of the White House earlier today. The deal emerging from the Senate on the fiscal cliff is a lousy one. Let me count the ways: 1. Republicans haven’t conceded anything on the debt ceiling, so over the next two months—as the Treasury runs out of tricks to avoid a default—Republicans are likely to do exactly what they did before, which is to hold their votes on raising the debt ceiling hostage to major cuts in programs for the poor and in Medicare and Social Security. 2. The deal makes tax cuts for the rich permanent (extending the Bush tax cuts for incomes up to $400,000 if filing singly and $450,000 if jointly) while extending refundable tax credits for the poor (child tax credit, enlarged EITC, and tuition tax credit) for only five years. There’s absolutely no justification for this asymmetry. 3. It doesn’t get nearly enough revenue from the wealthiest 2 percent—only $600...

Don't Count Boehner Out Just Yet

AP Photo/J. Scott Applewhite
AP Photo/John Duricka Representative John Boehner holds up a copy of the Constitution on Capitol Hill in Washington Thursday, May 7, 1992, as Senator Don Nickles looks on. T he side of John Boehner we understand most is the one that offers a distant sense of comfort—the one who'll pander to the conservative movement during these fiscal-cliff talks but understands a compromise must come through at the end. This is the John Boehner we dub the "dealmaker," the leader who must "stand up” to the Tea Party—and Majority Leader Eric Cantor, the rival who would do him in. His “dealmaker” persona stems from the assumption he isn’t a true believer or an aggressively ideological Republican, which is correct. But it's his other side, the deeply ambitious one, that clouds our ability to predict where the fiscal saga ends. This is the Boehner who clawed his way to the House Speakership for over 20 years, a position that his conference may force him out of if he "surrenders" to President Obama in...

It’s a Mad, Mad Michigan

Right-to-work legislation was only the beginning. State Republicans have an entire docket full of legislation set to limit rights.

(AP Photo/The Detroit News, Elizabeth Conley)
Sure, lame-duck legislatures are bound to be a bit mad. But the session that just closed in Michigan was one for the ages. Aflush with the flurry of bills sent to the desk of Governor Rick Snyder—not so much speaking to his opinion on their quality—a politics-loving friend of mine in Detroit exclaimed, “It’s like Christmas in … well, in December.” The swift passage of right-to-work in Michigan picked up national and international headlines last week. But that overhaul of labor law is only one piece of the expansive legislative plan for the state that now awaits Snyder’s go-ahead. The lame-duck session was the final and powerful display of influence by GOP and Tea Party lawmakers that had a total and triumphant win in the 2010 election. Even as Michigan’s reputation as a “swing state” is diminishing—it’s voted Democratic for president since 1992, and both its U.S. senators are Democrats—local politics remain fractious. Not only does the GOP dominate both chambers in the state...

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.” In the piece, I also criticized the role of my friend Bob Greenstein in lending credence to backdoor cuts in Social Security. Bob is the much revered and tireless advocate for the poor who is the longtime president of the Center on Budget and Policy Priorities. My piece questioned both his political logic in assuming that Social Security cuts have any place in this budget deal and his assumption that including them will somehow protect programs for the poor. My piece mistakenly described the annual cut as 3 percent rather than 0.3 percent, but it accurately pointed...

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