Budget

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...

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. Perhaps most shocking for pro-choice advocates was the effort to restrict abortion rights—or, as Mother Jones put it, “ the abortion mega-bill. ” Assuming the governor signs the bill into law, women in Michigan will now have to buy separate insurance policies to cover abortion. Otherwise, even in cases of rape or miscarriage, the abortion will not be covered. Clinics that provide more than 120 abortions a year will now face significantly more stringent licensing...

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 ,...

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...

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