Budget

The Austerity Experiment

(Press Association via AP Images)
BRUSSELS—Depending on whose narrative you believe, the deepening economic crisis in Greece proves (a) that the dysfunctional and dissolute Greeks just couldn’t get their act together and keep the reform commitments that they made in exchange for debt relief from the European authorities; or (b) it only proves that austerity breeds more austerity. Cut public spending and wages, and raise taxes in a recession, and you just dig yourself a deeper hole. Since only about 20 percent of the Greek economy is exports and less than 40 percent of export costs are wages, slashing wages just doesn’t produce much of a bounce, especially when the rest of Europe’s economy is contracting too. Greece is a lousy test of the austerity-as-cure hypothesis, because left, right, and center agree that Greece has an encrusted system. When I recently interviewed former Prime Minister George Papandreou, he referred to Greece as a “clientist” state—meaning government by crony constituency. When the right governs,...

In Texas, Incumbents Suffer for Not Being Extreme Enough

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Yesterday I asked whether Texas voters would punish those incumbents who approved billions in state education cuts . I didn't even mention the billions of dollars in cuts to health and human services—or that despite these cuts, critical structural revenue problems remain in the state, which means this coming session will be worse. I just wondered whether incumbents would suffer for the session's austere approach. Well several incumbents suffered—but not in a manner you might expect. Take Rob Eissler, the Republican chair of the Public Education Committee who pushed for some of the big budget cuts. He lost his primary Tuesday night in a big upset. But he didn't lost his seat to a candidate pushing back against cuts. Nope. Eissler lost his seat to a Tea Party insurgent because—get this—Eissler had been too moderate and was too closely aligned with House Speaker Joe Straus. Nationally the focus may be on the Cruz-Dewhurst Senate race, but it seems insurgencies are alive and well when it...

Will Texas Voters Care About Billions in Education Cuts?

(Flickr/hpeguk)
Last year, during the biennial legislative session, Texas House Republicans approved a budget with a crippling $10 billion in cuts to public schools over the next two years—this despite warnings from educators that the results would be catastrophic. Several state senators fought to make the cuts only harmful rather than damning. In the end, Texas public schools lost $5.4 billion in the two-year budget, an unprecedented cut that's left districts and classrooms struggling to provide basic services. More than 10,000 teaching positions have been cut, and over 8,000 elementary schools have applied for waivers to go over the state's class-size cap, almost 6,000 more than last year according to the AP. Tuesday's Texas primaries beg the question: Will any incumbents pay? Texas educators haven't traditionally been a politically hard-line group. It's a conservative state, but since the current funding system went into place after World War II, there've been no deep cuts to education. Texas has...

The Cost of the Debt-Ceiling Fight

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For a moment last fall, it looked as if the last-minute debt-ceiling deal was all for nothing. Democrats had caved to Republicans’ demands to cut spending in order to keep the government funded. But Standard and Poor’s decided that the brinkmanship displayed by John Boehner and Republicans reflected poorly on the country’s ability to pay its bills, and decided to lower the U.S.’s credit rating anyway from AAA to AA+. Luckily, that decision was taken more as a reflection of the rating agency than a proper assessment of the country’s credit-worthiness. The U.S. continues to sell Treasury bonds at record low interest rates, a sign that investor confidence hasn’t been shaken. That doesn’t mean the tussle over the debt ceiling last summer came without cost. Economists Betsey Stevenson and Justin Wolfers have an op-ed in Bloomberg today assessing the impact of the debt-ceiling showdown: High-frequency data on consumer confidence from the research company Gallup, based on surveys of 500...

No Taxmageddon Solution Before November

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Congress is deadlocked on a host of issues that will need to be solved before the end of the year lest the country plunge off a fiscal cliff at the start of 2013. If no action is taken, all of the Bush tax cuts will expire, the payroll tax will return to higher rates, and the full-sequester spending cuts will go into effect, with the debt ceiling hitting its limit shortly thereafter. Estimates from the Congressional Budget Office released early this week paint a horror story for the start of 2013, with the economy contracting by 1.3 percent. The New York Times tries to offer a bit of hope this morning, with a story detailing both Democrat and Republican intentions to tackle the tax cuts before the lame duck session: Both parties in the House and the Senate are eager, perhaps even giddy, at the prospect of voting for their respective versions of an extension of the cuts this summer, well before the due date. Speaker John A. Boehner, Republican of Ohio, has said there will be a House...

Unorthodoxies

Could Israel's new coalition get the ultra-Orthodox to go to work? Not by Netanyahu's methods.

(AP Photo/Emilio Morenatti)
In our last episode , dear viewers, we watched as Israel's main opposition party, Kadima, sold out its centrist voters and joined Benjamin Netanyahu's government—thereby providing the prime minister a reprieve of over a year before he must face the voters. This allows Bibi more time to raise regressive taxes, evade negotiations with the Palestinians, and deride diplomatic efforts to solve the Iranian nuclear issue. But perhaps there's a bright spot in this dark plot line. To paraphrase a question I've heard repeatedly over the last couple of weeks: Since the new coalition is broad enough to maintain its majority in parliament even if clerical parties walk out, can it finally end one of the strangest and best-known aberrations of Israeli life? Can it end the bizarre pork-barreling that allows most ultra-Orthodox men to spend their life in religious studies rather than working? After all, isn't the Israeli economy slowly sinking as the ultra-Orthodox community grows and the financial...

What Real Government Waste Looks Like

1,822,600 GSA conferences, in flight.
When it was discovered that the General Services Administration spent nearly a million dollars on a lavish conference in Las Vegas, the outrage thundered through Washington like a roiling tsunami. Congressional hearings were quickly organized, the scandal led the news every night for days, and you couldn't turn on a television or radio without hearing more horrifying details. The public trust was betrayed! Our tax dollars were wasted! Government was out of control! Yeah, maybe. But in the end, the whole thing was about $823,000, or .00004 percent of the federal budget for 2011. You want to talk real government waste? Get a load of the F-35 joint strike fighter : Although the plane was originally billed as a low-cost solution, major cost increases have plagued the program throughout the last decade. Last year, Pentagon leadership told Congress the acquisition price had increased another 16 percent, from $328.3 billion to $379.4 billion for the 2,457 aircraft to be bought. Not to worry...

A New Kind of Gold Standard?

(Flickr/tao_zhyn)
In the latest issue of the magazine, I have a piece examining a strange and growing trend in some conservative circles—pushing states to adopt alternative currencies to the federal dollar. The basic concern is one you've probably heard from Ron Paul: The Federal Reserve can't be trusted, the national debt is out of control, so the U.S. dollar, backed only by faith in the government, may become worthless. (The story outlines some of the more obvious economic problems with this theory.) To deal with the concern, problem-solving state lawmakers have started introducing bills to create a second currency, one of gold and silver. Sounds like a fringe concept right? Well, not entirely. In the 2011-2012 legislative cycle, 17 states saw some form of the legislation introduced, either implmenting a second currency or at least prompting a study of one. The famous (and failed) "doomsday bill" in Wyoming included one such study. Utah already passed its version last year, so you can now start...

Does Congress Even Need to Pass a Budget?

The last time the U.S. passed a real budget was in 1997. Does this mean we don't need one?

As much as the Internet might try to fool you, the 2012 political season is about more than just Etch A Sketches and sweater vests. We’re up crap creek in a leaky canoe when it comes to the economy, and as the country heads into the general election, the debt and budget will be at the fore of public debate. With competing budget proposals flying in from all sides, much of the political talk these days centers on the endless delays and extensions that Congress has thrown in the path of approving a long-term federal budget. Which might lead one to wonder: Would it matter if we never passed a budget plan ever again? What exactly is the federal budget? The federal budget is one big ’ol nasty bill thousands of pages long that determines the fiscal future of the country over the course of a year by allocating money to various programs like Medicare and Medicaid as well as to things like defense spending. When was the last time we had a budget bill that was approved? April of 2009. But...

Romney Takes On the Rich!

Mitt Romney's old ski lodge, aglow with the warm light of taxpayer subsidy.
Like a good liberal, I feel a tiny pang of guilt when I do my taxes every year and see how much the government is subsidizing my choice to buy a home. Not that I'm going to turn it down as long as it's in place, but the mortgage interest deduction is not easy to justify. Even if there are reasons to believe that homeownership is a good thing, that doesn't necessarily mean that the government should pay you thousands of dollars to do it, particularly when you were probably going to do it anyway. Mitt Romney is down to a modest three homes these days (the house in Boston, the lake house in New Hampshire, and the beach house in La Jolla; he got rid of the ski lodge in Deer Valley and a second Massachusetts house), but that didn't stop him from suggesting that we might consider eliminating the mortgage interest deduction for second (and third and fourth) homes. The idea was quickly attacked from multiple sides (unsurprisingly, the National Association of Realtors, one of the most powerful...

Romney's Not-So Secret Plan

(Flickr/Gage Skidmore)
One of the more frustrating aspects of this year's Republican primary was the utter lack of specificity in candidates' proposals. It turns out this was a strategic decision. In an interview with the Weekly Standard last month, Romney said : “One of the things I found in a short campaign against Ted Kennedy was that when I said, for instance, that I wanted to eliminate the Department of Education, that was used to suggest I don’t care about education,” Romney recalled. “So I think it’s important for me to point out that I anticipate that there will be departments and agencies that will either be eliminated or combined with other agencies. So for instance, I anticipate that housing vouchers will be turned over to the states rather than be administered at the federal level, and so at this point I think of the programs to be eliminated or to be returned to the states, and we’ll see what consolidation opportunities exist as a result of those program eliminations. So will there be some that...

Top Ten Tax Facts

Think you know a lot about government revenue? Think again.

(Flickr/401K)
This piece is the fifth in a six-part series on taxation, and a joint project by The American Prospect and its publishing partner, Demos. 1. The government has collected less in taxes as a proportion of the economy in the past three years than it has in any three-year period since World War II, and tax rates are at historic lows . 2. One out of three multi-millionaires pays a lower percentage of their income in taxes than the vast majority of people making $60,000 a year. 3. Chairman Paul Ryan’s budget proposal, which has been praised by Governor Romney, would deliver benefits to people with incomes over $1 million that are 10 times greater than the benefits to those earning $40,000 or less. 4. Corporate income taxes for the past three years have hovered at just over 1 percent of GDP , lower than for any three-year period since World War II. The average for OECD countries is 3.5 percent. 5. The Bush tax cuts added $1.7 trillion to the nation’s debt between 2001 and 2008, which is more...

With Corporate Taxes, Less Is More

The federal government can lower rates for companies while increasing revenue.

(Flickr/rexboggs5)
This piece is the fifth in a six-part series on taxation, and a joint project by The American Prospect and its publishing partner, Demos. There is no shortage of alarmism when it comes to corporate taxes. Earlier this year, Mitt Romney said that the U.S. tax code “looks like it was devised by our worst enemy to tie us in knots.” A more recent memo drafted by the Senate Republican Caucus claimed that the “corporate income tax harms workers, consumers, job creation, investment, and innovation” (you have to wonder what else exactly is left). These statements are enough to scare anyone into thinking that the entire U.S. economy will crumble if corporate tax rates aren’t slashed tomorrow. But, as Republicans often claim, are U.S. corporate tax rates really among the highest in the world? And are workers really so dependent on protecting corporate profits? More important, is there any reason the U.S. shouldn’t raise more revenues from corporations during this time of great fiscal need?...

Read My Lips: Fairer Taxes

Six ways to restore balance to our broken system

(Flickr/TruthOut)
This piece is the fourth in a six-part series on taxation, and a joint project by The American Prospect and its publishing partner, Demos. The “Buffett Rule” proposed by President Obama and now being considered by the Senate would be an important symbolic step toward a fairer tax system. By instituting a minimum tax on very high earners, it would advance the principle of progressive taxation and reform the tax code in an overdue way. By itself, though, the Buffett Rule does not go nearly far enough. It should be a small piece of a much larger agenda for restoring fairness to America’s tax system. Some of this agenda is reflected in President Barack Obama’s 2013 budget proposal, but other important ideas are not yet being seriously considered. Here are six such ideas that should be part of the national debate. Create New Top Tax Brackets The Obama budget plan would let the Bush tax cuts lapse at the end of this year for households making over $250,000, and the highest tax bracket—for...

Paul Ryan Wants Democratic Friends

(Flickr/Gage Skidmore)
Paul Ryan's budget has become a rallying cry for Democrats, and President Obama's re-election in particular. Republicans have long expressed an antipathy for the general concept of government services, but these were often expressed in the abstract or lone exceptions, with the party generally focusing on the starve-the-beast philosophy of reducing taxes so that government outlays would eventually have to be reduced. Ryan's budget gets that down on paper in crystallized form, codifying those ideas into a specific vision for the future that would gut all government services except health spending, Social Security, and an increased budget for defense, discarding the rest of discretionary spending. Earlier this morning, Ryan told a group of reporters in New York that his budget wasn't actually all that extreme because an anonymous selection of a dozen Democrats have told him they love his bill. From Buzzfeed: "There are a number of democrats but I don’t want to name their names, because I...

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