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“When Used For The Right Purpose”: Was Cheney Right That “Deficits Don’t Matter”?

After the Republicans gained control of the US Senate in the 2002 election, giving them across-the-board dominance of the legislative and executive branches of the federal government, the key players in the administration of President George W. Bush gathered to discuss fiscal policy.

Vice President Dick Cheney wanted to cut taxes for the rich.

Treasury Secretary Paul O’Neill was skeptical. According to his recounting of the incident in Ron Suskind’s brilliant book, The Price of Loyalty, O’Neill expressed concern that a trillion dollars worth of tax cuts had already been enacted. O’Neill was no liberal. He liked tax cuts. But with the country rebuilding from the economic slowdown after the 9/11 attacks, and with a war being fought in Afghanistan and another on the horizon in Iraq, O’Neill noted that the budget deficit was increasing. And he argued against Cheney’s position, suggesting that another tax cut was unnecessary and unwise.

“You know, Paul, Reagan proved that deficits don’t matter,” said the vice president. “We won the mid-term elections, this is our due.”

O’Neill was, according to Suskind, left speechless.

But Cheney wasn’t done. He and the Bush-Cheney administration that he served as CEO piled up deficits and debts. Indeed, as The New York Times has well noted, “Under Mr. Bush, tax cuts and war spending were the biggest policy drivers of the swing from projected surpluses to deficits from 2002 to 2009. Budget estimates that didn’t foresee the recessions in 2001 and in 2008 and 2009 also contributed to deficits. Mr. Obama’s policies, taken out to 2017, add to deficits, but not by nearly as much.”

Now, a decade later, Cheney’s party is arguing that deficits matter. A lot. House Republicans are so fretful that they are willing to steer the country toward chaos by refusing the compromises that would avert across-the-board sequester cuts. Other Republicans uncomfortable with sequestration are pushing an austerity agenda that’s better organized than the sequester, but potentially even more painful.

So was Cheney right in 2002? Or is he right, now, when he cheers on Republican attacks on Obama’s spending and says, “I worship the ground Paul Ryan walks on”?

The fact is that deficits are relevant.

So are debts.

Nations must treat them seriously.

But nations do not have to fear deficits, any more than Dick Cheney did on that day in the fall of 2002. And in that sense Cheney was right: deficits don’t matter if they are employed for a purpose. Cheney’s purpose—cutting taxes for the rich—was dubious. But stimulating the economy, expanding access to healthcare, funding state and local governments and protecting seniors on Social Security… these are good, and necessary, purposes.

Spending has value, especially when it is needed. As Bob Borosage of the Campaign for America’s Future reminds us: “The U.S. has witnessed slow growth since coming out of the Great Recession in 2009. The result has been a deficit that has come down from over 10 percent of gross domestic product to a projected 5.3 percent of GDP this year (slightly higher if Congress is sensible enough to repeal the sequester) and a projected 2.4 percent in 2015 (if congressional austerity bombs don’t blow up the weak recovery).”

For Cheney’s political heirs to claim now that the United States is in crisis, or at a “tipping point,” is absurd. For them to refuse to govern until they get their way, throwing one tantrum after another, is irresponsible. For them to see value in sequester cuts that impose real pain on real people is not just crude, it’s economically senseless—and dangerous to the long-term prospects for economic renewal and growth.

President Obama needs to push back against the deficit fabulists. He does not have to echo Cheney’s glib “deficits don’t matter” talk. But he should explain, as economist Dean Baker does, that the ranting and raving about deficits and debts by groups such as Pete Peterson’s Fix the Debt campaign and its co-chairs, Erskine Bowles and Alan Simpson, is “the great distraction.”

America should be focused on the economic challenges that have slowed our economy, and that have caused our government to run up deficits and debts. We need to be focused on putting people to work and growing the economy, not playing sequester games that result in real job losses and create an equally real threat of recession.

When the Fix the Debt crew gather, as Baker has noted, “many of the people most responsible for the current downturn come together to tell us why we should be worried about the deficit at a time when 25 million people are unemployed, underemployed or have given up looking for work altogether and millions face the prospect of losing their homes.”

Our concern as a country should be with shaping the policies and making the investments that find work for the jobless and create the robust economic growth that creates surpluses. That’s far more vital than the focus on fiscal issues and the deficits that Dick Cheney explained—back when he was in power—“don’t matter.”

 

By: John Nichols, The Nation, March 1, 2013

March 4, 2013 Posted by | Deficits | , , , , , , , , | 1 Comment

“Welfare For The Rich”: What If The Outrage Over Excessive Welfare Extended To The Tax Code?

Senator Jeff Sessions (R-AL) has created quite a stir with his estimates that every household below the poverty level receives an average of $168-a-day (or about $61,000-a-year) in government welfare.

Sessions’ calculations are extremely controversial and overstate the amount of government assistance for those in poverty. But for the sake of argument, let’s assume he’s right. How would $61,000 in direct government spending and refundable tax credits for the poor stack up against tax subsidies for the rich?

It isn’t even close. Indeed, my colleagues at the Tax Policy Center figure that in 2011 households making $1 million and up got that much in average tax benefits from just two deductions–for charitable gifts and state and local taxes. Add a fistful of other preferences–such as deductions for mortgage interest and exclusions such as the one for employer-sponsored health insurance– and top-bracket households got far more in tax benefits than the poor got in means-tested assistance.

These estimates exclude low tax rates on capital gains and dividends which are, arguably, very different from, say, subsidies for mortgage interest or employer-sponsored health insurance. If you include preferential rates on investment income, households making $1 million or more got an additional $119,000 in tax benefits, on average, in 2011.

Keep in mind that tax rates on ordinary income were relatively low in 2011. Now that the rate for high-income households has gone up significantly, their tax subsidies will be even more generous.

I readily admit that on one level, this is a fairly silly exercise. But there is an important point here: In much public discourse, direct government aid for the poor is easily dismissed by the pejorative “welfare.” Yet, spending-like subsidies administered through the revenue code provoke far less outrage. This is true even though many of these tax preferences are economically indistinguishable from direct spending and often add far more to the deficit.

Take housing, for instance. CBO figures that the lowest-income 20 percent of households get an average of about $1,100-a-year in means-tested rental housing assistance. TPC estimates that the lowest-income households got no benefit from tax deductions for mortgage interest and real estate taxes in 2011. But those in the top 20 percent, who make more than $100,000, got an average tax benefit of $2,900. Those in the top 1 percent, who make an average of $1.5 million, did even better. They got an average tax break of $5,700, more than five times the benefit the government provided low-income renters.

As with so much of the tax code, these homeowner tax benefits are upside down. On average, the more you make, the more you get. This seems an odd design in an era when fiscal restraint is all the rage. Yet politicians still recoil when tax expenditures—the vast bulk of which go to middle-class and high-income households—are described as subsidies.

In recent years, both Democrats and Republicans (including their recent presidential candidates) did talk about capping or limiting tax preferences for the highest income households. But so far, at least, that talk has come to nothing. It would be helpful if Sen. Sessions directed some of his outrage to the more than $1 trillion in tax expenditures that litter the revenue code—much of which go to those who need help the least.

 

By: Howard Gleckman, Tax Policy Center, February 26, 2013

March 4, 2013 Posted by | Economic Inequality, Tax Loopholes | , , , , , , , | 1 Comment

“Rights Are Not Entitlements”: Fundamental Human Rights Are Not Items That legislation Should Be Able To Take Away

As Americans discuss our system of social supports, we constantly hear the word “entitlements” and rarely the word “rights.” Of course, in America the word “entitlements” is not a neutral word. Rather, it is a loaded word, laced with specific attitudes and associations in both the speaker’s mouths and listener’s ears.

Instead of repeating facts about how America’s system of social supports is substantially smaller than nearly every other wealthy democratic country or the simple fact that America is the wealthiest country in the history of the world, it is important to pause to think about the concept of human rights.

A good starting point for thinking about human rights is the Universal Declaration of Human Rights, a declaration authored by a number of international delegates (including former First Lady Eleanor Roosevelt) and adopted by the United States and other members of the United Nations in 1948. This document builds on other declarations of human rights that have occurred in the past including our own Declaration of Independence’s statement of the right to “life, liberty and the pursuit of happiness.”

In our era of drone strikes without a judicial process, it is important to point out that the Universal Declaration of Human Rights states that “Everyone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal, in the determination of his rights and obligations and of any criminal charge against him.”

In our era of for-profit prisons pushing legislation to increase America’s already world-leading incarceration rates even higher, our era of prison gerrymandering and prison labor, it is important to point out that the Universal Declaration of Human Rights states that “No one shall be held in slavery or servitude.”

In our era of Guantanamo Bay and Abu Ghraib, it is important to point out that the Universal Declaration of Human Rights states that “No one shall be subjected to torture or to cruel, inhuman or degrading treatment or punishment. No one shall be subjected to arbitrary arrest, detention or exile.”

In our era of attempts to slash support for the unemployed and aggressive attempts to dismantle the rights of labor to organize, it is important to point out that the Universal Declaration of Human Rights states that “Everyone has the right to work, to free choice of employment, to just and favorable conditions of work and to protection against unemployment.”

In our era of attacks on America’s already minimal social security system, it is important to point out that the Universal Declaration of Human Rights states that “Everyone has the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.”

There was a time when our nation eloquently wrote and spoke in support of the basic rights of humans yet we have consistently abandoned those words, time after time, action after action, century after century.

Often when someone suggests that America needs to slash “entitlements,” I find myself asking two simple questions, “What are the most fundamental human rights and what role should governments play in guaranteeing those fundamental human rights?” After all, fundamental human rights are not items that legislation should be able to give and take away with the stroke of a pen or the barrel of a gun.

 

By: Howard Steven Friedman, Open Salon Blog, Salon, February 28, 2013

March 4, 2013 Posted by | Civil Rights, Human Rights | , , , , , , , | 1 Comment

“Intent On Dismantling The Government”: The Sequester And The Tea Party Plot

Imagine a plot to undermine the government of the United States, to destroy much of its capacity to do the public’s business, and to sow distrust among the population.

Imagine further that the plotters infiltrate Congress and state governments, reshape their districts to give them disproportionate influence in Washington, and use the media to spread big lies about the government.

Finally, imagine they not only paralyze the government but are on the verge of dismantling pieces of it.

Far-fetched? Perhaps. But take a look at what’s been happening in Washington and many state capitals since Tea Party fanatics gained effective control of the Republican Party, and you’d be forgiven if you see parallels.

Tea Party Republicans are crowing about the “sequestration” cuts beginning today (Friday). “This will be the first significant tea party victory in that we got what we set out to do in changing Washington,” says Rep. Tim Huelskamp (Kan.), a Tea Partier who was first elected in 2010.

Sequestration is only the start. What they set out to do was not simply change Washington but eviscerate the U.S. government — “drown it in the bathtub,” in the words of their guru Grover Norquist – slashing Social Security and Medicare, ending worker protections we’ve had since the 1930s, eroding civil rights and voting rights, terminating programs that have helped the poor for generations, and making it impossible for the government to invest in our future.

Sequestration grew out of a strategy hatched soon after they took over the House in 2011, to achieve their goals by holding hostage the full faith and credit of the United States – notwithstanding the Constitution’s instruction that the public debt of the United States “not be questioned.”

To avoid default on the public debt, the White House and House Republicans agreed to harsh and arbitrary “sequestered” spending cuts if they couldn’t come up with a more reasonable deal in the interim. But the Tea Partiers had no intention of agreeing to anything more reasonable. They knew the only way to dismember the federal government was through large spending cuts without tax increases.

Nor do they seem to mind the higher unemployment their strategy will almost certainly bring about. Sequestration combined with January’s fiscal cliff deal is expected to slow economic growth by 1.5 percentage points this year – dangerous for an economy now crawling at about 2 percent. It will be even worse if the Tea Partiers refuse to extend the government’s spending authority, which expires March 27.

A conspiracy theorist might think they welcome more joblessness because they want Americans to be even more fearful and angry. Tea Partiers use fear and anger in their war against the government – blaming the anemic recovery on government deficits and the government’s size, and selling a poisonous snake-oil of austerity economics and trickle-down economics as the remedy.

They likewise use the disruption and paralysis they’ve sown in Washington to persuade Americans government is necessarily dysfunctional, and politics inherently bad. Their continuing showdowns and standoffs are, in this sense, part of the plot.

What is the President’s response? He still wants a so-called “grand bargain” of “balanced” spending cuts (including cuts in the projected growth of Social Security and Medicare) combined with tax increases on the wealthy. So far, though, he has agreed to a gross imbalance — $1.5 trillion in cuts to Republicans’ $600 billion in tax increases on the rich.

The President apparently believes Republicans are serious about deficit reduction, when in fact the Tea Partiers now running the GOP are serious only about dismembering the government.

And he seems to accept that the budget deficit is the largest economic problem facing the nation, when in reality the largest problem is continuing high unemployment (some 20 million Americans unemployed or under-employed), declining real wages, and widening inequality. Deficit reduction now or in the near-term will only make these worse.

Besides, the deficit is now down to about 5 percent of GDP – where it was when Bill Clinton took office. It is projected to mushroom in later years mainly because healthcare costs are expected to rise faster than the economy is expected to grow, and the American population is aging. These trends have little or nothing to do with government programs. In fact, Medicare is far more efficient than private health insurance.

I suggest the President forget about a “grand bargain.” In fact, he should stop talking about the budget deficit and start talking about jobs and wages, and widening inequality – as he did in the campaign. And he should give up all hope of making a deal with the Tea Partiers who now run the Republican Party.

Instead, the President should let the public see the Tea Partiers for who they are — a small, radical minority intent on dismantling the government of the United States. As long as they are allowed to dictate the terms of public debate they will continue to hold the rest of us hostage to their extremism.

 

By: Robert Reich, The Robert Reich Blog, February 28, 2013

March 4, 2013 Posted by | Government, Sequester | , , , , , , , | 1 Comment

“Every Game Is A Shutout”: How Much Of A Market Is There On The Right For Real Reporting?

Four years ago, Tucker Carlson went before the audience at the Conservative Political Action Conference, and told them that instead of creating more media forums to talk to each other about what a bunch of jerks liberals are, they ought to nurture outlets that actually report news, with a commitment to accuracy. For his trouble he was booed vigorously, and I guess he learned his lesson about what conservatives are interested in, because instead of creating a newsgathering organization he created the Daily Caller. I’m sure it’s doing quite well with it’s target audience, and I couldn’t help but think about Carlson upon seeing that Erick Erickson, proprietor of RedState.com and CNN talking mouth, issued a plea to conservatives to come work for him and actually do journalism. First though, he identified the problem:

I think conservative media is failing to advance ideas and stories. Certainly part of that is because the general media has an ideological bias against conservatives, which makes it harder for the media to take our views seriously. But many conservatives are, instead of working doubly hard to overcome that bias, just yelling louder about the same things. The echo in the chamber has gotten so loud it is not well understood outside the echo chamber in the mainstream press and in the public. It translates only as anger and noise, neither of which are conducive to the art of persuasion.

You think? It’s a bit of a surprise to see this coming from Erickson, who in the past has had, shall we say, a taste for bombast and insults (he called David Souter a “goat-fucking child molester” and Michelle Obama a “Marxist harpy”; see here for more). But hey, people change. I completely understand how somebody can spend some time playing the role of shouting partisan, then decide it really isn’t accomplishing much and there might be a better way of accomplishing your ideological goals. Erickson went on:

Educating conservatives is a critical component of our mission. We have never viewed RedState as a site engaged in reporting, but as a site engaged in activism. Though occasionally we do break news, it has not been central to our existence. But, an honest accounting of facts and news is important and mission critical. Consequently, I would like to hire some reporters who can help educate conservative activists — who will not be focused on the outrage du jour, but focused on the daily grind of Washington and how the sausage being ground out in Washington will affect the conservative movement and the nation. Over time, I would like to expand this to covering governmental sausage making in the states too.

Good for him, I suppose, though I’ll admit I’m skeptical. There are certainly conservative reporters out there—heck, there are even some real reporters at Fox News—but the question is just how much of an audience there is for what they produce. The problem isn’t just that the really successful conservatives are bloviators like Rush Limbaugh and Sean Hannity, it’s that the entire movement seems content to treat their constituents like they’re a bunch of idiots who want only to nod their heads and mutter about how Barack Obama is a socialist and liberals are evil.

Consider the recent case of Jeff Sessions’ GAO report. The Alabama Republican senator asked the GAO to give him a report on how much Obamacare would add to the deficit if all the spending stayed in, but all the ways to pay for the bill, from cost savings from innovation, to reduced payments to providers, to tax increases, were taken out. The GAO has to respond to these kinds of requests, so it did. And then Sessions went in front of the cameras proclaiming that the GAO says Obamacare will increase the deficit by eleventy bazillion dollars, and one conservative news organization after another (here‘s an example) picked it up, saying, “See! See! See!” As Steve Benen said, the whole exercise was “roughly the equivalent of the Boston Celtics’ coach asking someone on his staff, ‘Figure out what our record would be if our opponents’ points didn’t count.’ Then, soon after, the coach called a press conference to declare, ‘Good news everyone! We’re undefeated! And every game was a shutout!'”

My point is, this is not how serious people who respect their constituents act. But Sessions knew that conservative media outlets would run with his ridiculousness, and they in turn knew that their audiences would eat it up. In the end, the whole thing did nothing but make conservatives a little dumber on the issue of health care. And you know what? They don’t care. Oh sure, there are some conservatives who are embarrassed by that kind of thing, but they’re the quiet ones, and they’re outnumbered.

And that’s what Erick Erickson will be confronting if he really wants to hire real reporters to do real reporting: there just aren’t enough people on his side who want it.

 

By: Paul Waldman, Contributing Editor, The American Prospect, February 28, 2013

March 4, 2013 Posted by | GOP, Journalism | , , , , , , , | 1 Comment

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