State Crises Mean New Language Of Deceit
For most of history, we had undebatable definitions of words such as “bailout” and “bankruptcy.” We understood the former as an undeserved public grant, and the latter as an inability to pay existing bills. Whatever your particular beliefs about these concepts, their meanings were at least agreed upon.
Sadly, that’s not the case during a deficit crisis that is seeing language redefined on ideological terms.
“Bailout” was the first word thrown into the Orwellian fire. As some lawmakers recently proposed replenishing depleted state coffers with federal dollars, the American Conservative Union urged Congress to oppose states “seek(ing) a bailout” from the feds. Now, Rep. Paul Ryan, R-Wis., says, “Should taxpayers in Indiana who have paid their bills on time, who have done their job fiscally be bailing out Californians who haven’t? No.”
Ryan, mind you, voted for 2008’s TARP program — a bank bailout in the purest sense of the term. But one lawmaker’s rank hypocrisy is less significant than how the word “bailout” is being used — and abused. Suddenly, the term suggests that federal aid would force taxpayers in allegedly “fiscally responsible” Republican states to underwrite taxpayers in supposedly irresponsible Democratic ones.
Aside from stoking a detestable interstate enmity, this thesis ignores the fact that state-to-state wealth transfers are already happening. According to the Tax Foundation, most Republican-voting states receive more in federal funding than they pay in federal taxes, while most Democratic-voting states receive less federal money than they pay in federal taxes.
That means traditionally blue states like California are now perpetually subsidizing — or in Ryan’s parlance, “bailing out” — traditionally red states like Indiana. Thus, federal aid to states could actually reduce the state-to-state subsidies conservatives say they oppose.
Congressional Republicans will undoubtedly ignore these facts. Their proposed solution to the budget emergency could instead be a Newt Gingrich-backed initiative letting states default on outstanding obligations by declaring bankruptcy. Again, the word is fraught with new connotations.
Whereas sick or laid-off individuals occasionally claim a genuine inability to repay debts and thus a need for bankruptcy protections, states can never legitimately claim such a need because they are never actually “bankrupt.” Why? Because they always posses the power to raise revenue. The power is called taxation — and destroying that authority is what the new bankruptcy idea is really about. It would let states avoid tax increases on the wealthy, renege on contractual promises to public employees and destroy the country’s creditworthiness.
Blocking state “bailouts” and letting states declare “bankruptcy” are radical notions, especially in a bad economy. One would result in recession-exacerbating public layoffs; the other would institutionalize an anti-tax zealotry that destroys tomorrow’s middle class in order to protect today’s rich. That’s why advocates of these ideas have resorted to manipulating language. They know the only way to make such extremism a reality is to distort the vernacular — and if we aren’t cognizant of their scheme, they will succeed.
By: David Sirota, Syndicated Columnist, Sun Journal-published March 8, 2011
How To Kill A Recovery-Republican Style
The economic news has been better lately. New claims for unemployment insurance are down; business and consumer surveys suggest solid growth. We’re still near the bottom of a very deep hole, but at least we’re climbing.
It’s too bad that so many people, mainly on the political right, want to send us sliding right back down again.
Before we get to that, let’s talk about why economic recovery has been so long in coming.
Some economists expected a rapid bounce-back once we were past the acute phase of the financial crisis — what I think of as the oh-God-we’re-all-gonna-die period — which lasted roughly from September 2008 to March 2009. But that was never in the cards. The bubble economy of the Bush years left many Americans with too much debt; once the bubble burst, consumers were forced to cut back, and it was inevitably going to take them time to repair their finances. And business investment was bound to be depressed, too. Why add to capacity when consumer demand is weak and you aren’t using the factories and office buildings you have?
The only way we could have avoided a prolonged slump would have been for government spending to take up the slack. But that didn’t happen: growth in total government spending actually slowed after the recession hit, as an underpowered federal stimulus was swamped by cuts at the state and local level.
So we’ve gone through years of high unemployment and inadequate growth. Despite the pain, however, American families have gradually improved their financial position. And in the past few months there have been signs of an emerging virtuous circle. As families have repaired their finances, they have increased their spending; as consumer demand has started to revive, businesses have become more willing to invest; and all this has led to an expanding economy, which further improves families’ financial situation.
But it’s still a fragile process, especially given the effects of rising oil and food prices. These price rises have little to do with U.S. policy; they’re mainly because of growing demand from China and other emerging markets, on one side, and disruption of supply from political turmoil and terrible weather on the other. But they’re a hit to purchasing power at an especially awkward time. And things will be much worse if the Federal Reserve and other central banks mistakenly respond to higher headline inflation by raising interest rates.
The clear and present danger to recovery, however, comes from politics — specifically, the demand from House Republicans that the government immediately slash spending on infant nutrition, disease control, clean water and more. Quite aside from their negative long-run consequences, these cuts would lead, directly and indirectly, to the elimination of hundreds of thousands of jobs — and this could short-circuit the virtuous circle of rising incomes and improving finances.
Of course, Republicans believe, or at least pretend to believe, that the direct job-destroying effects of their proposals would be more than offset by a rise in business confidence. As I like to put it, they believe that the Confidence Fairy will make everything all right.
But there’s no reason for the rest of us to share that belief. For one thing, it’s hard to see how such an obviously irresponsible plan — since when does starving the I.R.S. for funds help reduce the deficit? — can improve confidence.
Beyond that, we have a lot of evidence from other countries about the prospects for “expansionary austerity” — and that evidence is all negative. Last October, a comprehensive study by the International Monetary Fund concluded that “the idea that fiscal austerity stimulates economic activity in the short term finds little support in the data.”
And do you remember the lavish praise heaped on Britain’s conservative government, which announced harsh austerity measures after it took office last May? How’s that going? Well, business confidence did not, in fact, rise when the plan was announced; it plunged, and has yet to recover. And recent surveys suggest that confidence has fallen even further among both businesses and consumers, indicating, as one report put it, that the private sector is “unprepared to fill the hole left by public sector cuts.”
Which brings us back to the U.S. budget debate.
Over the next few weeks, House Republicans will try to blackmail the Obama administration into accepting their proposed spending cuts, using the threat of a government shutdown. They’ll claim that those cuts would be good for America in both the short term and the long term.
But the truth is exactly the reverse: Republicans have managed to come up with spending cuts that would do double duty, both undermining America’s future and threatening to abort a nascent economic recovery.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 3, 2011
No Glory For Governors Trying To Do The Right Fiscal Thing
If you want to get national attention as a governor these days, don’t try to be innovative about solving the problems you were elected to deal with – in education, transportation and health care. No, if you want ink and television time, just cut and cut and cut some more.
Almost no one in the national media is noticing governors who say the reasonable thing: that state budget deficits, caused largely by drops in revenue in the economic downturn, can’t be solved by cuts or tax increases alone.
There is nothing courageous about an ideological governor hacking away at programs that partisans of his philosophy, including campaign contributors, want eliminated. That’s staying in your comfort zone.
The brave ones are governors such as Jerry Brown in California, Dan Malloy in Connecticut, Pat Quinn in Illinois, Mark Dayton in Minnesota and Neil Abercrombie in Hawaii. They are declaring that you have to cut programs, even when your own side likes them, and raise taxes, which nobody likes much at all. Rhode Island’s Lincoln Chafee has warned of possible tax increases too.
Indeed, to the extent that Quinn received any national press coverage, he got pilloried in conservative outlets in January when he signed tax hikes that included a temporary increase in Illinois’ individual income tax rate from 3 percent to 5 percent.
Despite all the commotion around whether the federal government will shut down, the clamor in the states may be even more important than what’s happening in Washington, which is missing in action on the moment’s most vital fiscal question.
What states are doing to ease their fiscal agonies will only slow down our fragile economic recovery, and may stop it altogether. The last thing we need right now are state and local governments draining jobs and money from the economy, yet that is what they are being forced to do.
As the last three monthly reports from the Bureau of Labor Statistics showed, an economy that created a net 317,000 private-sector jobs lost 70,000 state and local government jobs. Cutbacks are dead weight on the recovery.
In a more rational political climate, President Obama would have resurrected the lovely old Republican idea of federal revenue sharing. Washington should have continued replenishing state budgets for two more years, until we were certain the economic storms had passed. Instead, anything that might be called “stimulus” – “S” is now a scarlet letter in politics – was rejected out of hand.
The federal government could also help the states by picking up more of their Medicaid costs. In the long run, health-care spending should be a responsibility of the national government – as it is in almost every other wealthy democracy. A national commitment would end the specter of states forcing already financially beleaguered citizens off the health insurance rolls.
Such ideas are off the table because the current rage is not for figuring out how to make government work better – a cause that once united governors of both parties – but for cutting back even its most basic and popular functions.
Consider the new budget Gov. Scott Walker announced in Wisconsin on Tuesday. Among other things, he proposed cutting state aid to schools by $834 million over the next two years, a 7.9 percent reduction.
On top of that, Walker would make it harder for localities and school districts to make up for the shortfall by limiting their ability to raise property taxes. This isn’t about education reform. It’s about forcing larger class sizes, layoffs, reductions in extracurricular activities or cuts in teacher pay and benefits. But, hey, if it’s labeled “government,” let’s slash it.
What’s truly amazing, as Stateline.org reported recently, is the number of governors who are cutting taxes at the same time they are eviscerating programs. A particularly dramatic case is Florida’s Republican Gov. Rick Scott. He faces a $3.5 billion budget gap – and is pushing for $2 billion in corporate and property tax cuts.
Historically, times of fiscal stress forced states to make useful economies in programs that didn’t work or were not essential. But what’s happening in so many places now is a reckless rush to gut the parts of government that all but the most extreme libertarians support – and that truly deserve to be seen (one thinks of education and programs for poor children) as investments in the future.
And those governors doing the hard work trying to balance cutbacks and tax increases get ignored, because there’s nothing sexy about being responsible.
By: E. J Dionne, Op-Ed Columnist, The Washington Post, March 3, 2011
Whatever Happened To Uncertainty?
With the House passing a two-week funding extension and Harry Reid promising the Senate will do likewise, it looks like we have at least until March 18th before any federal agencies have to shut their doors. But then there’s a shutdown risk. And there’s another one coming as early as April 15th, when the Treasury bumps into the the debt ceiling and needs Congress to lift it in order to avoid default. Federal budget policy over the next few months is going to be like a weekend with Charlie Sheen: A constant effort to avoid blackouts (yes, Wonkbook went there).
Prior to winning the election in November, the GOP spoke often about the pressing need to reduce “uncertainty” in the economy. This was a core principle of their plan to restore economic confidence and create jobs. As Rep. Paul Ryan put it to me in July, “uncertainty is a new economic buzzword, but for good reason: If we can reduce it, we’ll unlock capital.” If businesses and individuals could be confident about what government was doing, what taxes would look like, and what regulators would ask of them, they could start investing again.
So are they succeeding at their own promise of reducing uncertainty? It’s hard to see how. Budget experts on both sides of the aisle have sharply upgraded their estimate of how likely a government shutdown is in the next few months, either over the continuing resolution for 2011 or the debt limit or both. There’s an ongoing effort to starve health-care reform of implementation funds and a promise to “replace” it with some policy that hasn’t yet been written — no one in the health space would say that the shape of health-care policy over the coming years looks more certain now than it did six months ago. The GOP chose a tax deal that lowered all rates for two years rather than a tax deal that lowered most rates permanently, so there’s uncertainty over future tax rates. The tax and health-care policies would both do much more to increase the deficit than anything else on the list would do to reduce it, ensuring that concern continues to loom. So for what definition of “uncertainty” has the GOP succeeded in reducing its prevalence in the economy?
In each case, of course, the GOP has a good argument for the choice it’s made: Lower tax rates on large estates and income over $250,000 were judged more important than tax certainty or deficit reduction. The health-reform law is so unwise that repealing it should be a top priority. The prospect of a government shutdown and/or default provides leverage to extract spending cuts, which are more important right now than assuring the market that there won’t be some sort of shutdown or default. It’s all fair enough, at least on its own terms. But it’s meant that the post-election GOP takes the risk of uncertainty a lot less seriously than the pre-election GOP did. It’s a tension I’d like to hear more of them comment on.
By: Ezra Klein-The Washington Post, March 2, 2011
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