“GOP Deficit Scolds”: By All Means, Cut Social Security, But Don’t Tax The Rich
If the White House’s political goal in calling for Social Security cuts in its budget was to reveal the GOP as the intransigent, uncompromising party in Washington, it’s having the desired effect.
The statements from Republican leaders today in response to the budget are noteworthy, though not surprising: They say we should proceed with Obama’s proposed entitlement cuts but not raise any new revenues by closing any millionaire loopholes. Oh, they don’t put it in those terms. But here’s John Boehner:
While the president has backtracked on some of his entitlement reforms that were in conversations that we had a year and a half ago, he does deserve some credit for some incremental entitlement reforms that he has outlined in his budget. But I would hope that he would not hold hostage these modest reforms for his demand for bigger tax hikes. Listen, why don’t we do what we can agree to do? Why don’t we find the common ground that we do have and move on that?
And here’s Eric Cantor:
If the President believes, as we do, that programs like Medicare, Medicaid and Social Security are on the path to bankruptcy, and that we actually can do some things to put them back on the right course and save them to protect the beneficiaries of these programs, we ought to do so. And we ought to do so without holding them hostage for more tax hikes.
In other words, let’s only do the thing where there’s common ground (entitlement cuts) and not do the thing where there is disagreement (tax hikes).
Now in one sense, this can be seen to validate some of the left’s worst fears about what would happen if Obama offered entitlement cuts. Now that he’s formally proposed cutting Social Security benefits, Republicans can describe that proposal as the one area of agreement between the two parties. And it’s true Obama will probably take a political hit for the proposal.
At the same time, though, it’s worth noting that this doesn’t put Republicans in the greatest political position, either. The GOP position — revealed with fresh clarity today — is that we should only cut entitlements but not raise a penny in new revenues by getting rid of any loophole enjoyed by millionaires. GOP leaders try to compensate for this by robotically repeating the phrase “tax hikes” as a negative, but polls show that majorities already understand that Republican policies are skewed towards the rich. The use of the phrase “tax hikes” to obscure what Dems are really calling for — new revenues from the wealthy — didn’t fare too well in the 2012 elections.
And so, if the White House budget was partly intended as a trap, Republicans walked into it, revealing themselves as the only real obstacle to compromise. Indeed, as Steve Benen points out, Paul Ryan helped underscore the point when he struggled to name anything Republicans could support that their base wouldn’t like.
Now, maybe you don’t believe that there’s much political value in staking out the compromising high ground in this debate, because the Very Serious Deficit Scolds in Washington won’t ever award Obama any real credit for doing this. And maybe you believe that offering Chained CPI will do nothing more than make it easier for Republicans to attack Dems for cutting Social Security in 2014 and 2016.
All I can say to that is that the White House views things differently. Obama advisers believe Republicans could just as easily attack him this cycle for cutting Social Security based on his previous support for Chained CPI. They think the lesson of 2012 (remember the failed “he raided Medicare to pay for Obamacare” talking point?) is that Dems can fend off this attack with relative ease. And from what I have been told, they are looking beyond just getting the approval of the Very Serious People. They want to establish a Beltway narrative that GOP devotion to protecting the wealth of the rich is what’s preventing a deal to replace the sequester, in hopes that it will seep into local news coverage of the cuts around the country as the pain of those cuts sinks in, weakening Republicans further.
Chained CPI is awful policy, and I oppose it. On the raw politics of all this, however, only time will tell who is right.
By: Greg Sargent, The Plum Line, The Washington Post, April 10, 2013
“Cheating Our Children”: The Deficit Scolds Are Actually The Bad Guys In This Story
So, about that fiscal crisis — the one that would, any day now, turn us into Greece. Greece, I tell you: Never mind.
Over the past few weeks, there has been a remarkable change of position among the deficit scolds who have dominated economic policy debate for more than three years. It’s as if someone sent out a memo saying that the Chicken Little act, with its repeated warnings of a U.S. debt crisis that keeps not happening, has outlived its usefulness. Suddenly, the argument has changed: It’s not about the crisis next month; it’s about the long run, about not cheating our children. The deficit, we’re told, is really a moral issue.
There’s just one problem: The new argument is as bad as the old one. Yes, we are cheating our children, but the deficit has nothing to do with it.
Before I get there, a few words about the sudden switch in arguments.
There has, of course, been no explicit announcement of a change in position. But the signs are everywhere. Pundits who spent years trying to foster a sense of panic over the deficit have begun writing pieces lamenting the likelihood that there won’t be a crisis, after all. Maybe it wasn’t that significant when President Obama declared that we don’t face any “immediate” debt crisis, but it did represent a change in tone from his previous deficit-hawk rhetoric. And it was startling, indeed, when John Boehner, the speaker of the House, said exactly the same thing a few days later.
What happened? Basically, the numbers refuse to cooperate: Interest rates remain stubbornly low, deficits are declining and even 10-year budget projections basically show a stable fiscal outlook rather than exploding debt.
So talk of a fiscal crisis has subsided. Yet the deficit scolds haven’t given up on their determination to bully the nation into slashing Social Security and Medicare. So they have a new line: We must bring down the deficit right away because it’s “generational warfare,” imposing a crippling burden on the next generation.
What’s wrong with this argument? For one thing, it involves a fundamental misunderstanding of what debt does to the economy.
Contrary to almost everything you read in the papers or see on TV, debt doesn’t directly make our nation poorer; it’s essentially money we owe to ourselves. Deficits would indirectly be making us poorer if they were either leading to big trade deficits, increasing our overseas borrowing, or crowding out investment, reducing future productive capacity. But they aren’t: Trade deficits are down, not up, while business investment has actually recovered fairly strongly from the slump. And the main reason businesses aren’t investing more is inadequate demand. They’re sitting on lots of cash, despite soaring profits, because there’s no reason to expand capacity when you aren’t selling enough to use the capacity you have. In fact, you can think of deficits mainly as a way to put some of that idle cash to use.
Yet there is, as I said, a lot of truth to the charge that we’re cheating our children. How? By neglecting public investment and failing to provide jobs.
You don’t have to be a civil engineer to realize that America needs more and better infrastructure, but the latest “report card” from the American Society of Civil Engineers — with its tally of deficient dams, bridges, and more, and its overall grade of D+ — still makes startling and depressing reading. And right now — with vast numbers of unemployed construction workers and vast amounts of cash sitting idle — would be a great time to rebuild our infrastructure. Yet public investment has actually plunged since the slump began.
Or what about investing in our young? We’re cutting back there, too, having laid off hundreds of thousands of school teachers and slashed the aid that used to make college affordable for children of less-affluent families.
Last but not least, think of the waste of human potential caused by high unemployment among younger Americans — for example, among recent college graduates who can’t start their careers and will probably never make up the lost ground.
And why are we shortchanging the future so dramatically and inexcusably? Blame the deficit scolds, who weep crocodile tears over the supposed burden of debt on the next generation, but whose constant inveighing against the risks of government borrowing, by undercutting political support for public investment and job creation, has done far more to cheat our children than deficits ever did.
Fiscal policy is, indeed, a moral issue, and we should be ashamed of what we’re doing to the next generation’s economic prospects. But our sin involves investing too little, not borrowing too much — and the deficit scolds, for all their claims to have our children’s interests at heart, are actually the bad guys in this story.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 28, 2013
“Was Abe A RINO Too?” John Boehner Has No Use For Lincoln In Context
House Speaker John Boehner (R-Ohio) sent a memo to all House Republicans today, telling them what a great job they’re doing. Of particular interest, though, was the Speaker arguing how “noble” he and his party are for trying to balance the budget. From the memo:
The book Congressman Lincoln by Chris DeRose, which I recently read, includes a chapter focused on Abraham Lincoln’s efforts to help craft a new national agenda. At one point in the book, young Lincoln warns that government debt is “growing with a rapidity fearful to contemplate.”
“[Government debt] is a system not only ruinous while it lasts, but one that must soon fail and leave us destitute,” Lincoln warns his countrymen in Congressman Lincoln. “An individual who undertakes to live by borrowing, soon finds his original means devoured by interest, and next no one left to borrow from – so must it be with a government.”
Lincoln’s words ring true today, perhaps to a degree greater than ever before.
Oops.
Lincoln, however, while warning of debt, also said that the debt had been created by the unwillingness to consider new revenue.
“By this means a new national debt has been created, and is still growing on us with a rapidity fearful to contemplate — a rapidity only reasonably to be expected in time of war. This state of things has been produced by a prevailing unwillingness either to increase the tariff or resort to direct taxation. But the one or the other must come,” Lincoln wrote in the Whig Circular in 1843.
Oh how I love this story.
Lincoln, who saw great value in a strong federal government, supported public investments in infrastructure, and increased taxes to pay for the Civil War, was concerned about government debt. The historical context matters — Lincoln warned of lost creditors, while in contemporary times, investors are eager to loan the United States money — but it would appear the legendary leader believed in fiscal responsibility.
But Boehner has no use for what Lincoln actually said and did. While today’s House Speaker refuses to consider asking any American to pay so much as a penny in additional taxes, Lincoln saw increases in taxes or tariffs as an undeniable way of responsibly paying our debts. Indeed, he blamed federal debts on “a prevailing unwillingness [to] resort to direct taxation.”
And to borrow a phrase, Lincoln’s words ring true today, perhaps to a degree greater than ever before.
I’d just add, by the way, that the Speaker’s credibility on the issue is genuinely laughable. Boehner today writes, “There should be no doubt that our purpose in calling for a balanced budget is a noble one, and the right one.” This is the same Boehner who approved George W. Bush’s tax cuts without paying for them, put the price of two wars on the national charge card for future generations to worry about, supported Medicare expansion through deficit financing, and added the costs of a Wall Street bailout to the national debt.
Now this same guy wants to talk about the nobility of his fiscal agenda? While taking Lincoln out of context? And while pretending his preferred budget plan isn’t filled with magic asterisks?
C’mon, Mr. Speaker. You can do better than this.
Update: Jay Bookman emails to let me know the story gets even better. In that same piece, Lincoln goes on to endorse a tariff rather than a direct or property tax to raise revenue, because — get this — through a tariff, “the burthen of revenue falls almost entirely on the wealthy and luxurious few, while the substantial and laboring many … go entirely free.”
So, by 2013 standards, Lincoln is a success-hating RINO, right?
By: Steve Benen, The Maddow Blog, March 28, 2013
“Low Information Republicans”: What We Have Here Is More Than A Failure To Communicate
One of the more common areas of discussion among political professionals is the phenomenon of low-information voters. These are folks who care about the country and its future, but choose not to keep up on current events, due to some combination of feeling busy, apathetic, and frustrated. Political pros find these Americans difficult to reach — and at times, easy to manipulate — precisely because they’re disengaged and far behind the curve.
The point isn’t that low-information voters are dumb, but rather, that they’re ignorant. In focus groups, you’ll hear these same folks express poorly thought out opinions based on vague “something I heard on the news” observations.
But what happens when we move past low-information voters and start looking at low-information politicians? Ezra Klein relayed an incredible exchange from last week about the ongoing fiscal debate in Washington.
Would it matter, one reporter asked the veteran legislator, if the president were to put chained-CPI — a policy that reconfigures the way the government measures inflation and thus slows the growth of Social Security benefits — on the table?
“Absolutely,” the legislator said. “That’s serious.”
Another reporter jumped in. “But it is on the table! They tell us three times a day that they want to do chained-CPI.”
“Who wants to do it?” said the legislator.
“The president,” replied the reporter.
“I’d love to see it,” laughed the legislator.
In other words, an elected member of Congress — a “veteran legislator,” not some freshman who’s only been in office a couple of months — wants to see President Obama endorse a “serious” policy like chained-CPI as part of a larger debt-reduction package, but the lawmaker has absolutely no idea that Obama has already endorsed chained-CPI as part of a larger debt-reduction package. Indeed, in this case, the Republican lawmaker was so incredulous, he or she laughed at reality, as if it couldn’t possibly be true.
So, is it fair to say Washington debates would be less ridiculous if low-information Republican lawmakers were simply brought up to speed on the basics? Would compromise be easier if GOP officials had some clue as to what President Obama is, in reality, offering?
Well, no, probably not.
Jon Chait reminds us of the classic Upton Sinclair line: “It is impossible to make a man understand something if his livelihood depends on not understanding it.”
As this is applied to the ongoing political debates in DC, Republicans seem ignorant to a jaw-dropping degree about some of the basics, but even if they suddenly became more informed, it’s likely they’d come up with new reasons not to govern constructively with the White House.
Indeed, we don’t have to speculate to know this is true. Over the weekend, Ezra highlighted concerns raised by Mike Murphy, one of the top political consultants in the Republican Party, who said President Obama could reach a bipartisan deal with Republicans if only he endorsed chained CPI, apparently unaware that Obama has already done this.
Reminded of the facts, Murphy dug in, saying Obama endorsed means testing, but “refused” chained CPI. This is factually incorrect, too — indeed, it’s the exact opposite of reality — and when this was brought to his attention, Murphy switched gears, saying chained CPI is a “small beans gimmick” and Republicans just aren’t able to “trust” the White House.
Keep in mind, Murphy’s no dummy, but his line of argument is literally incoherent. He wants Obama to endorse a policy. Told that Obama already endorsed that policy, Murphy denies it. Presented with proof, Murphy decides the policy he supports isn’t so great after all.
So what does Murphy recommend? That Obama “earn trust” with Republicans by “first” agreeing to spending cuts. But in our reality, Obama already embraced about $1.5 trillion in spending cuts in 2011, with no accompanying revenue. In other words, Murphy believes the way out of the current mess is for the president to give Republicans 100% of what they want, accepting another cuts-only package.
Ezra’s bottom line rings true: Republicans have effectively eliminated the possibility of compromise, since they “just want to get the White House to implement their agenda in return for nothing.”
By: Steve Benen, The Maddow Blog, March 4, 2013
“Morning Joe’s Accuracy Deficit”: If It’s Way Too Early, It’s Just Flat Out Wrong
We’ve all played the game “telephone,” where a message gets distorted in the retelling, often so much so that the original sender has a hard time recognizing it when it comes back. Nowadays, “telephone” is played in the blogosphere, and that’s how I felt when I first learned that my views on reducing the federal budget deficit were portrayed as in sharp contrast to those of my famous Princeton colleague, Paul Krugman.
The story began when Krugman appeared as a guest on “Morning Joe” on January 28th. He locked horns with host Joe Scarborough and others over how urgent it is to reduce the deficit, with Krugman arguing that we have lots of time and Scarborough (and others) arguing that we need to act post haste. Krugman did not dispute the notion that we must eventually get ourselves off the explosive debt path on which we now find ourselves. But he insisted that, with the economy so weak and the markets so welcoming of U.S. Treasury debt, we can and should go slowly.
Scarborough, though cordial to his guest, was incredulous and even amused. He subsequently argued in POLITICO that Krugman’s view is extreme, dangerous, and — most germane to this note — shared by almost no one else. It certainly wasn’t the consensus view on “Morning Joe” that day.
When Scarborough speaks, people listen. So controversy quickly erupted in the blogosphere. In POLITICO on February 15th, Scarborough invoked me as being on his side of the debate — which was news to me. While there are nuances of difference between my views on the budget issue and Krugman’s, and notable differences in rhetorical style, our positions are broadly similar. I’m probably a tad more hawkish than my colleague, but there’s not much distance showing between us.
So why had Scarborough declared me a deficit hawk?, I wondered when someone informed me of the alleged schism within the Princeton economics department. Here’s the answer.
In my new book, “After the Music Stopped” (Penguin Press, 2013), which was published a few days before the Scarborough-Krugman debate, I argued that there is not just one, but actually three distinct deficit problems, each with its own solution.
PROBLEM 1: In the very short run, meaning right now, we probably have too much deficit reduction. The U.S. economy could actually use some fiscal stimulus (to wit, larger deficits) today, rather than more fiscal contraction, because unemployment is still so high. Doesn’t that sound like Krugman?
PROBLEM 2: Over the coming decade, however — which is the focus of Simpson-Bowles, the so-called grand bargain, and most other plans — we do need to bring the deficit down, I argued. And, indeed, Problems 1 and 2 should be linked: by joining together some modest stimulus now with perhaps ten times as much deficit reduction over the ten-year budget window. In Washington-speak, we would thus “pay for” the stimulus ten times over. Furthermore, I argued, we could accomplish that without undue pain and suffering.
PROBLEM 3: The real budget crunch comes well down the line — a decade or two or three from now. The problem is simple to diagnose — healthcare costs are projected to soar — and it looks massive. By the way, that doesn’t mean we shouldn’t start addressing the healthcare cost problem now.
An excerpt from my book, making these points, was published in The Atlantic on January 25th — three days before the “Morning Joe” show. Interestingly, The Atlantic entitled the excerpt: “How to Worry About the Deficit: (1) Don’t; (2) Wait a Few Years; (3) Then Worry About Healthcare Costs.” A bit long as headlines go, and maybe a bit misleading, but it did capture the three separate deficit issues.
Apparently the article caught Scarborough’s eye. In that POLITICO article, he cited me as among the anti-Krugmans, claiming I was “particularly supportive of the “Morning Joe” panel’s view.” Why? Because I had warned of “truly horrific problems” ahead and “even shared [the] conclusion that the coming Medicare crisis will be so great that Democrats won’t be able to tax their way out of it.”
Well, I did say those things, but they referred to Problem 3, the long-run explosion of healthcare costs, not to Problem 2, the ten-year budget. Here’s the actual quotation about taxing our way out of the exploding healthcare costs (from “After the Music Stopped,” p. 404):
“The government can cover no more than a small fraction of the projected deficits by raising taxes. Sorry, Democrats, but the Republicans are right on this one. Americans are used to federal taxes running about 18.5 percent of GDP; they will not allow them to rise to 32 percent of GDP. Never mind that a number of European countries do so; we won’t.”
Krugman subsequently noted in his blog (on February 16) that his position is “not so different” from mine.
I don’t blog, so the purpose of this missive is simple: Can we please end the mini-debate right here? While there may be some small differences between Krugman’s position on reducing the deficit and my own, they are pretty small. Had I been on “Morning Joe” that day, the debate surely would have been two against four, not one against four. Furthermore, Krugman and I are not occupying some obscure corner of the policy debate, where only weirdos live. A large number of economists are on our side. Others, of course, are closer to the Scarborough camp.
The more important question is the substantive issue of the day: Should we be going for more fiscal austerity right now, or not? Those of us who say “not” urge you to consider some pertinent facts: the unemployment rate remains sky high; fiscal austerity has failed in Europe, where it is harming growth; the U.S. Treasury can still borrow at super-low interest rates; and we have already made serious progress on the ten-year budget problem. Now make up your own minds.
By: Alan S. Blinder, Opinion Contributor; Professor of Economics and Public Affairs, Princeton; Former Vice Chairman of the Federal Reserve, Politico, March 4, 2013
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