“Republicans Can Kiss Medicare Privatization Goodbye”: GOP Has A Vice Grip On The House, A Much More Tenuous Grasp Of The Senate
For the last four years Republicans have used their small power perch in the House of Representatives to prime members for the day when they’d control the whole government. During each of those years, House Republicans passed a budget calling for vast, contentious reforms to Medicare, Medicaid, and other support programs. Republicans proposed crushing domestic spending to pay for regressive tax cuts and higher military spending, and then went further by laying out specific structural reforms to popular government spending programs.
Today they control the Senate as well, which represents significant progress toward their goal of complete control over the government. But as Republicans inch toward that goal they’re also growing less committed to their ideas.
Senate Republicans will not include detailed plans to overhaul entitlement programs when they unveil their first budget in nearly a decade this week, according to GOP sources… The GOP budget would balance in 10 years, according to GOP lawmakers familiar with the document, but it will only propose savings to be achieved in Medicare and Medicaid, without spelling out specific reforms as Ryan and House Republicans did in recent budgets.
House Republicans can proceed as they have in years past and pass a controversial budget of their own, but based on this report, it looks like the Senate isn’t inclined to reciprocate. The simplest explanation for the commitment gap is that the GOP has a vice grip on the House, but a much more tenuous grasp of the Senate. Leaving Medicare privatization out of the budget is a simple way to make life easier for embattled GOP incumbents in Wisconsin, Pennsylvania, New Hampshire, and elsewhere.
But that basic political calculation speaks to a much bigger structural impediment facing the kinds of policies conservative activists want to see. The farther and farther you zoom out from the gerrymandered districts most House Republicans represent, the more difficult it becomes to build political support for the House Republican budget. At the swing state level it’s very hard. At a national level it’s probably impossible.
Back in 2012, Republicans hoped to skip directly from controlling the House alone to controlling everything. If Mitt Romney and Paul Ryan had won, the party would’ve been well prepared to implement the kinds of policies Ryan had trained his foot soldiers in Congress to vote for. Instead, the slower process of expanding majorities has exposed basic weaknesses in their position.
In 2012, Grover Norquist could, with some authority, declare: “We are not auditioning for fearless leader. We don’t need a president to tell us in what direction to go. We know what direction to go. We want the Ryan budget…. We just need a president to sign this stuff.”
That line of thinking doesn’t hold up anymore. Can Republican presidential candidates run on privatizing Medicare if Senate candidates down the ballot can’t be seen supporting those kinds of reforms? Could they successfully spring a big entitlement devolution on the public in 2017 if they don’t campaign on it aggressively in 2016? George W. Bush tried that in 2005 and it blew up in his face. There’s no reason to think it wouldn’t play out the same way again.
By; Brian Beutler, The New Republic, March 16, 2015
“The 35-Year GOP Budget Dilemma”: Deficits Take Care Of Themselves, As Long As They Are The Ones Running Them Up
One of the more important consequences of the Republican takeover of both chambers of Congress has been the GOP’s inability to paper over internal differences of opinion–or more to the point, to blame the inability to get stuff done on Harry Reid. We may be about to see this dynamic playing out in spectacular fashion when Congress takes up a FY 2016 budget resolution, which Republicans pretty much have to attempt after years of attacking Reid for Democratic Senate refusals to pass budget resolutions (a largely symbolic exercise absent enforcement mechanisms, and unnecessary for a while given the Obama-GOP spending agreements adopted outside “regular order”). As the New York Times‘ Jonathan Weisman describes the state of play right now, there’s a “chasm” between Republicans whose prime objective is to eliminate the sequestration system that has capped defense spending, and Republicans who are still spouting 2009-10 rhetoric about debt and deficits.
“This is a war within the Republican Party,” said Senator Lindsey Graham, Republican of South Carolina, who has vowed to oppose a final budget that does not ensure more military spending. “You can shade it any way you want, but this is war.”
The divisions will be laid bare Tuesday when congressional leaders unveil blueprints that hew to spending limits imposed by the budget battles of 2011.
Unlike legislation, the spending plan Republicans will be creating this week requires only a majority vote in both the House and Senate, cannot be blocked by a filibuster and is not subject to presidential approval or veto.
The intra-party tension this year has been ratcheted up by three external factors, of course: the general war-lust of Republicans, which is currently reaching early-2000s levels; shrinking short-term federal budget deficits; and an impending presidential election that makes the most likely way out of the GOP’s budget dilemma–Social Security, Medicare and Medicaid cuts–rather perilous.
But it’s important not to think of this problem too narrowly as a current phenomenon. In reality, Republicans have been struggling with this same dynamic for 35 years, since the first Reagan Budget. Given four ideological goals in budgeting–lowering top-end tax rates; boosting defense spending; going after New Deal/Great Society spending; and reducing budget deficits–the one that always gets the short end of the straw is deficit reduction, even if supply-side magic asterisks allow GOPers to pretend, temporarily, that deficits will take care of themselves, as long as they are the ones running them up. And speaking of magic asterisks:
Senator Kelly Ayotte, Republican of New Hampshire, and Mr. Enzi are pressing for a place holder in the budget — a “deficit-neutral reserve fund” — that they say would allow Congress to come back in the coming months with legislation to lift the spending caps.
The idea is to pass a budget this month that sticks to the spending caps, but then negotiate a budget law this summer that ends sequestration. The $540 billion in cuts still to come under the Budget Control Act would be replaced by savings from entitlement programs like Medicare and Social Security as well as new revenue from closing some tax loopholes.
To translate, this means an unenforceable promise to come back later and pay for a defense spending boost via “entitlement reform,” which Democrats and the White House have no intention of allowing. By summer, I guess, Republicans will come up with some way to delay the inevitable, and/or to disguise an implicit deal with Democrats to suspend sequestration long enough to give both the Pentagon and domestic programs a fresh drink of water.
By: Ed Kilgore, Contributing Writer, Political Animal Blog, The Washington Monthly, March 16, 2015
“Dynamic Scoring Isn’t A Magical Tool”: Here’s How Conservatives Rig The Budget Game In Washington
When Republicans decided not to retain Doug Elmendorf as head of the Congressional Budget Office (CBO), Democrats became concerned that conservatives would try to rig the budget process. When the GOP required the CBO to use dynamic scoring for its legislative scores, Democrats became even more concerned. Those fears have proven overblown. The new CBO chair, whom Republicans announced last week, is Keith Hall, an economist at the Mercatus Center who was the commissioner of the Bureau of Labor Statistics under President Barack Obama. He’s a credible economist, not a partisan hack.
If you still want to see the budget gamed, though, look no further than the Tax Foundation’s score of Senators Marco Rubio and Mike Lee’s tax plan. The Foundation says that under a static scoring model, which doesn’t account for macroeconomic effects of the plan, the plan would cost the federal government $414 billion annually. That’s a huge amount of money. The government collects about $3 trillion a year in tax revenue, meaning the Rubio-Lee plan would be a 12.5 percent cut, a bold but unsurprising figure. Before Lee teamed up with Rubio, he released a first draft of his tax plan that reduced government revenue by an average of $240 billion a year. The new plan has even more tax cuts.
But when the Tax Foundation applies a dynamic scoring model to estimate the revenue effects of Rubio-Lee, the findings get downright wild. The Foundation projects that once the economy adjusts to the changes, it will grow enough to generate $508 billion (in 2015 dollars) in additional revenue each year. That would leave the American taxpayer with a cool $94 billion net annual gain.
To understand why this is so ridiculous, look at the Joint Committee on Taxation’s dynamic scoring estimates for the tax plan former Representative Dave Camp released last year. (The JCT produces revenue estimates for CBO.) The JCT used eight different dynamic scoring models and provided eight different estimates. “The increase in projected economic activity is projected to increase revenues relative to the conventional revenue estimate by $50 to $700 billion, depending on which modeling assumptions are used, over the 10-year budget period,” the report concluded. Now, $700 billion is nothing to sneer at, but that’s over a ten-year period. The Tax Foundation’s dynamic scoring model raised nearly that amount of additional revenue every single year.1
This is a slightly different comparison, because JCT’s numbers come from the 10-year period while the economy adjusted to the tax plan versus the Tax Foundation’s numbers, which are from after the economy full adjusted. The difference is still stark.
Once the Foundation releases the full report Monday, Rubio and Lee will surely cite the numbers ad nauseam to gin up favorable coverage and analyses of the proposal. The Tax Foundation is giving Rubio and Lee a major political boost by producing such a friendly score.
I’m sure the Foundation’s economists would disagree that they are doing the two senators a huge favor. They would say that the Rubio-Lee plan is far friendlier to economic growth than Camp’s plan was. Maybe they’re right. But it’s not that much friendlier. These numbers are far beyond any realistic estimate of Rubio-Lee’s macroeconomic effects. And it’s basically impossible to produce realistic estimates to start. “Theoretically dynamic scoring is the right thing to do,” Peter Orszag, who was director of CBO under President Barack Obama from 2007 to 2008, told me in January. “Just practically, it’s problematic. When you’re forced to pick one model, you’re pushing scientific knowledge beyond reality. You’re forcing the organization to pick one ‘true’ model when the economic science hasn’t produced a single model that works.”
Many conservative economists agree. Douglas Holtz-Eakin, a former CBO director, has frequently said that dynamic scoring isn’t a magical tool to make huge tax cuts look fiscally responsible. Greg Mankiw, who was the top economist for President George W. Bush from 2003 to 2005, recently wrote in the New York Times that while dynamic scoring is theoretically correct, “there are also good reasons to be wary of the endeavor.”
If Republicans had required that the CBO and the JCT use the Tax Foundation’s dynamic scoring model, it would have been a major problem. At least now the two parties accept the CBO’s score as legitimate. If they demand a bill to be deficit-neutral, the CBO is the final arbiter. That would all change if the Tax Foundation’s models were used. Of course, the actual likelihood of that happening was never clear. But if Republicans had required such changes, Democrats would never have trusted any score on any legislation—and rightfully so.
The two sides have enough trouble agreeing to pass anything today. It would be that much harder if they couldn’t even agree on the scores of legislation. You can understand why Democrats were so nervous as Republicans debated how to change the agencies.
1This is a slightly different comparison, because JCT’s numbers come from the 10-year period while the economy adjusted to the tax plan versus the Tax Foundation’s numbers, which are from after the economy full adjusted. The difference is still stark.
By: Danny Vinik, The New Republic, March 5, 2015
“More About Marketing Than Math”: The Tea Party’s Big Idea To Shrink Government Is A Vacuous Nothingburger
Insurgent political movements are usually built around a big idea, like abolition or workers’ rights. The Tea Party certainly has a big idea: Shrink the government.
Wanting to shrink the government is a perfectly reasonable impulse given the state of Washington’s finances. The federal debt has more than doubled as a share of GDP since 2007, and future spending projects are off the charts. The latest academic evidence suggests an increase in government size is associated with slower annual GDP growth.
It’s easy to see why this shrink-the-government idea is powerful, and how it fueled the Tea Party’s rapid ascent into a rocket-powered force on the right.
However, a big idea alone is not sufficiently enough, in and of itself, to guarantee success. And therein lies the Tea Party’s big problem.
The Tea Party’s blueprint for turning their raison d’être into reality is flawed. Called the “Penny Plan,” it’s a favorite of the Tea Party Patriots, media supporters such as Sean Hannity of Fox News, and fellow travelers in Congress, including possible 2016 presidential candidate Rand Paul and — perhaps most importantly — Mike Enzi, the new Republican chairman of the Senate Budget Committee.
First devised by Georgia businessman Bruce Cook, the Penny Plan would cut government spending by 1 percent a year until the federal budget is balanced. After that, federal spending would be capped at 18 percent of GDP, to match the long-term revenue trend. Here’s how Enzi touts the plan on his website:
Though only a 1 percent cut, the savings add up quickly to balance the budget. And if it’s done right, where we’re eliminating duplication and sensibly prioritizing, discomfort will be manageable. … Living with 1 percent less is a small price to pay in order to help bring this country back from the brink of catastrophic fiscal failure. [Enzi]
It sounds so simple! Well, it really isn’t.
For starters, the “penny” part of the plan is a gimmick, more about marketing than math. The Enzi version would cut 1 percent a year from total government spending, other than debt interest payments, for three years. Maybe that doesn’t sound like much. But once you factor in inflation, that works out to a 10 percent cut in real terms after three years.
Now maybe that still doesn’t sound like much. But getting such a reduction is tough enough that there are no details in the Penny Plan about what exactly would be cut. To balance the budget in 2018, according to CBO, it would require $540 billion in reduced spending. It can’t all come from reducing non-defense discretionary spending such as foreign aid or scientific research. That part of the budget, just 17 percent, or around $600 billion, is already at its lowest levels since the 1960s as a share of GDP.
That leads to a bigger problem with the Penny Plan: Is it realistic to cap long-term government spending at 18 percent of GDP — well less than the post-WWII average of 21 percent — when an aging population means increased spending on entitlements such as Medicare and Social Security? Remember, most of the spending increase from health-related entitlements and Social Security — 75 percent over the next quarter century — comes from simple demographics, more people getting benefits over a longer period of time. That works out to about 3 percentage points of GDP in additional spending baked into the budgetary cake. Overall, CBO projects total spending at 26 percent of GDP by 2039.
Just keeping long-term spending at its historic average will be a huge challenge, much less sharply reducing it. If you also want to spend a bit more on important public investments such as infrastructure and basic research while keeping military spending constant — well, good luck. Even the GOP Senate’s new balanced budget amendment — which doesn’t calculate debt interest payments as spending — would have a tough time hitting its 18 percent target.
That the Penny Plan offers zero specifics on how to make the numbers work undercuts its seriousness. It would obviously require sweeping entitlement reform — and more. But Enzi, for one, argues that “we should focus on identifying and eliminating all of the wasteful spending that occurs in Washington before we look to other important programs and services.” That’s an evasion, though hardly a surprising one from a party that depends on older voters.
In fact, some on the right are trying to fudge that political reality by distinguishing between “earned” entitlements — Social Security and Medicare — that go to GOP-leaning voters and “unearned” entitlements — such as Medicaid and ObamaCare subsidies — that go to Democratic-leaning voters.
So yes, the Tea Party has a big idea. But it has no idea how to make it happen.
By: James Pethokoukis, The Week, February 19, 2015
“Republican Ideas Haven’t Changed Since The 1970s”: John Boehner Should Try Listening To His Own Economic Advice For Obama
After President Obama released his 2016 budget on Monday, House Speaker John Boehner published a list of ten things that are “newer than Obama’s ideas.” Instagram, Angry Birds, Frozen, and the selfie stick all made the cut. Boehner’s office even created a clunky hashtag for the list—#NewerThanObamasIdeas. The irony is rich: Republican ideas have hardly changed since the 1970s.
It’s true that many proposals in Obama’s budget, like increased infrastructure spending, comprehensive immigration reform, and universal pre-kindergarten, were in his previous budget too. But there were many new ideas, as well. He proposed a new, 19 percent minimum tax on foreign corporate profits—a big move towards the GOP’s preferred territorial tax system. He also wants to expand a tax credit for child care while increasing the capital gains tax rate from 23.8 percent to 28 percent. He put forward a major overhaul of the unemployment insurance system.
None of these represent radical departures from Obama’s previous agendas. But Obama is a Democrat, not a Republican. He wasn’t suddenly going to abolish the Internal Revenue Service and repeal the Affordable Care Act, just as Republicans won’t suddenly wake up and support a single-payer system and higher taxes on the rich.
And Republican ideas on the economy have aged even worse than the Democrats’ stale agenda. Take monetary policy. Throughout Obama’s presidency, GOP lawmakers have frequently criticized the Federal Reserve for low interest rates and its recently-ended bond-buying program. Those policies, they have argued, would send inflation shooting upwards. That, of course, has not happened. Inflation has remained below the Fed’s 2 percent target for years. The greater risk is actually deflation—falling prices.
Of course, in the 1970s, inflation was a very real concern. Then-Fed chair Paul Volcker raised interest rates, causing a recession, but stamping out inflation. Republicans, fearing pre-Volcker inflation, are trying to apply those lessons during a very different time, when the far greater risk to the economy has been a weak labor market. If the Fed had implemented them, it would have led to a disastrous economic contraction.
Or consider taxes. Most of the Republican Party has a laser-like focus at lowering the top marginal tax rates. But some reform-minded conservatives also want to finance a huge expansion of the Child Tax Credit (CTC)—a tax credit available to parents. They believe that the Reagan tax cuts in the 1980s that lowered the top marginal tax rate from 70 percent to 50 percent was a smart move. But they see far fewer benefits in lowering marginal tax rates now. “Let’s say we cut the 15 percent federal income-tax rate faced by much of the middle class to 10 percent,” Robert Stein writes in the reformicon’s new conservative agenda, titled “Room to Grow.” “Instead of keeping 85 cents for a dollar of extra effort, a worker would get 90 cents—an improvement of only 5.9 percent.… For these workers, cutting the 15 percent rate to 10 percent would make absolutely no difference in work incentives.” A CTC expansion would put money directly into the pockets of parents who need it. While a few prominent members in the Republican Party have adopted Stein’s tax proposal, most notably Senator Marco Rubio, the vast majority of the party would rather lower marginal rates further instead of expanding the CTC. In other words, Republican tax ideas are still stuck in the 1970s as well.
At the end of Boehner’s listicle, his office writes, “The simple truth is this: The federal budget shouldn’t be cobwebbed by the policies of the past. It should be focused on the future—a future where our kids and grandkids can grow up free from the fear of never-ending debt and a bloated Washington bureaucracy.” His party should listen to that advice.
By: Danny Vinik, The New Republic, February 6, 2015
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