“Why Obama’s Budget Matters”: Differences Within The GOP That Could Be Finessed In The Past Will Have To Be Dealt With Openly
When President Obama releases his budget on Monday, the words “dead on arrival” will be widely incanted because they are part of a quasi-religious Beltway ritual.
This year, those words will be misleading.
No one expects Obama’s budget to be enacted as he proposes it. Republicans responded even to early outlines of his plan with a wall of opposition. But this time around is different because, paradoxically perhaps, the fact that Republicans control both the House and Senate makes Obama’s role more rather than less important.
For the last four years, the budget game was three-cornered. The president played alongside an often radically conservative Republican House and a Democratic Senate with views of its own. Now, Obama’s plan will be the main public alternative to whatever the Republicans decide to do.
Moreover, the Republicans are responsible for passing a budget through two houses, so differences within the GOP that could be finessed in the past will have to be dealt with openly.
The most obvious will be on whether to continue cuts in the defense budget prescribed under the so-called sequester enacted in 2011. GOP defense advocates want to raise Pentagon spending substantially, libertarians want to keep both domestic and military spending low, and many mainstream conservatives will try to cut domestic spending even more to accommodate defense increases. The third option will almost certainly be a non-starter, not only with the president — he has a veto and will insist that any cuts be balanced between the two sides of the ledger — but also with many in the GOP rank-and-file.
Obama has declined to offer premature concessions to the Republicans in his own proposal, which further clarifies the stakes. At the same time, he has made things trickier still for his opponents by putting many of his ideas in a form that Republicans have supported in the past. That’s true even of some of his tax proposals.
The president is aware that the most damaging alliance in Washington has been the one between establishment deficit hawks, who continue to think that long-term deficits are the premier economic issue before the country, and Republican conservatives, who have used the legitimate concerns of the deficit hawks to justify deep cuts in government programs without any offsetting increases in revenues.
The president will call this bluff by putting $1.8 trillion in long-term deficit reduction on the table. But most of it will come on the revenue side. His argument here is straightforward: The bulk of the deficit reduction in the deals reached since 2011 has come from cuts in discretionary spending — that is, almost everything except the big retirement programs — which is now at its lowest level as a share of GDP in decades.
The deficit hawks who aren’t part of the ideological assault on the public sector know that the basic functions of government have already been cut too much and that some new domestic spending, particularly for infrastructure, is essential. Obama calls the question: If additional revenues are unacceptable, how is deficit reduction supposed to be achieved? There can’t be any “grand bargains” until conservatives acknowledge upfront that tax increases of some kind need to be part of any long-term solution.
But the biggest challenge to Republicans may be whether they are willing to go along with Obama on ideas that are plainly in their wheelhouse. One small but significant hope: Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA) have been pushing the idea that we need more evidence-based policymaking, and Obama is joining their campaign. This sounds like a no-brainer, but much needs to be done to integrate concerns about what works and what doesn’t into our governing routines.
Republicans have been trying hard to tout their concern about income stagnation and an increasingly frozen class structure. Obama will be pushing for a new initiative, “The Upward Mobility Project,” to provide more flexibility to local officials in a set of government programs if they can show how their efforts will help people climb occupational and income ladders. Projects of this sort are exactly what we should be thinking about.
When budget fights become melodramas over whether the government will shut down or default, we lose track of what the exercise is supposed to be about. Obama’s opening bid ought to be the start of a back-to-basics debate — an argument that will extend into the 2016 campaign — over what we actually want government to do, and how we propose to pay for it.
By: E. J. Dionne, Jr., Opinion Writer, The Washington Post; The National Memo, February 2, 2015
“GOP Struggles With Phony Deficit Pretense”: Literally The Same People Who Ignored The Deficit In The Previous Decade
The perception of the Republican Party as the anti-deficit party used to be 100% true. A couple of generations ago, the GOP actually saw the deficit as a legitimate concern, and shaped their policy agenda accordingly. During the Eisenhower era, Republicans kept very high tax rates in place, first approved to pay for WWII, in the name of fiscal conservativism. Many Republicans balked at JFK’s tax breaks out of fear of higher deficits.
Obviously, those eras are long gone. The GOP’s shift began in earnest under Reagan, but became almost ridiculous under George W. Bush – an era in which Republicans put the cost of two wars, a Wall Street bailout, massive tax cuts, and Medicare expansion on the national charge card for some future generation to worry about.
But once the Obama era began, GOP leaders decided they cared about the deficit again. It was impossible to take seriously – we’re talking about literally the same people who ignored the deficit in the previous decade – but Republicans actively pretended they had both credibility and genuine concerns about budget shortfalls.
It’s hard not to notice, however, that much of the new congressional Republican agenda has a common thread. See if you notice what these measures have in common. On health care:
A Republican bill to change how Obamacare defines a full work-week would raise the deficit by $53.2 billion over the next decade.
And abortion:
The official budget scorekeeper of Congress says the Pain-Capable Unborn Child Protection Act, which would ban abortions after 20 weeks, would increase Medicaid costs by as much as $400 million…. CBO officially estimates that the bill increases federal deficits by $75 million between 2014 and 2018, and $225 million between 2014 and 2023.
And immigration:
Senate Democrats threatened Thursday to block action on legislation funding the Homeland Security Department until Republicans jettison House-passed provisions that reverse President Barack Obama’s key immigration policies…. The Congressional Budget Office estimates that the measure would increase the federal deficit by $7.5 billion over a decade.
How would Republicans prevent these proposals from increasing the deficit? With offsetting cuts? Higher taxes? Neither, actually – GOP lawmakers are content to approve their priorities regardless of the impact on the budget shortfall.
It seems about once a week or so, GOP lawmakers unveil some new priority, they learn their idea would make the deficit worse, and they quietly make clear they couldn’t care less.
All of which made it quite amusing to see Republicans complaining about President Obama’s upcoming budget plan, claiming that it – you guessed it – doesn’t go far enough to reduce the deficit that Republicans created in the Bush/Cheney era.
Danny Vinik is absolutely right:
Republicans shouldn’t be allowed to get away with this two-faced policymaking. If they care about the deficit, they have to care about it in all contexts. If not, then they shouldn’t justify their opposition to Obama’s policies on grounds that they increase the deficit. When Republican congressmen react to Obama’s budget and undoubtedly invoke the deficit, the media should ask them why they didn’t care about the deficit last year. Maybe there will be some accountability for a change.
Well, there certainly should be some accountability for a change, but Republicans seem awfully confident that that they’ll face no consequences whatsoever for their incoherent whining about the deficit. Given recent history and misplaced public perceptions, I suspect their expectations are probably correct.
By: Steve Benen, The Maddow Blog, January 29, 2015
“Your Tax Dollars”: Family Of New GOP Senate Pork Buster Joni Ernst Pocketed Almost Half A Million In Government Assistance
Anyone who tuned in to hear the GOP response to the State of the Union address was treated to an introduction to the GOP’s newest freshman Senate star, Joni Ernst of Iowa.
You may recall Ms. Ernst’s legendary campaign commercial where she informed us all that she had grown up castrating pigs and was, therefore, uniquely qualified to cut the pork from bloated federal spending. You may also recall that, in the castration commercial, she told us about how her family had taught Ernst what she needed to know about the importance of living within one’s means—a lesson, Ernst argued, that has been lost on the federal government.
Turns out, the Senator’s family has a somewhat unusual concept of what “living within one’s means” actually involves as we now know that her father and uncle have been the beneficiaries of some of that good old government pork that the newly minted Senator has sworn to snip from the body of the federal budget.
Apparently, living within their means, inside the Senator’s family, involves including some of your tax dollars and mine as a part of the family budget.
While it may be true, as Senator Ernst recounted in her official response to the SOTU, that she had to walk to school in the snow, uphill both ways, when she was a kid—not really as her actual claim to feeling the pain of low income Americans is that she and her friends wore bread bags over their one and only pair of shoes to protect them from the snow—her family may well have paid for those shoes with taxpayer cash.
An examination by the Washington DC based District Sentinel website reveals that Ernst’s father, Richard Culver, pocketed $38,395 in taxpayer money in the guise of corn subsidies.
But then, Ernst’s dad can’t hold a candle to his brother when it comes to receiving government redistribution of wealth as Senator Joni’s Uncle Dallas has pocketed a cool $370,000 in government subsidies.
Somehow, as Senator Ernst castigated the federal government for all this wasteful spending and wealth redistribution, she failed to mention that her own family has benefitted substantially from the same.
I suppose we can forgive this bit of hypocrisy given Ernst’s long record of involving herself in ‘clean’ government back in Iowa, right?
Not so much.
As reported by Salon, it turns out that daddy’s construction company (and here I thought he was but a poor, struggling farmer) was awarded some $215,665 in building contracts from the Montgomery County during the years 2009 and 2010.
There is certainly nothing inappropriate in a builder winning a few government contracts—unless it turns out that the builder’s daughter Joni, who would go on to become a United States Senator, happens to be the powerful county auditor for that very same Montgomery County.
According to Iowa law, that is a “no-no.”
“The Iowa Code lays out stringent conflict of interest standards for county contracts. Chapter 331 of the code stipulates that ‘[a]n officer or employee of a county shall not have an interest, direct, or indirect, in a contract with that county.’ The provision applies if 5 percent of a company’s outstanding stock is owned by either a county employee or an immediate family member – including a parent – of an employee.”
I’m not sure how much more “on point” the statute could be.
Meet the new GOP—same as the old GOP.
By: Rick Ungar, Contributor, Forbes, January 22, 2015
“Making Stuff Up”: A Republican Ruse To Make Tax Cuts Look Good
As Republicans take control of Congress this month, at the top of their to-do list is changing how the government measures the impact of tax cuts on federal revenue: namely, to switch from so-called static scoring to “dynamic” scoring. While seemingly arcane, the change could have significant, negative consequences for enacting sustainable, long-term fiscal policies.
Whenever new tax legislation is proposed, the nonpartisan Congressional Budget Office “scores” it, to estimate whether the bill would raise more or less revenue than existing law would.
In preparing estimates, scorekeepers try to predict how people will respond to a new tax law. For example, if Congress contemplates raising the excise tax on cigarettes, scorekeepers consider existing trends in cigarette consumption, the likelihood that the higher taxes will induce some smokers to quit, and the prospect that higher prices will increase incentives for cigarette smuggling. There are no truly “static” revenue estimates.
These conventional estimates do not, however, include any indirect feedback effects that tax law changes might have on overall national income. In other words, they do not incorporate macroeconomic behavioral changes.
Dynamic scoring does. Proponents point out, correctly, that if a tax proposal is large enough, then those sorts of feedback effects can aim the entire economy on a slightly different path.
Such proponents argue that conventional projections are skewed against tax cuts, because they do not consider that cutting taxes could lead to higher economic output, which would make up at least some of the lost revenues. They maintain that dynamic scoring will, therefore, be both more neutral and more accurate than current methodologies.
But the reality is more complex. In order to look at the effects across the entire economy, dynamic modeling relies on many simplifying assumptions, like how well people can predict the future or how much they care about their children’s future consumption versus their own.
Economists disagree on the answers, and different models’ predicted feedback effects vary wildly, depending on the values selected for those uncertain assumptions. The resulting estimates are likely to incorporate greater uncertainty about the magnitude of any revenue-estimating errors and greater exposure to the risk of a political thumb on the scale.
Consider the nonpartisan scorekeepers’ estimates of the consequences of a tax-reform bill proposed last year by Representative Dave Camp, Republican of Michigan. Using different models and plausible inputs, the scorekeepers estimated that, under the bill, total gross domestic product might rise between 0.1 percent and 1.6 percent over the next decade — a 16-fold spread in projected outcomes. Which result should be the basis of congressional scorekeeping?
But the bigger problems lie deeper. Federal deficits are on an unsustainable path (as it happens, because of undertaxation, not excessive spending). Simply cutting taxes against the headwind of structural deficits leads to lower growth, as government borrowing soaks up an ever-increasing share of savings.
The most optimistic dynamic models get around this by assuming that the world today is in fiscal equilibrium, where the deficit does not grow continuously as a percentage of gross domestic product. But that’s not true. If you add the reality of spiraling deficits into those models, they don’t work.
To make these models work, scorekeepers must arbitrarily assume either that we tax more and spend less today than is really the case — which is what they did for the Camp bill — or assume that a tax cut today will be followed by a spending cut or tax increase tomorrow. Economists describe such a move as “making counterfactual assumptions”; the rest of us call it “making stuff up.”
In practice, these models are political statements. They show the biggest economic effects by assuming that tax cuts are financed by unspecified future spending cuts. The smaller size of government, not the tax cuts by themselves, largely drives the models’ results.
Further, the models are not a step toward more neutral revenue estimates, because they assume that, while individuals make productive investments, government does not. In reality, government spending contributes significantly to economic output. Truly dynamic modeling would weigh the forgone economic returns of government investments against the economic gains from lower taxes.
The Republicans’ interest in dynamic scoring is not the result of a million-economist march on Washington; it comes from political factions convinced that tax cuts are the panacea for all economic ills. They will use dynamic scoring to justify a tax cut that, under conventional scorekeeping, loses revenue.
When revenues do in fact decline and deficits rise, those same proponents will push for steep cuts in government insurance or investment programs, because they will claim that the models demand it. That is what lies inside the Trojan horse of dynamic scoring.
By: Edward D. Kleinbard, Law Professor at the University of Southern California and a former Chief of Staff of the Congressional Joint Committee on Taxation; Op-Ed Contributor, The New York Times, January 2, 2015
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