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“How The GOP Made Fiscal Responsibility Look Irresponsible”: It’s A Matter Of When, Not If, Republicans Will Cave

It’s a minor miracle: Both houses of the Republican-controlled Congress have passed a budget.

Now, that’s the easy part compared to getting appropriations bills to Obama’s desk that he will actually sign. And notwithstanding the bipartisan lovefest that surrounded the House bill fixing Medicare physician reimbursements (held up for the moment in the Senate over abortion), deep philosophical differences between the parties remain.

So a standoff between congressional Republicans and the White House is inevitable. (Unless you think Obama is going to suddenly want to repeal ObamaCare.) And under both Obama and President Bill Clinton, these stalemates have seldom ended well for the Republicans.

Why? Because even though the Constitution vests the most important taxing and spending powers in Congress, the president has some huge advantages. If the president doesn’t want to sign a given spending bill and Congress doesn’t have the votes to override the veto, lawmakers only have blunt instruments with which to force his hand. And since congressional Republicans tend to end up getting the blame in the media and in the polls, even those tools are of limited utility. The president knows it is a matter of when, not if, Republicans will cave.

Republicans are trying to rein in the spending driving both the long-term debt and the unfunded liabilities of the major entitlement programs the Democrats built. They are trying to be fiscally responsible.

You may not agree with all the cuts Republicans make in their budgets. You may not be convinced their numbers add up. But Paul Ryan and Tom Price have been more transparent about their fiscal vision than most of their detractors.

The president has a different vision, and he isn’t budging. To try and force his hand (if not change his mind), Republicans have relied on a series of high-profile manufactured crises: the fiscal cliff, various debt ceiling standoffs, government shutdowns, near-shutdowns of major Cabinet departments, the threat of across-the-board tax increases, you name it.

And that’s the problem. In the process, they have made fiscal responsibility look downright irresponsible.

As the national debt was careening toward $18 trillion, Republicans insisted there be some limit to the federal government’s borrowing power. But because of the means they used to try to compel the president, it was the Republicans who stood accused of refusing to pay Washington’s bills and letting the government default on its obligations.

In the fiscal cliff debate, Obama likened congressional Republicans to hostage takers when they tried to hold the line on spending and taxes. Fiscally-minded conservatives probably fancy themselves more green eyeshade accountants than hostage takers. But it’s true that the GOP’s weaponized approach made them look like irresponsible bad guys, at least in the mainstream media.

These battles haven’t been a total loss for Republicans. Far more of the Bush tax cuts have survived than once seemed likely. Sequestration has contained spending growth. But because sequestration hits defense spending as well as social programs, a lot of Republicans are as anxious for relief as the Democrats. This in turn annoys the party’s strongest fiscal conservatives. Why trust promises of future spending cuts when the leadership seems willing to roll back the ones already in effect?

Conservative activists are irritated by the fact they have little to show for the last time Republicans held the White House and Congress simultaneously — and probably feel a little guilty they didn’t do more to pressure Republicans at the time. So they have made up for it by pressuring Republicans to do things they don’t have enough power to do. And because the Republican leadership frequently says it will fight next time and then next time doesn’t come, their pleas for patience fall on deaf ears.

That’s true even among members of the House. A key group of fiscal conservatives clearly lacks confidence in the leadership but doesn’t have the votes or a plan to replace them.

While there has been substantial short-term deficit reduction, the fiscal picture over the longer term keeps getting bleaker. All conservative lawmakers can do is vote for bills they correctly see as entirely inadequate to fix the challenges facing the country — or deny leadership the votes to pass anything, except by working with the Democrats.

Thus the party of fiscal discipline often doesn’t seem disciplined at all.

 

By: W. James Antle, lll, The Week, March 30, 2015

March 31, 2015 Posted by | Budget, Congress, Fiscal Policy | , , , , , , , , | Leave a comment

“Gimmicky Nature Of The Contingency Fund”: The Intra-GOP Budget Fight Grows Toxic Ahead Of Schedule

At the beginning of a week where action was scheduled to begin on a FY 2016 congressional budget resolution, it looked like Republicans were on the brink of a big split between fiscal hawks in the House who wanted to maintain caps on defense spending negotiated with the Obama administration and/or to require specific cuts in domestic spending to offset adjustments, and defense hawks in the Senate who wanted above all to blow up the defense caps forever and blast them to hell as a first step towards a 1980s-style defense buildup.

Those intra-Republican dynamics remain in place, but the fight has broken out much earlier than expected, in the House itself, and in fact in the House Budget Committee, where Paul Ryan’s successor as chairman, Tom Price of GA, can’t seem to get the votes to report a budget resolution. The Hill‘s Vicki Needham has the arcane story:

Negotiations to resolve a dispute over defense spending blew up Wednesday night in the House Budget Committee, as the panel came up short of approving a nearly $3.8 trillion Republican blueprint.

Budget Chairman Tom Price (R-Ga.) saw the chances of pushing through an amendment to boost defense spending without offsets fade quickly in the waning hours of a markup of the GOP’s budget proposal, in the latest misstep for House Republicans.

Without a resolution, the Budget panel packed up for the night with Price saying the committee may reconvene Thursday, after even House Majority Leader Kevin McCarthy (R-Calif.) wasn’t able to break the impasse.

House leadership had tested the waters for an amendment from Rep. Todd Rokita (R-Ind.) — which would bump up funding to $96 billion for an emergency account earmarked for overseas conflicts without a pay-for — in an effort to attract reluctant defense hawks.

Majority Whip Steve Scalise (R-La.) and his chief deputy, Rep. Patrick McHenry (R-N.C.), started reaching out to GOP Budget Committee members about whether a proposal to appease defense hawks could pass the panel even before Price kicked off his budget mark-up, according to aides.

Basically, Republicans anticipated trouble on the floor passing a budget resolution that already included a big chunk of change for an off-budget “contingency fund,” and tried to get an extra $20 billion thrown in to placate the defense hawks, but fiscal hawks on the committee–including that highly symbolic freshman, Rep. Dave Brat of VA, the man who slew Eric Cantor–said no.

Meanwhile, outside the hothouse–yes, pun intended–of the lower chamber, defense hawks were already complaining about the gimmicky nature of the contingency fund and are demanding a straight-up major boost in defense spending. Neocon WaPo blogger Jennifer Rubin was shrieking yesterday that the initial House budget resolution represented a “political betrayal” and a “disaster for national security.”

Trouble is, it’s not easy to find a way to accommodate still more defense spending in a budget that already (a) has the aforementioned phony-baloney “contingency fund,” (b) achieves its “balanced budget” targets only via “dynamic scoring” BS and by assuming revenues from implementation of Obamacare even as it proposes to abolish it, (c) proposes partially privatizing Medicare and dumping Medicaid on the states, and (d) stipulates vast but unspecified additional “entitlement” savings outside Social Security and health care.

There’s just no obvious way out of the budgetary math problems the GOP has invented for itself. If Republicans cannot come up with a consensus budget agreement, we’ll have another high-profile example of that party’s inability to govern, and there will also be no way to proceed with the plan to pass a reconciliation bill to repeal Obamacare to show “the base” what Republicans will be able to do once the hated incumbent has left office.

Expect the gimmickry to reach new heights.

 

By: Ed Kilgore, Contributing Writer, Political Animal Blog, The Washington Monthly, March 19, 2015

March 20, 2015 Posted by | Budget, Fiscal Policy, GOP | , , , , , , | Leave a comment

“Don’t Let The GOP Buy Your Vote, Stupid”: The GOP Has Zero Credibility When It Comes To Fiscal Responsibility

If you want to understand exactly how the Republicans plan to buy the votes needed to win the 2016 presidential election, look no further than “The Economic Growth and Family Fairness Tax Plan.”

Heard of it? The plan, which is being touted with Willy Loman-esque desperation by Sens. Marco Rubio and Mike Lee, seeks to fix our “antiquated and dysfunctional…federal tax system.” And it’s won slow clap after slow clap from Republican-friendly conservatives at Americans for Tax Reform, National Review, and The American Enterprise Institute, whose James Pethokoukis raves, “Lee and Rubio might have cooked up the first great tax cut plan of the 2000s.”

Yeah, not so much. Despite some good features that would likely spur economic growth—such as reducing corporate tax rates by 10 percentage points, switching to a territorial collection system, and capping business-income rates filed on individual Schedule C forms—what the plan does is return us to the early years of the George W. Bush presidency, when budget continence was never allowed to get in the way of shoveling cash to targeted voters.

Recall, for instance, how Bush and a Republican Congress pushed through an unfunded (and unnecessary) Medicare prescription drug plan back in 2003 as a straight-up gift to seniors, who had voted Democratic in 2000. Mission accomplished: Bush went from getting just 47 percent of the senior vote against Al Gore in 2000 to pulling 52 percent of the 65-plus crowd against John Kerry in 2004.

At least Bush was pissing away theoretical budget surpluses that were falsely projected to last far into the future. After years of record-setting deficits and mounting national debt, today’s politicians certainly don’t have that excuse. Yet last year’s Republican budget resolution called for net spending increases every year for the next 10 years, starting at $3.7 trillion and culminating in projected spending of $5 trillion in 2024 (in current dollars). And given the whopping increases in real per-capita spending under a Republican president and Congress during Bush’s first term in office, the GOP has zero credibility when it comes to fiscal responsibility.

There’s no doubt that a spending hawk such as Lee, who has proposed a balanced-budget amendment in the past, knows that. Yet at the heart of his and Marco Rubio’s plan is a massive giveaway to parents in the form of a new $2,500 child tax credit (this would be added to an already existing $1,000 child credit) with no phase-out due to income.  However, because it’s “limited to the sum of total income and payroll tax liabilities, including employer-side payroll tax liability,” it means that low-income parents won’t be able to claim the full amount.

The expanded child credit is a big reason why, as AEI’s Pethokoukis grants, the plan would “lose something like $4 trillion in federal tax revenue over a decade, maybe half that if you apply ‘dynamic scoring’ that factors in the effects of economic growth.” (Dynamic scoring attempts to model changes in people’s behavior to changes in the tax code. While the method is easily abused, its core insight—that we change our consumption patterns when costs and benefits vary—is sound.)

But unlike cutting taxes on business activity or trimming top marginal tax rates, expanding the child tax credit has nothing to do with spurring economic growth. This is something that conservatives grant in most contexts. As Curtis S. Dubay of the Heritage Foundation wrote just last year, “Increasing the credit would be a targeted tax cut that would put more money in the pockets of people who qualify for the expansion. However, it would not improve economic growth like rate reductions would because a [child tax credit] increase would not reduce those disincentives on productive activities.”

The free-market Tax Foundation agrees. In fact, in an analysis of the Rubio-Lee plan, it ran both static and dynamic scores of the plan. On its static score for the next 10 years, the Tax Foundation found the Rubio-Lee plan meant serious reductions in annual federal revenue. For instance, switching to just two tax brackets of 15 percent and 35 percent would mean $31 billion less each year compared to current law. The full expensing of business equipment would lead to another annual loss of $78 billion, while the changes to the business taxes would cut $210 billion. And the expanded child tax credit would mean the feds would forgo another $173 billion.

Yet in its dynamic score of the same provisions, something different happens. The consolidation of tax brackets yields an average annual net gain of $5 billion, full expensing yields of $115 billion, and the changes in business taxes pulls in a net of $210 billion a year. But the expanded child tax credit? It still shows an average annual loss of $173 billion.

So the expanded child tax credit has nothing to do with promoting growth. Indeed, as my frequent co-author Veronique de Rugy points out at National Review, the generally accepted best way to promote economic growth via tax policy is by cutting high marginal rates. But because of the size and scope of Rubio and Lee’s expanded child tax credit they can’t reduce the top individual rate below 35 percent without punching an even bigger hole in revenue. “If bolstering the economic status of families is the point of all this,” she writes, “the way to go is lower tax rates, not a tax credit.”

In their explanation of the plan, Rubio and Lee claim that the expanded child tax credit is simply a way of abolishing what they call “the Parent Tax Penalty.” I’m sure I’m not the only one who has trouble following the logic here: “As parents simultaneously pay payroll taxes while also paying to raise the next generation that will pay payroll taxes, parents pay more into the old-age entitlement systems.” Huh? Parents pay to raise their children, yes. When those kids enter the workforce, they (not their parents) will pay taxes on their wages. Forget those “It’s a child, not a choice” bumper stickers. Kids today apparently are to be most valued for their ability to pay into unsustainable old-age retirement plans that need to be scrapped, not propped up.

Questions abound: If the amount of income subject to Social Security taxes is capped, doesn’t it also make sense then to phase out the credit above certain income levels? What about all the tax dollars that flow to children (and their parents) during their first 18 to 21 years? And if the expanded child tax credit is supposed to credit parents for future tax payments made by their children (yes, getting complicated), then why are low-income parents’ credits “limited to the sum of total income and payroll tax liabilities”? Aren’t we crediting parents for their kids’ future tax payments?

I’d argue instead that the “family fairness” portion actually has very little to do with the future past the 2016 election. Expanding the child tax credit, especially in a way that keeps the full amount for middle- and upper-class parents while limiting the amount low-income parents can get, is a pretty obvious (and obnoxious) way to buy votes among likely Republican voters. Especially when we all know that the GOP has no intention of trimming $173 billion out of federal spending to pay for it.

We’re long past the time for a serious conversation about how much government we want to buy and at what price. If the Obama years are any indication, the Democrats are genuinely uninterested in having that conversation. (The president’s latest budget proposal would increase spending over the next decade by more than 50 percent and end the period with bigger annual deficits than we have today.) But the Republicans, who are supposed to know better and be better on fiscal issues, are part of the problem too.

Every bit as much as the tax-and-spend Dems they love to attack, the Party of Reagan ushered in “the Golden Age of Government by Groupon.”

The only question that remains is how much our kids and grandkids will hate us for how much debt—I mean “family fairness”—we’ve amassed in their name.

 

By: Nick Gillespie, The Daily Beast, March 13, 2015

March 14, 2015 Posted by | Fiscal Policy, GOP, Tax Reform | , , , , , , , , , | Leave a comment

“Money Makes Crazy”: The GOP Consensus On Money Is Crazy, Full-On Conspiracy-Theory Crazy

Monetary policy probably won’t be a major issue in the 2016 campaign, but it should be. It is, after all, extremely important, and the Republican base and many leading politicians have strong views about the Federal Reserve and its conduct. And the eventual presidential nominee will surely have to endorse the party line.

So it matters that the emerging G.O.P. consensus on money is crazy — full-on conspiracy-theory crazy.

Right now, the most obvious manifestation of money madness is Senator Rand Paul’s “Audit the Fed” campaign. Mr. Paul likes to warn that the Fed’s efforts to bolster the economy may lead to hyperinflation; he loves talking about the wheelbarrows of cash that people carted around in Weimar Germany. But he’s been saying that since 2009, and it keeps not happening. So now he has a new line: The Fed is an overleveraged bank, just as Lehman Brothers was, and could experience a disastrous collapse of confidence any day now.

This story is wrong on so many levels that reporters are having a hard time keeping up, but let’s simply note that the Fed’s “liabilities” consist of cash, and those who hold that cash have the option of converting it into, well, cash. No, the Fed can’t fall victim to a bank run. But is Mr. Paul being ostracized for his views? Not at all.

Moreover, while Mr. Paul may currently be the poster child for off-the-wall monetary views, he’s far from alone. A lot has been written about the 2010 open letter from leading Republicans to Ben Bernanke, then the Fed chairman, demanding that he cease efforts to support the economy, warning that such efforts would lead to inflation and “currency debasement.” Less has been written about the simultaneous turn of seemingly respectable figures to conspiracy theories.

There was, for example, the 2010 op-ed article by Representative Paul Ryan, who remains the G.O.P.’s de facto intellectual leader, and John Taylor, the party’s favorite monetary economist. Fed policy, they declared, “looks an awful lot like an attempt to bail out fiscal policy, and such attempts call the Fed’s independence into question.” That statement looks an awful lot like a claim that Mr. Bernanke and colleagues were betraying their trust in order to help out the Obama administration — a claim for which there is no evidence whatsoever.

Oh, and suppose you believe that the Fed’s actions did help avert what would otherwise have been a fiscal crisis. This is supposed to be a bad thing?

You may think that at least some of the current presidential aspirants are staying well clear of the fever swamps, but don’t be so sure. Jeb Bush appears to be getting his economic agenda, such as it is, from the George W. Bush Institute’s 4% Growth Project. And the head of that project, Amity Shlaes, is a prominent “inflation truther,” someone who claims that the government is greatly understating the true rate of inflation.

So monetary crazy is pervasive in today’s G.O.P. But why? Class interests no doubt play a role — the wealthy tend to be lenders rather than borrowers, and they benefit at least in relative terms from deflationary policies. But I also suspect that conservatives have a deep psychological problem with modern monetary systems.

You see, in the conservative worldview, markets aren’t just a useful way to organize the economy; they’re a moral structure: People get paid what they deserve, and what goods cost is what they are truly worth to society. You could say that to the free-market true believer, to know the price of everything is also to know the value of everything.

Modern money — consisting of pieces of paper or their digital equivalent that are issued by the Fed, not created by the heroic efforts of entrepreneurs — is an affront to that worldview. Mr. Ryan is on record declaring that his views on monetary policy come from a speech given by one of Ayn Rand’s fictional characters. And what the speaker declares is that money is “the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. … Paper is a check drawn by legal looters.”

Once you understand that this is how many conservatives really think, it all falls into place. Of course they predict disaster from monetary expansion, no matter the circumstances. Of course they are undaunted in their views no matter how wrong their predictions have been in the past. Of course they are quick to accuse the Fed of vile motives. From their point of view, monetary policy isn’t really a technical issue, a question of what works; it’s a matter of theology: Printing money is evil.

So as I said, monetary policy should be an issue in 2016. Because there’s a pretty good chance that someone who either gets his monetary economics from Ayn Rand, or at any rate feels the need to defer to such views, will get to appoint the next head of the Federal Reserve.

 

By: Paul Krugman, Op-Ed Contributor, The New York Times, February 13, 2015

February 15, 2015 Posted by | Federal Reserve, Fiscal Policy, GOP Presidential Candidates | , , , , , , , | 2 Comments

“Rand Paul’s Defining Fraud”: Behind His Moment Of Non-Truth On Iraq

If the United States were finally going to have a sober debate about post-9/11 national security and defense policy, deciding what to do about the chaos in Iraq would seem to be the time for it. It seems like a tailor-made opportunity for Sen. Rand Paul to showcase the foreign policy of realism and restraint his admirers say could make him a formidable 2016 contender; just this weekend, on MSNBC’s “Up With Steve Kornacki,” former Republican National Committee chairman Michael Steele suggested Paul might emerge as a leader among antiwar voices in Congress.

But not quite yet. While Paul has voiced caution about putting ground troops back in Iraq – as has the president, and most sane people – on Sunday he tried out some new gravitas by saying he’s open to airstrikes, in an interview with the Des Moines Register. Yes, in Iowa, home to the first 2016 caucus.

“I think we aided the Iraqi government for a long time; I’m not opposed to continuing to help them with arms,” Paul said. “I would not rule out airstrikes. But I would say, after 10 years, it is appalling to me that they are stripping their uniforms off and running. And it concerns me that we would have to do their fighting for them because they won’t fight for their own country, their own cities.”

The problem is there’s little that airstrikes can do to change the fundamental political problems that are leading to the bloodshed. That’s why it’s become clearer, over the weekend, that the major voices calling for military action in Iraq don’t foresee getting the job done with a few precision airstrikes, or maybe a drone campaign to minimize the possibility of U.S. casualties. No, they’re now saying Nuri al-Maliki must go, committing the U.S. to another round of regime change at an unimaginable cost.

On Friday MSNBC’s Andrea Mitchell asked Sen. John McCain whether Maliki could be coerced into broadening his government and changing his ways, and McCain answered, “He has to, or he has to be changed.”  On Sunday Sen. Lindsey Graham even suggested the U.S. work with Iran to topple Maliki and form a new government.  “The Iranians can provide some assets to make sure Baghdad doesn’t fall,” he said blithely. “We need to coordinate with the Iranians and the Turks need to get in the game and get the Sunni Arabs back into the game, form a new government without Maliki.”

That’s interesting. Here’s what Graham said about Iran seven months ago, when discussing negotiations over its nuclear program:

We’re dealing with people who are not only untrustworthy: this is a murderous regime that murders their own people, create chaos and mayhem throughout the whole world, the largest sponsor of terrorism. This deal doesn’t represent the fact we’re dealing with the most thuggish people in the whole world” (h/t The Wire).

Now Graham thinks “the most thuggish people in the world” are preferable to the Maliki government. To be fair to Rand Paul, supporting airstrikes does put him in opposition to the surreal hawkishness of his GOP Senate colleagues preaching regime change. But Paul could be meeting the Iraq crisis to lay out his larger vision of a realistic, restrained foreign policy that avoids such entanglements. Instead, there he was in Iowa taking a middle ground. “Rand Paul 2016: Not as Hawkish as the Old Guys” won’t make much of a bumper sticker.

It’s not the first time Paul’s supposed courage to question the national security state has itself come in for questions. After his filibuster against President Obama’s drone policy last year, he suggested he’d support the use of drones against the Tsarnaev brothers, the alleged Boston Marathon bombers, and even against someone trying to rob a liquor store. “If someone comes out of a liquor store with a weapon and $50 in cash I don’t care if a drone kills him or a policeman kills him,” the supposed libertarian told a shocked Neil Cavuto on Fox. Sounds like due process to me.

He missed another opportunity to stand out from the craven, anti-Obama Republican Party in the controversy over the prisoner swap that brought home Sgt. Bowe Bergdahl. The libertarian hero might have stood up for the principle that Bergdahl is innocent until proven guilty of various charges made by some of his fellow soldiers, or for the notion that we don’t leave our military men or women behind on the battlefield. The complicated politics of Bergdahl’s release, and even the circumstances of his enlisting in the Army – he’d been rejected by the Coast Guard but entered the Army on waivers that became common given the strain two wars put on the military – might have provided Paul with an opportunity to discuss the very human implications of America’s military overreach.

Instead, he used it as an opportunity to make a dumb partisan joke, suggesting Obama should have traded Democrats, not Taliban fighters, to retrieve Bergdahl. Another statesmanlike moment for the man some think could be the 2016 front-runner.

Some Republicans suggest Paul could be a formidable 2016 foe to Hillary Clinton, who may or may not be more hawkish than he is on foreign policy. I say “may or may not” because when Paul is pushed on his alleged anti-intervention, pro-liberty stances, he often goes limp: Drones are bad in Pakistan but OK in Boston? There’s not much the U.S. military can do in Iraq but let’s do some airstrikes because … well, we don’t know why. Airstrikes are quickly becoming the safe way for Republicans to trash Obama for the Iraq debacle without  committing themselves to ground troops either, and Paul missed another chance to show the foreign policy courage his supporters are always telling us about.

 

By: Joan Walsh, Editor at Large, Salon, June 17, 2014

June 18, 2014 Posted by | Fiscal Policy, Iraq, Rand Paul | , , , , , , | Leave a comment

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