A False Equivalency: Don’t Blame ‘Both Sides’ For Debt Impasse
Washington has many lazy habits, and one of the worst is a reflexive tendency to see equivalence where none exists. Hence the nonsense, being peddled by politicians and commentators who should know better, that “both sides” are equally at fault in the deadlocked talks over the debt ceiling.
This is patently false. The truth is that Democrats have made clear they are open to a compromise deal on budget cuts and revenue increases. Republicans have made clear they are not.
Put another way, Democrats reacted to the “grand bargain” proposed by President Obama and House Speaker John Boehner by squawking, complaining and highlighting elements they didn’t like. This is known throughout the world as the way to begin a process of negotiation.
Republicans, by contrast, answered with a definitive “no” and then covered their ears. Given the looming Aug. 2 deadline for default if the debt ceiling is not raised, the proper term for this approach is blackmail.
Yet the “both sides are to blame” narrative somehow gained currency after Boehner announced Saturday that House Republicans would not support any increase in revenue, period. A false equivalence was drawn between the absolute Republican rejection of “revenue-positive” tax reform and the less-than-absolute Democratic opposition to “benefit cuts” in Medicare and Social Security.
The bogus story line is that the radical right-wing base of the GOP and the radical left-wing base of the Democratic Party are equally to blame for sinking the deal.
Leave aside, for the moment, the fact that in the Obama-Boehner proposal, there would be roughly three dollars’ worth of budget cuts for every dollar of new revenue. Don’t pause to ask whether it makes sense to slash government spending when the economy is still sputtering out of the worst recession in decades. Instead, focus narrowly on the politics of the deal.
It is true that House Minority Leader Nancy Pelosi howled like a blindsided politician when she learned that entitlement programs were on the table. But her objections — and those of Democrats in general — are philosophical and tactical, not absolute.
Progressives understand that Medicare and Social Security are not sustainable on their current trajectories; in the long term, both must have their revenue and costs brought into balance. Pelosi’s position is that each program should be addressed with an eye toward sustainability — not as a part of a last-minute deal for a hike in the debt ceiling that covers us for two or three years.
It’s also true that Democrats believe they can win back a passel of House seats next year by highlighting the GOP plan to convert Medicare into a voucher program. They don’t want Republicans to be able to point and say, “See, the Democrats want to cut Medicare, too.”
There’s nothing in these Democratic objections, however, that couldn’t be creatively finessed. You can claim you haven’t actually “cut” a benefit, for example, if what you’ve done is restrained the rate at which its cost will grow. You can offset spending with new revenue, and you can do so in a way that gives low-income taxpayers a break. Democrats left the door open and these options could have been explored.
The story on the Republican side is entirely different. There are ways to finesse a “no new taxes” pledge, too. Instead of raising tax rates, you close loopholes in the name of reform; you add an enhancement here, a “user fee” there, and you can manage to get the revenue you need and still claim you haven’t voted to raise taxes.
But Republicans are taking the position that not a cent of new revenue can be raised, no matter the euphemism. Some Democrats, yes, are being scratchy and cantankerous. But Republicans are refusing to negotiate at all. That’s not the same thing.
I understand why President Obama, in his news conference Monday, chided “each side” for taking a “maximalist position.” For political and practical reasons, it’s advantageous for him to be seen as an honest broker.
Meanwhile, though, the clock ticks toward Aug. 2 and the possibility of a catastrophic default becomes more real. And no one should be confused about what the president confronts: On one side, grousing and grumbling. On the other, a brick wall.
By: Eugene Robinson, Opinion Writer, The Washington Post, July 11, 2011
GOP Passes Up Generational Conservative Victory In Order To Protect The Wealthy
Oh, the irony.
After generations of conservative dogma based solidly in the belief that fundamental changes to America’s entitlement programs are essential to the economic survival and betterment of the nation, that goal is now, finally, within the reach of the true believers.
Yet, remarkably, this dramatic change in national direction is being permitted to slip right through conservative fingers by the very people whom those ensconced on the right should be counting upon to bring home this great philosophical victory.
The fulfillment of the conservative dream is not vanishing from sight because Nancy Pelosi and the forces of progressivism are prepared to defend entitlements to the death. Nor is it happening because the President of the United States has counted up the votes and decided that messing with entitlements will cost him re-election.
It is not even the result of “bleeding hearts” like me rising nobly in defense of the needy and downtrodden.
Significant entitlement reform, long the goal of the fathers of modern day conservatism, is being flushed down the drain by the very Republican Party that has long battled to bring that goal to reality.
Somewhere in Connecticut, William F. Buckley Jr. is turning over in his grave.
On Saturday, Speaker of the House John Boehner announced that the ‘grand bargain’ – rumored to bring $4 trillion in debt reduction over the next ten years through a mixture of entitlement reform, defense cuts and a measure of revenue increases resulting from cleaning up the tax code to get rid of some of the corporate entitlement programs that result in lower taxes and higher subsidies – is now off the table.
Apparently, Boehner could not sell the GOP Congressional Caucus on a deal that involved anything in the way of revenue increases- not even in exchange for accomplishing reforms for which his party has fought since the days of FDR and his “New Deal”.
True conservatives should not blame Boehner for this heresy as it appears that he is no happier with the position he is being forced to take than the President is with his proposal being rejected by House Republicans who don’t grasp the whole compromise thing.
What Boehner likely understands – better than those who he is supposed to be leading – is that the GOP is permitting the fundamental change, long at the heart of the conservative cause, to vanish into thin air and that it is happening in the name of protecting corporate subsidies that are the very antitheses of a free market economy – another of the inviolate tenets of conservative policy.
Subsidies that provide government incentives to industry are as anti-free market as government subsidies and controls that conservatives argue have skewed the costs of health care in America and led to our current crisis.
According to American conservative scripture, a truly free market requires that players compete on level ground – not with the edge that comes from government handouts and special tax breaks, whether they be for the benefit of a corporation or an individual.
Thus, the GOP is rejecting the opportunity to accomplish a landmark, philosophical milestone by protecting a policy that is, in and of itself, a violation of that same conservative philosophy.
Is the irony of this enough to make even the most ardent conservative believer question what in the world is going on here?
It certainly should be.
Could the explanation for this odd behavior be that the Congressional Republican Caucus has decided to turn its back on what is supposed to be their most fundamental beliefs because their constituents are demanding that they do so?
Apparently not.
According to the Christian Science Monitor, the GOP Caucus does not appear to have any interest whatsoever in listening to its base.
“Two-thirds (67 percent) approve of making more of high earners’ income subject to Social Security tax, and nearly as many approve of raising taxes on incomes of over $250,000 (66 percent), reducing military commitments overseas (65 percent) and limiting tax deductions for large corporations (62 percent),” the Pew Research Center reported last month.
“Notably,” Pew found, “Republicans are as likely as Democrats to approve of limiting corporate tax deductions.”
Still, any kind of tax increases – whether it be a greater tax bite on the wealthy or on corporations seen as “job creators” – is off the table as far as large numbers of Republican House members are concerned. Via The Christian Science Monitor
So, the GOP rejection of the debt deal is neither based in the free market philosophy nor the fundamental belief in entitlement reform. It is also not based on meeting their obligations to their constituents.
So, what is driving their rather remarkable position?
It must be jobs and the economy.
Surely, the Republicans in Congress are convinced that removing tax subsidies to the oil industry and cleaning up the tax code to get rid of corporate welfare that is no longer of any discernable value to the nation will make what is already a very bad jobs situation even worse.
Except that it turns out that you have to search long and wide to find an economist who supports this notion.
The other argument that advocates of tax cuts for the rich make is that many small-business owners would be see their taxes go up and thus would be discouraged from hiring workers. The facts do not support this. “Only 3 percent of small-business owners are in the top bracket,” notes Roberton Williams, a senior fellow with the Tax Policy Center, which is sponsored by the Brookings Institution and the Urban Institute. And, he adds, “They are not all what we think of as job-creating small businesses. A lot of them are hedge-fund managers and law-firm partners.” So other than perhaps a few restaurateurs on Manhattan’s Upper East Side, the workforce is unlikely to be affected. Via Newsweek
So, while Eric Cantor continues to try and sell his base on this argument, it’s pretty hard to find anyone who knows anything about economics who actually is buying the pitch.
If it’s not philosophical dogma or fulfilling their obligation to those who elected them and it’s not the economy and/or jobs, what exactly is their problem?
I don’t know about you, but I can only think of one other explanation – fealty to the wealthy corporations and wealthy individuals who keep your Republican leadership rolling in the campaign cash so they can remain in their powerful jobs.
Now, if you believe this is a good enough reason to risk the financial stability of the nation – and possibly the world – then it’s all good.
Personally, I’m a little concerned.
I fear we are witnessing one of the most perverse and dangerous games our leaders have ever embarked upon. I’m stunned by the sheer audacity of these elected officials so ready to play chicken with the financial lives of so many simply to benefit a very few.
But what really amazes are the millions of middle class Americans who continue to believe that these officials are somehow acting in their best interest.
As curious as I am to see what will ultimately come of this game, my curiosity is far more piqued by the possibility that these middle class Americans might finally understand that the Republicans they sent to Congress work for the big corporations and care little for their needs and problems.
Should that light bulb (incandescent or otherwise) finally turn on, these folks should be assured that nobody is expecting them to run into the waiting arms of the Democratic Party. They can still quietly send their Congressional representatives a message indicating that they would prefer not to be abandoned so that Exxon might keep the government checks flowing in while maintaining their standing as upright, committed conservatives.
If these folks could – just this once – grasp what is being done in their name and communicate their rejection of the behavior of their leaders, the rest of us would genuinely appreciate it.
A true conservative should be as disgusted with what the Congressional Republican Caucus is doing as the rest of us and probably a great deal more so.
By: Rick Ungar, The Policy Page, Forbes, July 10, 2011
The Incredible Shrinking Speaker: The Inmates Have Taken Over The Asylum
On Thursday, President Obama asked the top eight officials in Congress — four from each party — and Vice President Biden to express a preference about a debt-reduction target. Should the negotiations focus on a more modest series of cuts ($2 trillion), a larger package in line with the Biden-led talks ($3 trillion to $3.5 trillion), or a more ambitious approach (roughly $4 trillion)?
Of the 10 people in the room, eight, including all the Democrats, said they want to go big. House Speaker John Boehner (R-Ohio) was one of them, “enthusiastically” endorsing the notion of a grand bargain, telling Republican lawmakers that bold action is necessary, and that this is why he wanted to be Speaker in the first place.
Two of the 10 balked. House Majority Leader Eric Cantor (R-Va.) and Senate Minority Whip Jon Kyl (R-Ariz.) said there’s no point in trying to strike a grand bargain because rank-and-file Republicans will never accept a compromise on revenue.
As of yesterday, Boehner abandoned his plan and came around to Cantor’s and Kyl’s way of thinking. The Speaker discovered his caucus just wasn’t willing to follow him.
The sweeping deal Obama and Boehner had been discussing would have required both parties to take a bold leap into the political abyss. […]
[Some] Republicans said Boehner had finally realized that he could not sell the tax framework within his party. Many House Republicans, particularly the influential 87-member freshman class, won elections vowing to never raise taxes. At a Thursday meeting at the White House, Cantor said the tax package could not pass the House. And at a Friday morning news conference, every member of Boehner’s leadership team denounced the idea of including tax increases in the debt legislation.
As a substantive matter, the anti-tax extremism that dominates Republican politics is well past the point of being farcical. Given a chance to cut the debt by $4 trillion, GOP leaders who claim to be frantic about a non-existent debt crisis have been exposed as frauds.
But the political issue that stands out for me is realizing just how weak a Speaker Boehner really is.
He started this debt-limit process saying, “We’re going to have to deal with it as adults. Whether we like it or not, the federal government has obligations and we have obligations on our part.” Republicans proceeded to ignore him. This week, Boehner believed he had the power and influence to convince at least most of his caucus to rise to the occasion. Republicans proceeded to ignore this, too. Even the Speaker’s own leadership team didn’t want to follow him, and in the end, it looks like Cantor understood the extremist attitudes of the caucus far better than the Speaker did.
The Speaker of the House is arguably one of the most powerful offices in the government, at least in theory. It’s supposed to be within Boehner’s power to simply tell his caucus what they have a responsibility to do, and demand their fealty.
But a leader with no followers is, by definition, weak. Boehner may be the Speaker, but as he’s quickly realizing, he’s taking the orders, not giving them.
In the asylum known as the House of Representatives, is there any doubt as to the inmates’ power?
By: Steve Benen, Contributing Writer, Political Animal-Washington Monthly, July 10, 2011
Speaker Boehner Abandons His Own Debt-Reduction Goal
President Obama and congressional Democrats were prepared to move forward on an ambitious Grand Bargain, which would have achieved more than $4 trillion in debt reduction over the next decade. House Speaker John Boehner (R-Ohio) embraced the White House’s goal and believed he was a strong enough leader to deliver on the agreement.
Yesterday, Boehner realized he’s not nearly as strong a Speaker as he’d hoped.
House Speaker John A. Boehner abandoned efforts Saturday night to cut a far-reaching debt-reduction deal, telling President Obama that a more modest package offers the only politically realistic path to avoiding a default on the mounting national debt.
On the eve of a critical White House summit on the debt issue, Boehner (R-Ohio) told Obama that their plan to “go big,” in the speaker’s words, and forge a compromise that would save more than $4 trillion over the next decade, was crumbling under Obama’s insistence on significant new tax revenue. […]
Obama, at least, was willing to make that leap and had put significant reductions to entitlement programs on the table. But on Saturday, Boehner blinked….
The conventional wisdom suggests Republicans, who falsely believe we’re in the midst of some sort of debt crisis, are desperate to slash the deficit and bring the budget closer to balance. The conventional wisdom is, and has been, entirely wrong — Republicans care about keeping taxes on the wealthy low. Every other priority is a distant second.
Obama was willing to go big, even at the risk of infuriating his own base. In the process, the GOP was presented with a test: when faced with a historic opportunity on an issue they claim to care about, are Republicans willing to accept some sensible, popular concessions in order to cut the debt by more than $4 trillion? Is the GOP ready to rise to the occasion?
Yesterday, Republican leaders replied, “No, we’re not.”
Of course, this appears to take one possible solution to the debt-ceiling standoff off the table, but it doesn’t change the fact that a solution is still a necessity.
As talks at the White House reconvene today, focus will shift towards a $2.4 trillion package, more in line with the plan produced by the Biden-led talks. This should, in theory, be easier to achieve, though you’ll recall that GOP leaders abandoned those negotiation two weeks ago, when Democrats said the agreement couldn’t be 100% to 0% in Republicans’ favor.
By: Steve Benen, Contributing Writer, Political Animal-Washington Monthly, July 10, 2011
Taxes and Billionaires: The “Carried Interest” Loophole Has To Go
The House speaker, John Boehner, suggests that the Republican threat of letting the United States default on its debts is driven by concern for jobs for ordinary Americans.
“We cannot miss this opportunity,” he told Fox News. “If we want jobs to come to America, we’ve got to give American businesspeople the confidence to invest in our economy.”
So take a look at one of the tax loopholes that Congressional Republicans are refusing to close — even if the cost is that America’s credit rating blows up. This loophole has nothing to do with creating jobs and everything to do with protecting some of America’s wealthiest financiers.
If there were an award for Most Unconscionable Tax Loophole, this one would win grand prize.
Wait, wake up! I know that “tax policy” makes one’s eyes glaze over, but that’s how financiers have gotten away with paying a lower tax rate than their chauffeurs or personal trainers. Tycoons have bet for years that the public is too stupid or distracted to note that in many cases they’re paying just a 15 percent tax rate.
What’s at stake is the “carried interest” loophole, and President Obama is pushing to close it. The White House estimates that this would raise $20 billion over a decade. But Congressional Republicans walked out of budget talks rather than discuss raising revenues from measures such as this one.
The biggest threat to the United States this summer probably doesn’t come from Iran or Libya but from the home-grown risk that the nation will default on its debts. We don’t know the economic consequences for America or the world, and some of the hand-wringing may be overblown — or maybe not — but it’s reckless of Republicans even to toy with such a threat.
This carried interest loophole benefits managers of financial partnerships such as hedge funds, private equity funds, venture capital funds and real estate funds — who are among the highest-paid people in the world. John Paulson, a hedge fund manager in New York City, made $4.9 billion last year, top of the chart for hedge fund managers, according to AR Magazine, which follows hedge funds. That’s equivalent to the average per capita income of 184,000 Americans, according to my back-of-envelope calculations based on Census Bureau figures.
Mr. Paulson declined to comment on this tax break, but here’s how it works. These fund managers are compensated mostly with a performance bonus of 20 percent or more of the profits they make. Under this carried interest loophole, that 20 percent is eligible to be taxed at the long-term capital gains rate (if the fund’s underlying assets are held long enough) of just 15 percent rather than the regular personal income rate of 35 percent.
This tax loophole is also intellectually vacuous. The performance fee is a return on the manager’s labor, not his or her capital, so there’s no reason to give it preferential capital gains treatment.
“The carried interest loophole represents everyone’s worst fear about the tax system — that the rich and powerful get away with murder,” says Victor Fleischer, a law professor at the University of Colorado, Boulder, who has written about the issue. “Closing the loophole won’t fix the budget by itself, but it gets us one step closer to justice.”
At a time when the richest 1 percent of Americans have a greater collective net worth than the entire bottom 90 percent, there are other ways we could raise money while also making tax policy more equitable. The White House is backing some of them in its negotiations with Congress, but others aren’t even in play.
One important proposal has to do with founder’s stock, the shares people own in companies they found. Professor Fleischer has written an interesting paper persuasively arguing that founder’s stock is hugely undertaxed. It, too, is essentially a return on labor, not capital, and shouldn’t benefit from the low capital gains rate.
Likewise, Europe is moving toward a financial transactions tax on trades made in financial markets. That is something long championed by some economists — especially James Tobin, who won a Nobel Prize for his work — and it would also raise tens of billions of dollars at a time when it is desperately needed. It makes sense.
The larger question is this: Do we try to balance budget deficits just by cutting antipoverty initiatives, college scholarships and other investments in young people and our future? Or do we also seek tax increases from those best able to afford them?
And when Congressional Republicans claim that the reason for their recalcitrance in budget negotiations is concern for the welfare of ordinary Americans, look more closely. Do we really want to close down the American government and risk another global financial crisis to protect the tax bills of billionaires?
By: Nicholas Kristoff, Op-Ed Columnist, The New York Times, July 6, 2011
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