Walking Away From The Truth: GOP Playing With Matches On The Debt
Just ignore Tuesday’s vote against raising the debt ceiling, House Republican leaders whispered to Wall Street. We didn’t really vote against it, members suggested; we just sent another of our endless symbolic messages, pretending to take the nation’s credit to the brink of collapse in order to extract the maximum concessions from President Obama.
Once he caves, members said, the debt limit will be raised and the credit scare will end. And the business world apparently got the message. It’s just a “joke,” said a leader of the United States Chamber of Commerce, and Wall Street is in on it. Not everyone found it funny.
No matter how they tried to spin it, 318 House members actually voted against paying the country’s bills and keeping the promise made to federal bondholders. That’s an incredibly dangerous message to send in a softening global economy. Among the jokesters were 236 Republicans playing the politics of extortion, and 82 feckless Democrats who fret that Republicans could transform a courageous vote into a foul-smelling advertisement.
The games that now pass for governing in an increasingly embarrassing 112th Congress are menacing the nation’s future. It was bad enough when Republicans threatened to shut down the government to achieve their extreme and extremely misguided spending cuts, but that threat would have caused temporary damage. The debt limit is something else altogether. If the global credit markets decide that the debt of the United States will regularly be held hostage to ideological demands, it could cause significant harm to investment in long-term bonds and other obligations. That, in turn, could damage domestic credit markets and easily spark another recession.
To prevent this from happening, 114 Democrats in April asked for a “clean” vote without conditions. But Republicans were not about to set their hostage free. Knowing that the clean vote would not pass — and imposing a two-thirds majority requirement to ensure its failure — House Republicans gave the Democrats what they requested. They then voted it down, sending their reckless message to the world.
But there was no excuse for so many Democrats to go along with that message, including the leadership. Steny Hoyer, the minority whip, urged his members to vote no so they would not “subject themselves to a political 30-second ad attack” with all Republicans voting no. Apparently Mr. Hoyer did not trust voters to understand what a dangerous and dishonest game the Republicans are playing.
The exercise has prompted the White House to convene talks to discuss the Republicans’ scattershot demands, which have ranged from trillions in spending cuts to the outright dismantling of vital safety-net programs like Medicare and Medicaid. Democrats have hoped to get an increase in revenues out of any deal, but House Republican leaders emerged from a White House meeting on Wednesday spouting the usual discredited claims that higher taxes on the rich would impede job growth.
What Republicans seem unwilling to acknowledge is that the debt-limit debate is not about future spending. It is about paying for a deficit already incurred because of two wars and tax cuts approved by both Republicans and Democrats at the behest of a Republican president. Tuesday’s vote was a chance to do the right thing and educate the public on why it was necessary. Instead, too many lawmakers walked away from the truth.
House GOP Scoffs At The Fact That Taxes Are Lower Under Obama Than Under Reagan
President Obama met with House Republicans today at the White House to discuss ways to move forward on negotiations regarding the nation’s debt ceiling and the budget. During the discussion, talk evidently turned to taxes, and when Obama noted that taxes today are lower than they were under President Reagan, the GOP, according to The Hill, “engaged in a lot of ‘eye-rolling’“:
Republicans attending a White House meeting on Wednesday didn’t take kindly to President Obama telling them tax rates were higher during the Reagan administration. GOP members engaged in a lot of “eye-rolling,” according to a member who was on hand to hear Obama, who invited House Republicans to the White House for discussions on the debt ceiling. […]
“[The President] made a comment like the tax rate is the lightest, even more than (under former President) Reagan,” Rep. Lee Terry (R-Neb.) told The Hill following the meeting. House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) joked that during the meeting, “We learned we had the lowest tax rates in history … lower than Reagan!”
That House Republicans find this preposterous is symptomatic of the hold Reagan mythology has over them. After all, for seven of Regan’s eight years in office, the top tax rate was higher than the current 35 percent. In six of those years, it was 50 percent or more. And every year that Regan was in office, the bottom tax bracket was higher than the current ten percent.
For a family of four, the “average income tax rate under Reagan in 1983 was 11.06 percent. Under Clinton in 1992, it was 9.18 percent. And under Obama in 2010, it was 4.68 percent.” During Reagan’s time, income tax revenue ranged from 7.8 to 9.4 percent of GDP. Last year, it was 6.2 percent and is not projected to climb back to 9 percent until 2016. In fact, in 2009, Americans paid their lowest taxes in 60 years.
Republicans are very fond of saying that the U.S. has “a spending problem, not a revenue problem.” But the truth is that revenue has plunged due to the recession and to continued misguided tax cuts, and revenue needs to be raised to eventually bring the budget into balance. And Reagan knew that taxes were an important part of the budget equation. After all, he “raised taxes in seven of his eight years in office,” including four times in just two years.
By: Pat Garofalo, Think Progress, June 1, 2011
GOP Jobs Plan: Old Ideas, Fancy New Clip Art
Academic books pack about 600 words to a page. Normal books clock in around
400. Large-print books, you know, the ones for kids or the visually impaired — fit about 250. The House GOP’s jobs plan, however, gets about 200 words to a page. The typeface is fit for giants, and the document’s 10 pages are mostly taken up by pictures. It looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday and cranked up the font to 24 points and began dumping clip art to pad out the plan.
Which is odd, because there’s nothing in this plan that hasn’t been in a thousand other plans. When I asked David Autor, an economist at the Massachusetts Institute of Technology and a specialist on labor markets, to take a look at the substance, he pronounced it a classic case of “what Larry Summers would call ‘now-more-than-everisms.”
“Here’s how it works,” Autor wrote in an e-mail. “1. You have a set of policies that you favor at all times and under all circumstances, e.g., cut taxes, remove regulations, drill-baby-drill, etc. 2. You see a problem that needs fixing (e.g., the economy stinks). 3. You say, ‘We need to enact my favored policies now more than ever.’ I believe that every item in the GOP list that you sent derives from this three-step procedure.
“That’s not to say that there are no reasonable ideas on this list. But there is certainly no original thinking here directed at addressing the employment problem. Or, to put it differently, is there any set of economic circumstances under which the GOP would not actually want to enact every item on this agenda? If the answer is no, then this is clearly now-more-than-everism.”
If you read Autor’s answer and then guessed at what’s included in the plan, you’d probably get it about right. The GOP wants a separate congressional vote on every significant regulation. It wants to cut taxes for corporations and small businesses led by individuals. It wants a tax break on profit that corporations earn overseas. It wants to pass pending trade agreements, increase domestic production of oil and enact spending cuts. The only two proposals you couldn’t have guessed sight unseen are patent reform and visas for the highly skilled.
But even if you think every item on that agenda is a grand idea, this isn’t exactly fast-acting medicine. “At best, an agenda like this is meant to improve long-term growth by a couple of tenths of a percentage point,” says Larry Mishel, president of the Economic Policy Institute. “It takes a really long time to move the dial. It’s not a response to a cyclical downturn.”
That’s okay, because the document doesn’t believe in cyclical downturns. It only believes in deviations from the Republican agenda. The first page sets out the GOP’s narrative of the unemployment crisis. See if you recognize what’s missing here: “For the past four years, Democrats in Washington have enacted policies that undermine these basic concepts which have historically placed America at the forefront of the global marketplace. As a result, most Americans know someone who has recently lost a job, and small businesses and entrepreneurs lack the confidence needed to invest in our economy. Not since the Great Depression has our nation’s unemployment rate been this high this long.”
Four years ago, of course, George W. Bush was president. And he was, as you might remember, a Republican, not a Democrat. As for Wall Street, well, Wall Street who?
But it’s not just that you could read this jobs plan without knowing the financial crisis ever happened. You could read it without knowing the past decade ever happened. As Mishel says, “If lower taxes and less regulation was such good policy, then George W. Bush’s economy would have been a lot better. But under Bush, Republicans cut taxes on business and on investors and high-income people, and they didn’t add many regulations, and that business cycle was the first one in the postwar period where the income for a typical working-class family was lower at the end than at the beginning.”
That, however, is the agenda the House GOP thinks we need. And now more than
ever.
By: Ezra Klein, Columnist, The Washington Post, May 26, 2011
The Fake James Madison: Conservatives Selective Reading Of The Founding Fathers Threatens Social Security And Medicare
The House Republican plan to phase out Medicare is crashing and burning. Rep.-elect Kathy Hochul (D-NY) just won an impossible election victory by campaigning to keep Medicare alive. The Senate just soundly rejected the House GOP’s plan. Even former Speaker of the House Newt Gingrich, who once shut down the government in a failed attempt to force President Bill Clinton to support draconian Medicare cuts, blasted this Medicare-killing plan as “radical right-wing social engineering.”
Yet even as this concerted assault on Medicare hemorrhages support from elected officials, conservatives have a backdoor plan to get the courts to kill Medicare for them. Numerous lawmakers embrace a discredited theory of the Constitution that would not only end Medicare outright but also cause countless other cherished programs to be declared unconstitutional. Under this theory, Pell Grants, federal student loans, food stamps, federal disaster relief, Medicaid, income assistance for the poor, and even Social Security must all be eliminated as offensive to the Constitution.
In essence, supporters of this constitutional theory would so completely rewrite America’s social contract that they make Rep. Paul Ryan (R-WI), the author of the House GOP plan, look like Martin Luther King Jr. This issue brief explores the legal and historical gymnastics required to accept the conservative position that programs like Medicare and Social Security violate the Constitution.
The general welfare
Although Congress’s authority is limited to an itemized list of powers contained in the text of the Constitution itself, these powers are quite sweeping. They include the authority to regulate the national economy, build a national postal system, create comprehensive immigration and intellectual property regulation, maintain a military, and raise and spend money.
This last power, the authority to raise and spend money, is among Congress’s broadest powers. Under the Constitution, national leaders are free to spend money in any way they choose so long as they do so to “provide for the common defense and general welfare of the United States.” For this reason, laws such as Medicare and Social Security are obviously constitutional because they both raise and spend money to the benefit of all Americans upon their retirement.
Many members of Congress, however, do not believe the Constitution’s words mean what they say they mean. Consider the words of Sen. Rand Paul (R-KY), who recently explained the origin of the increasingly common belief that Congress’s constitutional spending power is so small that it can be drowned in a bathtub:
If you read [James] Madison, Madison will tell you what he thought of the Welfare Clause. He said, “Yeah, there is a General Welfare Clause, but if we meant that you can do anything, why would we have listed the enumerated powers?” Really, the Welfare Clause is bound by the enumerated powers that we gave the federal government.
In essence, Paul and many of his fellow conservatives believe Congress’s power to collect taxes and “provide for the common defense and general welfare of the United States” really only enables Congress to build post offices or fund wars or take other actions expressly authorized by some other part of the Constitution. According to this view, the spending power is not—as it is almost universally understood —itself an independent enumerated power authorizing Congress to spend money.
Paul’s understanding of the Spending Clause is not simply the idiosyncratic view of an outlier senator. Indeed, there is strong reason to believe his view is shared by the majority of his caucus. In the lead-up to the 2010 midterm elections, congressional Republicans released a “Pledge to America,” which broadly outlined their plans for governing if they were to prevail that November. In it, the lawmakers claimed that “lack of respect for the clear constitutional limits and authorities has allowed Congress to create ineffective and costly programs that add to the massive deficit year after year.”
This language suggests that many conservatives agree with Sen. Paul that Congress is somehow exceeding its constitutional authority to spend money. But there is no support for this view in constitutional text or in Supreme Court precedent.
In its very first decision to consider the issue—its 1936 decision in United States v. Butler—the Supreme Court unanimously affirmed that “the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution,” as Sen. Paul would claim. Similarly, while the text of the Constitution establishes that “the exercise of the spending power must be in pursuit of ‘the general welfare,’” neither Sen. Paul nor the Pledge cites examples of laws that fail to meet this criterion.
Selectively reading Madison
While conservatives’ narrow understanding of the spending power finds no support in the text of the Constitution or in the Supreme Court’s decisions, Sen. Paul is correct that it does have one very famous supporter. In an 1831 missive, former President James Madison claimed that the best way to read the Spending Clause is to ignore its literal meaning and impose an extra-textual limit on Congressional power:
With respect to the words “general welfare,” I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators.
Sen. Paul suggests that Madison’s extra-textual limit is both authoritative and binding—even if it means that programs ranging from Social Security to Medicare to Pell Grants must all cease to exist. But it is a mistake to assume that Madison’s preferred construction of the Spending Clause must restrict modern-day congressional action.
First of all, even the most prominent supporters of “originalism”—the belief that the Constitution must be read exactly as it was understood at the time it was written—reject the view that an individual framer’s intentions can change constitutional meaning. As the nation’s leading originalist, Supreme Court Justice Antonin Scalia, explains, “I don’t care if the framers of the Constitution had some secret meaning in mind when they adopted its words. I take the words as they were promulgated to the people of the United States, and what is the fairly understood meaning of those words.”
Indeed, Madison himself would have been dismayed by the claim that an established understanding of the Constitution must bend to his own singular views. Like Scalia, Madison rejected the notion that the framers’ personal desires can defeat the words they actually committed to text. As he explained to future President Martin Van Buren, “I am aware that the document must speak for itself, and that that intention cannot be substituted for [the intention derived through] the established rules of interpretation.”
Secondly, Madison embraced a way of interpreting the Constitution reminiscent of the evolving theories of constitutional interpretation that are so widely decried by modern conservatives. Although Rep. Madison opposed on constitutional grounds the creation of the First Bank of the United States in 1791, President Madison signed into law an act creating the Second Bank in 1816. He “recognized that Congress, the President, the Supreme Court, and (most important, by failing to use their amending power) the American people had for two decades accepted” the First Bank, and he viewed this acceptance as “a construction put on the Constitution by the nation, which, having made it, had the supreme right to declare its meaning.”
The Constitution is not a scavenger hunt
Even if we must, as Sen. Paul suggests, be bound by the Founding Fathers’ subjective intentions, Madison’s understanding of the Constitution hardly reflects the consensus view among those who created it. The truth is that Madison’s voice was merely one of many competing voices among the founding generation—and his vision of the Constitution was eventually rejected by no less a figure than George Washington himself.
Madison’s chief antagonist in early debates about constitutional meaning was Alexander Hamilton. As the nation’s first secretary of the treasury, Hamilton offered an interpretation of the Spending Clause that closely resembles the modern understanding:
These three qualifications excepted, the power to raise money is plenary, and indefinite; and the objects to which it may be appropriated are no less comprehensive, than the payment of the public debts and the providing for the common defence and “general Welfare.” The terms “general Welfare” were doubtless intended to signify more than was expressed or imported in those which Preceded; otherwise numerous exigencies incident to the affairs of a Nation would have been left without a provision. The phrase is as comprehensive as any that could have been used; because it was not fit that the constitutional authority of the Union, to appropriate its revenues shou’d have been restricted within narrower limits than the “General Welfare” and because this necessarily embraces a vast variety of particulars, which are susceptible neither of specification nor of definition.
Hamilton’s understanding of the spending power was one part of a broader, more expansive vision of congressional power that also included a robust interpretation of Congress’s power under the Constitution’s Necessary and Proper Clause. This broader understanding of Congress’s role prevailed over Madison’s very limited one during the earliest days of the Republic. Hamilton was the chief advocate who convinced President George Washington to sign the First Bank bill over Madison’s objections.
The point here is not that constitutional interpretations should be played like the card game “War,” where conservatives play the Madison card and everyone else plays the Washington card, and whoever plays the higher card wins. Rather, the point is simply that conservatives are wrong to treat the Founding Fathers’ statements as if they were a menu that lawmakers can search through and order the kind of Constitution they want. The Constitution is not a scavenger hunt.
Moreover, it is hardly necessary to dismiss Madison’s tremendous contributions to the Constitution itself in order to recognize why America should not relitigate a 230-year-old argument about America’s power to spend money on programs like Medicare. Hamilton was undoubtedly correct that his own reading of the Spending Clause is more consistent with the Constitution’s text than the reading offered by Madison—Madison himself concedes as much—but Madison was also correct to warn that the nation rejects a longstanding and widely accepted constitutional interpretation at its peril.
Millions of Americans depend upon programs such as Social Security, Medicare, and federal student loans, and America has grown into the wealthiest and most prosperous nation ever to exist in the years since these programs were enacted. Throughout this golden age, not one Supreme Court justice has questioned what Justice Scalia recently told a gathering of members of Congress: “It’s up to Congress how you want to appropriate, basically.”
Conclusion
Few things are certain in American politics, but after this week one thing is crystal clear—the American people cherish Medicare and they want no truck with an agenda that would destroy it. Sadly, far too many conservative lawmakers refuse to listen to their constituents on this basic and obvious point—to the extent of inventing a theory of constitutional interpretation that would achieve their goal of ending Medicare far sooner than the House Republicans’ ill-considered budget.
Conservatives will tell you that killing Medicare is the only way to read the Constitution consistently with the framers’ intent. Don’t believe them. The truth is that the only way to reach this conclusion is to hunt through the framers’ statements, cherry pick statements that conservatives like, and ignore the very text of the Constitution itself in the process.
By: Ian Millhiser, Center for American Progress, May 27, 2011
To Fix The Budget Deficit, Raise Corporate Taxes
Washington is a town currently gripped by deficit hysteria. Various commissions and congressional “gangs” have formed (and broken up) with the goal of crafting a plan to bring the nation’s budget into balance. Even the media has been sucked into this vortex, dedicating far more of its time to covering the deficit than other economic issues, such as unemployment.
At the same time, both parties seem to agree that the nation’s corporate tax code needs to be reformed. President Obama and House Budget Committee Chairman Paul Ryan each dedicated a portion of their respective budget plans to overhauling the federal corporate income tax, which is high on paper, but so riddled with loopholes, deductions, and outright giveaways that few corporations pay the full statutory rate (and several corporations pay no corporate income tax at all).
This, then, should be an excellent opportunity to kill the proverbial two birds with one stone: cleaning up the corporate tax code, lowering the corporate tax rate, and still raising more revenue that can be put towards deficit reduction.
But no.
Despite all the hyperventilating over the deficit, both Republicans and Democrats have said that they want corporate tax reform to be revenue neutral, meaning no more or less revenue will be raised by the new system than was raised by the old. President Obama and Treasury Secretary Tim Geithner have each extolled the virtues of deficit-neutral corporate tax reform. But if this is actually the road that’s taken, it will constitute a colossal missed opportunity.
At the moment, corporate tax revenue has plunged to historic lows. In 1960, the corporate income tax provided more than 23 percent of federal revenue; the Office of Management and Budget estimates that it will provide less than 10 percent this year.
During the 1960s, the United States consistently raised nearly 4 percent of GDP in corporate revenue. During the 1970s, the total was still above 2.5 percent of GDP. Now, the U.S. raises less than 1.5 percent of GDP from the corporate income tax. As the Congressional Research Service put it, “Despite concerns expressed about the size of the corporate tax rate, current corporate taxes are extremely low by historical standards.”
The United States effective corporate tax rate is also low by international standards (though the 35 percent statutory rate is the second highest in the world). There are plenty of reasons for this drop, but chief among them is the proliferation of loopholes and credits clogging up the corporate tax code (alongside the growing use of offshore tax havens and the ability of corporations to defer taxes on offshore profits indefinitely).
Huge corporations, such as ExxonMobil, have recently had years where they paid literally nothing to the U.S. Treasury, despite making huge profits. The New York Times made waves by finding that General Electric paid no federal income tax last year, instead pocketing hundreds of millions of dollars in tax benefits. Mega-manufacturer Boeing has done the same, paying no federal taxes in 2009 while collecting $132 million in tax benefits. Google last year had a 2.4 percent effective tax rate, while California-based Broadcom’s rate was just 1.4 percent, far below the rate that the average American pays.
The Treasury Department estimated in 2007 that corporate tax preferences cost $1.2 trillion in lost revenue over a decade. So there is ample room to remove credits and deductions (like those that benefit, amongst others, hugely profitable oil companies and agribusinesses), lower the statutory rate, while still bringing in more revenue. Some companies would see their taxes go up, but others would see their tax bills drop, and the corporate tax code would be more fair, efficient, and competitive, while ensuring that all corporations pay their fair share.
As the Center on Budget and Policy Priorities put it, “corporate tax reform is a solid candidate to make a contribution to fiscal improvement … Taking a major revenue source off the table for deficit reduction at the outset would be ill-advised.” Indeed, with corporate profits skyrocketing—up 81 percent over a year ago—and corporations sitting on trillions in cash reserves, there is no reason that corporate tax reform should be done in a way that is deficit neutral, besides the fact that raising more revenue will be politically difficult, as corporations will likely throw their considerable lobbying weight against such a move. But in the end, failing to raise additional corporate tax revenue will simply shift more of the deficit reduction burden onto a middle-class already battered by the Great Recession.
By: Pat Garofalo, U. S. News and World Report, May 25, 2011
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