John Boehner’s Unreality Check On The Deficit
The news out of House Speaker John Boehner’s speech to the New York Economic Club was his demand for “cuts of trillions, not just billions” before the debt ceiling can be raised. Not just broad deficit-reduction targets, the Ohio Republican insisted, but “actual cuts and program reforms.”
That’s alarming enough. It is all but impossible to get this done in the available time. It certainly can’t be accomplished on Boehner’s unbending, no-new-taxes terms. And if the speaker truly believes that it would be “more irresponsible” to raise the debt ceiling without instituting deficit-reduction measures than not to raise it at all, we’re in a heap of trouble.
Even more alarming, because it has consequences beyond the debt-ceiling debate, is the incoherent, impervious-to-facts economic philosophy undergirding Boehner’s remarks.
Reporters naturally tend to ignore this boilerplate. Journalistically, that makes sense. Boehner’s economic comments were nothing particularly new. Indeed, they reflect what has become the mainstream thinking of the Republican Party. But that’s exactly the point. We become so inured to hearing this thinking that we neglect to point out how wrong it is.
My argument with Boehner is not that he believes in a more limited role for government than I do, not that he is more skeptical of government intervention and regulation, and not that he is more worried about the economically stifling implications of tax increases. Those are legitimate ideological differences. American politics is better off for them.
I’m talking about statements that are simply false.
“The recent stimulus spending binge hurt our economy and hampered private-sector job creation in America.”
Reasonable economists can disagree about the effectiveness of the stimulus spending and whether it was worth the drag of the additional debt, but no reasonable economist argues that it hurt the economy in the short term.
The Congressional Budget Office estimates the stimulus added, on average, about one percentage point annually to economic growth and reduced the unemployment rate by half a point between 2009 and 2011. And that’s the low-end estimate. The high-end numbers show the stimulus spending adding more than 2 percentage points annually to economic growth and cutting the unemployment rate by more than 1 percentage point.
The CBO is not alone. Economists Alan Blinder and Mark Zandi estimated in a July 2010 paper that without the stimulus spending, the unemployment rate would be 1.5 percentage points higher.
“The massive borrowing and spending by the Treasury Department crowded out private investment by American businesses of all sizes.”
Crowding out occurs when government spending drives up interest rates and makes borrowing unattractive to the private sector. As economist Joseph Minarik of the Committee for Economic Development explains, “When interest rates are on the floor, you can’t say federal government borrowing is crowding out business investment.” The lackluster investment climate reflects low consumer demand and underutilized capacity. You can’t be crowded out of a room you’re not trying to enter.
“The truth is we will never balance the budget and rid our children of debt unless we cut spending and have real economic growth. And we will never have real economic growth if we raise taxes on those in America who create jobs.”
Never? Under President Clinton, taxes were raised, primarily on the wealthy. During the eight years of his administration, the economy grew by an average of close to 4 percent.
“I ran for Congress in 1990, the year our nation’s leaders struck a so-called bargain that raised taxes as part of a bipartisan plan to balance the budget. The result of that so-called bargain was the recession of the early 1990s. It wasn’t until the economy picked back up toward the end of that decade that we achieved a balanced budget.”
Boehner blames the budget deal for tanking the economy, but the recession actually started in July 1990, two months before the agreement was reached. And that revived economy? It came despite the supposed dead weight of the Clinton tax increase.
“A tax hike would wreak havoc not only on our economy’s ability to create private-sector jobs, but also on our ability to tackle the national debt.”
During the early 1980s, taxes were cut and public debt ballooned, from 26 percent of GDP in 1980 to 40 percent by 1986. In 1993, taxes were increased (and spending cut); debt as a share of the economy fell, from 49 percent to 33 percent. In 2001 and 2003, taxes were cut. By the time President Obama took office, debt had climbed to 40 percent of GDP.
Listening to Boehner, I began to think the country suffers from two deficits: the gap between spending and revenue, and the one between reality and ideology. The first cannot be solved unless we find some way of at least narrowing the second.
By: Ruth Marcus, Opinion Writer, The Washington Post, May 10, 2011
In America, Being Poor Is A Criminal Offense
It takes a special kind of bully to target the most vulnerable and neediest families in society, which millionaire politicians like to argue are draining America’s treasury. I am referring to Rep. Charles Boustany (R-LA), who recently introduced a bill that would require states to implement drug testing of applicants for and recipients of the federal Temporary Assistance for Needy Families (TANF) program. This is reminiscent of Sen. Orrin Hatch’s (R-UT) failed legislation last summer to drug test the unemployed and those receiving other forms of government cash assistance, which ultimately died in the Senate. So far, Boustany’s proposal is following the same fate as Hatch’s, but around the country states are taking matters into their own hands.
In at least 30 state Legislatures across America, predominately wealthy politicians are quite impressed with themselves for considering bills that would limit the meager amount of state help given to needy families struggling to make ends meet. Many have proposed drug testing with some even extending it to recipients of other public benefits as well, such as unemployment insurance, medical assistance, and food assistance, in an attempt to add more obstacles to families’ access to desperately needed aid.
Florida’s Legislature has passed a bill that will require welfare applicants to take drug tests before they can receive state aid. Once signed into law by Republican Gov. Rick Scott, which is likely, all adult recipients of federal cash benefits will be required to pay for the drug tests, which are typically around $35. In Maine, Republican lawmakers introduced two proposals that would impose mandatory drug testing on Maine residents who are enrolled in MaineCare, the state’s Medicaid program for low-income and disabled residents. Under a similar bill that passed both the House and Senate in Missouri, recipients found to be on drugs will still be eligible for benefits only if they enter drug treatment programs, though the state wouldn’t pick up the tab for their recovery.
In Massachusetts — where about 450,000 households receive cash or food assistance — a bill introduced by state Rep. Daniel B. Winslow (R-Norfolk) would set up a program requiring those seeking benefits to disclose credit limits and assets such as homes and boats, as well as the kind of car they drive. His reasoning is “If you have two cars and a snowmobile, then you aren’t poor. If we do this, we will be able to preserve our limited resources for those who are truly in need and weed out fraud, because we know there’s fraud and we’re not looking for it.” State Rep. Daniel K. Webster (R-Pembroke) filed a budget amendment requiring the state to verify immigration status of those seeking public benefits. Webster made it clear that his proposal does not mean he dislikes poor people or immigrants, but “this is all unsustainable and the system is being abused.”
This is rather shocking because I can’t recall any Republicans or Democrats demanding that the CEO of Bank of America or JP Morgan disclose inventory of their vacation homes, private jets, and yachts before bailing them out in what amounts to corporate welfare. Nor did they insist that these CEOs submit to alcohol and drug screenings before receiving taxpayer money. No objections were made regarding the immigration status of the people running these companies or whether they happen to employ undocumented workers for cheap labor.
Some would argue that corporations are different, in that they create jobs. To that I will point out that corporations are making record profits, even as they layoff workers and pay next to nothing in Federal income taxes. And this doesn’t even begin to scratch at the surface of corporate abuse by the very entities that are soaked in taxpayer money. Just contrast these proposals with the way the rich are treated in this country with billions of dollars in subsidies and tax breaks.
This is simply an extension of a conversation that began in 1996, when President Bill Clinton and House Speaker Newt Gingrich passed bipartisan welfare reform, whose results have been tragic to say the least. The 1996 Welfare Reform Act authorized, but did not require, states to impose mandatory drug testing as a prerequisite to receiving state welfare assistance. Back then, unproven allegations of criminal behavior and drug abuse among welfare recipients were the rationales cited by those in support of the bill’s many punitive measures that were infused with race, class, and gender bias.
The majority of the proposals for drug testing require no suspicion of drug use whatsoever. Instead they rest on the assumption that the poor are inherently inclined to immoral and illegal behavior, and therefore unworthy of privacy rights as guaranteed under the Fourth Amendment. These proposals simply reaffirm the longstanding concept of the poor as intrinsically prone to and deserving of their predicament. Jordan C. Budd, in his superb analysis Pledge Your Body for Your Bread: Welfare, Drug Testing, and the Inferior Fourth Amendment, demonstrates how the drug testing of welfare recipients is part of what’s called a “poverty exception” to the Constitution, particularly the Fourth Amendment, a bias that renders much of the Constitution irrelevant at best, and hostile at worst, to the American poor.
Kaaryn Gustafson extensively documents the trend toward the criminalization of poverty. She demonstrates how, in her words “welfare applicants are treated as presumptive liars, cheaters, and thieves,” which is “rooted in the notion that the poor are latent criminals and that anyone who is not part of the paid labor force is looking for a free handout.” I would argue that given the disdain that has been shown for “entitlements” over the years, it won’t be long before this treatment extends to Social Security, Medicare, and even Financial Aid recipients.
The notion that the poor are more prone to drug use has no basis in reality. Research shows that substance use is no more prevalent among people on welfare than it is among the working population, and is not a reliable indicator of an individual’s ability to secure employment. Furthermore, imposing additional sanctions on welfare recipients will disproportionately harm children, since welfare sanctions and benefit decreases have been shown to increase the risk that children will be hospitalized and face food insecurity. In addition, analysis shows that drug testing would be immensely more expensive than the acquired savings in reduced benefits for addicts
With regard to welfare legislation, it’s beneficial to highlight where on the class ladder members of Congress stand. According to a study by the Center for Responsive Politics released late last year, nearly half of the members in congress — 261 — were millionaires, compared to about 1 percent of Americans. The study also pointed out that 55 of these congressional millionaires had an average calculated wealth in 2009 of $10 million dollars and up, with eight in the $100 million-plus range. A more recent study released in March, found that 60 percent of Senate freshman and more than 40 percent of House freshmen of the 112th congress are millionaires.
Why is this so important? Because very few of our lawmakers understand what it’s like to struggle financially. Millionaires can generally afford healthcare without grappling with unemployment, foreclosure, or an empty refrigerator. The majority of our representatives haven’t a clue what the daily lives of the people they represent are like, let alone the constant struggle of single mothers living below the poverty line. They are constantly arguing that we all must sacrifice with our pensions, our wages, our education, the security of our communities, and with the belly’s of our children, while they sit atop heavily guarded piles of money.
With the ranks of the underclass growing and the unemployment level at a staggering 9%, it’s more clear than ever that the wealth divide between “we the people” and our representatives has caused a dangerous disconnect. State and federal legislators claim to be acting fiscally responsible, but they support budgets that create unimaginably difficult circumstances for the lives of the most vulnerable people, especially children. There is no question that these newest proposals amount to class warfare, and the longer we ignore it, the more it will spread.
By: Rania Khalek, CommonDreams.org, May 14, 2011
We Don’t Have A Spending Problem, We Have A Fraud Problem
Conservatives seem to have a knack for changing the subject whenever their backs are up against the wall. Over the last several weeks, there has been an orchestrated chorus by the House Republicans in particular to define the so-called “deficit problem” in terms of a wild spending binge by the federal government and the Obama administration. They seem to have easily forgotten who got us into this mess in the first place. That aside, everyone from Speaker John Boehner to Sen Mitch McConnell have been bellowing throughout the halls of Congress and at every available microphone that “We don’t have a revenue problem, we have a spending problem”.
It’s amazing how we all have bought into this line. The media, in its usual rush to get a headline or sound bite, immediately picked up this line and has been the waterboys for the GOP by enabling this hoax on the American people. The focus in most circles has been on spending cuts. Well, we need to re-characterize what is actually going on here. We don’t have a spending problem..we have a fraud problem.
This fraud has been played on the American people by an ideologically depraved Republican party for at least the last ten years. They have made everybody believe that if we just make the wealthy wealthier, somewhere down the road, we will all benefit. There would be job creation with full employment, small businesses would thrive, home prices would fall, gas would cost less than two dollars a gallon and there would be a chicken in every pot. And we believed it hook, line and sinker. Now we are back to square one. None of these things have happened except the fact that we have indeed made the wealthy wealthier. In 2010, the 400 Americans with the highest adjusted gross revenue incomes averaged $345 million. The average federal income tax was 17%, down from 26% in 1992. The income gap just keeps getting wider. Why does this continue to happen? Because we let it happen.
Just last week, Standard and Poor’s accentuated the Republican clarion that the sky is falling. This call comes from the same S&P who supported every toxic waste subprime security under the sky, the same S&P who sold its ratings to the highest bidder. Regulators have also assisted the GOP in their fraud. The Office of the Currency has gone out of its way to protect its clients, ie the banks. Efforts to reign in the banks and stop their predatory loan practices have been foiled at every turn. Even the banks are too big to fail. Profits for banks, corporations, CEO’s, Wall St and the wealthy just keep soaring. There is a lot of back scratching going on here, by and for a lot of wealthy people.
Now that the cat is out of the bag, all of these wealthy people are trying to figure out a way to take the spot light off themselves. They are beginning to see that they may not be able to stave off demands any longer that they pay their fare share. People who have been adversely affected for so many years are now demanding that this fraud be stopped. Teachers and other low wage earners, the poor, seniors, students and union members have all come to believe that they have sacrificed enough. Even some tea party members are beginning to see the light.
For too many years, the Republicans and their wealthy friends have had their hands in everybody’s pockets. Your pocket was the revenue stream for them. General Electric and the Koch Brothers were probably happier than anyone. The Republicans were also happy because their happy friends provided the cover that allows them to do whatever they want to in terms of policy. Being the ideologues that they are, this protection gives them unimpeded opportunity to push forward with their agenda, from dissolving women’s rights, overturning the Affordable Care Act, union busting, replacing Medicare with vouchers and completely eliminating any sense of environmental protection just to name a few. With happy and contented wealthy backers behind you for so many years, how could you go wrong. My, how things are changing.
The revenue stream that the Republicans have depended on for so long is now drying up…that stream is you. They are finding that when they put their hands in your pockets now, they are feeling the seam of the sewn pocket. There just isn’t any more money there. They become flushed and filled with extreme panic, finally realizing that they are going to have their taxes raised after all these years. Their backs are against the wall. So what do they do now? Change the debate..”Let’s raise taxes on everybody”. Nice try!
It’s well past time that shared sacrifice mean exactly what it says. It is no longer acceptable that the poor, under privileged, seniors and the disenfranchised continue to carry the load for corporations, Wall St and their deadbeat tax-evading friends. No, let’s not raise taxes on everybody. Let’s end the fraud and insist that the wealthy start paying taxes just like everyone else. This being Easter Sunday, this may be a good symbolic time to increase taxes only for the rich. We should leave that rate in place for oh say, the next 40 years. Besides, they have accumulated a fair amount of wealth over the years and should easily be able to live off that profit during that time. Perhaps take a trip or two or just wander around the world enjoying their spoils. We will pledge to re-visit this issue after that time. If, and only if, the middle class has reached a level playing field, then we can talk about lowering the tax rate for the wealthy. I think Moses and the Pharaoh’s would be happy with this compromise. So it is written, so let it be done.
By: raemd95, mykeystrokes.com, April 24, 2011
Yes, Paul Ryan Does Cut Taxes For The Rich
A number of conservatives have asserted that, contrary to what I’ve written, the House Republican budget written by Paul Ryan does not cut taxes for high earners. (See John McCormack, Ramesh Ponnuru, Charles Krauthammer, and McCormack again quoting Ryan.) Here’s the argument. Ryan keeps overall tax levels the same as they are right now by making the tax cuts permanent. He would then reduce the corporate tax rate and the top income tax rate by ten percentage points, from 35% to 25%. But he would make up for that additional revenue loss by closing “loopholes and deductions,” many of which benefit the rich. Therefore, his plan doesn’t really cut taxes on the rich.
There are four problems with this claim, each of them fatal.
First, the argument simply reflects a legitimate difference in baselines. Under current law, the Bush tax cuts are in full effect, but expire at the end of 2012. Keep Bush-era tax levels in place is not a tax cut compared with the tax code now, but it is a tax cut compared with the tax code in 2013. Which is the true baseline? I think both sides have a point, and Congressional scorekeepers have taken to using both baselines.
When President Obama accuses Ryan of cutting taxes for the rich, he’s using the post-2012 baseline. I consider that the best point of reference because the most important force in our political system is inertia. Given our multiple veto points, it takes great effort to enact a policy change that the parties disagree upon. Ryan proposes to make that change. Therefore, I think it’s fair to describe him as “cutting taxes,” even if revenues did remain at present levels (which I dispute, but more on that later.) I do think there’s merit in both baselines. The argument that Obama is lying about Ryan — that calling him a tax-cutter is, in Krauthammer’s characteristically understated phrasing, “scurrilous” — rests upon the assumption that the current-policy baseline is not only more preferable but the only remotely honest point of reference. That seems like a huge stretch.
Second, even if we accept Ryan’s preferred baseline, his description of his plan is hard to accept at face value. Tax reform is a trade where you take away deductions (that’s hard) and use the money to reduce rates (that’s easy.) The rate reductions are specified. The reduced deductions aren’t. Another way to put this is that Ryan has proposed a specific tax cut that would benefit the affluent, accompanied by utterly vague promises to find offsets. At the very least, the rate-lowering portion ought to carry more weight than the deduction-closing portion.
Third, even if we accept both Ryan’s baseline and assume he will match every dollar in lost revenue from the rate cuts with another dollar in reduced deductions, he will almost certainly wind up cutting taxes for the rich relative even to the post-Bush tax code. Ryan implies that his plan would leave the rich paying the same effective tax rates as they do now because he’s “getting rid of loopholes and deductions, which by the way are enjoyed by the top [tax] rate filers, the people in the top two brackets.” But he hasn’t put out any details. In 1995, House Republicans loudly promised to promote shared sacrifice by rooting out corporate welfare in the tax code. The actual savings they produced turned out to consist of proposals that hurt the poor (by cutting the Earned Income Tax Credit), benefited business (by letting them swipe funds from employee pensions, keeping the money as profit and thus increasing corporate tax revenue), or other reverse-Robin Hood measures.
Now, Ryan was not around then. But we can get a measure of his intentions from the more specific tax plan laid out in his “Roadmap” from 2010. That plan constituted a massive tax cut for the rich, combined with a tax hike on the middle class.
The Tax Policy Center examined various proposals to reduce tax deductions while using the revenue to lower rates across the board. All the plans decreased the tax burden for the top-earning 1%. The problem is that tax deductions are just not worth as much to very rich people as low tax rates.
It’s true that the Bowles-Simpson deficit reduction plan includes proposals that would lower rates to around 25% while increasing the effective tax rate paid by the very rich. To do that, you have to do things like raise the estate tax rate and completely eliminate the preferential treatment of capital gains. But Ryan’s budget promises instead — and this is the only specific policy commitment in its tax section, other than lowering rates — to expand the preferential treatment of income from wealth:
Raising taxes on capital is another idea that purports to affect the wealthy but actually hurts all participants in the economy. Mainstream economics, not to mention common sense, teaches that raising taxes on any activity generally results in less of it. Economics and common sense also teach that the size of a nation’s capital stock – the pool of saved money available for investment and job creation – has an effect on employment, productivity, and wages. Tax reform should promote savings and investment because more savings and more investment mean a larger stock of capital available for job creation. That means more jobs, more productivity, and higher wages for all American workers.
Fourth — almost there! — even if you reject everything I’ve written to this point, Ryan’s plan includes the repeal of all the taxes in the Affordable Care Act, including the taxes on the affluent. Here’s the Path to Prosperity’s description of health care taxes he proposes to undo:
The new law imposes a 0.9 percent surtax on wages and a 3.8 percent surtax on interest, dividends, and capital gains. Both taxes only apply to filers in the top two income brackets, but as discussed elsewhere in this section, those filers include small businesses employing millions of Americans, and the new taxes on capital will reduce the pool of capital available for investment and job creation.
There. Per Paul Ryan, these are upper-bracket taxes he proposes to lower. He could keep those taxes in effect, and cover a few of the uninsured people he throws off their coverage, or make the progressively-more-inadequate health care vouchers he uses to replace Medicare slightly less inadequate. But he chooses not to do that, because he believes it’s more important to tax capital at lower rates. It’s fine for him to believe that. But he and his defenders have to stop insisting that he doesn’t propose tax cuts for the rich. He indisputably does so.
By: Jonathan Chait, The New Republic, April 20, 2011
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