Can Seven Reports Be Wrong About The Risks of Spending Cuts? GOP Says Yes
Could two independent economic reports, a liberal think tank and four bipartisan reports on debt reduction be wrong? They all conclude that slashing federal spending this year could cause job losses and threaten the economic recovery.
The latest report, from Mark Zandi of Moody’s Analytics, says 700,000 jobs could be lost by the end of 2012 if Republicans succeed in their quest to cut $60 billion from domestic programs this year. Cuts and tax increases are necessary to address the nation’s long-term fiscal problems, Zandi said, but “cutting too deeply before the economy is in full expansion would add unnecessary risk.” The report largely echoes earlier analyses by Alec Phillips of Goldman Sachs and the Center for American Progress.
House Speaker John Boehner famously responded, when asked about potential job losses earlier this month, “so be it.” On Monday his office pointed to a new counter argument offered by Stanford economist John Taylor – that “a credible plan to reduce the deficit” will help the economy, not hurt it, and that $60 billion – the amount the other analyses assume will be cut this year – is an inaccurate, inflated figure.
Taylor is a former Bush administration official based at the conservative Hoover Institution at Stanford; last year he received an award from the conservative Bradley Foundation. Zandi, founder and chief economist at Moody’s, was an adviser to Republican presidential nominee John McCain in 2008. However, he is a registered Democrat. (Update: Fed chairman Ben Bernanke, named by Republican George W. Bush and re-appointed by President Barack Obama, also disputes the Zandi and Phillips reports).
Boehner spokesman Michael Steel called Zandi “a relentless cheerleader for the failed ‘stimulus,'” who “refuses to understand that ending the spending binge will help the private sector.” That led the Chicago Tribune’s Mike Memoli to tweet, “Today, GOP discredits Mark Zandi. Last fall, cited his analysis in arguing against tax hikes.”
It is an article of faith among Republicans that 2009 stimulus package has “failed.” But the Obama administration, Zandi and many others disagree with that assessment. The nonpartisan Congressional Budget Office estimates that the stimulus created or saved up to 3.5 million jobs, raised the GDP and stabilized an economy that had been in free-fall.
There is no sign the stimulus will ever be anything but a partisan flashpoint. Yet there is bipartisan consensus to be found in the reports from various deficit and debt commissions. They are unanimous in suggesting either increased stimulus or steady government spending in 2011.
“Don’t disrupt the fragile recovery,” the National Commission on Fiscal Responsibility and Reform warned in December. Its plan – adopted by 11 of the 18 panel members – calls for “serious belt-tightening” to begin in 2012. A report from the Bipartisan Policy Center suggested gradually phasing in steps to reduce deficits and debt “beginning in 2012, so the economy will be strong enough to absorb them.” The 2009 Peterson-Pew Commission on Budget Reform put off cuts to the same year, as did a recent proposal from Brookings fellow Bill Galston and Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
MacGuineas has mixed feelings about the GOP drive to slash spending and slash it now. “It’s good that we’re actually talking about spending reductions” instead of putting it off, she said in an interview. “On the one hand, that’s helpful. On the other hand, they are focusing on the wrong time frame — this year instead of this decade, and focusing on the wrong part of the budget — a very thin slice instead of the real problem areas” such as Medicare and Medicaid.
The ideal scenario in the view of MacGuineas and the bipartisan commissions would be for politicians serious about debt reduction to spend 2011 on a long-term plan to reduce domestic and defense spending, raise taxes, ensure long-term health for Social Security and solve the riddle of controlling Medicare and Medicaid costs. “The right model is to put in place this year a multiyear plan to get there,” MacGuineas said, adding she has high hopes for a bipartisan group of senators led by Democrat Mark Warner of Virginia and Republican Saxby Chambliss of Georgia.
The skirmishes over spending – destined to repeat themselves constantly this year as Congress confronts potential government shutdowns and loan defaults – have provided political fodder for all sides. Democrats seized on Boehner’s initial response to the prospect of job losses and now refer often to the GOP’s “so be it” jobs policy. Republicans, though they only control half of Congress, are making good on promises to the tea party movement and other voters who put a premium on cutting government spending.
If Republicans can’t secure Senate passage and Obama’s signature for their spending cuts, they will have at least made clear to their base that they tried. If by some political miracle they win the $60 billion in cuts they are seeking, and the recovery picks up, they can take credit. If the economy dips back into crisis, or even if the jobless rate is flat, they can blame Obama and bolster their case to take back the White House.
Unless of course Obama and the Democrats, equipped with who knows how many reports by then, figure out a way to blame them first.
By: Jill Lawrence, Senior Correspondent-Politics Daily, March 1, 2011
Deficit Hawks and The Games They Play
For 30 years, conservative ideologues have played moderate deficit hawks for suckers.
You’d think this might endow those middle-of-the-road deficit-busters with a touch of humility. Fat chance. They stick with their self-righteous moralism, pretending to be bipartisan and beyond ideology. In fact, they make the problem they want to solve worse by continuing to empower the tax-cuts-in-every-season conservatives.
It’s thus satisfying to see President Obama ignore the willfully naive who are wailing over deficits. He knows that new revenue will have to play a big role in deficit reduction. He also knows that House Republicans are pretending we can cut our way out of this mess and would demagogue any general tax increases.
So he has proposed some serious spending cuts and some modest revenue increases to keep things stable as he embarks on a long struggle to move our dysfunctional budget politics to a better place. This annoys his deficit-obsessed critics, by which I mean just about everyone who says he should simply embrace the proposals of the Bowles-Simpson commission. Obama should smile, let them rage and go about his business.
Let’s look at history. When Ronald Reagan took office in 1981, he won big tax cuts coupled with big increases in military spending. The tax cuts and a severe recession tanked government revenue.
Unlike today’s conservatives, Reagan at least acknowledged mathematical reality and signed some tax increases. But these were insufficient, and it fell first to George H.W. Bush – the last truly fiscally responsible Republican – and then to Bill Clinton to restore budgetary sanity.
But the conservatives who dug the hole did nothing to get us out of it. On the contrary, they denounced the first President Bush for raising taxes, and every Republican voted against Clinton’s economic plan. For their bravery in supporting tax increases in 1993, Democrats lost control of Congress in 1994.
By the end of the Clinton years, we had a handsome surplus. In came the second President Bush who, with Republicans in Congress, declared the surplus too big. It was one problem they worked very hard to solve. Two tax cuts and two wars later, we were plunged into deficits – again. And the economic downturn that started on Bush 43’s watch made everything worse, cutting revenue and requiring more deficit spending to get the economy moving.
Where were the moderate deficit hawks in all this? They have a very bad habit. When conservatives blow up our fiscal position with their tax cuts, the deficit hawks are silent – or, at best, mumble a few words of mild reproach to have something on the record – and let the budget wreckage happen. Quite a few in their ranks (yes, including some Democrats) actually supported the Bush tax cuts.
But when it’s the progressives’ turn in power, the deficit hawks become ferocious. They denounce liberals if they do not move immediately to address the shortfall left by conservatives. Thus, conservatives get to govern as they wish. Liberals are labeled as irresponsible unless they abandon their own agenda and devote their every moment in power to cutting the deficit.
It’s a game for chumps. The conservatives play it brilliantly. By winning their tax cuts and slashing government revenue, they constrain what liberals can do whenever they get back into power.
How do we know our difficulties stem primarily from a shortage of revenue? Consider what would happen if we allowed all the tax cuts scheduled to expire in 2012, including the ones enacted under Bush, to go away. That would produce nearly as much deficit reduction over the next decade – roughly $4 trillion – as all the maneuvers of the Bowles-Simpson commission put together. If you want to be serious about closing the deficit, ending the Bush tax cuts is a good place to start.
The commission’s work showed just how effective conservatives have been. By saying they will never, ever, ever raise taxes, conservatives intimidate moderates into making concession after concession.
In the end, the Senate conservatives on the commission – but not the House conservatives – supported some mild tax increases. But Bowles-Simpson proposed about twice as much in spending cuts as in revenue increases. You would think that moderates could at least hold out for a 50-50 split. But no, they’ll do anything to win over a few conservatives.
As a result, any conservative who supports even the smallest tax increase is hailed as courageous. Any liberal who proposes moderate spending cuts is condemned as a gutless coward unless he or she also supports slashing Social Security and Medicare. What’s “moderate” or “balanced” about this?
I hope Obama has the spine to keep calling the bluff of the deficit hawks until they get serious about changing the politics of deficit reduction. We can’t afford another 30 years of fiscal evasion.
By: E. J. Dionne, Jr-Op-Ed Columnist, The Washington Post, originally posted February 17, 2011
Commerce Clause Challenges To Health Care Reform
The following article, forthcoming in U. Penn. L. Rev., pinpoints the strongest arguments for and against federal power under the Commerce Clause to mandate the purchase of health insurance: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1747189
Among the key points I make in defense of this federal law are:
1. The “commerce” in question is simply health insurance, and not the non-purchase of insurance as challengers have framed it. Because “regulate” clearly allows both prohibitions and mandates of behavior, mandating purchase is lexically just as valid an application of the clause as is prohibiting purchase or mandating the sale of insurance.
2. Although existing precedent might allow a line to be drawn between economic activity and inactivity, there is no reason in principle or theory why such a line should be drawn in order to preserve state sovereignty. Purchase mandates, after all, are as rare under state law as under federal law.
3. Challengers do not seriously dispute the constitutional validity of the ACA’s regulation of insurers or the economic necessity of the mandate in order for that regulation to be effective. In fact, they essentially concede the mandate’s necessity by asking to strike the entire law if it is declared invalid. Accordingly, the mandate would pass the tests for constitutional necessity articulated by at least seven of the Justices in the Comstock opinion last year, and might even pass the necessity test embraced by Justices Thomas and Scalia.
4. An important challenge, not yet clearly discussed by court opinions to date, is that the mandate does not, strictly speaking, simply “carry into execution” Congress’ other regulatory powers, but is the exercise of a distinct power. However, both modern and historical precedents under the Necessary and Proper Clause are not limited narrowly to merely implementation measures. Both Comstock and a series of decisions under the Postal Power are good examples to the contrary since they authorize independent federal powers that expand the range of purposes and measures permitted by express Congressional powers.
5. There is no coherent basis for declaring a purchase mandate to be constitutionally “improper,” and a categorical ban on regulating inactivity would contradict the implicit reasoning underlying several other established precedents — such as those upholding the draft and the Congressional subpoena power. Also, federal eminent domain allows compelled transactions justified in part by the Necessary and Proper clause’s expansion of the commerce power, when applied, for instance, to citizen’s refusal to sell land for use in constructing highways, bridges, and canals.
6. Using the 10th Amendment to justify a categorical prohibition of purchase mandates (as Randy Barnett has argued) would be no more convincing than using the 9th or 5th Amendments (substantive due process). Instead, such a move would, for the first time and contrary to precedent, make the 10th a protector of individual liberties rather than just federalism concerns, and would radically enforce an absolute right to economic liberty, regardless of level of legislative justification or judicial scrutiny (see point 9).
7. Slippery slope concerns are no greater here than for any other of a range of expansive federal powers. Instead, the novelty of the mandate subjects it to greater political constraint, and so “parade of horribles” concerns may be even more unrealistic than similar settings where the Court has rejected them.
8. Grounding the mandate in the Necessary and Proper clause helps to confine its precedential effect by emphasizing it’s necessary role in the ACA’s particular regulatory scheme that, in other respects, clearly resides within the core of the conventional commerce power. This essential supportive and interconnected role is not shared by free-standing mandates to purchase American cars or broccoli, for instance.
9. Counteracting imaginary slippery slope concerns about absurd hypothetical laws are the legitimate concerns about insurmountable barriers that a prohibition of purchase mandates would erect. Forbidding Congress from any purchase mandate could cripple necessary efforts, for instance, to require preventive measures in the face of a massive pandemic that threatened tens of millions of lives.
By: Mark Hall, Professor of Law, Wake Forest University School of Law: Originally published in Health Reform Law, January 26, 2011.
The Real Threat to Health Care Reform….It’s Not The Supreme Court
Will the Supreme Court overturn the part of the health-care law that penalizes people who don’t buy insurance for themselves? A few months ago, the answer that experienced Court-watchers gave was “not a chance.” Orin Kerr, a law professor at George Washington University who once clerked for Justice Anthony Kennedy, said “there is a less than 1 percent chance that the courts will invalidate the individual mandate.” Now, the best we can say is, who knows?
As Slate’s legal columnist Dahlia Lithwick has said, the conventional wisdom has turned sharply. “Today,” she writes, “it is an equally powerful article of faith that everything rests in the hands of Justice Anthony Kennedy in what will surely be a 5-4 decision.”
That could mean we were wrong a few months ago, or it could mean we’re wrong now. But it doesn’t matter. Replacing the individual mandate wouldn’t be particularly hard. All we need is another policy that does the same thing – specifically, discourage free-riders who don’t want to buy insurance until after they get sick and thus leave the rest of us paying for them.
In fact, I can give you four credible alternatives in four sentences:
We could limit enrollment changes to once every two years, so people who decide to go without insurance can’t buy coverage the moment they get a bad report from their doctor.
We could penalize those who wait to buy coverage with higher premiums, which is what we do in the Medicare Prescription Drug Benefit.
We could have a five-year lockout, in which people who decide to go without coverage wouldn’t be able to access the subsidies or insurance protections for five years, even if they decided they wanted to buy insurance.
We could raise taxes by the same amount as the individual mandate penalty and give everyone who showed proof of insurance on their tax forms a “personal responsibility tax credit” of the same amount.
But all these ideas suffer the same problem: They’d need to pass through Congress. And Republicans in Congress don’t want to make the Affordable Care Act better. They want to repeal it.
This – and not the Supreme Court, or even any flaws in the design of the bill – is the real problem for the Affordable Care Act. Like any major piece of legislation, parts of it will work much better than we expect, and parts of it will disappoint us. Perhaps the experiment with paying hospitals a flat fee to treat a patient’s diabetes will prove a smashing success, leading to lower costs and higher-quality care. And perhaps the provision allowing individuals to publicly rate their insurers will prove a disaster, with companies paying the computer-savvy to rig the ratings.
In that world, the answer would be obvious: Expand the good and repeal the bad. Indeed, we should expect to do this over and over again. We’ll constantly need to double down on what works, remove what doesn’t, and add new ideas and refinements into the mix. Policymakers are never omniscient, but they are, at their best, persistent. And that’s how we’ll move from the inefficient and expensive health-care system we have to the efficient and affordable system we want: one tweak at a time.
That assumes, however, that both parties’ top priority is to get from the system we have to the system that the Affordable Care Act suggests we want: a system with lower costs and near-universal care. But is it?
Increasingly, it seems not. The Democrats have a deep and longtime commitment to health-care reform, one they’ve proven by moving continually right on the issue in a fruitless search for bipartisan support. They’ve given up on single-payer, on an employer mandate, on a public option. And they adopted the same structure that Mitt Romney signed in Massachusetts and that Republicans called for in 1994.
Republicans, meanwhile, have proven deeply and continually committed to opposing health-care reform bills pushed by Democrats. They abandoned Richard Nixon’s idea when Bill Clinton adopted it and Romney’s idea when President Obama endorsed it. In the most recent election, they ran on “repeal and replace,” but when they got to Congress, they voted on a bill that included the “repeal” but was silent on the “replace.” Even now, they’ve done nothing more than vaguely direct some committees to come up with some unspecified ideas at some unnamed date in the future.
Their inattention to “replace” is evidence that their top priority is “repeal.” But they don’t have the votes to repeal the bill. They might not have the votes to repeal it after 2012, either. But so long as they’re telling their base that they will repeal it, if not today then soon, they can’t participate in any significant reforms of the bill, as improving the legislation tacitly accepts its existence. “I think it’s clear that this is an area upon which we are not likely to reach any agreements with the president,” Senate Minority Leader Mitch McConnell told conservative radio host Laura Ingraham.
Democrats, meanwhile, aren’t becoming any friendlier to the GOP’s repeal efforts. Of the 13 House Democrats who voted against the law and survived the election, only three voted with the House Republicans to repeal the bill. In the Senate, not a single Democrat voted for repeal.
This raises the possibility that Congress will neither repeal the legislation nor commit itself to its success. Rather, Republicans will work to hobble it where they can, starving the law of the funds needed for its implementation, harassing the regulators charged with setting it up and stopping Democrats from improving on the law’s successes or responding to its inevitable failures. Democrats will work to ensure that the law survives, but they won’t have the votes to do much more than that.
Wounded, the law will limp along, protected from dying and prevented from thriving.
By: Ezra Klein-The Washington Post, February 8, 2011
The Fight Over The Individual Mandate Is Not About Liberty
Whatever the legal argument about the individual mandate is about, it’s not, as some of its detractors would have it, a question of liberty. Charles Fried, Ronald Reagan’s former solicitor general, put this well at Wednesday’s Senate Judiciary Committee hearing.
“As I recall,” he said, “the great debate was between this device and the government option. And the government option was described as being akin to socialism, and there was a point to that. But what’s striking is that nobody in the world could’ve argued that the government option or single-payer could’ve been unconstitutional. It could’ve been deplorable. It could’ve been regrettable. It could’ve been Eastern rather than Western European. But it would’ve been constitutional.”
I’d disagree slightly with Fried’s characterization of the policy debate — the individual mandate and the public option do very different things, and a bill with a public option would still have had an individual mandate — but on the law, even the panel’s anti-mandate witnesses agreed with his characterization of the single payer’s legality. So, too, does Daniel Foster, a conservative at the National Review, who wrote, “All conservatives, I’d imagine, think single-payer is unwise, but I’m sure plenty of them think it’s also constitutional (I’m probably one of them, as well).”
There is little doubt that the individual mandate, which preserves a private insurance market and the right to opt out of purchasing coverage, accords more closely with most conservative definitions of liberty than a single-payer system, which wipes out private insurers and coerces every American to pay for the government’s coverage. That doesn’t make it more constitutional, of course. But it does suggest that the dividing point isn’t liberty.
When it comes to the legislation itself, the key question actually comes down to semantics. It’s broadly agreed that tax breaks are constitutional. The individual mandate could’ve been called the “personal responsibility tax.” If you can show the IRS proof of insurance coverage, you then get a “personal responsibility tax credit” for exactly the same amount. This implies that what makes the mandate unconstitutional in the eyes of some conservatives is its wording: It’s called a “penalty” rather than a “tax.” As Judge Henry Hudson put it in his ruling, “In the final version of the [Affordable Care Act] enacted by the Senate on December 24th, 2009, the term ‘penalty’ was substituted for the term ‘tax’ in Section 1501(b)(1). A logical inference can be drawn that the substitution of this critical language was a conscious and deliberate act on the part of Congress.” And it was: Taxes are more politically toxic than penalties, or so the authors of the bill thought. But they’re not more damaging to liberty than taxes.
Despite the overheated rhetoric that’s been tossed around in this debate, I don’t believe our forefathers risked their lives to make sure the word “penalty” was eschewed in favor of the word “tax.” This is not a country built upon semantics. And I don’t think semantics underly the principle conservatives are fighting for here, either. After all, before Barack Obama adopted the individual mandate — and I mean mere months before — Sen. Chuck Grassley (R-Iowa) said there was “bipartisan consensus” around the need for an individual mandate. Sen. Olympia Snowe (R-Maine) voted for the individual mandate in the Senate Finance Committee. Sen. Bob Bennett (R-Utah) had his name on a bill that included an individual mandate. Sen. Bob Dole (Kan.), back when he led the Senate’s Republicans, co-sponsored a bill that included an individual mandate. None of these legislators takes the Constitution lightly. They didn’t see the individual mandate as a threat to liberty, and they weren’t constantly emphasizing that it was a tax rather than a penalty.
The principle conservatives are fighting for is that they don’t like the Affordable Care Act. And having failed to win that fight in Congress, they’ve moved it to the courts in the hopes that their allies on the bench will accomplish what their members in the Senate couldn’t. That’s fair enough, of course. But they didn’t see the individual mandate as a question of liberty or constitutionality until Democrats passed it into law in a bill Republicans opposed, and they have no interest in changing its name to the “personal responsibility tax,” nor would they be mollified if it was called the “personal responsibility tax.” The hope here is that they’ll get the bill overturned on a technicality. And perhaps they will. But no one should be confused by what’s going on.
By: Ezra Klein, The Washington Post, Posted February 2, 2011
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