“Fool Me Once”: The Sequester Is Proof That Washington Thinks We Are All Idiots
The tales of sequester woe are starting to mount. Congressmen are complaining about cancelled White House tours, freaking out over potential furloughs of meat inspectors, and fretting over budget cuts in Yellowstone National Park. Republican officeholders are starting to realize that the parochial government services that businesses and consumers in their districts need and care about are getting hit.
And for what? We’ve argued that the primary deficit—the mismatch between the amount of money the government collects each year and the amount of money it spends each year—is melting away. We received further confirmation of this melting trend Wednesday, with the release of the latest Treasury Monthly Statement. It was overlooked, as it dropped just a couple hours before the new pope was announced. But it’s worth examining.
The headline was that February wasn’t a great month for the profit-and-loss sheet of the federal government. It took in $122.8 billion and spent $326 billion, notching a $203.5 billion deficit. That’s pretty grim. But February is always a bad month for receipts. And when you dig into the number, it is possible to see significant improvement.
Compared with February 2012, revenues in February 2013 were up an impressive 18.8 percent. Meanwhile, spending was actually down 2.6 percent from February 2012. So the February 2013 monthly deficit was 12 percent smaller than the February 2012 monthly deficit. This is not an anomaly. For the first five months of fiscal 2013, which started in October, revenues were $1.01 trillion, up 13 percent from the first five months of fiscal 2012, while spending was up just 2.1 percent. The deficit in the first five months of fiscal 2013 is $494 billion, down nearly 15 percent from the first five months of fiscal 2012.
To what do we owe this? Revenue is tied to growth. When the economy grows consistently, more people go to work, more people earn higher wages, and they pay more income and payroll taxes. Companies tend to make more profits, and even though they spend lots of time and effort dodging taxes, they still wind up paying more corporate income taxes. Meanwhile, as we’ve pointed out before, when jobs increase and the economy grows, spending on programs like unemployment benefits fall. That helps narrow the deficit, too. In February, spending on unemployment benefits was off 25 percent from the year before.
There’s another factor at play. And Republicans might want to avert their eyes for this next paragraph. On January 1, the government raised taxes. The payroll tax, which had been cut temporarily to 4.2 percent from 6.2 percent, went back up—a 48 percent increase. And so the 130 million or so Americans with payroll jobs have been paying higher federal taxes for the past two months. Meanwhile, as part of the fiscal cliff deal, higher income taxes were also put in place for high earners. They’re now paying more, too.
A funny thing happens when you raise taxes—you get more tax revenue.
Since the higher tax rates kicked in on January 1, Americans haven’t Gone Galt. They haven’t stopped working in protest of higher taxes and companies haven’t stopped hiring. In fact, they’ve been working more. As a result, revenue has been flooding into Washington. In the two months of the new tax regimen (January and February 2013), receipts are up 17 percent from the comparable period in 2012. Meanwhile, for all the charges of socialism, spending remains muted. A look at the daily Treasury statement suggests the higher revenue trend has continued through the first half of March.
The sequester, universally derided as a stupid way to get deficit reduction, is designed to bring $84 billion in deficit reduction in this fiscal year. Well, in the first five months of fiscal 2013, the deficit is already, wait for it, $85.8 billion smaller than it was in the first five months of fiscal 2012. And that’s all before the sequester takes full effect.
Quiet as it is kept, we are living in a great age of deficit reduction. If we project the numbers from the first five months of this fiscal year into the rest of it, it’s quite likely that the deficit will come in under $900 billion—even without the sequester. That’s high, and it is still a lot of money. But it would represent a deduction of nearly 20 percent from fiscal 2012. And with the economy continuing to grow steadily, the deficit as a percentage of GDP would shrink by an even larger margin.
Washington told itself it needed the sequester in order to make a significant dent in the annual deficit. With each passing month, and with each passing Treasury Monthly Statement, we’re learning that’s not true.
By: Daniel Gross, The Daily Beast, March 14, 2013
“Both Sides Are Not To Be Blamed”: John Boehner Will Accept Only A 100%-0% “Compromise” Deal
President Obama met with congressional leaders from both parties and both chambers at the White House this morning about the latest in a series of self-inflicted, easily-avoided wounds. There were no realistic hopes that the policymakers would somehow reach an agreement to replace the sequestration cuts, and expectations were met: the group spoke for about an hour and then quit, resolving nothing.
House Speaker John Boehner (R-Ohio) left the meeting and spoke for about a minute to reporters without taking questions. For those who can’t watch clips online, he argued:
“Let’s make it clear, the president got his tax hike on January 1st. The discussion about revenue, in my view, is over. It’s about taking on the spending problem here in Washington.”
I’m trying to think of a way to explain this in a way Boehner will understand. As the Speaker sees it, the very idea of a balanced compromise is ridiculous — a compromise would necessarily include revenue, Democrats already got new revenue, so it’s outrageous for anyone to even raise the possibility.
Let’s put this as plainly as possible: in the summer of 2011, both sides accepted a debt-reduction deal that cut spending by over $1.2 trillion without any additional revenue — a win for Republicans. In late 2012, both sides accepted another deal that raised about $600 billion in revenue without any additional cuts — a win for Democrats.
Now it’s time to add another piece to the puzzle, and the Speaker of the House only remembers part of the very recent past.
This sentence…
“Let’s make it clear, the president got his tax hike on January 1st. The discussion about revenue, in my view, is over.”
…makes exactly as much sense as this sentence:
“Let’s make it clear, Republicans got their spending cuts in 2011. The discussion about spending cuts, in my view, is over.”
Substantively, there is no difference between the two arguments. Both represent extremes. Except right now, Republicans think the first sentence makes perfect sense and no one is even bothering with the second sentence.
Indeed, if Boehner were to accept Obama’s compromise, Boehner would still come out on top since the spending-cut totals would still easily outweigh the revenue totals. The president’s offer, at face value, is already a win for the GOP.
But Republicans won’t accept a win; they’ll accept a rout. According to Boehner, the only available solution to a problem he helped create is one in which his side gets 100% of what it wants, predicated on the assumption that the massive spending cuts agreed to in 2011 have escaped Republicans’ memories altogether.
At this point, most Americans want a compromise. Most Democrats want and have already proposed a compromise. But Boehner wants everyone to know there will be no compromise, and there’s nothing the president can say or do to change his mind.
I’ll now look forward to pundits everywhere telling me how “both sides” are to blame.
By: Steve Benen, The Maddow Blog, March 1, 2013
“In The Mosh Pit”: The Self-Centered Political Media
With many Americans alternately bored and infuriated by the latest made-for-TV fiscal melodrama in Washington, something highly unusual happened. A prominent, name-brand pundit published a column about the “sequestration” battle that was not merely smug, lazy and condescending, but factually false.
So what else is new, right?
What’s newsworthy is that when somebody he couldn’t ignore called him out, the columnist was forced to publicly eat his words. Newsworthy for two reasons: first, because regardless of what they claim about their strict code of professional ethics, Washington political journalists normally cover for each other like cops and Roman Catholic clerics.
It’s been going on for a generation, and worsening as TV stardom and the lecture circuit have made celebrity pundits wealthy.
Second, because of what David Brooks’ blunder says about the “fever swamp of the center,” as New York magazine’s Jonathan Chait calls it: a mindset reflecting the desperate pretense that “both sides” are equally responsible for Washington’s endless budgetary crises, and all that’s necessary to resolve them is a mature spirit of compromise.
And maybe too what the whole charade says about the audience for such piffle: an American public that’s better informed about Tom Brady’s new contract and Kim Kardashian’s cup size than the national budget deficit.
How New York Times editors waved David Brooks’ column into print is a mystery. One had the impression things had improved there since the heyday of Jeff Gerth and Judith Miller—whose inept reporting helped bring us the Whitewater hoax and the Iraq War, respectively.
“The DC Dubstep,” Brooks called the column; the joke being that budget sequestration gave Democrats and Republicans alike a chance to do “the dance moves they enjoy the most.”
“Under the Permanent Campaign Shimmy,” Brooks wrote, “the president identifies a problem. Then he declines to come up with a proposal to address the problem. Then he comes up with a vague-but-politically-convenient concept that doesn’t address the problem (let’s raise taxes on the rich). Then he goes around the country blasting the opposition….The president hasn’t actually come up with a proposal to avert sequestration, let alone one that is politically plausible.”
Ha, ha, ha! See, Obama’s failure to lead then encourages Republicans to do the “Suicide Stage Dive,” working themselves “into a frenzy of self-admiration,” and leaping “into what they imagine is [sic] the loving arms of their adoring fans” only to “land with a thud on the floor.”
Probably a sober-sided fellow like Brooks shouldn’t attempt satire, which requires a subversive imagination. Also a regular on PBS and NPR, he plays a non-carnivorous Republican—conservative, yes, but not somebody who’s going to carry an AR-15 to a Washington cocktail party.
But the problem with Brooks’ column is more basic. Because love it or hate it, the White House long ago presented a detailed plan for averting sequestration. President Obama has been flying around the country talking it up every day. You can read it here.
Kevin Drum neatly summarized the contents: “specific cuts to entitlements, including the adoption of chained CPI for Social Security and $400 billion in various cuts to healthcare spending, along with further cuts to mandatory programs as well as to both defense and domestic discretionary programs. Altogether, it clocks in at $1.1 trillion in spending cuts and $700 billion in revenue increases, mostly gained from limiting tax deductions for high-end earners.”
In short, you can call the White House plan anything you like. But you can’t call it non-existent. The entire premise of Brooks’ column was false; the political equivalent of criticizing Bill Belichick’s poor coaching in the 2013 Super Bowl. (His team didn’t get there.) A sportswriter would be laughed out of the press room; maybe out of journalism.
But hey, it’s only national politics, and only the New York Times.
Enter Ezra Klein, the Washington Post’s ubiquitous blogger. An ambitious lad of 28, Klein had the temerity to pick up the phone. Apparently, the youngster didn’t understand that these things simply aren’t done. His column, he informed Brooks, was rubbish. Would he like to talk about it?
To his credit, Brooks did, but not before adding an online postscript to his column explaining that he’d “written in a mood of justified frustration over …fiscal idiocy,” and “should have acknowledged the balanced and tough-minded elements in the president’s approach.”
A transcript of Brooks’ deeply embarrassing conversation with his younger rival was posted online. Give him this much: Brooks definitely faced the music. So frank an admission of error rarely appears in the high-dollar press.
And what about you, dear reader?
Recently Bloomberg News published a poll. Asked if the nation’s budget deficit was growing or shrinking, only 6% answered correctly: it’s going down. This year’s projected deficit is $600 billion smaller than when President Obama took office.
If you didn’t know that, maybe you’re also part of the problem.
By: Gene Lyons, The National Memo, February 27, 2013
“The Message Was Crystal Clear”: On The Sequester, The American People “Moved The Goalposts”
I don’t agree with my colleague Bob Woodward, who says the Obama administration is “moving the goalposts” when they insist on a sequester replacement that includes revenues. I remember talking to both members of the Obama administration and the Republican leadership in 2011, and everyone was perfectly clear that Democrats were going to pursue tax increases in any sequester replacement, and Republicans were going to oppose tax increases in any sequester replacement. What no one knew was who would win.
“Moving the goal posts” isn’t a concept that actually makes any sense in the context of replacing the sequester. The whole point of the policy was to buy time until someone, somehow, moved the goalposts such that the sequester could be replaced.
Think back to July 2011. The problem was simple. Republicans wouldn’t agree to raise the debt ceiling without trillions of dollars in deficit reduction. Democrats wouldn’t agree to trillions of dollars in deficit reduction if it didn’t include significant tax increases. Republicans wouldn’t agree to significant tax increases. The political system was at an impasse, and in a few short days, that impasse would create a global financial crisis.
The sequester was a punt. The point was to give both sides a face-saving way to raise the debt ceiling even though the tax issue was stopping them from agreeing to a deficit deal. The hope was that sometime between the day the sequester was signed into law (Aug. 2, 2011) and the day it was set to go into effect (Jan. 1, 2013), something would change.
There were two candidates to drive that change. The first and least likely was the supercommittee. If they came to a deal that both sides accepted, they could replace the sequester. They failed.
The second was the 2012 election. If Republicans won, then that would pretty much settle it: No tax increases. If President Obama won, then that, too, would pretty much settle it: The American people would’ve voted for the guy who wants to cut the deficit by increasing taxes.
The American people voted for the guy who wants to cut the deficit by increasing taxes.
In fact, they went even further than that. They also voted for a Senate that would cut the deficit by increasing taxes. And then they voted for a House that would cut the deficit by increasing taxes, though due to the quirks of congressional districts, they didn’t get one.
Here in DC, we can get a bit buried in Beltway minutia. The ongoing blame game over who concocted the sequester is an excellent example. But it’s worth remembering that the goalposts in American politics aren’t set in backroom deals between politicians. They’re set in elections. And in the 2012 election, the American people were very clear on where they wanted the goalposts moved to.
By: Ezra Klein, The Washington Post, February 23, 2013
“A Straightforward Factual Description”: Only One Party Is Willing To Compromise And It Isn’t The GOP
The difference between the Republican and Democratic positions on the sequester is simple: Democrats believe reaching a compromise is preferable to letting the sequester happen, since it could devastate the military and scuttle the recovery. Republicans believe letting the sequester happen is preferable to reaching a compromise, even though it could devastate the military and scuttle the recovery.
This is not a partisan observation. It is a straightforward factual description of the two sides’ positions and public statements. The Democratic position is that we must avert the sequester with a mix of new revenues and spending cuts — which is to say, a mix of what both sides want. The Republican position is that we must avert the deal only with spending cuts — which is to say, only with what Republicans want. Some Republicans are openly declaring that they will sooner allow the sequester to kick in than accept a compromise that includes revenue hikes. In other words, the sequester is preferable to any compromise that includes a mix of concessions by both sides. That’s their explicit position.
Indeed, Politico details this morning that many Republicans are holding to this position because they believe that they can blame Obama for the sequester. Roll Call adds that Mitch McConnell is urging Republicans to draw a hard line on the issue.
But given that polls show the public is already convinced Republicans are not doing enough to compromise with Obama, this position is not without risk to their side. So Republicans have tried to obscure the true nature of their stance in two ways.
One is to pretend they are the party that has made all the concessions to deficit reduction thus far. For instance, Charles Krauthammer argues today that Republicans should not give an inch on new revenues, because they already agreed to tax hikes as part of the fiscal cliff deal. Krauthammer doesn’t mention that Democrats agreed to $1.5 trillion in spending cuts — significantly more than the $700 billion in revenues Republicans agreed to — in 2011. Indeed, even if the parties agreed to a roughly one-to-one split between revenues and cuts to avert the sequester, the overall ledger would still be tilted towards Republicans.
The second way Republicans try to obscure the true nature of their position is by pretending Democrats aren’t willing to cut spending. But there’s that aforementioned $1.5 trillion that must not ever be discussed. What’s more, there is simply no question that if Republicans agreed to new revenues, Democrats would give Republicans at least as much, and likely more, in spending cuts. Yes, some liberals want Dems to refuse to offer any cuts. But the position of Democratic leaders, and even the President himself, is that spending cuts must be part of any deal. By contrast, the position held by the Tea Party wing of the GOP — no new revenues no matter what — is the position held by GOP leaders.
The problem for Republicans remains that they are on record saying that the sequester would devastate our military and are even on record saying it would scuttle the recovery. And so the current political situation is this: One side is willing to reach a compromise to avert disaster for the country; the other is not only unwilling to reach a compromise to avert disaster, it views the impending disaster as an opportunity to get what it wants and even sees it as preferable to compromise. This is an objectively true description of the two sides’ positions. If Republicans believe this is a political winner for them, then hey, go for it.
By: Greg Sargent, The Washington Post The Plum Line, February 8, 2013
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