Whatever Happened To Uncertainty?
With the House passing a two-week funding extension and Harry Reid promising the Senate will do likewise, it looks like we have at least until March 18th before any federal agencies have to shut their doors. But then there’s a shutdown risk. And there’s another one coming as early as April 15th, when the Treasury bumps into the the debt ceiling and needs Congress to lift it in order to avoid default. Federal budget policy over the next few months is going to be like a weekend with Charlie Sheen: A constant effort to avoid blackouts (yes, Wonkbook went there).
Prior to winning the election in November, the GOP spoke often about the pressing need to reduce “uncertainty” in the economy. This was a core principle of their plan to restore economic confidence and create jobs. As Rep. Paul Ryan put it to me in July, “uncertainty is a new economic buzzword, but for good reason: If we can reduce it, we’ll unlock capital.” If businesses and individuals could be confident about what government was doing, what taxes would look like, and what regulators would ask of them, they could start investing again.
So are they succeeding at their own promise of reducing uncertainty? It’s hard to see how. Budget experts on both sides of the aisle have sharply upgraded their estimate of how likely a government shutdown is in the next few months, either over the continuing resolution for 2011 or the debt limit or both. There’s an ongoing effort to starve health-care reform of implementation funds and a promise to “replace” it with some policy that hasn’t yet been written — no one in the health space would say that the shape of health-care policy over the coming years looks more certain now than it did six months ago. The GOP chose a tax deal that lowered all rates for two years rather than a tax deal that lowered most rates permanently, so there’s uncertainty over future tax rates. The tax and health-care policies would both do much more to increase the deficit than anything else on the list would do to reduce it, ensuring that concern continues to loom. So for what definition of “uncertainty” has the GOP succeeded in reducing its prevalence in the economy?
In each case, of course, the GOP has a good argument for the choice it’s made: Lower tax rates on large estates and income over $250,000 were judged more important than tax certainty or deficit reduction. The health-reform law is so unwise that repealing it should be a top priority. The prospect of a government shutdown and/or default provides leverage to extract spending cuts, which are more important right now than assuring the market that there won’t be some sort of shutdown or default. It’s all fair enough, at least on its own terms. But it’s meant that the post-election GOP takes the risk of uncertainty a lot less seriously than the pre-election GOP did. It’s a tension I’d like to hear more of them comment on.
By: Ezra Klein-The Washington Post, March 2, 2011
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
The “Deficit Problem” Isn’t Financial: It’s Political
The federal budget deficit and its cumulative cousin, the national debt, are much more political and media phenomena than they are financial. Which isn’t to say that they don’t exist. Obviously, they do. But they have been invested with apocalyptic significance mainly for political purposes: to scare people and to coerce them into reducing the size and the scope of government.
The truth is that massive deficits are almost exclusively a Republican creation. But Republicans were conspicuously silent in the decades of their big run-up, when the deficits were providing the hollow illusion of easy prosperity. The other truth is that it is only deficits that can get the economy out of the ditch that Republicans left it in when Bush slunk out of office.
But as Republican Senate leader Mitch McConnell has said, “Our first priority is to make sure Obama is a one-term president.” That is the real reason Republicans are born-again fiscal fundamentalists: deficits are the only thing that might actually turn the economy around and that is exactly what the Republicans are so intent on avoiding.
The first tip-off about the fake hysteria surrounding the deficits is that all the Chicken Littles crying the end of the world were silent when the real run-up was being conducted. Look at the history.
Ronald Reagan inherited a national debt of $1 trillion. He cut taxes on the rich and exploded government spending so that in just twelve years, by the end of the Bush I administration, the debt had quadrupled to $4 trillion.
Where were the Nervous Nellies back then? And Republicans have apotheosized Reagan into some kind of secular saint, a totally schizophrenic adulation if we are to believe their current hair-on-fire shtick about the toxicity of debt.
Bill Clinton reversed Reagan’s supply side economics. He raised taxes on the wealthy and cut government spending to the lowest percent of GDP in 40 years. As a result, he paid down the deficit every year he was in office, even delivering a budgetary surplus in each of his last three years. He handed a $136 billion surplus to George W. Bush in 2001.
If Republicans were truly sincere about their putative religious aversion to deficits, they would idolize Clinton, who paid them down, and demonize Reagan who ran them up. It says everything about their honesty that they do exactly the opposite.
Bush II, of course, returned to the same voodoo economics that Reagan and his father had embraced. He aggressively cut taxes on the rich (his “base” as he called them) and exploded government spending. He ran deficits every single year of his presidency, doubling the national debt in only eight years.
Again, where were the Heraldic voices of doom when their country really needed them? They were nowhere to be found. In fact, Bush’s vice president, Dick Cheney, brushed off Treasury secretary Paul O’Neil’s concerns about the hemorrhage with his famous dictum, “Deficits don’t matter. Reagan proved that.” Remember?
So, the choice to get all apoplectic about government borrowing is exactly that — a choice, and a political one at that. It is a choice Republicans conveniently never invoke when the deficits are their own, as they almost always are. Again, look at the history.
A Republican has occupied the White House for 28 of the last 42 years and never once in all of those years did any one of them ever produce a single balanced budget. Not once. They are financial phonies. Fiscal frauds.
And how ironic is it that these same Cassandras who are prophesying the end of the world are just as adamant that Bush’s tax cuts for the very rich must be preserved at all costs. Over the next ten years, those tax cuts will cost the government $700 billion in lost revenues, a seven hundred billion dollar, dollar-for-dollar increase in the deficit.
So, they can’t have it both ways. If the deficits do, in fact, pose an existential threat to the republic, then the government had better bring in more revenues from whatever source it can. But it looks like the deficits aren’t quite so onerous that we should bring in revenues from the only source that could actually pay them, the very rich. Funny thing, huh?
It is this duplicity on both history and policy that so clearly betrays Republican hypocrisy. They’re not interested in reducing deficits. They’re interested in reducing the size, the scope, and the efficacy of government, for government is the only agent left in the country with the capacity to stand up to the big corporations, to stop their sociopathic looting of the economy and their suicidal predations on the environment.
Republicans are also determined to undermine, even destroy, anyone who stands in the way of their agenda. Scott Walker, governor of Wisconsin, is the archetypal poster-child for this role.
Wisconsin’s legislative fiscal analyst had reported that the state had a $120 million surplus before the governor gave $140 million in tax breaks to corporations. So now, being shocked — SHOCKED — to discover a deficit, Walker claims he needs to dismantle public sector unions.
It’s like that iconic parable describing chutzpah: the child who kills his parents and then throws himself on the mercy of the court because he’s an orphan. But wait! It actually gets worse. The unions responded with substantial give-backs to help control the state government’s costs. Walker’s response? He’s not interested.
You see, the deficit is not, in fact, the problem. It’s just the fiscal train wreck that Republicans, from Wisconsin to Washington, have engineered to justify dismantling the social safety net and breaking the resistance of those people who will not submit themselves to living as serfs.
Finally, beyond the sham of their real history, beyond two-faced policies, there is the simple, conveniently overlooked matter of economics itself.
Ninety percent of the Obama deficits can be traced directly to actions of the Bush administration that carry over to the present. These include two sets of tax cuts for the rich, two seemingly unending wars, a $600 billion give-away to the pharmaceutical industry, and The Greatest Economic Collapse Since the Great Depression. That is what Obama inherited from Bush, together with a $1.3 trillion deficit. Again, look at the data.
Bush’s Great Recession started in December 2007, 13 months before Obama took office. In January 2009 when Obama was sworn in, the economy was losing 780,000 jobs a month. A month later, in February 2009, he pushed through a $787 billion stimulus package. Job losses bottomed out two months later, in April, and by November the economy was not only not losing jobs any more, it was creating them.
Did the turn-around require deficits? Of course it did! The economy had imploded and Bush was only too happy to toss the turd to his successor. And where else was the impetus going to come from to actually re-start demand? The alternative would have been an accelerating death spiral into complete economic collapse. We did that once under the tutelage of Republican economics. It was called The Great Depression.
Now, to be sure, the current recovery is fragile. Eight million jobs were lost in the Bush Recession. They haven’t been replaced. Eight trillion dollars of home equity was destroyed and it may not be replaced for decades. Fifty million people are living in poverty. Consumer spending makes up some 70% of the economy. So, as long as consumers are so battered, spending is going to be weak.
And businesses are certainly not taking up the slack. Though their balance sheets are glutted with some $2 trillion made from shifting jobs to China, investment in the U.S. economy as a percent of GDP is at 12%, the lowest it’s been in the last 40 years.
Are Obama’s policies beyond reproach? Not by a long shot. He should have pushed for a much larger stimulus package and not caved to Republican demands to extend the Bush tax cuts. He shouldn’t have gone along with Bush’s larcenous give-aways to the banks and should have done much more to constrain the soaring costs of health care which are the real source of the economy’s debt problems.
But right now it is federal government spending that is keeping the economy afloat, the more so as states and cities, which cannot run deficits, are cutting their spending. In fact, the surest way to sink the economy would be to pull the plug on federal government spending. Which says more about the real motives of the latter-day deficit hawks than all of their insufferably strident sanctimony combined.
Yes, in the long run, the debts will have to be repaid. But the best way to assure that that can happen is to get the economy moving again, to get people working and paying taxes, just like Roosevelt did the last time Republicans drove it over a cliff. But rebuilding is going to require some deficit spending, at least in the short run.
Republicans don’t abhor deficits. They love them. That is the real “money-where-your-mouth-is” truth that all of their pious posturing cannot disguise. Their own history couldn’t be more persuasive on that point. What they abhor is deficit spending that will help the economy on a Democrat’s watch. Their aversion to deficits isn’t economic, it’s political. And their motives aren’t exemplary. They’re despicable.
By: Robert Freeman, CommonDreams.org, originally posted February 27, 2011
Repeal, Restrict and Repress: GOP Running Amok
Republican state lawmakers, emboldened by their swollen ranks, have a message for minorities, women, immigrants and the poor: It’s on!
In the first month of the new legislative season, they have introduced a dizzying number of measures on hot-button issues in statehouses around the country as part of what amounts to a full-throttle mission to repeal, restrict and repress.
It wasn’t supposed to happen like this.
As Reuters pointed out this week, in the midterms, “Republicans gained nearly 700 state legislative seats and now have their largest numbers since the Great Depression, according to the National Conference of State Legislatures.”
Judging by the lead-up to those elections, one could have easily concluded that the first order of business on Republicans’ agendas would be a laserlike focus on job creation and deficit reductions to the exclusion of all else. Not the case.
As MSNBC and Telemundo reported recently, at least 15 state legislatures are considering Arizona-style immigration legislation. If passed, four of the five states with the largest Hispanic populations — California, Texas, Florida and Arizona — would also be the most inhospitable to them.
As Fox News Latino recently reported, state legislatures are poised to break the record on the number of immigration measures and resolutions introduced this year, having already introduced 600 by the end of last month. For comparison, 1,400 were introduced in total last year, according to a report issued last month by the state legislatures’ group. A record number of those laws were enacted.
And, according to the State Legislators for Legal Immigration, which was founded by State Representative Daryl Metcalfe, a Republican of Pennsylvania, lawmakers from 40 state legislatures have joined the group that last month unveiled “model legislation to correct the monumental misapplication of the 14th Amendment of the U.S. Constitution.”
On another note, Republicans in Kentucky, Missouri, Nebraska and Oregon are pushing legislation that would require drug testing of welfare recipients.
This despite the fact that, as the American Civil Liberties Union rightly pointed out, the policy is “scientifically, fiscally, and constitutionally unsound.” Other states have considered it but deemed it not feasible or impractical. In Michigan, the only state to implement it, only a tenth of those tested had positive results for drugs and only 3 percent had positive results for hard drugs, which the A.C.L.U. points out is “in line with the drug use rates of the general population.”
Most importantly, the Michigan law was struck down as unconstitutional, with the judge ruling that the rationale for testing people on welfare “could be used for testing the parents of all children who received Medicaid, State Emergency Relief, educational grants or loans, public education or any other benefit from that state.”
Despite all this, these states are pushing ahead because the made-for-the-movies image of a crack-addicted welfare queen squandering government money on her habit is the beef carpaccio of red meat for spending-weary, hungry conservatives.
On the gay rights front, Republicans in Iowa, Indiana, West Virginia and Wyoming (where Matthew Shepard was tortured to death) are pushing constitutional amendments to ban same-sex marriage.
Republican Rick Snuffer, a freshman delegate from Raleigh, W.Va., turned logic on its head when arguing for that state’s amendment. He chided Democrats’ pro-choice position, and reasoned that, “They don’t want you to choose your definition of marriage, so they’re not really pro-choice. If they’re pro-choice, let the people choose their definition of marriage.” So let me get this straight. To be pro-choice, one has to submit to the tyranny of the majority, which may seek to restrict the rights and choices of others?
This is exactly the kind of thinking that the shapers of the Constitution worried about. A quick read of the Federalist Papers would help Mr. Snuffer understand just how concerned they were about the danger posed by majority rule to personal freedom.
Republicans in New Hampshire have filed bills to overturn that state’s same-sex marriage law, even though, according to a recent WMUR Granite State Poll, the state’s residents want to leave the law in place by a majority of more than 2 to 1, and when asked which were the most important issues the State Legislature should address, “almost no one mentioned dealing with hot-button social issues such as gay marriage or abortion.” I guess that “let the people choose” argument only works when the people agree with the Republican position.
A Republican state representative in Utah has even gone so far as to introduce a bill that would bar same-sex couples from drafting wills.
According to The News and Observer in North Carolina, Republicans are considering severely narrowing or repealing the state’s recently enacted Racial Justice Act, which allows death-row inmates to use statistics to appeal their cases on the basis of racial discrimination.
Two studies of the death penalty in the state have found that someone who kills a white person is about three times as likely to be sentenced to death as someone who kills a minority.
And in Wisconsin, Republicans are pushing a bill that would repeal a 2009 law that requires police to record the race of people they pull over at traffic stops so the data could be used to study racial-profiling.
Furthermore, abortion rights advocates are now bracing for the worst. NARAL Pro Choice America is now tracking 133 proposed bills thus far this legislative season, and that’s just the beginning. Donna Crane, the policy director of the group, said earlier this month that thanks to the gains by conservatives in the Nov. 2 election, “2011 will be a banner year for anti-choice legislation in the states.”
Richard Gephardt once said, “Elections have consequences.” He was right, and the consequences of the last election could well be a loss of liberty, choice, access and avenues of recourse for many. Brace yourselves. It’s on!
By: Charles M. Blow, Op-Ed Columnist, The New York Times-February 11, 2011
Do Republicans Really Oppose Making Health Care Insurance Cheaper?
The health-care debate has a cyclical nature, and I don’t want to keep writing the same posts over and over again. So rather than write a whole new piece on the GOP’s rediscovery of the Congressional Budget Office’s estimate that the health-care law will reduce the labor supply (which they recast as “destroying jobs”), I’ll just link to the long post I did on the subject in January.
In case you don’t want to click over, though, the short version is this: If you make health-care insurance cheaper and make it harder for insurance companies to deny people coverage, then a certain number of people who would like to leave the labor force but can’t afford or access health-care insurance without their job will stop working.
To understand why, imagine a 62-year-old woman who works for IBM and beat breast cancer 10 years ago. She wants to retire. She has the money to retire. But no one will sell her health care under the status quo. Under the health-reform law, she can buy health care in an exchange because insurers can’t turn her away due to her history of breast cancer. So she’ll retire. Or imagine a 50-year-old single mother who wants to home-school her developmentally disabled child but can’t quit her job because they’ll lose health care. The subsidies and the protections in the Affordable Care Act will give her the option to stop working for awhile, while under the old system she’d need to stick with her job to keep her family’s health-care coverage. That’s how health-care reform can reduce the labor supply. If either case counts as a destroyed job, then so does my winning the lottery and moving to Scotland in search of the perfect glass of whiskey.
Moreover, this would happen for any health-care reform that reduced costs and improved access. So when Republicans say that they want a better health-care reform bill that does even more to reduce costs, they’re calling for legislation that, according to them, would “destroy” even more jobs than the Affordable Care Act. If they’re against all legislation that might destroy jobs in this way, then they’re against making health care cheaper. In fact, by that logic, we could just jack the price of health-care insurance up and make it easier for insurers to turn individuals away. Then even more people would have to stick with their employers. Job creation!
By: Ezra Klein-The Washington Post, February 11, 2011
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