“Ill Omen”: The Country Has A Confidence Problem And It’s Congress’s Fault
The country has a confidence problem, and Congress bears much of the responsibility for it.
That conclusion, drawn by Republican pollster Bill McInturff, carries ill omens as lawmakers seem all but certain to let more than $1 trillion in automatic spending cuts go into effect at the end of the month and with fights over keeping the government funded and raising the debt ceiling looming.
“It is clear we have entered a new phase where the dysfunction and paralysis in Washington is having a significant and deleterious impact on how consumers feel about the overall state of the economy and their personal financial situations,” writes McInturff in an analysis entitled “The Washington Economy.”
As evidence of his assertion, McInturff cites the Michigan Consumer Sentiment Index in the months leading up to the “fiscal cliff” fight last winter. From October to December, consumer confidence dipped from 82.6 to 72.9. (The Michigan Index is based on a 100-point scale.) McInturff notes that the index typically moves only a point or two a month, and that such large-scale moves within such a short time typically require a “signal event” like Hurricane Katrina (a 19.6-point drop in two months), Iraq invading Kuwait (15.4-point drop) or the Lehman Brothers collapse (15-point drop).
The “fiscal cliff” debate (a 9.7 point drop) and the 2011 debt ceiling showdown (15.8) fit neatly into that category of signal events, a remarkable reflection of how what happens — or, more accurately, doesn’t happen — in Washington reverberates around the country. (One remarkable factoid: The drop in consumer confidence during the “fiscal cliff” debate was larger than the one that followed the Sept. 11, 2001, terrorist attacks.)
The Michigan Index is not alone in showing the drastic impact on confidence that the seemingly endless fiscal fights in Washington are causing. In the summer of 2011 — at the heart of the debt ceiling debate — Gallup’s Economic Confidence Index showed a score of -54. (The lowest possible number is -100, the highest is 100.) At the end of 2012, confidence dipped again in the Gallup measurement — down to -22.
Now, it’s not all doom and gloom. Of late, the Michigan Index has been showing increased public confidence, hitting a three-month high of 76.3 this month. And, the Gallup number reached as high as -8 earlier this month —a five-year high— before dipping back down to -13 last week.
But, a look at the longer trend suggests that the country is in the grips of a broader crisis of confidence that Washington is making worse. Looking all the way back to 2008 when Gallup began testing economic confidence, the organization has never — repeat, never — turned out a positive confidence score in its daily tracking polling. And, as McInturff notes, the country is now in the midst of a historically long run of low confidence. It has been 59 months since the Michigan Index dropped below 65 and it has never been back above 85. That’s the longest recovery period of any time since World War II; in 1974, amid the Watergate scandal, the Michigan Index dropped below 65, but 30 months later it was over 85 again.
Then consider that the sequester seems all but certain to kick in on March 1, the potential for a government shutdown on March 31, and the debt ceiling debate returning later this summer and it seems clear that the current bump in confidence is likely to be short-lived. Put another way: We may well be in the eye of an economic confidence hurricane.
What’s clear from all the data is that a federal government that lurches from financial crisis to financial crisis as its normal course of business is doing a great disservice to a country badly looking to finds its footing again.
“It is important leaders in both parties begin to recognize how the tenor, tone and the outcome of the policy debates in Washington are actually retarding economic confidence in a way that makes building a sustained recovery more difficult,” concludes McInturff.
The warnings, from the debt ceiling fight through the “fiscal cliff” crisis, are clear. But, political Washington has shown a remarkable inability to heed them in the past few years. If that doesn’t change in the next three months, the impact on the nation’s economy could be drastic.
By: Chris Cillizza, The Washington Post, The Fix, February 17, 2013
“Weather Vane Man”: Tracking Paul Ryan’s 5 Different Positions On The Sequester
House Republicans are attempting to blame Democrats and President Obama for “sequestration,” the automatic budget cuts that will begin taking effect on March 1 if Congress fails to avert them. But even as they cast that blame and ignore their own role in creation of the sequester, which wouldn’t exist had Republicans not refused to raise the debt ceiling in August 2011, Budget Committee Chairman Paul Ryan (R-WI) is expected to count the sequester’s automatic cuts in the next version of his budget, BuzzFeed reports:
According to two senior GOP aides familiar with Ryan’s thinking on the budget, the Wisconsin Republican and former vice presidential candidate will use the so-called sequester as part of the baseline level of spending for his budget.
Ryan’s position on the sequester has changed multiple times:
1. Helped make the sequester happen. Ryan was among the Republicans leading demands for spending cuts to offset a debt ceiling increase in the summer of 2011, and was among the leaders who refused to consider new revenues in those negotiations. Had Republicans not refused to raise the debt ceiling in the first place, the sequester wouldn’t exist.
2. Voted for plan to create the sequester, then bragged about it. Ryan took credit for the sequester in August 2011, bragging to Fox News that it guaranteed the massive budget cuts Republicans were seeking. “We got that in law,” he boasted. On the House floor, he said the Budget Control Act’s spending cuts were “a victory for those committed to controlling government spending.”
3. Called the sequester “devastating” during the presidential election. Ryan blasted Obama for wanting the sequester’s “devastating defense cuts” to take place during the presidential election, when he was the GOP’s vice presidential candidate.
4. Blamed the likelihood of the sequester occurring on Obama. The sequester “will probably occur” because “the president has not a proposal yet on the table,” Ryan told CBS News last week. “Don’t forget it’s the president who first proposed the sequester. It’s the president who designed the sequester as it is now designed,” he added.
5. Will include sequester cuts in his latest budget.
This is hardly a new strategy for Ryan, who crisscrossed the country blasting Obama for cutting Medicare spending even as he included the cuts in his last budget proposal and made even bigger changes to the program.
By: Travis Waldron, Think Progress, February 15, 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
“Driving While Impaired”: After Falling In Sequester Ditch, GOPers Look For Way Out
Remember the Republicans’ debt-ceiling crisis in 2011? It was about a year and a half ago when GOP leaders handed President Obama a ransom note: accept more than $2 trillion in debt reduction or the economy gets it. The parties agreed to more than $1 trillion in cuts, but agreed they needed more time to work on a larger agreement.
So, they crafted a mechanism intended to force both sides to the negotiating table — a sword of Damocles hanging over Washington’s head that would be so severe, Democrats and Republicans would have a strong incentive to strike a deal to avoid the drastic consequences.
The mechanism was automatic sequestration cuts — or “the sequester” — valued at about $1.2 trillion, half of which would come from the Pentagon. (Democrats originally wanted automatic tax hikes to motivate the GOP, but Republicans refused — even hypothetical tax increases were deemed outrageous — and deep Defense cuts were used instead.)
These cuts kick in three weeks from today, and so far, the two sides aren’t close. Democrats want a balanced deal the GOP should find tolerable — spending cuts on one side of the ledger, revenue from closed tax loopholes on the other. Republicans, meanwhile, say they’re prepared to simply let the sequester happen, regardless of the consequences to the economy, the military, or the public.
At least, that’s what they say publicly. Behind the scenes, the GOP strategy is on shaky ground.
One thing is becoming clear: Republicans want to find a way to replace the cuts in the sequester, despite some loud rhetoric to the contrary.
Top House Republican aides privately concede that the politics of allowing the cuts to hit — layoffs, furloughs and a stalled economic recovery — are tough to stomach and they would prefer to make a deal, on their terms of course. […]
A top GOP leadership aide, speaking anonymously to divulge internal thinking, laid out 10 options that the House GOP leadership would be willing to accept, along with savings estimates developed by GOP policy aides, in order to avoid the sequester.
So, the good news is, Republicans are not actively seeking a course that would hurt the country on purpose. The bad news is, they’re still struggling with the whole “compromise” concept.
To date, with just 21 days to go, Republicans leaders have offered nothing — there is no sequester alternative on the table, and in this Congress, no bills to replace the sequester have even been written. There are reportedly 10 different scenarios Republican leaders would be willing to consider, but all 10 are made up entirely of deep spending cuts and would not include so much as a penny in additional revenue.
In other words, Republicans want to replace sequestration with a package that gives them 100% of what they want and 0% of what Democrats want.
This after a national campaign in which Democrats voiced support for a balanced approach, and the American electorate strongly agreed.
It’s nice, I suppose, that there are so many Republican-friendly options to choose from — the menu includes everything from raising the Medicare eligibility age to chained CPI, cutting federal pensions to cutting agricultural subsidies — but so long as GOP officials expect a 100%/0% deal, the likelihood of a breakthrough is remote.
That said, with three weeks to go, I expect some movement away from the intransigent status quo. Put aside the rhetoric and the posturing and we’re left with a picture in which Democrats and Republicans actually have the same goal: to get rid of the sequester. The GOP doesn’t want to admit it, but a bipartisan deal, featuring a combination of spending cuts and revenue from closed tax loopholes and unnecessary deductions could come together with relative ease.
What’s more, if the automatic sequestration cuts happen, and the economy tanks, Republicans probably realize this will be their fault and they’ll likely get the blame. It’s why Josh Green wrote late yesterday that a “Republican crackup over the sequester” almost seems inevitable.
As the process unfolds, I’d like to take a moment to throw in my own suggestion: get rid of the sequester. Don’t try to replace it, don’t struggle to find some satisfying ratio that pleases both sides, don’t delay it for a few months, just cancel it. The deficit is already shrinking, spending has already been cut, and if policymakers want to do even more to improve the nation’s long-term finances, they can work on a deal without some dangerous threat hanging over their heads.
Sequestration was a bad idea. There’s no reason both sides can’t agree to get rid of the darn thing and start fighting over something else.
By: Steve Benen, The Maddow Blog, February 7, 2013
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