“Lord Help Us!”: The Return Of One Of The GOP’s Dumbest Ideas
Lord help us, is the balanced budget amendment—one of the dumbest policy ideas the right ever cooked up (and that’s saying something)—actually back? Only time will tell, but today on the New York Times op-ed page, two prominent conservative economists, Glenn Hubbard and Tim Kane, try to revive it with an argument so unconvincing that I worry it’s going to be embraced by every Republican in sight. If you think the sequester was a terrific idea and worked out great for everyone, have they got a deal for you.
Hubbard and Kane start by insisting that deficit panic must not be allowed to wane. “We are stuck in a bad and worsening place: sure, deficits strike fear in the hearts of economists and intellectuals, but they don’t matter at the ballot box.” Haven’t we actually cut the deficit by more than half from its 2009 peak? And isn’t creating jobs and increasing wages more important? And aren’t most “economists and intellectuals” not actually driven to terror by the deficit at the moment? Of course not, silly. We must put aside parochial concerns like jobs and focus our fear on deficits, lest they one day…well, one day they’ll do something really bad, but don’t worry about what it is.
You never hear conservatives articulate exactly why running a deficit, any deficit, is so problematic. They rely on the fact that it seems self-evident, and in fairness, some Democrats, Barack Obama in particular, contribute to widespread misunderstanding of the subject by repeatedly comparing the government’s finances to a family’s finances. But the government’s budget isn’t at all like a family’s budget. For instance, when it’s faced with a crisis like the Great Recession, borrowing more and spending more is exactly what it has to do. In the last 50 years, we’ve had a balanced budget eight times, four of which were at the end of the Clinton years. There’s no reason why the deficit has to come down to zero. If that’s what you’re forced to do, then you end up making problems worse at the worst moments. That’s what happened to states over the last few years; because nearly every state has a requirement to balance their budget every year, when tax revenues plummeted, they were forced to slash government services and lay off hundreds of thousands of workers. This made the recession more painful for everybody (and the federal government sent billions of dollars to the states in an attempt to mitigate the damage).
If you had a balanced budget amendment in place, when a recession hits and tax revenues fall, the federal government would have to immediately cut back its spending, precisely the opposite of what it ought to be doing. Yet for years, a balanced budget amendment was Republican dogma, nearly on par with tax cuts for the wealthy and big defense budgets. Which brings us to Hubbard and Kane’s new balanced budget amendment proposal. Here’s part 1:
First, because reconciling expenditures and revenues would be impossible in real time, the constraint should be on expenditures only. A good rule would be this: Congress shall spend no more in the current year than it collected, on average, over the previous seven years. No more overspending in fat years and no draconian cuts to expenditures during future recessions.
This rolling average idea makes things a bit more sane, but do you see what they did there? I’ve highlighted it in bold. “The constraint should be on expenditures only,” meaning that their balanced budget amendment would require spending cuts, but not tax increases. Why? Because these are Republicans, that’s why. Here’s part 2:
Second, any amendment should be simple, focused only on fiscal balance. The best mix of tax and expenditure changes is for each generation of voters to decide.
Is that supposed to mean that the amendment itself shouldn’t actually write into the Constitution budgetary limits for every single federal agency for every year in the future? Well since that would be insane, I’m not sure why it has to be an explicit part of their three-part proposal. Perhaps they should also specify that a balanced budget amendment shouldn’t deal with abortion and drug legalization, or that the amendment need not specify the headline font on the Department of Energy’s press releases. And on to part 3:
Third, there should be an exception to the spending constraint for national emergencies.
And what would be a national emergency? Would the Great Recession count? How about the Iraq War, which the Bush administration (where Glenn Hubbard served) financed through deficit spending? This is basically a way of saying, don’t worry, we’ll require balanced budgets, unless requiring balanced budgets looks like a terrible idea, at which point we won’t. And then we get to the end, where Hubbard and Kane finally reveal the threat posed by deficits, a threat so profound it must be met with the constitutional equivalent of permanent sequestration:
America’s high and rising national debt threatens our economic health through higher future taxes, crowding out important government services, or both. The best antidote is a focus on economic growth and a balanced approach to deficit control
Ah, there we are. We must force draconian budget cuts now, because if we don’t, at some point in the future we might have to…force budget cuts. And of course raise taxes, which we can’t ever, ever do. So by imposing those cuts, we can “focus on economic growth,” not by actually promoting economic growth, but by…um…confidence!
This isn’t some dopey politician offering his opinion on a topic he plainly doesn’t understand, this is two highly-placed and supposedly informed conservative economists. Hubbard is dean of the business school at Columbia and was George W. Bush’s chief economic adviser. Kane is chief economist at the Hudson Institute. These are the Republican party’s big economic thinkers. And this is what they have to offer.
By: Paul Waldman, Contributing Editor, The American Prospect, August 12, 2013
“Your Call Republicans”: Either Job Creation Is The Top Priority Or It Isn’t
I’d very nearly given up trying to convince the political world that sequestration cuts still matter. But then yesterday, something changed my mind.
For those who still care about the policy that was designed to hurt the country on purpose, there’s been quite a bit of news lately, all of it showing the sequester doing what it was intended to do. In addition to the voluminous list of documented problems, just over the last few days we’ve gotten a better sense of the ways in which the policy is hurting the military, public schools, parks, and the justice system. The poor and minorities are disproportionately suffering.
Did the political world care about these stories? Not really. Generally speaking, the slow-motion disaster on auto-pilot just keeps plodding along, with little more than indifference from the Beltway.
So what made yesterday different? This did.
The nonpartisan Congressional Budget Office on Thursday estimated that keeping the spending cuts from sequestration in place through fiscal 2014 would cost up to 1.6 million jobs.
Canceling the cuts, on the other hand, would yield between 300,000 to 1.6 million new jobs, with the most likely outcome being the addition of 900,000, the CBO said.
The full CBO report, requested by Rep. Chris Van Hollen (D-Md.), is online here.
And why might this part of the sequestration story matter, even after the other elements of the story were largely ignored? Because it offers the political world an important test.
A month ago, several congressional Republican leaders, including House Speaker John Boehner (R-Ohio), insisted publicly that job creation is their “number one priority.” If those claims were true, I have good news — now they can prove they meant it.
After all, we now have independent confirmation that this one policy, if it remains in place, will cost the nation about 1.6 million jobs through next year. End the policy, on the other hand, and the U.S. economy adds 900,000 jobs.
For those who say the job market is their “number one priority,” this is what’s commonly known as a “no-brainer.”
Let’s make this incredibly simple for Congress: either job creation is your top priority or it isn’t. If it is, then the House and Senate could take five minutes, scrap the sequester, and help the U.S. job market. A lot.
Is it really that simple? Well, yes, actually it is that simple.
But won’t that mean slightly higher spending levels? And won’t that mean slightly less deficit reduction?
Perhaps, but either job creation is your top priority or it isn’t. If someone says, “I’d like to end the sequester, but not if it means increased spending and higher deficits,” then we know, in a very literal sense, that the jobs are not their “number one priority.”
It’s a straightforward, binary choice. Your call, Republicans.
By: Steve Benen, The Maddow Blog, July 26, 2013
“Apocalypse Not Now”: Just About Everything Is Getting Better
As a culture, we seem to be in an apocalyptic moment. Judging from the movie trailers, it looks like the human race is basically screwed this summer in After Earth, World War Z, and This Is the End—a comedy!—while Washington (and its black president) will be besieged by cyber-terrorists in White House Down. In the real world, we’re bombarded with warnings about our debt crisis, our economic crisis, and of course our political crisis, which is to say, our government’s inability to deal with all its other crises. Republicans in particular have become perennial prophets of doom, warning that President Obama’s foreign policies will destroy our standing in the world, that Obamacare will destroy our health care system, that out-of-control spending, growth-killing taxes, and loose monetary policy will turn us into a dystopia of inflation, high interest rates and economic paralysis.
Relax!
Things are OK. And while you can’t tell from following the news—the press doesn’t like to report on planes that land safely, or seemingly obvious stuff that didn’t happen yesterday—things are getting better. The apocalypse is not nigh.
We are now in the fourth year of a slow but steady recovery. The economy is adding about 200,000 jobs a month, and has added 6.8 million private-sector jobs since the end of the Great Recession. The stock market is at an all-time high, and has almost doubled since Obama took office. The housing market is rebounding. It’s true that 7.5% unemployment is way too high, but it’s better than the double-digit unemployment we had in the wake of the financial meltdown, when the apocalypse really was nigh. The government has even turned a profit on the reviled Wall Street bailouts that ended the meltdown.
Yes, the economy would be doing even better if it weren’t being dragged down by the “sequester,” $85 billion worth of haphazard spending cuts resulting from Republican demands for government austerity. Those were misguided demands after a financial crisis, the kind of demands that have turned Europe into an economic basket case. But so far, at least, fears that the sequester could scuttle the U.S. recovery have proven to be overblown. Consumer confidence just hit a six-year high.
What about the fears that inspired the sequester and the rest of the austerity push, the fears that spiraling deficits would turn us into Greece? Well, the Congressional Budget Office now estimates the deficit at $642 billion, the lowest since the crisis; it’s been cut in half since Obama took office, the fastest reduction since World War 2. We’re not Greece. The bond markets certainly don’t think so; interest rates are at historic lows. And the runaway inflation that Paul Ryan and other loose-money critics keep predicting has yet to materialize; inflation is actually below the official Federal Reserve target of just 2 percent.
In fairness, while America’s short-term deficit is shrinking fast, our long-term deficit is still a concern, because soaring health care costs have threatened the future of Medicare and Medicaid. But there’s good news there, too. According to the nonpartisan Kaiser Foundation, health care spending is now growing at the slowest rate in five decades, which is why Medicare’s trustees just upgraded the program’s budget outlook. And there is strong evidence that Obamacare’s efforts to reorient the medical system to reward providers who keep their patients healthy instead of providers who perform more services are working. For example, Obamacare imposes financial penalties on hospitals with high rates of readmissions and central-line infections; predictably, hospitals have improved their performance in both areas. The health information technology revolution—launched by Obama’s 2009 stimulus—is also bending the cost curve, dragging a pen-and-paper system into digital age.
Meanwhile, U.S. combat forces are out of Iraq, and they’ll be out of Afghanistan next year. U.S. carbon emissions are at their lowest level in two decades, and so are U.S. oil imports. By historical standards, taxes are very low and spending is very modest. General Motors and Chrysler, wards of the state four years ago, are posting their best sales numbers in years. Gays are serving openly in the military, solar installations have increased over 1,000% in four years, a cool robot is taking cool pictures of Mars, and Tesla just paid back its government loan with interest. Things are getting better, and better is better than worse.
But the headlines are all about supposed scandals—stupid IRS agents in Cincinnati, overzealous leak investigations at the Justice Department, a dopey dispute over Benghazi talking points. These are the kind of things that politicians can obsess about when there’s no crisis on the horizon; the last time the national outlook was this bright, Republicans impeached the president for sexing up an intern. It’s unfortunate, but it’s not as if the latest wannabe-scandals are distracting official Washington from any important work it might be doing. Sure, Congress ought to do something about climate change, but as long as Republicans control the House, Congress isn’t going to do anything about climate change.
I guess that qualifies as a crisis. But one of the lessons of the Obama era, along with the general advisability of DOING STUFF regardless of the political implications, is that positive change can happen in spite of a dysfunctional system. You couldn’t build a summer movie around that—”In a world where complex legislation is implemented effectively…”—but it’s still a feel-good idea, even if it seems to have limited box-office appeal.
By: Michael Grunwald, Time Magazine, June 9, 2013
“A Failure To Hold Congress Accountable”: Economic Policy Is Largely Being Driven By Obstructionism, Not Economic Advisers
President Obama is reportedly planning to nominate economist Jason Furman to replace Alan Krueger as the head of the Council of Economic Advisers. Like Krueger and, for that matter, Austan Goolsbee and Christina Romer who previously served this administration in the same capacity, Furman boasts an impressive resume, with a Harvard economics doctorate as well as stints at the Brooking Institution, the Center on Budget and Policy Priorities (CBPP), and the CEA under President Clinton, among others. If you’re still of the incorrect belief that tax cuts largely pay for themselves (looking at you, Senate Minority Leader Mitch McConnell), do yourself a favor and read his CBPP report explaining the mechanics and empirics of “dynamic scoring” (pdf) and why invoking it as a talisman doesn’t mean one can claim anything one finds politically expedient.
The Beltway coverage of this news is overly focused on the inside baseball politics between the CEA and the National Economic Council, where Furman has been serving as Deputy Director since January 2009. But it’s important to step back and remember that economic policy in recent years has been principally driven not by well-qualified economists with the CEA, NEC, or elsewhere in the executive branch, but instead by conservative congressional obstructionism. Jason Furman’s appointment to the CEA will not alter the troubling reality that the United States is on an autopilot course of premature, excessive austerity and intentionally poorly designed sequestration spending cuts. But even if the ghost of conservative saint Milton Friedman rose up and warned the GOP against such austerity, today’s conservatives in Congress would declare him an apostate and continue their destructive course.
Consequently, the U.S. economy will almost certainly continue muddling through an adverse equilibrium of anemic growth, severely depressed output, massive underemployment, large cyclical budget deficits, subdued price inflation, widespread real wage deflation and low interest rates. It’s really quite simple: a steep aggregate demand shortfall continues to keep the economy’s performance well below potential, and the Federal Reserve has been and will continue to be incapable of fully ameliorating this shortfall so long as contractionary fiscal policy is being pursued. (See this paper for a thorough treatment.)
In short, the intellectual debate over austerity vs. stimulus has been totally decoupled from the policy debate and, more importantly, policy outcomes in Washington—despite having been resolved in a virtual TKO by those opposed to foisting austerity on depressed economies. The United States doesn’t face, or, perhaps more accurately, no longer faces a deficit of economists capable of opening up an intermediate macroeconomics textbook and relearning liquidity trap/depression economics. But the U.S. Congress faces a depressing deficit of members who seem to care about empiricism or evidence-based policy, never mind their unemployed constituents.
My colleague Josh Bivens and I have chronicled the ways the GOP has routinely and frequently obstructed economic recovery since 2009—much of which should inform any debate this summer regarding much needed reform of the Senate’s filibuster rules, as well as the inevitable political fight over the debt ceiling. Conservatives, particularly the Tea Party caucus, are to blame for exploiting every piece of leverage available (including the nation’s credit worthiness) to extract premature spending cuts, filibustering just about anything that would boost aggregate demand, watering down the Recovery Act, hamstringing monetary policy and demanding counterproductive legislative ‘pay fors’—stipulated to never, ever include revenue increases. The frequently espoused pox-on-both houses punditry is not just off-base, but is also somewhat complicit in this sad state of affairs.
Does it matter who advises the president? Absolutely. But the distressing state of the U.S. economy is, at root, a failure of our representative democracy and institutions to hold Congress accountable for its decisions preventing economic recovery, not a failure of technical advice given to the president. Realistically, the Constitution and budgetary process outlook afford the administration scant leverage to force more deficit-financed government spending, the most effective policy lever for digging out of this Lesser Depression. Under this backdrop, the United States needs more than qualified economic advisers to the president—a majority of representatives and (barring meaningful filibuster reform) super-majority of senators who heed evidence, as well as a press corps holding them accountable, jump to mind.
By: Andrew Fieldhouse, Economic Policy Institute, May 29, 2013
“Arrested Governance”: Do Everything You Can To Sabotage Government To Keep It From Operating Effectively
The Internal Revenue Service was closed today, as employees were furloughed due to sequestration’s budget cuts. Conservatives found this to be an occasion for side-splitting humor; Sarah Palin, for example, tweeted, “The IRS is closed today, feel free to use your phones.” Get it, because the IRS was tapping … um … well, never mind. In any case, today is a reminder that this scandal could be an opportunity for reform that clarifies the law on political and non-political groups, leads to a greater professionalization of the agency, and makes future misconduct less likely. Or it could wind up being just the opposite.
As Kevin Drum reminded us yesterday, one of the low moments of the Gingrich years in Congress was a series of hearings meant to expose IRS wrongdoing, in which horror stories of the agency’s abuse of taxpayers were told to lawmakers eager to hear them. In response, the IRS’s authority was curtailed and its budget slashed. The predictable consequence was less enforcement of tax laws (warming Republicans’ hearts, no doubt), but also an agency that had to do more with less.
If anyone was forced to do more with less, it was the office in Cincinnati, where a small number of poorly trained employees had to process thousands of new applications from groups seeking tax-exempt status after 2010. That isn’t to say there was no wrongdoing, but if you want an agency that does its job well and upholds the highest standards of professionalism, cutting its resources is not the way to get it.
But that could well happen again, and Republicans would be only too happy about it. It would be of a piece with the way they approach so much of what passes for their attempts at governing: Do everything you can to sabotage government and keep it from operating effectively, and then when it falls short, shout “See?!? We told you government can’t do anything right!”
By: Paul Waldman, Contributing Editor, The American Prospect, May 24, 2013
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