“Not A Boon For Most Americans”: Congress Has Tackled The Deficit At The Cost Of The Economy
This morning, Eric Rosengren, chief executive of the Boston Federal Reserve, cautioned lawmakers against further fiscal retrenchment, lest they slow the recovery. As he said at the Global Interdependence Center’s Central Banking Conference in Italy: “Given the economic realities I would urge policymakers to consider scenarios where some elements of fiscal rebalancing take effect only after the economy has more fully improved.”
He’s right, in large part because Congress has already done a fair amount of deficit reduction. Beginning in 2011, with unemployment still high and the economy on a long, slow climb out of recession, Congress — led by a new Republican majority in the House of Representatives — moved to make big cuts in medium-term discretionary spending. It slashed $1 trillion with the Budget Control Act of 2011, and followed that with hundreds of billions more in spending cuts and tax increases with the fiscal cliff deal and sequester.
Now, as a result of this deficit reduction, the Congressional Budget Office projects a $642 billion budget deficit for fiscal year 2013, down $200 billion from its projection at the beginning of the year, and the lowest level of deficit spending since President Obama entered office. The near-term deficit projection also shows improvement; the CBO estimates a 2015 deficit of $378 billion. For Washington’s deficit hawks, this is cause for celebration. It’s a sign the federal government is on its way to a more sustainable debt load.
But this rapid deficit reduction is far less of a boon for most Americans, who have to live in an economy that’s been largely stalled by Congressional inaction. At 7.5 percent, unemployment is still too high, and there’s little sign of rapid improvement. According to most projections, joblessness won’t reach pre-recession levels for another three years.
Congress’ push for deficit reduction has a lot to do with this. As noted in the New York Times last week: “The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011.”
To put that in more concrete terms, 1.5 million more Americans would have jobs if not for Washington’s decision to pursue deficit reduction in the midst of a sluggish economy.
Unfortunately, news of successful deficit reduction is unlikely to result in any respite from new cuts or tax increases. The Obama administration still has its Social Security cuts on the table — as part of a potential “grand bargain” — and Congressional Republicans are gearing up to demand still more spending cuts in exchange for raising the debt ceiling.
Will Washington avoid endangering the still-fragile recovery with further deficit reduction? If the refusal to end or replace the sequester is any indication, I wouldn’t hold my breath.
By: Jamelle Bouie, The American Prospect, May 16, 2013
“The Real IRS Scandal”: Lawmakers Who Pushed The Agency To Rely On Bone-Headed Tactics By Refusing To Fund It To Do Its Job
David Simon, of “The Wire” fame, once responded to the idea of “doing more with less” by saying, “That’s the bullshit of bean counters who care only about the bottom line. You do less with less.” For the Internal Revenue Service, the line should perhaps be updated to “you do less with less, and also cause a scandal.”
The IRS, of course, was recently caught singling out conservative groups seeking tax-exempt status for extra scrutiny. IRS employees in a Cincinnati office used search terms such as “tea party” and “patriot” to find organizations they deemed worthy of more attention in their request to be exempted from paying federal taxes. (The irony of tea party groups complaining about not getting effectively subsidized by the government in a timely enough fashion will be left for another time.)
The “scandal” has already caused the acting commissioner of the IRS to lose his job and prompted a hearing on Capitol Hill Friday during which lawmakers expressed their outrage that the tax agency could act in such a manner. But Congress deserves its own share of blame for the debacle.
Now, the IRS employees who were searching for “tea party” surely should have known better. But the fact of the matter is that the agency has been dealing with a deluge of applications for tax-exempt status at a time when its budget is shrinking. The size of the IRS workforce has dropped 9 percent from its 2010 level, and the agency has seen its budget cut in each of the last two fiscal years. This fiscal year, the amount the IRS spends per capita (meaning per citizen) will be 20 percent lower than it was in 2002, according to an analysis by tax expert David Cay Johnston.
Meanwhile, as Reuters reported, “The IRS has seen the number of groups applying for 501(c)4 status double in the wake of a January 2010 Supreme Court decision that loosened campaign-finance rules.” The Obama administration has requested budget increases for the IRS, but Republicans in Congress refuse to approve them. So it’s perhaps not surprising that already overworked employees at the agency looked for a few shortcuts.
And things are likely not going to get any better this summer when the IRS shuts down entirely for five days due to budget cuts under the so-called “sequester.” These cuts don’t just inconvenience people who need tax assistance; they cost the Treasury money. The IRS estimates that every dollar spent on enforcement brings in $4 to $5 in additional revenue, so cutting the IRS budget is akin to the government cutting off its nose to spite its face.
My colleague Robert Schlesinger noted today that the real scandal surrounding the attack at the U.S. diplomatic outpost in Benghazi, Libya, is not who edited which talking point when, but that the State Department was denied funds to beef up consular security. Much the same can be said for the IRS. The scandal is not about the agency’s shortcuts, but the lawmakers who pushed it towards relying on bone-headed tactics by refusing to give it the money it needs to do its job.
By: Pat Garofalo, U. S. News and World Report, May 17, 2013
“It’s Time For Republicans To Get Serious”: Spending Cuts In President Obama’s Budget Put Onus On Paul Ryan
When it comes to deficit reduction, President Barack Obama may have correctly taken the measure of Alan Simpson and Erskine Bowles and U.S. corporate leaders; that’s a reason why any deficit deal is more remote than ever.
Two and a half years ago, when the president refused to embrace the recommendations of his own deficit-reduction panel, he was criticized by the authors, Bowles, a former chief of staff to President Bill Clinton, and Simpson, a former Republican senator from Wyoming, as well as by business leaders.
The plan proposed a balance of spending reductions and tax increases of about $4 trillion over almost a decade; that would bring the long-term debt to a sustainable level, according to proponents, who said the president was abdicating leadership.
Privately, Obama saw the proposal as a trap. If he embraced it, Republicans would say, “let’s focus on areas where we agree — spending, including entitlement cuts — and return later to raising revenue.” Then, he feared, Simpson, Bowles and those worried executives would provide aid and comfort for that position, handing a devastating defeat to Democrats.
In these recurring budget battles, Obama deserves his share of blame. At the turn of the year, he was unwilling to hang tough for an entitlements-revenue deal as tax increases loomed for all Americans. He blinked and accepted a smaller tax increase on the wealthy. The White House then miscalculated that the mindless across-the-board spending cuts under sequestration were so bad that an alternative would emerge.
Yet, a month ago, Obama took a risk and proposed a budget containing cuts to entitlements cherished by his party. House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, and his cohorts were unmoved; they wouldn’t give an inch on new revenue.
Simpson and Bowles gave Obama a pat on the back and largely refrained from criticizing Ryan or House Speaker John Boehner, while corporate leaders ducked.
Moreover, Simpson and Bowles have revised their plan and moved to the right, proposing proportionately more spending cuts and less in new revenue. Obama is playing ball, Ryan isn’t, and the two deficit hawks, and their CEO supporters, are rewarding the guy who is stiffing them.
Simpson and Bowles have been admirably persistent, open to some modifications and correctly insistent on the need to curb long-term health-care costs. A spokesman offered this explanation for their latest move to the right: Republicans now control the House. Sorry, Republicans had just won a huge victory, taking control of the House, and were on a high when Bowles-Simpson was first offered in December 2010.
What’s really going on is that their fervent hope for a deal rests on a naïve assumption that the able Ryan will strike a responsible compromise, even though he has made clear that he won’t.
The Republican position is that taxes went up as part of the deal on the so-called fiscal cliff, and there will be no more increases. In reality, all the tax cuts enacted under President George W. Bush were slated to expire anyway, and Republican congressional leaders, their backs against the wall, had to accept some higher levies on the wealthy.
Moreover, that $600 billion, over a decade, is only a little more than half of what Bowles-Simpson proposed. In addition, the new revenue is dwarfed by spending cuts, which have been more than twice as large.
Obama, for all his earlier timidity, showed political guts with his budget last month. He would lower cost-of-living adjustments for most Social Security recipients, means-test Medicare benefits for wealthier senior citizens and enact other reforms to entitlements that would amount to about as much as the deficit commission recommended.
This has infuriated the Democratic base, some of whom, unreasonably, oppose any cuts to Social Security or Medicare. Others warned that, whatever the merits, there was a political risk to a unilateral gesture, which would be rejected by the Republicans and rob the Democrats of a good issue.
So far, that’s proven to be the case.
Other Republican criticisms are equally dubious. The charge that Obama doesn’t deal with long-term health-care spending would be more credible if a stronger alternative were on the table. Obama’s Medicare cutbacks, over 20 years, are larger than Ryan’s. The sequestration cuts, now accepted by many Republicans, as the White House notes, provide no permanent entitlement changes. None.
There’s also sniping that the entitlement changes would be phased in only gradually. Well, that’s the only way to make entitlement changes politically viable. Consider the much-praised 1983 commission led by future Federal Reserve Chairman Alan Greenspan that made Social Security more solvent with spending cuts and higher taxes. It takes full effect in 2022, almost 40 years after it was enacted.
Corporate executives say they’re pessimistic about any long-term deficit changes and thus it’s better not to rock the boat. Who’s abdicating now?
Senate Democrats, after legitimate criticism for failing to pass a budget for years, did so this year. Now, it’s Ryan and the House Republicans who refuse to go to a conference to try to reconcile differences.
In Washington, there’s a propensity to find bipartisan fault in most conflicts. Often, that is on the mark.
Now, however, if Simpson and Bowles and the CEOs who warned about the dire need to get America’s fiscal house in order are serious, they have a clear target: Paul Ryan.
By: Albert R. Hunt, The National Memo, May 16, 2013
“Two Steps Forward, Two Steps Back”: Today’s GOP Is Not A Small-Government Party, It’s An Anti-Tax Party
When it comes to striking a bipartisan fiscal deal, House Speaker John Boehner (R-Ohio) argued yesterday that the only compromise he’ll consider is one in which Republicans accept no concessions whatsoever. Around the same time, House Majority Whip Kevin McCarthy (R-Calif.) said the same thing.
Given this, it’s fair to say the prospects for a so-called “Grand Bargain” are finished, right? Almost, but not quite.
Sen. Bob Corker (R-Tenn.) said Sunday that he believes Republicans would consider adding new tax revenues by closing loopholes if Democrats show a willingness to embrace “true” entitlement reform.
“I think Republicans, if they saw true entitlement reform, would be glad to look at tax reform that generates additional revenues,” Corker said on “Fox News Sunday.” “And that doesn’t mean increasing rates, that means closing loopholes. It also means arranging our tax system so that we have economic growth.”
Corker is clearly part of a very small minority in his party, but it’s worth noting he’s not completely alone — Sen. Lindsey Graham (R-S.C.) made similar remarks shortly before the sequestration deadline about Republicans trading tax-reform revenue for unspecified entitlement “reforms.”
It’s admittedly difficult to read the available tea leaves — for every report that says Republicans will simply never even consider a compromise, there’s another that says the window is not yet closed and a deal is still possible.
But if we’re keeping score, put me down in the “deeply skeptical” category. Putting aside the merits of a “Grand Bargain” — I’m skeptical about the need for such a deal, too — I just don’t see a scenario in which enough congressional Republicans accept concessions to pass an agreement.
In fairness, the optimists have a compelling talking point: Republicans want changes to social-insurance programs like Medicare and Social Security; President Obama is tempting them by putting the “reforms” on the table; and GOP leaders know the only way Democrats would even consider these cuts is if Republicans make concessions on new revenue.
So why is failure probably inevitable anyway? In large part because when weighing the Republican support for entitlement cuts against the Republican opposition to new tax revenue, it’s no contest — today’s GOP is not a small-government party; it’s an anti-tax party. On the list of Republican priorities, there’s a #1 issue, followed by a steep drop-off to every other consideration.
For proof, look no further than Boehner’s and McCarthy’s comments yesterday. Yes, Corker sounded a more constructive note, but I strongly suspect he’s part of an intra-party minority that would be quickly crushed if a deal started to materialize.
But isn’t Obama making them a generous offer intended to garner GOP support? Yes, but let’s also not forget two things. First, the president has already put very conservative measures on the table, but they’re far short of what Republicans generally consider acceptable (the elimination and privatization of entitlement programs). Second, as we’ve seen before, the m.o. for Republicans is to simply pocket Obama’s offers while demanding more, constantly moving the goal posts to new extremes, before the president eventually gives up and the media blames “both sides.”
Indeed, look again at Corker’s specific use of words: he’ll consider revenue if Democrats accept “true” reforms. Who gets to decide what’s “true”? Apparently, Corker and his party do, and chances are, their definition won’t line up well with the Democrats’ definition.
I realize that on a conceptual level, this seems like the sort of agreement that could be reached in an afternoon. Both sides are looking for similar amounts of debt reduction, and have already made significant progress towards their goal. Democrats are open to spending cuts and entitlement changes, and if Republicans met them half-way on tax-reform revenue, they could shake hands and move on to some other issue.
But if I were a betting man, I’d say the smart money is on “never going to happen.” All of the GOP leadership and most of their rank-and-file members not only refuse to consider a compromise, but consider the very idea of meeting the White House half-way to be ridiculous.
By: Steve Benen, The Maddow Blog, Marh 18, 2013
“Riding The Bench” John Boehner Still Waiting For Others To “Lead”
When it comes to power in Washington, John Boehner isn’t exactly a hapless schlub, at least not on paper. He’s the Speaker of the House, second in the presidential line of succession, and ostensibly the most powerful member of the legislative branch of government. He has a powerful megaphone, a sizable House majority, and the capacity to have an enormous impact on policymaking.
And yet, John Boehner believes leadership is something others should show. In his new Washington Post op-ed on the larger budget fight, the House Speaker is giving new meaning to the phrase “leading from behind.”
The problem, in large part, is that Democrats refuse to make the tough choices necessary to solve our long-term debt crisis…. [P]residential leadership is really what’s needed.
Needed for what? Well, according to Boehner, he’d like to see President Obama cut spending the way Republicans want, cut entitlements the way Republicans want, balance the budget the way Republicans want, and approve the Keystone XL pipeline the way Republicans want.
And if Obama disagrees, he’s not making “tough choices” and failing to show “leadership.”
Left unsaid: John Boehner, despite his power and authority, isn’t leading, doesn’t want to lead, has no intention of leading, and doesn’t even know how to lead — which is precisely why he keeps waiting for the White House and Senate to do the real work while Boehner waits patiently (or as evidenced by this op-ed, perhaps not so patiently) on the sidelines.
Let’s make this easy for the Speaker: (1) Name one budget issue on which you and your party are prepared to compromise; (2) Name one concession you and your party are willing to accept in exchange for a related Democratic concession.
If the answer to either of these is questions is a blank stare, then the Speaker of the House has no business calling himself a leader of anyone or anything.
By: Steve Benen, The Maddow Blog, March 14, 2013
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