“Social Safety Net In Hands Of The States?”: The GOP’s State Budget Disaster Is The Best Case For Big Government
The Republican Party is cutting a swath of destruction through state budgets.
In Kansas, Gov. Sam Brownback’s experiment in income and business tax cuts has blown a $344 million hole in the budget for this fiscal year, and a projected $600 million hole for the next fiscal year. Part of his plan to close it is to cut $44.5 million from public schools and universities.
Illinois needs to cut over $6 billion to balance its books. So Gov. Bruce Rauner is calling for a $1.5 billion cut to the state’s Medicaid program, plus $600 million in cuts to local government finances and $387 million in cuts to higher education (though he may have trouble getting those ideas past the Democrats in the Illinois legislature).
Wisconsin’s state budget, meanwhile, faces a $238 million deficit, thanks in small part to tax cuts Gov. Scott Walker pushed through after taking office in 2011. That wiped out a $759 million budget surplus in 2013. Now Walker is looking to cut $300 million from higher education over the next two years, along with cuts to the state park system and its recycling programs, among other things, and to restructure about $100 million in debt payments the state already owes.
These three examples show the GOP’s “tax cuts now, tax cuts forever” ideology remains utterly unconcerned with economic reality. But more deeply, they’re a lesson in some bad choices America made in how to design its national social safety net, which set the stage for the current crises.
In not one of these three cases do the projected budget gaps rise above 1 percent of the income generated annually by the state’s economy. The idea that taxes couldn’t be raised, starting on high earners, to close these holes is risible.
On top of that, these tax cuts are often pitched as growth enhancers for state economies. That was the explicit case Brownback made for his tax cut package. But for such a policy gambit to have even a chance of working, spending must be held constant. If you start cutting spending on things like health care or education or transit or whatnot, you’re just pulling more dollars out of the state economy with one hand even as you leave more dollars in with the other.
In other words, you have to be able to deficit spend. But that can be hard for states. First off, most of them have balanced budget amendments in their constitutions, which means deficit spending is just a no-go. These restrictions generally don’t cover individual infrastructure projects and the like, which states can choose to borrow a set amount for from the bond markets. But covering shortfalls between general annual spending and revenue is much more difficult legislatively.
The other problem is that the bond markets might just not give you the money. Investors may consider a state a bad bet, which would drive its borrowing and interest payments up. That hasn’t been much of a problem in the aftermath of the recession, as investors have been desperate for safe places to park their money — which makes the refusal of state governments to borrow to cover their regular expenditures all the more absurd.
But the low rates won’t last forever, and the willingness of investors to take a bet on a state puts limits on state government borrowing.
What this all means is that state government spending is pretty pro-cyclical — i.e. it rises and falls with the economy. If the economy is doing well, state tax revenues go up. If the economy goes into recession, state tax revenues go down, forcing budget cuts in health, education, and elsewhere. And that’s before you factor in Republican governors and state legislators who are out to cut taxes willy-nilly.
But for spending on things like health care and education — two of the biggest drivers of any state’s budget — being pro-cyclical makes no sense. It’s not as if people just stop getting sick during recessions, or that children simply stop needing an education. These are public investments in the health and well-being of the American people themselves, and the need for them remains constant throughout all the ups and downs in the economy.
The only entity that can spend with impunity regardless of the state of the economy is the federal government. That’s because it can print money, which means it can always pay lenders back in a pinch. This does mean the federal government faces a different sort of threat — instead of being abandoned by investors, it could print so much money it drives up inflation. But that’s just really hard to do, historically speaking.
In short, these are programs that should be run through the federal government. But Medicaid is a joint state-and-federal program, meaning both the federal government and state government supply some of the money from their respective budgets. Meanwhile, education is funded by streams from the federal, state, and local levels at the same time.
That structure leaves these programs critically vulnerable to the whims of the economy — not to mention the whims of Walker, Brownback, Rauner, and their friends in the Republican Party.
By: Jeff Spross, The Week, February 24, 2015
“Lying To Your Face”: Republicans Don’t Care About The Deficit. Just Look At Scott Walker
Wisconsin’s Republican Gov. Scott Walker is almost certain to run for president. He’s got two blue state election victories under his belt, ravening anti-union bona fides, and a record that would make him the most conservative presidential candidate in at least 50 years. Best of all, he’s got a pleasant, mild demeanor — none of the bug-eyed nutcase affect of other right-wingers.
However, he’s recently run into some budget troubles. Back in 2013, Wisconsin had a sizable budget surplus. Walker did what conservatives always do: he passed $2 billion in tax cuts heavily weighted towards the rich, blowing through the entire surplus and then some. Now he’s resorting to financial chicanery to avoid default:
Scott Walker, facing a $283 million deficit that needs to be closed by the end of June, will skip more than $100 million in debt payments to balance the books thrown into disarray by his tax cuts. [Bloomberg]
Whether Walker — who has surrounded himself with Ronald Reagan’s crackpot voodoo economists — can talk his way out of this will be a big political question. But this does demonstrate a fundamental truth of American politics: conservatives don’t care, at all, about deficits or debt. They use deficit concern trolling as a convenient excuse to cut social insurance and other benefits. But when it comes down to brass tacks, they choose larger deficits, not smaller.
To be clear, Walker’s move is perfectly legal. But it’s just a delaying tactic, and it will cost more in the future. Per Bloomberg‘s analysis, it will increase debt service payments “by $545,000 in the next budget year, which starts July 1, and by $18.7 million in the one after that.”
Kansas’ Sam Brownback, another Republican governor, did the exact same thing to his state. Louisiana Gov. Bobby Jindal, another possible 2016 contender, has the same problems as Walker, only worse — his budget hole is $1.6 billion. He passed massive tax cuts early in his term, and has spent the rest of the time cutting services, especially higher education, to the bone in a desperate, futile bid to make up the shortfall. He won’t rescind the tax cuts, of course.
And when collapsing oil revenues turned the budget problem into a full-blown crisis, Jindal began raiding every change jar in the state to keep Louisiana from defaulting outright, including selling state property and burning through all manner of special reserve funds.
The Republican Party has gone precisely nowhere on fiscal policy since 2000, when President George W. Bush pulled this exact same trick. He took the Clinton surplus and spent it on tax cuts for the rich. The following eight years, incidentally, resulted in the worst economic performance since Herbert Hoover.
Policy-wise, there isn’t that much to learn from this, other than conservatives produce absolutely atrocious economic policy. But we already knew that.
However, there are two political lessons. For liberals, very much including President Obama, it implies that any hard work done reducing the budget deficit will be immediately negated the moment Republicans get a chance. All of Obama’s cherished deficit reduction — accomplished at gruesome cost to the American people — will go straight to the 1 percent if Walker (or Jindal, or Jeb Bush) is elected.
Second, for paid-up members of the centrist austerity cult, who worship a falling deficit like some kind of fetish object, realize that Republicans are lying to your face. If you genuinely care about the deficit, the GOP is not going to deliver.
By: Ryan Cooper, The Week, February 20, 2015
“Back To The Future In 2016”: Nothing Would Make Policy Debates More Obvious Than Bill Clinton’s Wife And George W. Bush’s Brother
It’s never long in a presidential race before one candidate or another says, “This election isn’t about the past—it’s about the future.” But the 2016 election is probably going to be even more about the past than most, particularly given that there will be no incumbent running.
I thought of that late last week when I heard that Rick Perry—who promises to once again provide more than his share of unintentional comic relief over the next year or so until he drops out—told attendees at an event in New Hampshire that Abraham Lincoln was a great advocate of states’ rights. “Abraham Lincoln read the Constitution, and he also read the Bill of Rights, and he got down to the Tenth Amendment, and he liked it,” Perry said. “That Tenth Amendment that talks about these states, these laboratories of democracy.”
That’s certainly a novel perspective, to characterize Lincoln as a Tenth-Amendment fetishist like today’s tea partiers. But I suppose one can forgive the impulse, given how far the GOP has traveled from what it was in the time of the first Republican president. Pop quiz: If they had been alive in the 1860s, how many of today’s Republicans would have been on the side of the North? Not too many. Rick Perry sure as hell wouldn’t have.
But the history we’re going to argue much more about in 2016 isn’t so distant, and its protagonists—and their family members—are still around. Last week, a prominent Republican economist came up with what may be the most biting message any Democrat could hope for:
“When Hillary Clinton runs, she’s going to say, ‘The Republicans gave us a crappy economy twice, and we fixed it twice. Why would you ever trust them again?’ ” said Kevin Hassett, a former economic adviser to GOP nominees Sen. John McCain (R-Ariz.) and former Massachusetts governor Mitt Romney. “The objective for the people in the Republican Party who want to defeat her is to come up with a story about what’s not great” in this recovery, especially wage growth, he said.
Now imagine that Jeb Bush is the Republican nominee, and replace “The Republicans gave us a crappy economy twice” with “The Bushes gave us a crappy economy twice.” It hits even harder.
Is that unfair? In the sense that Jeb Bush can’t be held directly responsible for what his father and brother did in office, sure. Or at least, he’s no more responsible for it than any other Republican. It isn’t as though there’s a distinct Bushian strand of economic policy within the GOP, one that differs in some meaningful way from what other Republicans advocate. Although nobody has released detailed campaign policy papers yet, it’s all but guaranteed that the things Jeb Bush would do as president don’t differ too much from what the other candidates would do. They’d all like to cut taxes, particularly on investments; they’d reduce regulations on corporations; and they’d do what they could to roll back the policies of the Obama years in areas like labor and environmental enforcement. It’s possible that one candidate or another has some spectacularly creative new idea that will completely transform the American economy in ways no one has imagined. But probably not.
If the debate around the economy truly has changed, from a focus on what will produce growth to a focus on how to make the economy’s fruits more widely and equitably distributed, then it’s even less clear what Republicans will have to offer. Hillary Clinton can say that the years of her husband’s administration were the only period in recent decades that saw real (if not overwhelming) growth in wages for people in the middle and the bottom. If Jeb Bush were her opponent, it would offer an opportunity to have a historically grounded discussion about everything that has happened since his father was president.
Because I’ve yet to hear Republicans explain that history. If they tried to, they’d have to confront the fact that at every key point, their predictions about what effect policy changes would have turned out completely wrong. When Bill Clinton passed his 1993 budget with an increase in the top income tax rate, they all said that a “job-killing recession” was sure to result (I assume the phrase came from Newt Gingrich, because its use was so ubiquitous during that time). What actually ensued was not a recession but a rather remarkable boom; there were nearly 23 million more Americans working when Clinton handed off the White House to George W. Bush than when Clinton took office eight years before. Bush then committed himself to cutting taxes, particularly those affecting the wealthy—not just income taxes but taxes on investments and large inheritances as well. Republicans predicted that these policy changes would produce an economy practically bursting with wonderful new jobs for all.
That, of course, didn’t happen. Total job growth during the Bush years was a meager 1.3 million. Even if we’re unusually kind to Bush and go back to the high point of jobs in his administration (the end of 2007, before the Great Recession), he would only score a 5.6 million increase, or around one quarter of what Clinton managed.
Then Barack Obama allowed some of those top-tier tax cuts to expire, despite Republicans’ protestation that doing so would create a ball and chain dragging the economy down. Once again, disaster did not ensue; 2014 was the best year for job growth since 1999.
Like a number of liberals before me, I’ll take pains to note that this history doesn’t demonstrate that increasing taxes on the wealthy produces job growth. What it does show is that relatively small changes in the wealthy’s taxes have little effect on the economy one way or the other. Yet the idea that altering the tax burden on the wealthy produces enormous economy-wide effects is still central to conservative economic thinking. And it’s about as fanciful as the idea that Abraham Lincoln was a states’ rights advocate.
Unlike some of the policy debates we engage in, this history of the last couple of decades is pretty easy for voters to understand, since most of them lived through it. And nothing would make it more obvious than a general election between Bill Clinton’s wife and George W. Bush’s brother.
By: Paul Waldman, Senior Writer, The American Prospect; The Plum Line, The Washington Post, February 15, 2015
“The Country Paid Heavily For The Risks He Took”: It’s Not Too Soon To Judge George W. Bush’s Presidency On Key Issues
In the six years since he left the White House, President George W. Bush has often claimed that it is too early for historical judgments about his presidency. “It’s too soon to say how many of my decisions will turn out,” he wrote in Decision Points, his presidential memoir.
In this, Bush was indulging in what we will call the Truman Consolation. President Harry S. Truman was deeply unpopular during most of his time in the White House and in the years immediately afterward. Only decades later did historians begin to rate his presidency highly for the actions he took in the early years of the Cold War. At one time or another, when their poll ratings are slumping and their media coverage is biting, most modern American presidents like to believe they will eventually be vindicated, just as Truman was.
But Bush is largely wrong: In some of the most important areas of his presidency, it’s not too soon to draw conclusions. Just by judging against Bush’s own forecasts, some of the most far-reaching and important initiatives of his presidency didn’t work — or turned out poorly.
At the top of the list is the war in Iraq. Bush and his advisors badly misjudged what it would entail. They overestimated the international support the United States would be able to obtain for military action. They asserted before the war that American troops would need to stay in Iraq for no more than a couple of years. The administration’s public estimate before the war was that it would cost less than $100 billion; instead, it cost $2 trillion.
Intended originally as a short-term demonstration of American power and influence, the Iraq war over the longer term brought about the opposite. In its unhappy aftermath, Americans became increasingly cautious, more reluctant to become involved overseas. Overall, the war will go down as a strategic blunder of epic proportions, among the most serious in American history.
A similar fate will befall the second-most far-reaching aspect of Bush’s legacy, his historic tax cuts. Bush argued that they would stimulate the economy and spur economic growth. The short-term benefits proved dubious at best, but the harmful long-term consequences were incalculable, both for the federal government and, more importantly, for American society.
When Bush took office, America was in a brief period of budgetary surplus. There was actually a debate, forgotten and almost unimaginable today, about how to use the surplus: Pay down the debt? Launch new federal initiatives? Bush chose to cut taxes, and then did so in ways (tax cuts on dividends and capital gains) that proved immensely beneficial to the wealthiest Americans.
It’s true that President Barack Obama eventually allowed the Bush cuts on upper-income Americans to expire. But the damage had been done. Over the course of nearly a decade, the federal government became increasingly short of funds, while wealthy Americans built up greater and greater assets. Whenever you use a road, bridge or airport that needs repairs (or read a news story about the Pentagon complaining about budget constraints), you might pause to think about the Bush tax cuts and the role they played in shaping the America we see today.
Bush’s second round of tax cuts, in 2003, were historic in another sense. By then, he had already dispatched American troops to Iraq. In every previous military conflict since the Civil War, American presidents had raised taxes to help defray the costs. Bush bucked this historical trend: He lowered them.
It’s true that in a few other policy areas judgments of Bush’s presidency may improve over the years as events unfold and as more information comes to light.
The primary example could be counter-terrorism. The Senate’s recent report on enhanced interrogation techniques makes current judgments on that dark era even harsher than they would have been otherwise. Torture is torture, and no passage of time will change the moral judgments on that.
On the other hand, in the immediate aftermath of the Charlie Hebdo attacks in Paris, some Europeans began to ask why the attackers had not been kept under greater surveillance. If such terrorist attacks were to continue over many years, then judgments on the Bush-era surveillance programs might eventually come to be less harsh than they are today. Or they may come to be seen as the true beginning of a new surveillance state. More time needs to pass before historical judgments on this issue can take shape.
Overall, Bush’s presidency is likely to be remembered for his lack of caution and restraint. Once, in the midst of a discussion with his military advisors, Bush made a telling observation: “Someone has got to be risk-averse in this process, and it better be you, because I’m not.”
George W. Bush was certainly not risk-averse. He took gambles both in foreign policy and with the economy. Sometimes they paid off. Yet overall, the country paid heavily for the risks he took. History isn’t likely to revise that judgment.
By: James Mann, Los Angeles Times (TNS), a fellow in residence at the Johns Hopkins School of Advanced International Studies; The National Memo, February 10, 2015
“More Worried About Their Reputation”: Republicans Don’t Really Care About Inequality
The Republican Party appears to accept that poverty and the inequities of wealth and political power that have prevailed over the last 15 years are issues it can no longer ignore. Not without paying a price. After all, Mitt Romney’s cool indifference to the everyday struggles of working Americans went a long way toward sinking his 2012 campaign.
But expressing concern about inequality is one thing. Doing something about it is another. The GOP so far appears more worried about its reputation as being the party of the very, very rich, than the empirical reality of its being the party of the very, very rich.
At a recent Republican gathering, Senator Ted Cruz of Texas gave voice to the party’s incongruity of perception and reality. “I think Republicans are and should be the party of the 47 percent,” he said. Later at that same event, billionaire brothers Charles and David Koch announced plans to spend nearly $1 billion through their political network in the next race for the White House, with virtually all of it going to the Republican Party’s nominee.
If the GOP were truly troubled by historic rates of income and wealth inequality, it would rubber-stamp President Barack Obama’s plan to raise taxes on the wealthy and use the proceeds to fund infrastructure projects like roads, bridges, waterways, and sewer systems. Public investments like these have historically garnered broad support, because they are neutral vehicles for achieving the goals of statecraft. Such expenditures would not only create hundreds of thousands of seasonal jobs, as well as many thousands of permanent jobs, but also stimulate economic activity on a national scale. And they’d pay for themselves over time.
The president’s $4 trillion fiscal budget would tap into offshore accounts and Wall Street transactions that only the very, very rich possess and thus care about. In addition to public works, which Obama has been calling for since his took office, increased revenues would be used for free community college and universal child care.
This, or something like it, is what serious people talk about if they are serious about combating inequality. Progressive redistribution, however bitter-tasting the phrase may be, must be on the table. But all we are likely to hear, especially from Republicans aiming high, are platitudes steeped in conservative morality, homilies to the power of private enterprise freed from the bonds of bureaucratic red tape, or the benefits of cutting taxes. Really. Anything. Anything at all to avoid tax hikes even on the treasonous few who hide their money offshore.
All one needs to do to see the difference between what Republicans are saying and Republicans are doing is look at the current session of Congress. The very first item on Senate Majority Leader Mitch McConnell’s to-do list was passing a bill authorizing the construction of the Keystone XL Pipeline. That project would indeed create thousands of seasonal jobs, but only about 40 permanent ones. It would have virtually no impact on the U.S. economy. Moreover, the public would get nothing in return, unless you count greater levels of global warming.
That’s not to mention other items being pushed which have nothing to do with serving the greater good. A short list: House Republicans have introduced legislation to restrict abortion (the melodramatically titled “fetal-pain bill”), to dismantle part of the Dodd-Frank financial reform law, and to starve to death the president’s modest executive action on illegal immigration.
Even if the Republicans really did believe, as Jeb Bush is trying to convince us, that addressing inequality is the right thing to do, don’t bet on any action. Doing the right thing had rarely been an incentive, because this is a party now committed to total warfare against Obama and the Democratic agenda. The only way the Republicans will take action on inequality is if they are forced to, but even then, they’ll likely do everything short of raising taxes on the very, very rich.
That’s why we should keep our eyes on the minimum wage and paid sick leave. House Speaker John Boehner has said he’d rather kill himself than raise the minimum wage. Conservatives are poised to attack Republicans entertaining mandated sick days. But in terms of inequality, these are the easiest ways to say you’ve done something without raising taxes on the very, very rich.
So yes, inequality is emerging as a major issue in the 2016 presidential race, and Jeb Bush, Ted Cruz and others are going to try hard to convince us that the Republican Party cares, really cares, about the plight of the poor and an ever-shrinking middle class. But remember the last time a major candidate talked about such “compassionate conservatism.” By the end of his second term, the greatest beneficiaries of that compassion were the very, very wealthy.
By: John Stoehr, Managing Editor of The Washington Spectator; The National Memo, February 6, 2015
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 