Posts Tagged ‘Federal Deficit’

Thomas Friedman: Where Have You Gone Joe DiMaggio?

Monday, October 10th, 2011

Here’s Thomas Friedman on the death of Steve Jobs and how it taps into the greater American sense that this country is off the rails and in bad need of leadership:

Think of how cramped and uninspiring our national debate has become. It is all about cutting, filibustering, vetoing and blaming — or solving our problems by either untaxing or taxing millionaires alone.

Neither party is saying: Here is the world we are living in; here are the big trends; here is our long-term plan for rolling up our sleeves to ensure that America thrives in this world because it is not going to come easy; nothing important ever does.

What is John Boehner’s vision? I laugh just thinking about the question. What is President Obama’s vision? I cry just thinking about the question. The Republican Party has been taken over by an antitax cult, and Obama just seems lost. Obama supporters complain that the G.O.P. has tried to block him at every turn. That is true. But why have they gotten away with it? It’s because Obama never persuaded people that he had a Grand Bargain tied to a vision worth fighting for.

I’m an Obama fan, but he’s not being straight with you when he says that we can balance the budget long term by just taxing the rich. He’s not being any more straight than the Republicans are when they say that we can only balance the budget by cutting spending and that we can reduce massive deficits by decreasing taxes at a time when they’re the lowest they’ve been in 50 years.

Friedman’s obsession with “the Grand Bargain” has been pilloried by people like Frank Rich who rightly point out that Obama isn’t going to come to any Grand Bargain with people who consider closing tax loopholes just as bad as the mortal sin of raising income taxes. But Friedman is ever the optimist, arguing that leadership entails telling the truth and that the American people are hungering to hear it.

Given the history, I’m not so sure, but I agree that telling the truth to the people is more important now than it has been in some time.

The Tea Party Downgrade

Sunday, August 14th, 2011

In a recent flurry of e-mails with my conservative uncle, we have been arguing about who is responsible for the S&P downgrade of US debt. While it should be obvious to everyone but the Fox News addled that Congressional Republicans are responsible, the back and forth with my uncle has convinced me that this apparently needs some more explanation.

First of all, let’s stipulate that the idea of a debt ceiling doesn’t make a whole lot of sense. Congress and the President are responsible for appropriating money and (much to the chagrin of the Tea Baggers) borrowing money is a part of running a government. A separate debate and vote on whether the government can borrow money to spend funds that have already been approved is superfluous. Not to mention the fact that the most reactionary budget that has come out of the House of Representatives in recent memory, the Ryan Plan, assumes a deficit for this year (and indeed a deficit for over ten years). Furthermore (although the Tea Party Constitutional fetishists have been adept at ignoring it) the Constitution is pretty clear on this. Section 4 of the 14th Amendment reads:

the validity of the public debt of the United States, authorized by law, including debts incurred for the payments of pension and bounties for service in suppressing insurrection or rebellion shall not be questioned.

In my opinion, Obama took this Constitutional arrow out of his quiver too soon. While it would set a bad precedent to just ignore a practice that has been in place for decades, he should have reserved his ability to invoke this power in the time of a crisis.

The debt ceiling has been raised 106 times since 1940 and the historical precedent is that the “out party” (who doesn’t control the presidency) votes against it as soon as they know that there are enough votes to pass it. Again, Republicans are shocked (shocked, I say!) that there might be politics in Washington DC and point to the fact that Obama and Biden both voted against it during the Bush Administration. In return, Democrats saw their Barack Obama and raised them a Ronald Reagan, who raised the debt ceiling 18 times in 8 years and in 1987, in a speech that could have been given by Barack Obama, publicly called on the Democratic Congress to stop acting irresponsibly and raise the debt ceiling. 

But this time was different. It was different because the 2010 elections brought to power a bunch of Tea Party Congresmen who cared more about their extreme policy prescriptions than they did about the fragile economic recovery of the United States. The US Government’s much vaunted “checks and balances” are basically a way to insure compromise in lawmaking. But the opposite is true as well: checks and balances also provide an easy way for one faction to grind the system to a halt by refusing to compromise. And this is exactly what the Tea Party has been intent on doing.

Just as they forced a crisis when the Bush Tax cuts were set to expire in 2010, and then again earlier this year when the remaining money from last year was to be appropriated, the Tea Party was set on using the Full Faith and Credit of the United States as a political weapon. The initial Republican plan was to tie the US Government in knots over the debt ceiling to force spending cuts, while only extending the debt ceiling for another 6 months, thereby creating another opportunity to tie the government in knots 6 months later. This is from the same people who talk about the “uncertainty” caused by Democrat’s attempts to regulate the economy or raise enough money to finance the meager social programs we have in this country. What could lead to more uncertainty than questioning whether the largest economy in the world would pay the debts it had run up?

As if that wasn’t enough, the Republicans added the demand that not only did the deficit have to be cut, it had to be cut without raising taxes at a time where taxes are lower than they have been in 60 years.

Faced with this extraordinary economic extortion, Obama called the Republicans’ bluff. He unilaterally put the two most popular social programs in the country on the table and began to push for a deal that would cut the deficit $3-4 trillion over the next 10 years. The catch was that the Republicans would have to agree to tax increases in order to get these cuts. To be sure, this was political gamesmanship too, but it was about time. Obama has been pummeled by Republican political gamesmanship for the past 3 years, and in this case, the right political position also happened to be the right position for the country (not to mention supported by over 2/3 of the American people).

Republicans counter that Obama wasn’t serious about deficit reduction since he never submitted a detailed proposal, but (for better or worse) that’s the same thing he did during the Health Care debate and no one can question his commitment to that policy after witnessing his determination to push it through. Ultimately, Obama was expecting the usual rules to apply here: The Republican House comes out with something reactionary, the Senate moderates it, cooler heads prevail and the President signs the compromise. That is how the system is supposed to work.

But the Tea Partiers aren’t interested in how the system works. They insisted on getting 95% of what they wanted and were ready to risk the position of United States as the economic leader in the world to get that 95%. Ultimately, the deal that was struck produced a lower deficit reduction than S&P said would be necessary to avoid a downgrade and put in place an unwieldy process where a super committee is charged with finding the savings. If they don’t materialize, automatic cuts in domestic and military spending will be enacted.

While this deal took the immediate threat of a default off the table, it provided less debt reduction than S&P had said it would take as a meaningful down-payment on the debt and provided yet another choke point for the Republicans to hold the country hostage to their extreme demands.

My conservative uncle makes the argument that the downgrade was caused by President Obama’s lack of seriousness when it came to tackling the debt, but that ignores the fact that the debt is a long term problem and that the only thing that made the debt problem a “debt crisis”  was the threat of the Republicans not to raise the debt ceiling and their insistence that any deficit reduction not include any additional “revenues,” no matter how small and insignificant they were.

But don’t take my word for it. Read S&P’s statement that accompanied the downgrade (italics added):

The political brinksmanship of recent months highlights what we see as America’s governance and policy making becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.

In other words, if debt ceiling and threat of default weren’t used as “political bargaining chips” or if  the “Grand Bargain” of $3-4 trillion in debt reduction from spending cuts and new revenues that Obama was pushing for  was agreed to, the downgrade wouldn’t have happened.

In the aftermath of the downgrade, many attacked the S&P, noting that they and other ratings agencies that graded risky derivatives as AAA were in large part responsible for the economic crash that we are currently in. While this is clearly true, Reuters financial blogger Felix Salmon points out that, in this case, S&P was really just doing it’s job:

Any student of sovereign default knows that it is born of precisely the kind of failures of governance that we saw during the debt-ceiling debate. That is why the US cannot hold a triple-A rating from S&P: the chance of having a dysfunctional Congress in future is 100%, and a dysfunctional Congress, armed with a statutory debt ceiling, is an extremely dangerous thing, and very far from risk-free…We saw the values of Congress during the debt-ceiling debate, including various members of the House who said with genuine sincerity that they’d actually welcome a default. In that context, S&P’s judgment is hard to fault.

Indeed.

A Pox on Both Your Houses

Sunday, July 31st, 2011

There will be a bunch of upcoming punditry in the media about which party got the better deal and which political party benefits more from the shameful Republican debt ceiling episode, but one thing’s for sure: the loser was the American people’s faith in the political system to solve the problems of this country.

A movement that represents a reactionary minority of Americans has effectively taken over the Republican party and used a technicality that a majority of Americans have never heard of in order to create a crisis that tied up the government for months with a ridiculous debate about whether the United States should decline to pay the bills that were run up by presidents of both parties over decades.

Mewanwhile, back in the real world, unemployment is at 9.2% according to the Bureau of Labor Statistics, but measures of “real” unemployment (including people who stopped looking and the underemployed) are closer to 16%.  A majority of Americans want to balance the budget, but this is a long term issue, not a short term issue, and you would be hard pressed to find many economists who would tell you that cutting government funding (AKA jobs) in a recession is a way to spur economic growth.

Remember when the Democrats took over in 2008 and spent a year arguing about health care when the country was in the middle of the worst recession since the Great Depression? Well, this is like that, but even worse. The Democrats failing at that time was ignoring the public’s desire for a strong focus on jobs. Not only have the Republicans not done one single thing to foster job creation in the United States since they were elected, they have actually done the opposite by threatening to set off a world economic crisis in order to get their way. 

My sense is that the whole “let’s hold the world economic system hostage to our narrow ideological agenda strategy” hurts the Republicans more than it hurts the President, but this should be little consolation for Obama, who’s approval rating dropped to a new low of 40 percent in this weekend’s Gallup Poll.

US Kissing AAA Rating Goodbye?

Friday, July 29th, 2011

I’m learning all kinds of new things from the Republican’s debt ceiling shenanigans. Here is Howard Gold on how avoiding a technical default might not be enough to prevent a downgrade of US Treasury bond ratings. The ratings agencies have warned that they “may lower the long-term rating on the U.S. by one or more notches into the ‘AA’ category in the next three months, if we conclude that Congress and the administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future.”

Does anyone watching the news this week think that Congress and the administration will have a “credible solution” to the US debt problem any time soon?

While I was writing this, my cousin that works on Wall Street called, all drunked up from a night with his boys on the town. He says that the backlash on the ratings agencies would be so intense that they wouldn’t dare downgrade the US credit ratings…but do the teabaggers really want to take that chance?

Ironically, one of the side effects of a US default would be increased borrowing costs…and by extension, a larger deficit.

Losing the AAA would probably hurt the economy through higher borrowing costs for the government, corporations and consumers, especially those who have adjustable-rate debt, and we’d likely see a stock market decline. But most of all it would be a terrible blow to our national pride and prestige, capping a decade of decline from the commanding heights we bestrode at the start of the millennium

In other words, higher national debt and a loss of international prestige brought to you by the people who came to power by complaining non-stop about the national debt and bemoaning the decline of America as a global power under Obama.

What a Country!

Dissecting Krauthammer on the Debt Ceiling

Tuesday, July 26th, 2011

So my conservative uncle really likes this Charles Krauthammer article. He likes it so much that he e-mailed it twice. Of course, his version came from the paranoid neo-con Jewishworldreview.com website. Which is weird, because he’s Italian, but I digress…

Regarding Krauthammer, I hate to break it to him, but he and the other Fox News talking heads are the only people who care about what was in Obama’s original budget that never stood a chance to be enacted; or about how many times Obama said debt in his State of the Union speech. (How often did Bush say debt? How did that work out?)

It’s like Krauthammer lived in Washington all his life and never heard of politics. Obama let the Republicans go first on the debt because they spent the last two years complaining incessantly about it, and because they ran their whole campaign on cutting the deficit as if they just awoke from a 8 year winter slumber just in time for President Obama’s inauguration.

But you gotta give credit to these guys. They sure have (as Michele Bachmann would say), a lot of “chutspa.” They ran their last campaign on how unconscionable it was for Obama to make some small cuts in Medicare to fund health care and then, as soon as they get elected, every single one of them voted not only to cut Medicare, but to completely abolish it and replace it with a system that centers around coupons.

…and the poor Republicans had their plan demagogued by mean old President Obama. Not like the Republican’s have ever demagogued anything before (death panels anyone?).

Regarding the corporate jet and oil company tax breaks, I’ve heard this argument before from Republican pundits, but it seems like a counterintuitive point to make if you’re arguing for the Republican side. If the tax increases generate so little revenue (and presumably don’t impact very many people), then shouldn’t the Republicans jump at a deal where they only have to cut loopholes that benefit a few in order to balance the budget that they supposedly care about so much?

In retrospect, it’s clear what people like Krauthammer have their panties in a bunch about. They thought that Obama was such a pushover that they could force him to make massive cuts by threatening the economic security of the United States. But in a brilliant political move, Obama called the Republicans bluff by offering significant cuts in government spending with the caveat that Republicans would have to support popular tax increases that only benefit a select few (who also happen to be the Republican base). The House Republican’s response was typical: they walked out of the negotiations rather than discuss tax increases, proving once again that (although they might care about deficits a little bit), they clearly care about keeping and extending tax cuts even more.

I understand that all the Republicans made pledges to Grover Norquist not to raise taxes, but that’s not my problem, and it shouldn’t have to be the country’s problem either. The Republicans didn’t take over the government last year. They took over 1/3 of the 3 institutions that are involved in passing laws. Once they elect a Republican president, keep control of the House, and have over 60 solid votes in the Senate, they can get everything they want and balance the budget on the backs of (future) seniors and poor people. Until then, they are going to have to compromise.

My unsolicited advice to Republicans: quit acting like crybabies. Only children are naive enough to think they will get everything they want, especially in this system. Get over yourselves and do your job.

The Debt Negotiations in 6 1/2 Minutes

Saturday, July 16th, 2011

This pretty much sums it up.

How Obama Outfoxed Republicans on Debt Ceiling

Wednesday, July 13th, 2011

 


More than a little dramatic, but a great summary of how the Republicans underestimated Obama and how he outmaneuvered them on the debt ceiling.

If there was any doubt that these guys aren’t serious about deficit reduction, there shouldn’t be any more. They only want to cut the deficit if they can get tax cuts as well. The president put $4 trillion in deficit reduction on the table and the Republicans turned it down because they didn’t want to increase taxes on the top 2%. 

Laughable.

Wednesday update here.

Jon Stewart Explains the Ryan Plan

Wednesday, April 20th, 2011

The Daily Show – Ryan’s Private Savings – Path to Prosperity
Tags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

If you have more than a few minutes, here is the intro.

You Balance the Budget

Sunday, April 17th, 2011

Here’s The New York Time’s Interactive Budget Balancer.

This is from before the 2010 budget deal,  and doesn’t include all of the current proposals, but it’s a great way to test your assumptions about the federal budget.

Keep Medicare and Social Security at current levels and see how much you need to increase taxes and cut defense in order to pay for it. Rollback the Bush tax cuts for only the rich (as Obama is proposing) and see how much additional cutting you need to do to maintain a balanced budget in 2030. Exempt Social Security, Medicare, Defense and tax increases (as many Republicans have advocated) and see how impossible it becomes.

“Starve The Beast” Unmasked

Sunday, April 17th, 2011

Here’s Lawrence O’ Donnell with analysis on Obama’s Wednesday speech.


The real analysis starts at the 2:30 point. O’ Donnell explains how the Republican strategy of “Starve the Beast” got us to the point we are at today. As Reagan said:

You know, we can lecture our children about extravagance until we run out of voice and breath, or we can cure their extravagance by simply reducing their allowance.

O’Donnell continues:

Reducing their allowance. If you’re a conservative republican you can reduce the government’s allowance by cutting taxes, and then sit by and try to watch the democrats preserve their spending programs when they don’t have the money to do it…

“Starve the Beast”…Starve it, cut taxes, don’t collect the money the government needs to run its programs and those programs will then have to be cut. This has been the republican strategy since Reagan. It is the Republican strategy now. If you don’t understand that it is the republican strategy, then you do not understand what you’re up against.

With a nod to Naomi Klein’s “The Shock Doctrine,” this is basically an argument that the Republican theories and policies (along with Democratic enabling) basically created this crisis knowing that it would bankrupt the country. Now that the bill for endless tax cuts with no accompanying spending cuts has come due, they tell us that we have no other choice but to dismantle the social programs that Americans have worked decades to build up and maintain.

O’ Donnell, again:

That plan, the Reagan plan, the Starve the Beast plan, controls our governing dialogue today. This is not an accidental legacy of Reagan’s. This was his plan. This didn’t happen because George W. Bush lost his way and forgot to pay for things, it was because George W. Bush faithfully executed the plan.

This is why the Ryan Plan and Obama’s response to it represent a turning point in the debate, and indeed in America’s history.

The Republicans just spent all last year arguing that tax cuts for the richest 2% had to be preserved. They filibustered benefits for 9-11 responders so that they could preserve these tax cuts. Now that they’ve seized the House, they turn around and say: we have no choice as Americans. We now have to dismantle the safety net that has been in place for over 40 years.  

Bullshit.

The Republicans will tell you that we are “broke.” Don’t believe that for a second.

We’re the richest country in the world. We’re fighting two wars, one in Asia and one in the Middle East. We’re supporting an air campaign against another dictator in North Africa and running a covert drone based bombing campaign in a fourth country.  We have 12 aircraft carriers that allow us to project force anywhere in the world on short notice. We have hundreds of thousands of troops stationed in countries where we fought wars over sixty years ago. We’re the strongest economy in the world and we have more billionaires than any other country in the world by a mile.

We also have one of the lowest tax rates of any industrialized country and our taxes are the lowest they have been in fifty years. 

To be sure, there will need to be decreases in spending across the board and entitlements need to be a part of that. But Americans need to make some tough decisions about what kind of a country we want to be. Medicare is the 2nd most popular social program in the country and the Republicans just voted to dismantle it because they say that we’re broke. But we’re apparently not so broke that we couldn’t afford to pass even more tax cuts for the rich as part of the same budget.

The time for maintaining  high levels of defense spending, moderate levels of social spending and low taxes is over. Americans now need to decide whether we would rather deny poor, disabled and the elderly the health care that they need, or whether we should cut back out military commitments around the world. We need to decide if it’s more of a priority to have low taxes for the top 2% or if we can go back to the tax levels of the Clinton years (when the economy created 23 million new jobs) and cushion the cuts to the social programs that most Americans now view as a right. 

I honestly cannot believe that the Republican House actually passed the Ryan budget yesterday. If their vision of America is one where the safety net is no longer guaranteed and seniors no longer have their medical bills paid so that the rich can get more tax cuts, then you’ve got to give them credit for standing up for their beliefs. But I think they’ll soon find that what they believe differs significantly from what the American people believe in.