Posts Tagged ‘Laurence O’Donnell’

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.

Simpson and Bowles Fire First Salvo in Deficit Reduction Battle

Tuesday, November 30th, 2010

The initial recommendations of the Deficit Reduction Commission Chairmen have been released and if anyone was unsure why neither party has tackled this issue before, the answer can be found in the report.

It reads like a litany of third rail issues and has come in for criticism from both the left and the right since it’s release. Talking Points Memo provides a summary of the major proposals.

There have been attacks on the proposal from both the left and the right, but a surprising number of pundits have argued that, even if they disagree with many of the proposals, the effort is important and the proposal represents a good starting point.

It’s worth noting that this isn’t the report of the deficit commission, but just the initial recommendations of the chairmen. The release of these recommendations has been seen as a sign that the chairmen don’t have the 14 out of 18 votes they need in order to produce a report, and the report itself can be seen as a first step for negotiation. Even if the commission is not able to produce a consensus report, the release of the report on the heels of the Republican victory in the midterm elections sets the tone for Washington’s agenda over the next few years. It’s a hell of a time to have to be balancing the budget, but that’s what we get for running structural deficits ever since the Reagan Administration.

The point I have been making about serious deficit reduction for the past two years is that it can’t be done without sacrifice and that, while I agree with Republicans that this can’t be done just by raising taxes, the Tea Partiers need to understand that it can’t be done just by cutting government spending (especially if you want to give yourself a tax cut, protect your favorite parts of the crappiest welfare state in the industrialized world and continue to act as policemen for the rest of the world). Anyone who thinks that cutting taxes, protecting Social Security, Medicare and defense from cuts is a recipe for deficit reduction is deluding themselves.

With that being said, there are a number of ways to get to there from here. The Simpson-Bowles framework is based on a number of changes, including:

Tax Changes

  • Ending a number of tax deductions, including the deduction of mortage interest.
  • Using some of this money to lower overall tax rates across the board
  • Raising the gas tax by 15 cents over a 10 year period to pay for transportation projects
  • Increased Social Security taxes for higher income earners

Entitlement Reform

  • Pegging the growth of Social Security income to a lower inflation rate.
  • Increasing the retirement age to 69 in 2075
  • Means-testing Social Security
  • Increasing Medicaid co-pays
  • Increasing Medicare premiums

Cutbacks in Discretionary Spending, including:

  • Wage freezes and cutbacks in the federal workforce
  • Decreased benefits for veterans health care
  • Elimination of subsidized student loans
  • Cuts in Foreign Aid and the State Department

Cuts in Defense Spending, including:

  • Cutting forces in Europe and Asia by 1/3
  • Cuting a number of weapons systems
  • Freezing salaries of non-combat military personnel
  • Reducing spending on R&D

If these changes seem drastic to you, consider that Simpson-Bowles doesn’t even eliminate the deficit by 2020, just decreases it to a more manageable portion of GDP going forward. All in all, it takes a $4 trillion bite out of the $9 trillion projected deficit over the next 10 years.

While Simpson-Bowles is the only official deficit reduction panel, others have taken a shot at the goal of deficit reduction as well. Earlier this year, Esquire magazine convened a bi-partisan group of former Senators organized by MSNBC TV personality and former Senate Finance Committee Staff Director Laurence O’Donnell. O’Donnell’s team actually put together a plan to eliminate the deficit by 2020. Their plan includes many of the same elements of Simpson-Bowles, but (among other things) assumes decreased costs for Afghanistan and Iraq, more cuts in defense spending and includes a $1 a gallon gas tax (which is offset for the average American by increasing fuel efficiency to 46 MPG (the current European standard)). 

In the wake of Simpson-Bowles, the Bipartisan Policy Center, led by former Clinton OMB Director Alice Rivlin and former Republican Senator Pete Dominici, has also released a plan to cut the deficit to Simpson Bowles levels by 2020. The Rivlin-Dominici Plan is a more balanced approach, relying equally on revenue and spending cuts to balance the budget, while Simpson-Bowles rely on a 3 to 1 ratio of cuts to revenues. Again, much of the same framework remains, but Rivlin-Dominici also include a new national sales tax of 6.5%, and takes into account the fact that the economy needs additional short term stimulus to get us out of this mess, proposing a pricey ($640 billion) one-year payroll tax exemption to take effect in 2011.

No doubt everyone who reads this will have a moment (more likely multiple moments) in which they think “They want to what? That’ll never happen!” No doubt that is true. It’s hard to see Republicans and Democrats in Washington agreeing on eliminating the mortgage deduction, or raising the gas tax by a dollar a gallon, or imposing a 6% national sales tax. But it’s equally difficult to see what cuts in benefits Americans would be willing to accept in order to forgoe these tax increases, and anyone who looks at the numbers will agree that something drastic needs to be done. As the initial Simpson-Bowles recommendations indicate, under current projections, by 2020 we will be paying $1 trillion every year just to service the debt we have already run up.

I noted in one of my first posts on this blog that deficit reduction would be a true test of the political parties in Washington. Can the Democrats show some restraint, or would they prefer to continue to increase spending indefinitely without paying for it? Does the Tea Party dominated Republican party really care about deficits, or do they just want tax cuts?

It might take a few years, but we’re going to know the answer soon enough.