Congress

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Taxes, taxes, taxes

Who was it that said, “Nothing is certain but death and taxes”?  They should have added tax loopholes and exemptions to that list.

Here in Massachusetts we have a Senate candidate who took at $281,000 tax credit for agreeing not to made changes to the facade of his home located in a historic district.  I don’t know how this works in other states but here local city and town councils can pass by-laws regulating historic districts.  Cohasset, the town where Gabriel Gomez lives, has a by-law on the books that says owners of homes in the historic district may not change the facades of their homes.  So Mr. Gomez basically took a tax credit for something he was prohibited from doing anyway.  Adrian Walker wrote this in the Globe this morning.

Challenged to explain, a testy Gomez set a new standard for chutzpah. He claimed that his tax break is really the fault of his opponent, Ed Markey — because in 1981, Markey voted for the law that established tax breaks for historical preservation.

OK.  So maybe taking the tax break was not illegal, but there is something about it that makes me – and it appears – other voters wonder if this is the guy we want representing us.  Plus there is the fact that most of us don’t make $281K over many years much less get to take that much off our taxes.

Walker continues

Andy Hiller of WHDH-TV cornered Gomez and asked a few questions about it, or tried to. What he got back from Gomez was this: “I don’t apologize for any success I’ve had. Absolutely not. I’m proud of everything I’ve done. I’ve worked for everything I’ve done. I’ve earned everything I’ve done.”

Gomez is an accomplished military veteran who has earned many things in his life, but he certainly didn’t earn this. Even the Internal Revenue Service has decried the historical-preservation deduction he took as a farce.

The questions about Gomez’s taxes probably haven’t ended, either.

On a financial disclosure form filed in March, Gomez said that under his separation agreement from the private equity firm Advent International, he received something called “carried interests.”

Carried interests are fees paid to equity firms and hedge funds to manage portfolios. They are taxed as capital gains, at a rate of 20 percent, rather than the top income rate of 39.5 percent.

Carried interests are fees paid to equity firms and hedge funds to manage portfolios. They are taxed as capital gains, at a rate of 20 percent, rather than the top income rate of 39.5 percent.

The carried interest rate — which costs taxpayers an estimated $1.3 billion a year — has long been the subject of dispute, with some critics arguing that this is one of the first tax loopholes lawmakers should close.

How much of Gomez’s income falls under the “carried interest” loophole is unclear from the disclosure form.

Gabriel Gomez is running as a reformer, as an outsider but as Walker points out, he already knows all the tricks.  Maybe we need someone like him to help reform the tax code – not!

Internal Revenue Service Building

Internal Revenue Service Building

Taxes are also at the heart of what the Republicans hope will be the scandal that brings down the Obama Administration if Benghazi doesn’t work out for them.  According to the New York Times this is what we know.

The Internal Revenue Service’s special scrutiny of small-government groups applying for tax-exempt status went beyond keyword hunts for organizations with “Tea Party” or “Patriot” in their names, to a more overtly ideological search for applicants seeking to “make America a better place to live” or “criticize how the country is being run,” according to part of a draft audit by the inspector general that has been given to Capitol Hill.

The head of the division on tax-exempt organizations, Lois Lerner, was briefed on the effort in June 2011, seemingly contradicting her assertion on Friday that she learned of the effort from news reports. But the audit shows that she seemed to work hard to rein in the focus on conservatives and change it to a look at any political advocacy group of any stripe.

…

Since last year’s elections, Republicans in Congress have struggled for traction on their legislative efforts, torn between conservatives who drove the agenda after their 2010 landslide and new voices counseling a shift in course to reflect President Obama’s re-election and the loss of Republican seats in the House and the Senate.

But the accusations of I.R.S. abuse are sure to fuel an effort that appears to be uniting dispirited Republicans and their conservative political base: investigating Mr. Obama and his administration. Republicans are pushing a portrayal of an administration overreaching its authority and punishing its enemies.

“The bottom line is they used keywords to go after conservatives,” Representative Darrell Issa of California, the chairman of the House Oversight and Government Reform Committee, said Sunday on the NBC News program “Meet the Press.” He requested the inspector general’s audit along with another Republican, Representative Jim Jordan of Ohio. As an audit, it will not find blame or refer anyone for criminal prosecution.

This all goes back to the Citizens United decision by the Supreme Count and the flood of organization, most it seems on the right to register as 501(c)4 social welfare groups.  This leaves me puzzled.  How can a group which supports political lobbying be tax exempt?  I give money to Planned Parenthood to support clinics.  I also give money for the political operations.  The first is tax exempt, the second is not.  So maybe the problem is, once again, with the tax code.  Ezra Klein explains.

Let’s try to keep two things in mind simultaneously: The IRS does need some kind of test that helps them weed out political organizations attempting to register as tax-exempt 501(c)4 social welfare groups. But that test has to be studiously, unquestionably neutral.

The story thus far seems both chilling and cheering. Employees at the agency’s Cincinnati branch did employ a test that, in effect, targeted tea party groups. Whether they meant it to be discriminatory or they simply created one that was discriminatory is in contention, but ultimately immaterial. The IRS, more so than almost any other agency, must act in ways above  reproach.

But when the Cincinnati group explained their test to IRS exempt organizations division chief Lois G. Lerner, she objected to it and it was changed. A few months later, the IRS would release new guidance that suggested scrutinizing “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform movement,” and after that, “organizations with indicators of significant amounts of political  campaign intervention (raising questions as to exempt purpose and/or excess private benefit.)”

The context for all this is that after Citizens United and some related decisions, the number of groups registering as 501(c)4s doubled. Because the timing of that doubling coincided with a rise in political activism on the right rather than the left, a lot of the politicized groups attempting to register as 501(c)4s were describing their purpose in tea party terms. A popular conceit, for  instance, was that they existed to educate on the Constitution — even if the particular pedagogical method meant participating in Republican Party primaries and pressuring incumbent politicians.

In looking for that kind of language in 2010, the Cincinnati employees were attempting to create a usable shortcut. Like Willie Sutton robbing banks, they were going where the action was. But they needed a clearer test that also identified the language of the left, even if left-leaning  groups weren’t exhibiting the same surge in activism. And, frankly, it shouldn’t have been left to career employees in Cincinnati. The IRS needed clearer rules coming from the top. But the top didn’t know what to do with these 501(c)4s, in part because it feared a situation precisely like this one.

It is worth remembering an important fact here: The IRS is supposed to reject groups that are primarily political from registering as 501(c)4s. If they’re going to do  that, then they need some kind of test that helps them flag problematic applicants. And that test will have to be a bit impressionistic. It will mean taking the political rhetoric of the moment and watching for it in applications. It will require digging into the finances and activities of groups on the left and the right that seem to be political even as they’re promising their activities are primarily non-political.

If we’re not comfortable with that, then we need to either  loosen the definition of 501(c)4s or create a new designation that gives explicitly political groups the benefits of the 501(c)4s (namely, they don’t have to pay taxes and they can keep their donors anonymous). But either way, as I wrote on Friday, the only way to make sure this doesn’t keep happening is for the IRS — or the Congress and White House that control it — to make some tough decisions about 501(c)4s.

To make things look even more suspicious, Ms. Lerner appears to have been confused about the order in which events unfolded.  But, is there a scandal here?   It does not appear that any group, on the right or left has been denied 501(c)4 status.  I believe that to get 501(c)3 status which most community development groups and organizations like the Girl Scouts and the Boys and Girls clubs have one must provide a lot of information including board membership and by-laws.  The problem here is that many these new groups appear to be political organizations regardless of whether or not they claim to be educational.  I question whether any of these groups, right or left, should be tax exempt.

“Tax-exempt social-welfare groups organized under section 501(c)(4) of the Internal Revenue Code are allowed to engage in some political activity, but the primary focus of their efforts must remain promoting social welfare. That social-welfare activity can include lobbying and advocating for issues and legislation, but not outright political-campaign activity. But some of the rules leave room for IRS officials to make judgment calls and probe individual groups for further information. Organizing as such a group is desirable, not just because such entities typically don’t have to pay taxes, but also because they generally don’t have to identify their donors.” John D. McKinnon and Siobhan Hughes in The Wall Street Journal.

The odds are against Mr. Gomez being elected to the Senate and they are likely to be against the Republicans making a credible argument about the IRS, but taxes and tax exemptions are clearly land mines for anyone in politics today.  But if the Republicans are right, that is a place where the Obama Administration and I will part company.  As my Congressman Mike Capuano said today, “There’s no way in the world, I’m going to defend that. [if the accounts are true] Hell, I spent my youth vilifying the Nixon administration for doing the same thing.”

Photograph:  Reuters

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Let’s Define Hypocrisy

Best summary of what is up with the Republicans and Benghazi, including a reminder from Steve Lynch of MA that the Republicans all voted to cut the embassy security budger.

h2dog's avatarDesert Dogmeh

Republicans remind us not to politicize something that they have been, and are currently, hell-bent on politicizing.

Seems fair.

Republicans lead a witch hunt on Benghazi

By Eugene Robinson,

May 09, 2013 11:31 PM EDT

The Washington Post

Those who are trying to make the Benghazi tragedy into a scandal for the Obama administration really ought to decide what story line they want to sell.

Actually, by “those” I mean Republicans, and by “the Obama administration” I mean Hillary Clinton. The only coherent purpose I can discern in all of this is to sully Clinton’s record as secretary of state in case she runs for president in 2016.

Did Clinton’s State Department fail to provide adequate security for the U.S. Consulate in Benghazi? In retrospect, obviously so. But the three diplomats who testified at the hearing gave no evidence that this failure sprang from anything other than the need to…

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What does this mean?!

What does this mean?!

Jonathan Capehart wrote this about it in the Washington Post.

I’ve grown accustomed to the lunacy that emanates from the far right on Capitol Hill. But a tweet last night from Rep. Steve Stockman (R-Tex.) promoting his new bumper sticker was a jaw-dropper.

Just when you think things can’t get sicker something new comes along.

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The NRA shield for schools

I have to say that the NRA plan for school safety made my husband apoplectic.  He’s been asking loud questions ever since it was released.  Questions like:  How many schools are there in the country?  How many armed officers would you need?  Who is going to pay for this?

According to the New York Times, the answer to the last question is us taxpayers.

The task force panel called on the Departments of Homeland Security, Education and Justice to coordinate school safety efforts and provide grant money for schools to assess their ability to prevent and respond to attacks. It recommended that officers or employees who are armed take a 40- to 60-hour training course to be developed by the rifle association based on a model the task force has designed.

The group also called on states to require schools to develop security plans.

But how and whether the task force recommendations will be put into effect — and the cost — was unclear.

Maybe gun owners should pay a surtax when they purchase/register weapons and ammunition.

The only way to reduce the danger that weapons pose to schoolchildren, to shoppers at malls, to bystanders, to movie goers, to law enforcement officials is to enact stricter gun safety laws.

This chart was in an article published by Atlantic Cities and is from a study done by Boston Childrens Hospital, Harvard Medical School and the Harvard School of Public Health.

Gun safety map The study found that states with the strictest gun control laws had lower rates of gun-related homicides and suicides, though it notes that these findings are limited to associations and could not determine precise cause-and-effect. Gun-related deaths were measured per 100,000 people for both homicides and suicides based on data from the Centers for Disease Control and Prevention, controlling for other factors thought to be associated with gun deaths including age, sex, race and ethnicity, poverty, unemployment, college education, population density, other violence-related deaths, and firearm ownership.

This is contrary to what many gun rights activists believe.

I believe that we need fewer guns around, not more.  While I was writing this word came of a lock down on the University of Rhode Island campus because someone had evidently waved a gun at a lecture and then left the room.  If the NRA gets its way, we will have guns all around us and how will we be able to tell who is a lunatic wanting to kill everyone and who is just a lunatic?

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How to get a functioning government

Winning Progressive had a very interesting and thoughtful post this morning by NChrissie B.

We need political fringes because that’s where most new ideas begin. Many will be bad ideas, like the House Republican Budget’s plan to turn Medicare into a voucher program. Others will be good ideas, like the financial transactions tax in the Congressional Progressive Caucus “Back to Work” Budget. As the Economic Policy Institute report noted, that tax would “raise significant revenue while dampening speculative trading and encouraging more productive investment.” It would also discourage individual investors from day-trading and other mistakes that churn their savings into brokers’ profits.

New ideas tend to start on the fringes – right and left – because the fringes don’t have to govern. Think tanks, academics, pundits, and bloggers can kick around ideas without worrying about whether the ideas are politically viable. We did that at BPI when we discussed a Guaranteed Basic Income, an idea from and still on the political fringe. We didn’t talk about whether it could pass in the House or Senate. It couldn’t, at least not soon. But it might gain traction in some form, at some point, and such discussions open our eyes to other perspectives on work, wages, and the social safety net.

I wrote in my unpublished dissertation that social movements need racial fringes to make the movement look mainstream.  NChrissie B.  is arguing that the same is true of  legislating.  The danger, however, is that the Democrats ignore their progressive or left wing while the Republicans are ruled by their right or Tea Party wing.  This is where we seem to be right now and nothing is functioning.  We need to get back to a place where there is a middle ground.  NChrissie B. uses the Overton Window as an illustration.

overton window

I’d like to see the window moved a little more to the left and I think that could happen if Harry Reid would just fix the damn filibuster rules.  I also think the Democrats (and President Obama) need to take the Progressive Caucus budget a little more seriously than they do.  It would also help if Mitch McConnell grew a backbone.

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Infrastructure, infrastructure, infrastructure

One  of my favorite promotional advertisements is an old one.  Rachel Maddow is standing in front of a pile of dirt which could be the beginning of a new highway or of a dam or a bridge abutment.  She points out that the country needs infrastructure and that the private sector does not build it.  And then Elizabeth Warren famously said (quote from Michael Smerconsish on the Huffington Post.)

“There is nobody in this country who got rich on his own. Nobody.” And then she hit her stride:

“You built a factory out there? Good for you,” she says. “But I want to be clear: You moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.”

As for the tax implications, Warren said, “Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.” The crowd enthusiastically applauded.

Of course that morphed into the out of context quote used against President Obama:  “You didn’t build it.”

What puzzles me is why the Republicans are so afraid of spending for infrastructure.  And why their fear is making so many Democrats cautious.  Juliette Kayyem tries in her column in today’s Boston Globe to make the link between national security, which every politician is for, and infrastructure.

The United States now concedes that the security of nations is “being affected by weather conditions outside of historical norms, including more frequent and extreme floods, droughts, wildfires, tornadoes, coastal high water, and heat waves.” These have had an impact on food supplies and demographic trends. The global population is expected to hit 8.3 billion by 2030. About 60 percent (up from the current 50 percent) of people will live in cities, putting greater pressure on agriculture, energy, transportation, and water supplies.

We are not alone in our concerns. The American Security Project, a bipartisan think tank, analyzed military assessments worldwide. From China to Rwanda, Belarus to Brazil, over 70 percent of nations view climate change as a top threat to their national security.

The United States now concedes that the security of nations is “being affected by weather conditions outside of historical norms, including more frequent and extreme floods, droughts, wildfires, tornadoes, coastal high water, and heat waves.” These have had an impact on food supplies and demographic trends. The global population is expected to hit 8.3 billion by 2030. About 60 percent (up from the current 50 percent) of people will live in cities, putting greater pressure on agriculture, energy, transportation, and water supplies.

We are not alone in our concerns. The American Security Project, a bipartisan think tank, analyzed military assessments worldwide. From China to Rwanda, Belarus to Brazil, over 70 percent of nations view climate change as a top threat to their national security.

Protecting against it isn’t just a matter of preserving natural resources; it is about adapting everyday activities to the threat. We are in competition with other nations in this regard: Global investments are linked to cities that can function in bad weather, airports that can lure commerce, ports that can deliver goods. When storms are powerful enough to wipe out electrical grids, our nation’s ability to project power is limited by our powerlessness.

She goes on to say that much of the infrastructure fight is a local one.

And we still must become a more resilient society, one whose basic building blocks cannot be knocked out by threats that are utterly predictable. This effort to construct a society with climate challenges in mind isn’t necessarily new, but it comes at a time when the limits of America’s infrastructure are abundantly clear and entirely visible: We all feel them as we drive to work, head to school, or use the subways.

Local governments are already invested in these national security efforts, whether they know it or not. Such efforts range from a mayor’s desire to fix potholes on residential streets to a governor’s promise to modernize public transportation. More than a lack of commitment or resources, it’s actually our hodge-podge of governance structures — New York City has control over its building codes, while Boston’s are often at the mercy of state approval — that too often become impediments to local ingenuity in preparing for oncoming storms.

At the same time as our intelligence agencies were reminding us that the climate poses as much of a threat as Iran or North Korea, the American Society of Civil Engineers last week gave American infrastructure a pathetic “D+” grade (up from a D!). Delayed maintenance investments and the failure to commit to modernization projects undermine economic progress, global competitiveness, and the sense that we live in a well-functioning society.

Boston Public Works Department employees Aroll Victor and Julio Echemendia clear rocks from a pothole in South Boston on March 12.

Boston Public Works Department employees Aroll Victor and Julio Echemendia clear rocks from a pothole in South Boston on March 12.

So back to my question:  Why are Republicans (and many Democrats) so unwilling to invest in infrastructure?  Until we figure this out, our bridges will crumble, our power grids are subject to blackouts, and many people will be like us and spend thousands on front end work due to driving on crumbling highways.  Wouldn’t the money I am going to spend this spring on my car be better spent paying taxes that will fix the roads and put some people back to work?    Just asking.

Photograph City of Boston
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Impasse?! We should look at the Progressive Caucus Budget

President Obama met with the Republicans in the House yesterday.  I think Politico had the best take on the meeting.

After years of pining for more face time with the president, House Republicans  found out Wednesday that Barack Obama looks and sounds the same behind closed  doors as he does on TV.

President Obama meets with Congress. AP Photograph

President Obama meets with Congress. AP Photograph

I think they are finally learning what many of us have known for a while:  what you see is what you get with Barack Obama.  Michelle has been trying to tell everyone this for years.  So he has his line and the Republicans led by Paul Ryan have theirs.  But where does that leave the rest of  us?  How to deal in a meaningful way with the sequester and the budget?  I see two paths:  One, those affected by the cuts start putting on the pressure and two, we begin looking at alternatives to either the Republican or White House budget proposals.

On the first, the lobbying has begun.  The New York Times reports

Construction companies are lobbying the government to spare their projects from across-the-board cuts. Drug companies are pleading with the White House to use all the fees they pay to speed the approval of new medicines.

And supporters of Israel have begun a campaign to make sure the Jewish state receives the full amount of military assistance promised by the United States.

A frenzy of lobbying has been touched off by President Obama’s order to slice spending this year by $85 billion, divided equally between military and civilian programs. The cuts have created new alliances and strange bedfellows.

Hunter R. Rawlings III, a historian of ancient Greece who is the president of the Association of American Universities, joined Wesley G. Bush, the chief executive of Northrop Grumman, the maker of surveillance drones and B-2 bombers, in a news conference in which they denounced the automatic cuts known as sequestration.

Health care and education groups, advocates for poor people, and state and local officials who fought in the past for bigger budgets are now trying to minimize the pain.

How much money do you think will be spent on lobbying?  I don’t even want to begin to add it up.  What a waste of money.  But I guess some people will still have jobs.

For an alternate budget we can look at the Congressional Progressive Caucus budget proposal.    The Economic Policy Institute assisted in putting the budget together and scoring it.  Dean Baker from the Center for Economic and Policy Research calls it “A Serious Budget That the Serious People Won’t Take Seriously”.  The Progressive Caucus has been proposing budgets for a number of years now and takes the position that if their proposals had been adopted, we wouldn’t be in the mess we are in now.

So what exactly are they proposing?

Direct hire programs that create a School Improvement Corps, a Park Improvement Corps, and a Student Jobs Corps, among others.

Targeted tax incentives that spur clean energy, manufacturing, and cutting-edge technological investments in the private sector.

Widespread domestic investments including an infrastructure bank, a $556 billion surface transportation bill, and approximately $2.1 trillion in widespread domestic investment.

Ends tax cuts for the top 2% of Americans on schedule at year’s end

Extends tax relief for middle class households and the vast majority of Americans

Creates new tax brackets for millionaires and billionaires

Eliminates the tax code’s preferential treatment of capital gains and dividends

Abolishes corporate welfare for oil, gas, and coal companies

Eliminates loopholes that allow businesses to dodge their true tax liability

Calls for the adoption of the “Buffett Rule”

Creates a publicly funded federal election system that gets corporate money out of politics for good.

Provides a Making Work Pay tax credit for families struggling with high gas and food cost 2013-2015

Extends Earned Income Tax Credit, and the Child and Dependent Care Credit

Invests in programs to stave off further foreclosures to keep families in their homes

Invests in our children’s education by increasing Education, Training, and Social Services

It would also end the war in Afghanistan and do selective, not blanket cuts to the military budget.  It basically spends money to put people back to work and stabilize the economy.  This assumes that people who work pay taxes and put money back into the economy.  It also achieves deficit reduction.  All through government spending.  As Dean Baker poinst out

For those upset that the budget debate is getting ever further removed from the real world problems of an economy that is suffering from a deficit of 9 million jobs, there is good news. The Congressional Progressive Caucus (CPC) has produced a budget that is intended to make the unemployment situation better rather than worse.

The story of course is that we are still in a situation where we need the government as a source of demand in the economy. This is independent of how much we like the government or the private sector. The private sector does not expand and create jobs just because governments want it to, as is being discovered now by leaders in the United Kingdom, Greece, Italy, Spain and everywhere else where deficit reduction is now in vogue. In the current economic situation, loss of demand from the government is a loss of demand to the economy. That is why recent steps to reduce the deficit, such as the ending of the payroll tax cut (which put money in consumers’ pockets) and the sequester, will lead to slower growth and higher unemployment.

Would this happen with the adoption of the progressive budget?  I don’t know, but I know that what is going on now isn’t working either.  And what is worse, people are tuning out and shrugging their shoulders assuming nothing can be done.

Gail Collins has this fantasy.

White smoke poured from the Capitol today and crowds of onlookers broke into shouts of jubilation, crying: “We have a budget!”

Inside, where the nation’s legislators had been walled off in seclusion, the newly chosen tax-and-spending plan was garbed in the traditional brass staples for its first public appearance. Insiders said it planned to take the name of Budget for Fiscal Year 2014.

I guess that is alternative number three.  Maybe we should try sequestering Congress.

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Star Trek or Star Wars

I’m a fan of the original Star Trek and of the first Star Wars trilogy.  I guess I dropped out after that, maybe moved on or something.  But putting that aside, I love this Ruben Bolling.  Sums up the cultural reference controversy and the sequester all in one.

tom 3-13-2013

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OK. No one cares about the sequester

No one cares about the sequester.  Or maybe, no one knows about it.  Or maybe everyone is just tired of Congress.

Here is Mike Luckovich today with a history of our recent financial crises.

Gee. I don't know why you think all this is my fault.

Gee. I don’t know why you think all this is my fault.

No wonder the general public doesn’t care right now.  And they probably won’t care until cuts start to hurt them.  Let’s face it:  both sides are using those old techniques of  putting forward the arguments that make the best case for their point of view.  The Republicans are right in that it won’t hurt for a little while – maybe a month or so.  And the Democrats are right that this whole exercise is unnecessary and, in the long run not helpful to recovery.

Thomas Mann and Norman Ornstein who wrote the excellent book, “It’s Even Worse Than It Looks”, have an excellent piece in today’s Washington Post titled “Five myths about the sequester”.

1. Blame Obama — the sequester was his White House’s idea.

Identifying the origins of the sequester has become a major Washington fight. Bob Woodward weighed in recently with a Washington Post op-ed making the case that the idea began in the White House. He’s right in a narrow sense, mainly because he focuses on the middle of the 2011 negotiations between Obama and Republican lawmakers. If you look before and after, a different picture emerges.

In our view, what happened is quite straightforward: In 2011, House Republican leaders used their new majority to force their priorities on the Democratically controlled Senate and the president by holding the debt limit hostage to demands for deep and immediate spending cuts. After negotiations between Obama and House Speaker John A. Boehner failed (Eric Cantor recently took credit for scuttling a deal), the parties at the eleventh hour settled on a two-part solution: immediate discretionary spending caps that would result in cuts of almost $1 trillion over 10 years; and the creation of a “supercommittee” tasked with reducing the 2012-2021 deficit by another $1.2 trillion to $1.5 trillion. If the supercommittee didn’t broker a deal, automatic spending cuts of $1.2 trillion over the next decade — the sequester — would go into effect. The sequester was designed to be so potentially destructive that the supercommittee would surely reach a deal to avert it.

The sequester’s origins can’t be blamed on one person — or one party. Republicans insisted on a trigger for automatic cuts; Jack Lew, then the White House budget director, suggested the specifics, modeled after a sequester-like mechanism Congress used in the 1980s, but with automatic tax increases added. Republicans rejected the latter but, at the time, took credit for the rest. Obama took the deal to get a debt-ceiling increase. But the president never accepted the prospect that the sequester would occur, nor did he ever agree to take tax increases off the table.

And of course no deal has been reached yet.

2. At least the automatic cuts will reduce runaway spending and begin to control the deficit.

What runaway spending? The $787 billion stimulus was a one-time expenditure that has come and gone. Under current law not including the sequester, non-defense discretionary spending as a share of the economy will shrink to a level not seen in 50 years. Defense spending grew substantially over the past decade, but that pattern has slowed and will soon end. Additional reductions must be achieved intelligently, tied to legitimate national security needs.

…

The annual budget deficit is projected to fall by almost 50 percent in 2013 compared with the height of the recession. Reducing the deficit over the long term requires going where the money is — boosting economic growth, controlling health-care costs and increasing revenue to handle the expense of an aging population. Deeper discretionary-spending cuts are counterproductive; immediate cuts, as Europe has made recently, could lead to a recession and bigger deficits.

I guess the Republicans want us to be like Greece after all.

And finally, one for the Democrats.

4. The cuts are so large, they will be catastrophic.

The administration has released state-by-state estimates of the sequester and highlighted the cutbacks most likely to harm or inconvenience the public. The reality is not so immediate or dramatic. The damage will accumulate in less visible ways, as irrational reductions in public spending impede economic growth and job creation; reduce investments in education, infrastructure and scientific research; and further disrupt the routines of a modern democracy. The longer the sequester remains in place, the more harm is inflicted.

So it may take a while to feel the cuts.  Maybe long enough for the Obama Administration to submit a sensible budget that everyone can agree on.  And no, I’m not smoking anything.  Just counting on mayors and governors to continue to put the pressure on Congress.

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Still more on sequestration

This morning The Fix by Chris Cillizza included this interesting post by Aaron Blake.  Blake posted four great graphics explaining the impact of the sequester.  I am going to copy 2 of them here, but you should look at the entire post.

Blake explains

First up is Pew’s illustration of the year-by-year spending cuts that are included in the sequester. As you can see, the cuts start out relatively small — less than $75 billion in 2013 — but they grow to more than twice that size by 2021, for a total of more than $1 trillion.

The biggest growth in cuts over that time occurs in the interest payments, but everything except for mandatory spending cuts grow steadily over time.

And then there is this depressing news.  Sequester will not have that big of a positive impact.

There has to be a better way.  Maybe spend some money to put people back to work and let them pay taxes thus increasing revenue?  And we do have to fix the tax code so Facebook executives actually pay taxes.  And maybe we can cut programs and defense more selectively.  This won’t be as dramatic, and it might be slower, but it will hurt fewer people.

Meanwhile, members of Congress of both parties are doing their best to keep funding for their own districts.  Politico quotes Senator Lindsey Graham, an opponent of the sequester

I’m almost relishing the moment all these tough-talking guys say: ‘Can you  help me with my base?’” Sen. Lindsey Graham (R-S.C.), one of the most vocal  critics of the sequester, told POLITICO.

“When it’s somebody else’s base and district, it’s good government. When it’s  in your state or your backyard, it’s devastating,” he added.

Of course Graham’s solution is to do away with the Affordable Care Act or Obama care.  Is the momentum swinging toward a rational budget and solution?  Probably not.

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