Democrats

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Creating Jobs: which party does better

The Republicans will campaign on the idea that lowing taxes on the wealthy (I think Romney wants to keep the Bush tax cuts and even cut more) creates jobs because the money the wealthy do not pay in taxes goes to create jobs.  Fay Paxton has looked at the history of job creation and posted an analysis on Winning Progressive.   Her conclusion:  Democrats create more jobs.  These charts describe private sector job creation.

Yes, the first months of the Obama Administration were rough, but as the chart shows, we started bleeding jobs under George W. Bush.

Ronald Reagan wins among Republicans, but he wasn’t afraid of raising taxes.

So what about federal public sector jobs?  The Republicans always claim that the Democrats are the party of big government.  Is this true?  Paxton says

Republicans talk about being conservatives who believe in small government and reducing the federal workforce. The numbers don’t bear out their claims.  In a press conference, House Speaker John Boehner said, “In the last two years, under President Obama, the federal government has added 200,000 new federal jobs.”  The Republicans even advanced legislation calling for a reduction of 200,000 federal employees.

Here’s the truth:

According to the Office of Personnel Management, it is true that the federal workforce increased by 237,000 employees. What Boehner does not tell…150,000 of the employees added to the roles were uniformed military personnel, no doubt to accommodate the wars in Iraq and Afghanistan. The 237,000 figure also includes temporary Census workers.

Despite claims of huge government expansion, historically, Democratic presidents reduced the size of the federal government workforce. The federal employment numbers, according to the U.S. Office of Personnel Management, the department charged with tracking the number of employees, the data shows the following:

Paxton summarizes

If we combine the totals for all federal employees, including the military:
Reagan began office with a total of 4,982,000 employees and ended his term with 5,292,000 employees. While President Obama took office with a federal employee roster of 4,430,000 employees (fewer than Reagan). At the end of 2010 President Obama’s federal workforce numbered 4,443,000; that’s 849,000 fewer employees than Reagan, the advocate of small government! Add to this the fact that President Reagan governed during peacetime, while President Obama inherited two wars.

So the figures don’t lie:  Democrats do a much better at creating new private sector jobs and reducing the size of the federal government.

 

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So what has Obama accomplished?

The group Winning Progressive has a posted a list of the President’s achievements the last 3 years.  

This picture and the text list only a few accomplishments but given the hostility of almost half of Congress and the American people we Democrats, progressives, liberals what ever we label ourselves can be proud.   One needs to click on the link above to get a more complete list.

Those of us who support the President and support his re-election need to ask ourselves why a vast majority of people don’t think he has done anything.  Paul Glastris in  Washington Monthly points out in his long article “The Incomplete Greatness of Barack Obama”.

In mid-January, pollsters for the Washington Post and ABC News asked a representative sampling of Americans the following question: “Obama has been president for about three years. Would you say he has accomplished a great deal during that time, a good amount, not very much, or little or nothing?”

When the poll’s results were released on January 18, even the most seasoned White House staffers, who know the president faces a tough battle for reelection, must have spit up their coffee: more than half the respondents—52 percent—said the president has accomplished “not very much” or “little or nothing.”

It is often said that there are no right or wrong answers in opinion polling, but in this case, there is an empirically right answer—one chosen by only 12 percent of the poll’s respondents. The answer is that Obama has accomplished “a great deal.”

Paul Glastris continues what the President has done and to try to explain why people don’t think he has done much.

In short, when judging Obama’s record so far, conservatives measure him against their fears, liberals against their hopes, and the rest of us against our pocketbooks. But if you measure Obama against other presidents—arguably the more relevant yardstick—a couple of things come to light. Speaking again in terms of sheer tonnage, Obama has gotten more done than any president since LBJ. But the effects of some of those achievements have yet to be felt by most Americans, often by design. Here, too, Obama is in good historical company.

The greatest achievements of some of our most admired presidents were often unrecognized during their years in office, and in many cases could only be appreciated with the passing of time. When FDR created Social Security in 1935, the program offered meager benefits that were delayed for years, excluded domestic workers and other heavily black professions (a necessary compromise to win southern votes), and was widely panned by liberals as a watered-down sellout. Only in subsequent decades, as benefits were raised and expanded, did Social Security become the country’s most beloved government program. Roosevelt’s first proposal for a GI Bill for returning World War II veterans was also relatively stingy, and while its benefits grew as it moved through Congress, its aim remained focused on keeping returning veterans from flooding the labor market. Only later was it apparent that the program was fueling the growth of America’s first mass middle class. When Harry Truman took office at the dawn of the Cold War, he chose the policy of containment over a more aggressive “rollback” of communism, and then he built the institutions to carry it out. He left office with a 32 percent public approval rating. Only decades later would it become clear that he made the right choice.

President Obama’s weak point is definitely the economy and the stimulus.  Was the stimulus too little to have a huge impact as Paul Krugman would argue or was it a total waste as many conservatives including those currently running for the Republican nomination would have us think?  The facts are that the bailout of the banks and of the auto industry did work and in the end it didn’t cost the taxpayers since money was paid back with interest.  Obama supporters need to hope that economic numbers continue to improve.

Glastris continues

I had conversations recently with six presidential scholars. Three of them—Robert Dallek, Matthew Dallek, and Alan Lichtman—said that, based on what Obama has gotten done in his first term, he has a good shot at ranking in or just below the top ten presidents of history, but with the proviso that he almost certainly needs to get reelected to secure that position. The other three—Alan Brinkley, David Greenberg, and Allen Guelzo—took a more jaundiced view. While conceding that Obama has put a lot of points on the board in terms of legislation, they felt that the highly compromised nature of that legislation, among other things, reflects qualities of leadership—a lack of experience, acumen, and forcefulness—that will keep him from ranking with the great presidents, and will more likely place him somewhere in the middle of the pack, presuming he even gets reelected.

These last three scholars’ views mesh with the broader feeling among Obama’s critics, especially on the liberal side, that Obama is fatally overcautious. What’s notable about such critiques is that they essentially rest on arguments that are counterfactual—that a savvier, more experienced, more energetic president could have gotten more done. Certainly that’s plausible, if unprovable. But it is equally plausible, as Ezra Klein has argued, that what has constrained Obama is not a lack of boldness but a lack of political space. With Republicans unified in opposition and willing to abuse the filibuster such that to pass any legislation has required sixty Senate votes that Obama has seldom had, it is unrealistic to think he or anyone could have done a whole lot better.

I would argue that part of that lack of political space is due to race.  I know that some who read this blog may feel that I harp on race too much, but it is the, so to speak, elephant in the room.  Just look at todays Doonesbury.

Doonesbury

Gladris ends with this

One of the most important tasks a president must master—and Obama hasn’t—is speaking up for his own record. This has been especially challenging for him because of the still-widespread economic suffering across the country and the too-soon-to-tell quality of his biggest accomplishments. And again, his even temperament hasn’t helped. He has seemed to want his achievements to speak for themselves. Who wouldn’t? But the presidency doesn’t work that way. A president has to remind the public every day of what he’s already done, why he’s done it, and how those achievements fit into a broader plan that will help them in the future.

With his State of the Union and some subsequent speeches, he has only begun this task. And while it’s very late in the day, the election is still eight months away. The irony is that, while Barack Obama has achieved a tremendous amount in his first term, the only way to secure that record of achievement in the eyes of history is to win a second. And to do that, he first has to convince the American voters that he in fact has a record of achievement.

So if the prospect of one of the Republican candidates becoming President frightens you, you need to help the President in spreading the word about what he has done in three years in the face of immense opposition.

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How the Virginia Legislature spent the session

If the Virginia State General Assembly were a 3rd grader and had to write about what they did during the 2012 Legislative session what would they write?  “I spend a lot of the 60 days talking about women’s body parts and didn’t have time to pass a budget.”

 Virginia State Capitol buiding designed by Thomas Jefferson.

I was skimming through headlines on the Washington Post website yesterday when this caught my eye:  “Va. Assembly will adjourn Saturday without a budget”.  Of course Governor McDonnell immediately sent the Democratic caucus a letter blaming them for the failure.  I guess they submitted amendments too late so now there has to be a special session which will cost money.  According to the Richmond Times Dispatch

Earlier Friday, McDonnell released a letter to Senate Democrats in which he said he was disappointed that their caucus waited until the end of the session to forward additional amendments to the budget. McDonnell noted that an extended session will cost state taxpayers additional money.

McDonnell maintained that in addition to transportation, Democratic proposals would increase spending by more than $600 million over two years, and he challenged them to make corresponding amendments to reduce costs or raise revenue.

The amended House version of McDonnell’s two-year, $85 billion plan is in the Senate Finance Committee. Democratic senators — who defeated two previous budget proposals before the full chamber — have offered amendments to the latest House plan that would add approximately $450 million in spending.

Roughly $150 million would go toward public education and restoration of health services to the poor, while $300 million would go toward transportation and reducing the impact of tolls in Northern Virginia and Hampton Roads.

Democrats have also proposed that McDonnell abandon his bid to divert additional sales tax revenue to transportation in favor of indexing the gasoline tax to rise with inflation. They also say the state should pay for the costs of a new law that will require women to get ultrasounds before they can get an abortion

So in addition to money for public education and health services for the poor, the Virginia Democrats want the state to pay for women’s ultrasounds?  Now we are getting to what the General Assembly really spent their 60 day session doing:  Debating transvaginal and other types of ultrasounds for women who seek a legal medical procedure known as an abortion.

There have been many words written on the Virginia bill and many more spoken, but Andrew Rosenthal summed it up neatly in the New York Times.

The Virginia State Legislature has decided not to force pregnant women to undergo vaginal penetration in a medical office before they exercise their Supreme Court-sanctioned right to an abortion. I suppose this is a victory of sorts.

As a refresher: The Legislature was on the verge of passing a law compelling doctors to perform ultrasounds before abortions. The bill, as written, would have required many women to undergo a trans-vaginal procedure, the sort of coerced penetration that in other circumstances could be considered rape.

Gov. Bob McDonnell wanted to sign it to polish his right-wing credentials for the eventual national political bid that so many people expect him to make. But the backlash was too much for him— even in the angry, superheated national debate about abortion there are, apparently, some limits—and he prevailed on the legislature to tweak the bill.

An amended version, mandating ultrasounds while specifying that women can refuse the trans-vaginal kind, passed the House and won a 21-19 vote in the Senate on Tuesday.

Let me get this straight.  The Virginia General Assembly frittered away the session talking about an unnecessary medical procedure intervenes in the relationship between a woman and her doctor while somehow not passing a budget.  OK.  I know it is not that simple, but having spent many years hanging around the Virginia GA I can tell you they can get things done if they want to do so.  But I think the Republicans would rather impose a procedure they won’t pay for, cut health care benefits and education, than get serious about a budget that actually benefits people who live in Virginia.  Both sides are using the budget to push agendas, but the budget is really the only thing the Democrats have to use.  Since the Senate is tied at 20-20 and the Lt. Governor can’t vote on the budget, it is the only way Democratic members can get some sensible measures passed.

I don’t know enough about what is going on in the other budget proposals to comment, but it seems to me that if you mandate something, you need to pay for it.  And the Virginia General Assembly needs to find the money to pay for those ultasounds.

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Who is really European?

I was reading Paul Krugman’s column in the New York Times this morning and I started thinking.  The Republicans accuse President Obama of trying to make us more like European Socialists, but in reality it is they who want to make us European.  Think about it a minute.

Krugman writes

Last week the European Commission confirmed what everyone suspected: the economies it surveys are shrinking, not growing. It’s not an official recession yet, but the only real question is how deep the downturn will be.

And this downturn is hitting nations that have never recovered from the last recession. For all America’s troubles, its gross domestic product has finally surpassed its pre-crisis peak; Europe’s has not. And some nations are suffering Great Depression-level pain: Greece and Ireland have had double-digit declines in output, Spain has 23 percent unemployment, Britain’s slump has now gone on longer than its slump in the 1930s.

Worse yet, European leaders — and quite a few influential players here — are still wedded to the economic doctrine responsible for this disaster.

What is that doctrine?  Basically you gut the retirement system, layoff workers, cut wages, and increase taxes.  Krugman puts it this way

Specifically, in early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.

President Herbert Hoover.

Image via Wikipedia

 

Thomas Wright in a column published in the Financial Times brings in the Republicans.  He points out the while Mitt Romney and Newt Gingrich want to deal immediately with the debt crisis – like the Europeans – Democrats and, in particular the President, believe that the debt is a long term issue and not a near term crisis. 

I’m certainly not an expert, but it does appear that the European Hooverism is being largely driven by Germany.  It will be interesting to see how that works out for them in the long run.  What happens when the Greek economy continues to sink and they decide to pull out of the Euro? 

Back to Krugman again.

Meanwhile, countries that didn’t jump on the austerity train — most notably, Japan and the United States — continue to have very low borrowing costs, defying the dire predictions of fiscal hawks.

…

So what will it take to convince the Pain Caucus, the people on both sides of the Atlantic who insist that we can cut our way to prosperity, that they are wrong?

After all, the usual suspects were quick to pronounce the idea of fiscal stimulus dead for all time after President Obama’s efforts failed to produce a quick fall in unemployment — even though many economists warned in advance that the stimulus was too small. Yet as far as I can tell, austerity is still considered responsible and necessary despite its catastrophic failure in practice.

The big question:  Will the Congress pass the President’s new jobs bill?  Or will it stick to slash, slash, slash?  Increasing aid to local governments for police, fire, schools and programs like the Community Development Block Grant (CDBG) will prevent layoffs and enable hiring.  Take CDBG  for example.  The City of Boston uses the funds to assist human services programs like afterschool and youth recreation, to assist small businesses and nonprofits make repairs and improvements, and help low income homeowners make repairs.  There are rules about who can get assistance.  Jobs are ceated when the business or nonprofit hires staff or a contractor to make repairs and improvements.  Assistance to homeowners also creates jobs.  Many other localities use CDBG to improve roads and sidewalks.  I think everyone understand how keeping teachers, police, and firefighters employed helps local governments.  It also increases the tax base for all levels of government and will eventually help lower the debt.  Or am I being too simplistic?

Krugman ends this way

Look, I understand why influential people are reluctant to admit that policy ideas they thought reflected deep wisdom actually amounted to utter, destructive folly. But it’s time to put delusional beliefs about the virtues of austerity in a depressed economy behind us.

So it seems that it is really the Republicans who are more European with their belief in continued austerity.  They need to look around and see what is happening in Europe and decide if they – and us – really want to be like them or continue to pursue the President’s American exceptionalism.

 

 

 

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Democratic Results from New Hampshire

According to this new report in Politico.com, President Obama got 49,480 votes in the Democratic primary and 282 votes in the Republican primary.  Tim Mak notes, however, that

The nearly 300 votes are not enough to award Obama any delegates to the Republican convention in Tampa, Fla.

Republicans also got votes in the Democratic primary.

The Republican Congressman [Ron Paul] from Texas led all write-ins in the Democratic primary with 2,273, followed by former Massachusetts Gov. Mitt Romney at 1,808 and and former Utah Gov. Jon Huntsman at 1,228
I think this just goes to show how strange the voting can get in New Hampshire.  The votes for Huntsman and Paul, I can understand but Dems voting for Mitt not so much.
 
Glenn Thrush later updated this and explained the Romney vote
Ron Paul got 2,273 Democratic write-ins but, as one GOP operative pointed out, those might have been anti-war or anti-Wall Street protest votes. The Romney Democrats likely switched for other reasons: The economy, the deficit, frustration with big government, etc.

A Dem official pushed back – and said the crossover tally is low to average. In 1996, for instance, Pat Buchanan received 3,347 votes in the Democratic primary, and Lamar Alexander, Steve Forbes, and Bob Dole were all over 1,250.

“If anything,” the Democrat says, “Romney should be concerned he didn’t receive more write-ins on the Democratic ballot.”

There are caveats, of course. Republicans were actively recruiting Democrats for weeks up to the primary and pushing hard to whip up a Democrats-for-Mitt storyline.

Mitt “Mittens” Willard Romney

No one is claiming the campaign will be easy for the President.

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The afternoon before Iowa

Yesterday we were out in South Hadley having our traditional family Japanese New Year brunch when talk turned to the 2012 election season and to Nate Silver’s piece in the Sunday Review section of the New York Times.  Some very interesting stuff there.

For example:  Iowa is 91% white (the entire country is 74% white).  You knew that, right?  Did you know there are so few Jewish people, they don’t register as a percentage?  But, except for race and the fact the Jews did not migrate to Iowa, the state is a fairly good mirror.  Oh, except for turnout.  Iowa wins 67 to 57.   Iowa and New Hampshire have each picked 10 of the eventual nominees.  Iowa does better with Democrats picking 6 while NH has picked 5 from each party.  They have each picked the President correctly 3 times with Iowa having the most recent pick, President Obama.  The track record is not particularly spectacular, but all the candidates  are flocking there and political junkies are watching polls eagerly.

John Nichols writes in the Nation that the Republican candidates and their PACs will have spent upwards of $200 per vote when you count only television advertising.  Kinda of nuts.

Seriously? All this for an glorified straw poll?

That’s the problem with the caucus system, which operates on an only slightly better model on the Democratic side.

Huge amounts of money are spent to influence a very small percentage of the electorate—less than 20 percent of Iowans who are likely to vote Republican in November will participate in Tuesday’s caucuses, and most of them will leave after the balloting finishes. An even smaller number of Iowans will begin the process of choosing representatives to county conventions, who in turn elect delegates to district and state conventions at which Iowa’s national delegates are actually selected.

As of lunch time today, Real Clear Politics shows  Romney edging out Paul 22.8% to 21.5%.  Romney is not even projected to get as many votes as he did in 2008- 25.2%.  Nate Silver has the race a little closer with Romney edging out Paul 21.8 to 21.  It is all in how you weight the various polls.  Throw in an estimated 41% undecided and Iowa is anyone’s game.  I think it is a measure of the field that Republican’s can’t decide who to support.  Poor Jon Huntsman.  We all agreed yesterday that is the only sensible one in the bunch so he has no chance.  Probably lucky for Obama.

Rosie Moser, an undecided voter thinking of endorsing Michelle Bachmann, listened to former U.S. Speaker of the House Newt Gingrich, in Independence, Iowa, on Monday.

(Daniel Acker for The New York Times)

Speaking of the President. he has been organizing in Iowa for more than a year and has more field offices that any of the Republicans.  It is will be interesting to see what the Democratic turn out is tomorrow night for a caucus that is already decided.  The link is to an interesting video on the Obama efforts from the New York Times

I think the polls are all done and we only need to wait for the caucus goers to speak.

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The complicated deficit deal

I know I’ll be writing more about the imact of the “compromise” in the days to come, but for now here a summary.  The Atlantic Wire has the best written summary I’ve been able to find.

The basic plan, as explained by The New York Times‘ Carl Hulse and Helene Cooper, Politico’s David Rogers, and The Hill‘s Alexander Bolton, goes something like this:

1. Raise the debt limit by $900 billion and cut spending by the same amount over 10 years. Members of Congress can vote to show they don’t like the increase but Obama can veto their disapproval. 
2. Create a bipartisan committee with three members of each party from each chamber of Congress to find spending cuts the size of a second debt limit increase of $1.5 trillion. As a special holiday treat, the plan must be presented to colleagues by Thanksgiving and voted on by Christmas.
3. If the plan passes, Obama can raise the limit by $1.5 trillion.
4. If the cuts committee can’t come up with a plan, Obama can get only a $1.2 trillion debt limit increase, and Congress must either:
a. Pass a balanced-budget amendment to the Constitution, or
b. Allow spending cuts the size of the debt limit increase over the next 10 years, with at least half coming from cuts to defense spending. These cuts would be automatic by the end of 2012.
 
 
There is still a chance to get revenue increases through the committee’s recommendations.  That is what the Democrats have to run around the country selling:  increased revenues and more chanced to create jobs.  I heard Nancy Pelosi say at one point that the country did not want this debt crisis business, but were interested in “jobs, jobs, jobs.”  This has to be the new Democratic message:  OK, we have pretty much caved on the debt business, now create some jobs.
 
 
We Have a Debt Limit Deal: Now What?
 
So smile now, because if there aren’t more jobs soon – and the deficit deal has the potential to make a lot more of them go away – you might not be smiling in November 2012.
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Watching the circus

Watching the circus in Washington used to be a fun activity, but right now it is just depressing.  I got home from work last night expecting to watch the Republican vote on the Speaker’s plan only to learn that it had been postponed.  When I went to bed at 10 it was still pending.  At 5 this morning, I learned it didn’t happen because the Republican leadership didn’t have the votes.  All this for a bill that is DOA in the Senate.

We are all being held hostage by a handful of tea partiers and other Republicans who are convinced that their election gave them some kind of mandate to kill the country.  As they are learning in Wisconsin, people are beginning to have buyer’s remorse.  On the other hand, the tea partiers are threatening to run against the very people they elected if the new Congressmembers don’t come through.  Among those making the threats are Sarah Palin and the founder of the Texas Tea Party on Al Sharpton’s MSNBC show last night.  So I don’t think the 20 or so votes that Boehner is looking for will materialize, but then again, this whole spectacle is full of surprises so one never knows.

Everyone, including President Obama, has let this small faction define the fight.  I think Eugene Robinson is right:  The Republicans have one easily stated idea:  Reduce the deficit (and deny Obama a second term) while the Democrats and particularly Progressives don’t have an easily stated idea.

Those who would chronicle events in Washington can find no richer source of analogy and metaphor than the Three Stooges. These days, I’m thinking of the times when an exasperated Moe, having suffered the indignity of an accidental spritzing or clobbering, turns to Larry or Curly and demands, “What’s the big idea?”

The premise of the debt-ceiling fight is too far-fetched for a Stooges film, since no audience could imagine leaders of a great nation stumbling into such a mess. Moe’s trademark line is still relevant, however, even if it’s not followed by the two-fingered poke in the eyes that our elected officials richly deserve.

It is clear that unless President Obama ends up taking unilateral action to break a hopeless deadlock, Republicans will win. The House, the Senate and the White House are all working within GOP-defined parameters: New tax revenue is off the table, painful budget cuts are a given, everyone seems to accept the principle that a debt-ceiling increase — which allows the Treasury to pay bills Congress has already incurred — must be tied to reductions in future spending.

Besides not having an easily stated idea that everyone repeats, the Democrats have done all the compromising.  And it hasn’t worked out so well.  Look back at the retention of the Bush tax cuts:  Do you see any jobs?  Robinson concludes

Obama talks about “winning the future,” but that’s too nebulous. I’d suggest something pithier: jobs, jobs, jobs.

People may dislike paying taxes, but they dislike unemployment more. Progressives should talk about bringing the nation back to full employment and healthy growth — and how this requires an adequately funded government to play a major role.

The next time Moe asks about the big idea, Democrats, say “jobs.” You might avoid a slap on the noggin and a poke in the eyes.

I think it maybe time for the President to stop trying to compromise, to get together with Reid and Pelosi and make a real proposal.  To quote Paul Krugman

Some of us have long complained about the cult of “balance,” the insistence on portraying both parties as equally wrong and equally at fault on any issue, never mind the facts. I joked long ago that if one party declared that the earth was flat, the headlines would read “Views Differ on Shape of Planet.” But would that cult still rule in a situation as stark as the one we now face, in which one party is clearly engaged in blackmail and the other is dickering over the size of the ransom?

The answer, it turns out, is yes. And this is no laughing matter: The cult of balance has played an important role in bringing us to the edge of disaster. For when reporting on political disputes always implies that both sides are to blame, there is no penalty for extremism. Voters won’t punish you for outrageous behavior if all they ever hear is that both sides are at fault.

,,,

So what’s with the buzz about a centrist uprising? As I see it, it’s coming from people who recognize the dysfunctional nature of modern American politics, but refuse, for whatever reason, to acknowledge the one-sided role of Republican extremists in making our system dysfunctional. And it’s not hard to guess at their motivation. After all, pointing out the obvious truth gets you labeled as a shrill partisan, not just from the right, but from the ranks of self-proclaimed centrists.

But making nebulous calls for centrism, like writing news reports that always place equal blame on both parties, is a big cop-out — a cop-out that only encourages more bad behavior. The problem with American politics right now is Republican extremism, and if you’re not willing to say that, you’re helping make that problem worse.

Time for the President to not only talk the talk as he did last week, but also walk the walk.  Compromise by only one side has lead to this circus that is not even very entertaining.  At the very least, round up enough votes in the Senate to pass the Reid plan so the Democrats can at least say they did something.  You can compare plans here.  And please, let there be only one vote.  I don’t think anyone can take this again in 6 months.

 

 

 

 

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The “gang of six” plan and the debt ceiling

In case you are wondering what it is, the New York Times has published a summary.  It is really a budget and deficit reduction plan and not something to raise the debt ceiling which still has to be done.  And time is running out.

A couple of interesting comments about the plan on Politico’s Arena.

First from Jeff Smith, professor at the New School and former Missouri State Senator:

The one real piece missing from this entire conversation? The piece that would make the numbers work and dramatically reduce the pain?

Comprehensive immigration reform. That’s right. There’s only one pool of 15 million people begging to be able to pay more into the system, and this country has spent the last several years fighting to make sure they can’t.

We need to get over our xenophobia, give them a path to citizenship, and let them start paying in to the system at regular rates in regular intervals. The nation’s immigrant population tilts much younger than the native-born population and is predominantly in the workforce, and would reverse the trend of a rising retiree-to-worker ratio, thereby shoring up both major entitlement programs

The immigrants would pay taxes, pay into social security, and Medicare.

Bernie Sanders (D-VT) points out

While the spending cuts for programs that working people desperately depend upon are enforced by specific spending caps, there is no such enforcement or clarity regarding the $1.1 trillion to be raised in revenue over 10 years.

What happens if that revenue target is not reached? There is no language that deals with that. Where does the revenue come from? That very important issue is kicked to the tax writing committees with no guarantee that hundreds of billions of dollars in new revenue will not come from the pockets of low- and moderate-income Americans. While nobody knows for certain what provisions might be adopted, there is reason to expect that some of the areas that the House and Senate will be looking at include the home mortgage deduction for middle-class families, taxes on health care benefits, and increased taxes on retirement programs such as 401(k)s and IRAs. In other words, while there is a reasonable degree of specificity in terms of cuts there is only vagueness in terms of revenue.

But Dean Baker from the Center for Economic and Policy Research asks the questions I’ve been wondering about:  What is wrong with the deficit at a time when we have no jobs and isn’t there a solution besides massive budget cutting?

The arithmetic is clear as day. The United States does not now, nor will it in the near future, face a serious problem meeting its debt obligations. It had a debt to GDP ratio of 116 percent after World War II. The baseline projections have it getting to 90 percent by 2021. 116 percent is much larger than 90 percent. (The difference will be more than $5 trillion in 2021.) This should be understandable even to a 6-figure Washington policy wonk or budget reporter.

Other countries had and have much higher ratios of debt to GDP and still face no problem paying their bills. In Japan, the ratio of debt to GDP is more than 220 percent, yet private investors are willing to lend the country money long-term at interest rates of less than 1.5 percent. Of course investors are also willing to put their money on the line in the U.S., lending us money long-term at interest rates close to 3.0 percent. So the people who actually have money on the line are saying as clearly as they can that the debt is not a serious problem.

Furthermore, there are many ways to deal with the debt that do not require attacking ordinary workers, who have been the victims of Wall Street greed and economic mismanagement by the deficit hawks. (People like Kent Conrad held positions of responsibility in the years of the build-up of the housing bubble, but were so utterly incompetent they either did not see it or recognize its danger.)

We could just have the Fed hold $3 trillion in government debt indefinitely. It would then refund more than $1 trillion in interest payments to the Treasury over the next decade. The inflationary impact of the additional reserves could be offset by raising bank reserve requirements. What could be more simple and costless than this mechanism? But the Gang of Six would rather cut Social Security and Medicare.

We could follow the example of England and impose a financial speculation on trades of stock, futures, options, credit default swaps and other financial instruments. This could raise more than $1. 5 trillion over the next decade. But the Gang of Six would rather cut Social Security and Medicare.

It is my understanding that we didn’t have a debt ceiling until World War I and that no many countries have one so why not do away with our?  Politico had this piece about that from Moody’s a few weeks ago.

The United States should do away with the debt ceiling altogether to bring greater certainty to investors in U.S. Treasury bonds, Moody’s suggested Monday.

With the August 2 deadline for raising the debt ceiling barely more than two weeks away, the bond-rating agency issued a report Monday noting that the U.S. is one of just a few countries that has a statutory borrowing limit and saying that the limit creates “periodic uncertainty” for investors, Reuters reported.

Rather than continuing to use the debt ceiling in an effort to keep U.S. borrowing down, the government should look toward Chile, Moody’s suggested. There, “the level of deficits is constrained by a ‘fiscal rule,’ which means the rise in debt is constrained though not technically limited.” Chile is considered to be Latin America’s most fiscally sound country.

And, the report noted, it’s not like the debt ceiling has been effective in keeping U.S. debt down: Congress has in the past raised it often and has not linked it to spending levels.

So the bottom line is that the Gang of Six plan may be a place to start talking budget and deficit reduction, but we should do something about the debt ceiling first – like abolish it.

 

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2012 Budget Talk

There are three budget proposals on the table that have been made public:  The President’s, Paul Ryan’s, and the Progressive Caucus.  So far all the talk is on Ryan’s cutting of Medicare.  It has defined the Republican politics.  Newt Gingrich found that out.  As I understand the President’s proposal it uses the 2008 budget as a baseline – a baseline we are already below. But no one is talking much about the Progressive budget.

The Progressive and Ryan budgets are good symbols of the world views currently held by many on the two sides.  The Democrats being democrats are not as monolithic and many will object to the severe defense cuts in the Progressive budget, but it seems to me that these proposals can be the end points that let everyone meet in the middle.

The National Priorities Project compares the two proposals.

  Congressional Progressive Caucus People’s Budget Rep. Ryan’s The Path to Prosperity
     
Underlying Philosophy Strengthens role of government in reducing income inequality and providing social safety net. Reduces deficit through combination of increased revenues and reductions in spending Relies on private sector to spur economic growth and employment using a trickle down approach. Reduces deficit solely through spending cuts
     
Revenues Shifts tax burden towards higher income earners and corporations Decreases taxes for wealthy and corporations
Individual Taxes Allows for the expiration of Bush era tax cuts Maintains the Bush era tax cuts
  Reverts highest individual tax brackets to 36% and 39.6% from 33% and 35% Cuts the top individual tax rate to 25% from 35%
  Enacts new tax brackets for high income earners (45%-49% for $1 million – $1 billion range Consolidates the current six tax brackets
  Taxes capital gains and dividends as ordinary income Eliminates $800 billion in tax increases imposed by the Patient Protection and Affordable Care Act
  Limits tax benefit of itemized deductions to 28%  
  Enacts progressive estate tax in which larger estates pay higher tax rates  
Corporate Taxes Imposes financial transaction tax on derivatives and speculative financial products Reduces corporate tax rate to 25% from 35%
  Repeals tax deductions and preferences for oil, natural gas and coal producers Eliminates loopholes and deductions that allow some corporations to pay no tax
  Taxes US corporate foreign income as it is earned instead of as dividend  
  Imposes tax equal to 0.15% of covered liabilities for banks with more than $50 billion in assets  
     
Investment Emphasizes public investment as engine for job creation and economic growth Believes that public investment crowds out private investment
  Rebuilds infrastructure – highways, railways, National Infrastructure Bank  
  Funds highway construction through increase in Gasoline Tax of 25 cents  
     
Health Care and Social Safety Net Maintains government role in providing vital public services and programs Limits government provision of social programs
  Maintains Medicare reimbursement rates for doctors Privatizes Medicare starting in 2022 for new beneficiaries
  Establishes public health care option in health care exchanges starting in 2014 Repeals Patient Protection and Affordable Care Act
  Negotiates drug prices with pharmaceutical companies Raises age of Medicare eligibility to 67 from 65
  Increases Social Security benefits based on higher employee contributions Converts Medicaid into block grants to the states
  Raises Social Security contribution limits, including employer contributions for high earners Converts SNAP (food stamps) into block grant to the states. Requires recipients to work or get job training
    Reduces Pell grants to 2008 levels
    Imposes time limits and work requirements for recipients of federal housing assistance (Section 8)
     
Defense Makes significant cuts in annual defense spending and ends the wars in Iraq and Afghanistan in FY2012 Largely exempts the military from spending cuts
Funding for Security Generates $2.3 trillion in savings compared to the CBO baseline over the FY2012-2021 period Provides real growth for “security” in each year through 2021, totaling $214 billion in new spending
Annual Pentagon Spending Reduces DoD baseline budget by $692.2 billion over 10 years compared to CBO, or $816.7 billion compared to the Obama Pentagon spending plan Reduces DoD waste by $178 billion. Reinvests $100 billion of this into key combat capabilities and uses $78 billion to reduce the deficit
Overseas Contingency Operations (Iraq & Afghanistan) Provides $161.4 billion for “Overseas Contingency Operations” (OCO) in FY2012 and withdraws U.S. forces from Iraq and Afghanistan. Provides no funding for OCO starting in FY2013, saving $1.6 trillion between 2013-2021 compared to the CBO baseline Continues Iraq and Afghanistan wars and provides $117.8 billion in FY2012. Anticipates over $1 trillion in savings from reduced costs of the “Global War on Terror” over the next decade by using the Pentagon’s $50 billion annual “placeholder” for OCO costs
     
Government Maintains size and role of government Reduces size and scope of government
  Provides percentage increases for discretionary programs Reduces size of government to 20% of GDP by 2015 and 15% of GDP by 2050
    Reduces non-security discretionary spending to pre-2008 levels
    Reduces public sector employment by 10% through attrition by 2014
    Institutes government pay freeze through 2015
    Increases federal employee contributions to retirement
    Privatizes Fannie Mae and Freddie Mac
    Decreases regulation of the energy industry
    Establishes a binding cap on total spending as a percentage of the economy
    Requires any increase in debt levels to be accompanied by spending reductions

I couldn’t find a chart that adds the President’s budget proposal, but here is a short summary.

Key Budget Facts

  • The Budget includes more than $1 trillion in deficit reduction – two-thirds of it from cuts — and puts the nation on a path toward fiscal sustainability so that by the middle of the decade, the government will be paying for what it spends and debt will no longer be increasing as a share of the economy.
  • The President meets his pledge to cut the deficit he inherited in half by the end of his first term.
  • Five-year non-security discretionary spending freeze will reduce the deficit by over $400 billion over the next decade and bring this spending to the lowest level since President Eisenhower sat in the Oval Office.
  • 10-year Deficit Reduction:  $1.1 trillion, excluding war savings and not extending 2001 and 2003 tax cuts for high-income earners. Two-thirds are from spending cuts.
  • 2011 Projected Deficit: $1.645 trillion, 10.9 percent of GDP; 2012 Projected Deficit: $1.101 trillion, 7.0 percent of GDP; 2015 Projected Deficit: $607 billion, 3.2 percent of GDP; 2017 Projected Deficit: $627 billion, 3.0 percent of GDP

The budget itself is composed of proposals made by federal agencies under guidelines from the White House budget folks, but it seems to be a timid version of the Progressive Budget.

The choices are pretty clear.  And the news this week – increased unemployment and no job creation – has everyone saying it is bad news for the President.  But with the layoffs of public employees is it surprising that unemployment is rising?  Wasn’t keeping the Bush tax cuts supposed to create jobs?  Where exactly are all these jobs?  The Republicans are all about not raising taxes on anyone and cutting the size of government and government benefits.  They don’t care about the widening gap between rich and poor but seem to be perfectly happy to accept tax payer paid benefits.   Like Congressman Woodall. (R- GA) who thinks we should all be self reliant except for him.

The bottom line:  We have two visions of American and the one that wins will determine our future.