With the submission of the Obama administration's budget today, fiscal silly season is opening. President Obama already launched an opening salvo last week with his proposed freeze on non-security-related military spending, which amounts to a rounding error on the ten-year budget projections, which are themselves a rounding error on the long-term budget projections -- at a time when unemployment is running at 10.0 percent. Fortunately, there is a partial saving grace, which is that the freeze does not set in until fiscal year 2011 (which begins in October 2010), and in the meantime Obama has proposed $100 billion in tax cuts and government spending to create jobs. (Whether his proposals are the right way to spend $100 billion is a debate for another time.)
The midterm elections are looming already (note: do we have to be satisfied with a political system in which the legislature is preoccupied with upcoming elections half the time?), and the two big themes seem to be jobs and the deficit. With unemployment at levels not seen since the 1980s, it's obvious why jobs are on the political agenda. With the federal budget deficit at record (nominal) levels, it also seems obvious that the deficit should be on the agenda, but this is really an unfortunate artifact of our political system. A government deficit is the result of insufficient government saving, and a period of high unemployment is absolutely the worst time to increase government saving. The sensible solution would be to use the urgency we currently feel to put in place long-term fiscal solutions, but the political system can't handle that (see health care reform as Exhibit A). As a result, when deficits go up, we get lots of short-term politicking about the deficit-in Paul Krugman's words, the "march of the deficit peacocks."
On these two themes, the Democrats' message is that (a) they are fixing the economy (growth is back, they are doing something about jobs) and (b) they are serious about the deficit (bank tax, three-year freeze, health care reform, etc.). The Republicans' message is that (a) the Democrats have failed to fix the economy (unemployment is still high) and (b) the deficit is the Democrats' fault due to runaway government spending. While I have been extremely critical of the Obama administration for its generous policies toward large banks, which I believe have increased the risks facing the financial system in the future, otherwise they have taken, directionally, the right steps as far as jobs are concerned. And when it comes to long-term deficits, the Senate health care reform bill -- whose cost-cutting measures are based largely on proposals from the administration, particularly Peter Orszag -- is perhaps the biggest deficit-reduction bill of all time.
The Republicans, by contrast, are using their status as the party out of power to spout all sorts of nonsense when it comes to the deficit. Representative Paul Ryan was quoted by the New York Times calling the budget "nothing more than a plan for more of the same -- a very aggressive agenda of more government spending, more taxes, more deficits and more debt -- with just a few cosmetic budget maneuvers to give the illusion of restraint." To begin with, I can give him a pass for redundancy ("more deficits and more debt"), but complaining about "more taxes" and "more deficits" in the same sentence? Does Paul Ryan not know how a deficit is measured, or does he not know where government revenues come from? Logically speaking, it must be one or the other.
Speaking of taxes, how did we get into this deficit mess in the first place?
You've no doubt seen this chart from the Center on Budget and Policy Priorities or something similar before, but that doesn't make it any less true. And what is it in the president's proposed budget that the Republicans are aiming at? The plan to let the Bush tax cuts lapse for people making more than $250,000 per year. In other words, the problem with the Obama budget is that the deficits are too high, and the solution is to cut taxes. Huh?
None of this is new, of course. Sam Stein pointed out the same issues in December. Yet since Ronald Reagan, a large proportion of the electorate has become wired to believe that deficits are always the product of excess government spending, so the facts bear repeating.
The fiscal situation is actually very simple. The budget was in surplus when President Clinton left office, although there was already the prospect of budget-busting Medicare deficits in the long-term future. The 2001 and 2003 Bush tax cuts and the unfunded Medicare prescription drug benefit created the large deficits of the Bush era. (The Iraq and Afghanistan wars didn't help, but it's not fair to blame those entirely on the Republicans; plenty of Democrats went along.) Then the financial crisis and the resulting recession blew a huge hole in government tax revenues, creating the current spike in deficits; that spike was exacerbated by the stimulus package, which most but not all economists would consider a sensible response to a major recession. (According to an earlier analysis by David Leonhardt, the projected average fiscal balance for the years 2009-2012 has changed, since Clinton left office, from an $846 billion surplus to a $1,215 billion deficit. The biggest lumps are $673 billion in Bush administration policies and $664 billion in the costs of the financial crisis and recession, including bailout costs.)
Yet somehow the Republicans have tried -- successfully! -- to spin our current and projected deficits as the result of "more government spending," putting the Democrats on the defensive. And unfortunately, the result is the Obama administration buying into the Republican attack line: that government spending must be reduced. How else to explain the three-year spending freeze, which is mainly symbolic and a little bit destructive? The bipartisan commission to reduce the deficit has a little more to recommend it, although I'm skeptical that it will achieve anything. The Republican position seems to be that the deficit commission is bad because -- wait for it -- it might increase taxes. Here's what the Wall Street Journal has to say:
"Republican leaders are under pressure from conservatives not to cooperate, due to concerns that the commission would recommend tax increases.
"'Look, I don't think anybody in the country thinks we have a problem because we tax too little, I think the problem is we spend too much,' Senate Minority Leader Mitch McConnell (R., Ky.) said on CNN's 'State of the Union' on Sunday. 'So, I like the commission idea, just as I said a few months ago. I think a better way to do it is target spending.'"Deficit hawks in both parties say the commission must be able to look at spending and revenue to make a dent in the deficit in the near term. But politically, its members could be boxed in. Not only are Republicans opposing tax increases, but they are also attacking Democrats for proposing cuts to Medicare."
So, let's recap. The medium-term deficit problem was created by Bush tax cuts and by an unfunded Bush-era expansion of Medicare. The long-term deficit problem is all about Medicare. Yet the only solution that Republicans can think of is reducing spending, but not Medicare spending. Of course, this shouldn't surprise us; Mitch McConnell gave us this, after all:*
But apparently the sharp political minds in the Obama administration have decided that this is the turf they have to fight on. Now it seems that instead of going back to Bill Clinton in 1995-1996, they are reaching all the way back to 1993, when Clinton, Rubin, et al. decided to kill the deficit monster first and worry about helping the poor and the middle class later. They did kill the deficit monster (OK, they just knocked it out for a decade), but then they lost Congress in 1994 and never got around to helping the poor and the middle class; by the time we got a president and Congress who might have tried, it became time to kill the deficit monster again.
The real solution to the deficit problem must fix the long-term Medicare problem. That means some combination of reducing the long-term cost of health care (which the administration tried mightily to do, so far unsuccessfully) and increasing funding (taxes). The idea that we can just spend less money on health care as health care costs increase (and with about 47 million Americans already uninsured) is patently ridiculous -- unless your goal is simply to let low- and middle-income seniors die. So the only important question is how to reduce Medicare spending or increase Medicare revenues. But with an opposition party ready to roll out its artillery at any mention of either Medicare cuts or tax increases, it's hard to see where a solution can come from.
* The image is from congressional Democrats, but the press releases were really issued by McConnell.
Crossposted with The Baseline Scenario.
Huff TV: Sam Stein: Obama 'Boxed In' Between Deficits And Creating Jobs (VIDEO)
Huffington Post political reporter Sam Stein appeared on MSNBC's Morning Joe today to discuss President Obama's plan to rein in the rising national deficit. Stein...
They believe that by constantly cutting taxes and obstructing any hikes, they can make government fail and force the deficit so high that we HAVE to cut programs, regardless of the consequences.
In other words they seek to destroy our country so that they can "save" it.
But they're winning. Taxes are still the number one sin in the US public. And even when people okay taxes, it's always on someone else (maybe the problem with the 250k mark is that it's too high, not too low... but never tell that to the public).
We learn all the wrong lessons from defeats.
From Carter, we learned never to speak the truth of bad situations. From Dukakis, we learned never to admit the need to raise taxes.
If Obama is not reelected, I fear the most looming consequence will be the next "lesson" that entices our politicians to lie and feed the very misguided conservative force that is eating away at the fabric of the country.
Mr Kwak, deficits are created when government spending exceeds government taxes. It's the same as your household budget. When you spend more than what you take in, you go into debt. You do not get yourself out of debt by expanding spending. You either expand your income to match your spending, or reduce your spending to match your income - pretty simple.
And yet that logic eludes fiscal profligates (including neo-cons) when applied to government. Every dollar taken from the citizenry to promote government spending results in a reverse mulitplier - the opposite of Prof Keynes theories (one current estimate is .8 to 1).
Back to school Mr Kwak; try again.
Keynes is discredited? You think government should put more people out of work during a recession? What kind of an economic theory is that? Meanness?
The President has already started on the DOD by requiring Gates to go through the DOD budget and icksnay any current waste and once we pull out of Iraq (already started) and Afghanistan (2013) he'll be in a position to reduce Defense spending. If he were to make any meaningful cuts right now, the American people would go bananas, rightly or wrongly.
OBlame has spent more then all former prez. combined! Our debt will cripple our country soon.
But what you say is true, "meaningful cuts right now, the American people would go bananas, rightly or wrongly" .
The McCian style Obama spending freeze is meeting fierce disapproval from Liberals "stupid to reduce spending during a recession" and Conservatives "we must get our national debt down"
This is an enormous challenge, one that the prez. him self has little control over.
http://www.freerepublic.com/focus/f-bloggers/2327185/posts
Since 1980, the House of Representatives, which prepares and votes on budget resolutions and sets spending and revenue levels for committees to consider pursuant to Article 1, Section 8 and 9 of the US Constitution (subject to Presidential veto), has been controlled for 12 years by Republican Party and will be controlled for 18 years by the Democratic Party until 2010
Democratic Houses run budget deficits on average FIVE TIMES higher than Republican Houses (4.7% versus .9% of GDP).
The message: if you want real fiscal restraint, put the House in Republican hands. The data for Republican presidents is another matter, but then the President only proposes a budget, Congress enacts it (as Murtha likes to point out)
http://blog.cleangovernmentnow.org/2009/04/03/do-you-want-our-country-and-obama-to-succeed-2.aspx
You may want to blame the '06 - '08 Congress, but a majority of this mess was caused by UNPAID for tax cuts in '01 and '03; UNPAID for Medicare Part D legislation and an UNPAID for war.
As far as Congress, the President has veto power so it's incorrect that Congress controls the budget. Plus it's the President who proposes a budget not the other way around.
The Republicans used reconciliation and supplemental spending to force their agenda through; at least the Dems are attempting to use the process as it should be.
One of Obama's first actions, supported by a DEM Congress, was to re-institute the "Pay As You Go" fiscal policy of Pres. Clinton.
Sorry, your argument makes a good sound bite except...it's not TRUE.
Cliton had the "tech bubble".
Bush the "housing bubble"
Obama the "government spending Bubble"
Taking into consideration all budgetary points and factors a yearly budget is prepared that would with all possibility meet the need of the nation’s welfare and development and in running the Government machinery. The final assessment cannot be made whether the Budget is a bad budget or a good budget. To say good or bad the critics will have to wait for the entire year.
Yes, it is a fact no Budget is 100% perfect so there may always be some short comings which the government may expected that it could be overcome in due course. But to criticize before it has been implemented because it is prepared by Obama administer is but carry no sense. Regarding tax cuts is a common for the people who all want to criticize. Why should carry any sense now and why it did not during Bush? why so much concerned about it
We should be way past the blame-game by now.
They bought our mortgage backed securties with insurance - when they failed the insurance companies tried to get out of the claims- The 2008 crisis impacted other countries not just the US-
Sir you have to look.
http://www.nytimes.com/2010/01/25/us/politics/25deficit.html
and
"legislation sponsored by Sen. Judd Gregg (R-NH) and Sen. Kent Conrad (D-ND) to create an independent commission with the power to force Congress to vote on major deficit reduction steps this year"
Peace
Democratic House Financial Services Committee Chair promoted GSEs while former 'spouse' was Fannie Mae executive
http://www.businessandmedia.org/articles/2008/20080924145932.aspx
Solving the budget problem is easy. There are 2 ways of doing it. One get back to full employment. Two (this is the secret dirty plan nobody wants to admit to siring) pay off the debt with cheap dollars.
get rid of big government, opressive tax, and uninos and you will see jobs come back!
Go to
http://whitecollargreenspace.blogspot.com/
http://www.youtube.com/user/greenspaceguy
for a simple plan that allows the government to pay for a public option for healthcare without new taxes or fees. It also cuts the governments carbon footprint by 50%.
The Federal government pays for almost one billion square feet of office space. Most office space is very expensive yet it sits unused 70% of the time because most white collar work is scheduled for only one shift per day or only 45 hours out of a 168 hour week. 30% efficiency is completely unacceptable in today's economic and ecological environment. Most buildings are open for 12 hours each day from 6 am to 6 pm. By keeping buildings open an additional 4 or 5 hours each day, we could schedule 2 shifts of white collar workers, thus increasing our efficiency by 100% and reducing our carbon footprint by 50%. We could cut the cost of overhead for each employee by 40 to 50%, half as much infrastructure, half as much office space, half as many computers and supplies. With the overhead for each of our 2 million Federal workers approaching $50,000 per year, the potential savings could be $50 billion per year, enough to pay for health care reform
Some of the downtime would be currently used for cleanup and maintenance. Some of the longer hours might not be as efficient. Working overnight does not seem psychologically sound (third shift workers are all crazy. They lack healthy sleep and mesh poorly with their families.) All of my objections surely have work arounds. For example, Whitecollargreen doesn't suggest a third shift.
my own thinking; my path began a long time ago, when I was four years, watching my mother being taken away from me for the very last time. As far as qoutes, well, my goals are loftier and necessary within the present context, so the answer to your question is no.
Why won’t anyone write or talk about this?
The federal government’s entitlement disasters of Medicare and Medicaid could easily be salvaged without bankrupting the federal government by using government systems similar to the Veteran Administration hospitals to deliver high quality care and medications through government systems at a fraction of the costs now being devoured by private systems.
Seniors using public care could receive it free; no more insurance payments, donut holes or copays.
Everyone who receives government funded health care from any source anywhere in the US whether it be Medicare, Medicaid, all states, cities, school systems everything, could all be offloaded to a federally operated national health care system.
Everyone would have the option to choose either free public care or alternatively to purchase and receive care from private providers.
Everyone choosing free government care could have it regardless of age, financial circumstances, or pre existing conditions, there will be no restrictions, no insurance, no co pays, and free period.
Public government care would be all inclusive to cover primary, inpatient, long-term, ophthalmology, and dentistry.
A trillion dollars in savings from dual coexisting public or private care choice system should be debated.
One obvious thing is to provide lifetime care to all veterans. This has a measure of justice as veterans may get chronic diseases for service in a toxic environment (uranium augmented missiles) and local diseases that they have no acquired immunity for. There are little economies as court suits may be avoided, acceptance to VA care would be easier, and more reliance on nurses and paramedics would use the doctors better.
One huge hurdle that I see is the other topic that no one wants to talk or write about...The fact that the federal government simply does not have the legal authority to collect money for health care! Read the Constitution! That's right, medicare and medicaid are unconstitutional as well. The states have every right to do this, but not Uncle Sam.
Why does everyone have the knee-jerk reaction to go to the federal government for every damn thing? Since when are they they the exemplars of excellent management and fiscal responsibility?