I didn't quite believe my eyes this morning when I read an op-ed piece by Martin Feldstein in The Wall Street Journal. Obama caused the growing debt levels, he says. For you nonbelievers, here's the quote: "Much of the projected doubling of the national debt between now and 2020 reflects the spending and tax proposals in the president's fiscal plan this year."
Professor Feldstein, former Reagan economist and head of the National Bureau of Economic Research, is known for his sleight of hand. But this one is a beauty. How does he pin this on Obama? He basically calls the Bush tax cuts the Obama tax cuts. "The $5.1 trillion gross cost of the Obama proposals reflects the cost of making the Bush tax cuts permanent for individuals with less than $250,000..."
Does Feldstein really support a tax increase in this economy by rescinding the Bush tax cuts? He doesn't bother to take that on.
But he has more up his sleeve. He doesn't mention war spending at all. He doesn't mention the tax-plunging consequences of the recession, which Obama inherited from Bush. He doesn't note that the Obama stimulus package helped stop a recession and will probably result in a much lower deficit in 2011 and 2012, as Alan Blinder and Mark Zandi's model shows (Zandi was an adviser to John McCain).
The more honest Center on Budget and Policy Priorities has it basically right. The growing debt levels out to 2020 are due to the recession, war spending, and the Bush tax cuts.
The thrust of the Feldstein piece was a fairly warm endorsement of the proposals put forward by the co-chairmen of the Obama fiscal commission, Erskine Bowles and Alan Simpson. Glenn Hubbard wrote a still warmer endorsement in The New York Times earlier in the week. Both are members of the conservative team of Harvard economists -- students and faculty -- who now dominate the department. Their friendly endorsements suggest how ideologically right-wing the proposals basically are.
Feldstein does say the proposals don't cut social programs enough -- or soon enough. But both Feldstein and Hubbard like the proposal to sharply cut marginal tax rates. Hubbard, formerly George Bush's chief economist, never saw a tax cut he didn't like. He of course ignores the intrusive fact that the Bush tax cuts he oversaw resulted in a mediocre economic expansion, with falling wages and fairly tepid capital investment. Martin Feldstein has long been the clever godfather of the Harvard group, where Hubbard got his Ph.D. He must be smiling at the sharp cuts in marginal tax rates -- from 25 percent to 23 percent for top earners, some 15 percent in the middle and 8 percent at the bottom.
Alice Rivlin, a member of the Obama commission, and Pete Domenici, have also come up with a plan to cut marginal rates. You'd think there was some serious economic evidence to support the case. Feldstein, of course, warned vociferously that the Clinton tax hike on upper income Americans would be a disaster for the economy back in 1993. Austan Goolsebee, the politically moderate economist, now Obama's chief economist and formerly at the University of Chicago, showed how wrong Feldstein was. So did the booming economy that followed.
No matter. On we go. Helped by little response from the press. Bowles-Simpson and Rivlin-Domenici claim we will grow more rapidly by cutting tax rates. They claim the cuts will not reduce tax revenues because they also propose to close tax loopholes and "broaden the base." Of course, closing loopholes is one of the perennially unfulfilled political promises of all time. If anything happens, we will get tax cuts and retain loopholes.
Rivlin-Domenici at least propose a VAT, a sales tax, to make up for some of the tax cuts. Some point out that in Europe, progressive income taxes account for far less tax revenue than they do here. Their high VAT does much of the heavy lifting. But Europe spends that money on highly egalitarian social programs, including free -- or nearly so -- health care, higher education, childcare, and adequate retirement programs.
Feldstein insists we must get the debt-to-GDP ratio down to 40 percent, and mischievously says the Bowles-Simpson proposal doesn't do it fast enough. I say "mischievously" because he must know that pulling still further right is good politics when it is time to compromise. But he must quietly love the 21 percent cap on government spending as a percent of GDP proposed by Bowles-Simpson.
With this limit, we have the excuse to cut social programs, notably Social Security, Medicare and Medicaid. More than two thirds of the budget balancing is accomplished through spending cuts, less than one third by new revenue raising. The limit is an outrage. It is the average over the last forty years -- before there were soaring health care costs, two new wars, and the retirement of the baby boomers. And there is utterly no evidence that a 21 percent economy will growth faster than a 22 or 23 percent economy.
There are some good ideas in these plans, such as cutting military spending and tax expenditures, like the home mortgage interest deduction. But some of it is charade. Peter Orszag, the former Obama budget chief, made a case for the Social Security cuts of the Bowles-Simpson plan because they are "progressive." They raise benefits to the poor and cut them for the better off. This is blowing smoke. The very low end of Social Security recipients will be put up all the way to 125 percent of what is already a very low poverty line. Meanwhile, recipients merely earning in the high $30,000 a year bracket will have to give up benefits. Those in the middle, around $43,000 a year, will see benefit cuts of 15 to 20 percent over the years. This is progressive reform?
These plans are basically government bashing, especially the Bowles-Simpson trial balloon. Yet the media simply doesn't see the ideological take. As usual, they bend over backwards to give credibility to these ideas. The best example was a column by moderate conservative Ross Douthat in The New York Times, claiming the Democrats were now the Party of No for not supporting the good side of the Bowles-Simpson proposals.
These are not balanced proposals. If they were, Hubbard and Feldstein would never have been as supportive as they are. They'd be railing at the Obama commission. Of course, the final recommendations are still to come.
Cross-posted from New Deal 2.0.
Military spending by the US has reached ridiculous proportions. The knowable US annual military expenditures of about $700 Billion is approximately 4.5% of GDP; it accounts for more than half of the world’s military expenditures. The US is only 4.5% of the world’s population. China, for instance, the next highest spending country, spends less than $100 Billion. That figure represents 2% of its GDP while China is 19.5% of the world’s population. The US could cut military expenditures in half and still spend double what China spends.
We are powerlessly witnessing the harming of innocents with devastating weapons such as cluster bombs, cruise missiles, drone aircraft, depleted uranium munitions and military occupations. Our less advantaged youth are placed in lethal confrontations in places where the US is not wanted. All of this because war and war preparations are profitable for the ruling minority, not because we need to defend ourselves from those that are very poor and still, in many respects tribal societies.
After all it is either "cut spending" or "raise revenue", isn't it ? Well, they offered the "cut spending" solution but did not offer an alternate "revenue raising" solution.
THEY SHOULD HAVE.
How much should the income cap subject to SS (currently cap $106,800) be raised to, to ensure financial stability in the SS program ?
I don't think they are using the present gas taxes to keep up the highways now.
Why did Obama select a conservative democrat for this committee? Is there anybody representing progressive views in this govt? 'Cap & Trade' and HCR were both conservative sponsored ideas at some time or the other, but now they're being labeled as liberal legislation. No wonder the people are confused. The lies told are being compounded as I write. What is red, is green now. No wonder the people voted the repubs back in office, those moneyed conservatives shifted all the blame onto Obama and the dems and the people bought it hook and line.
Saying you can't afford something is NOT bashing it. While I understand the position and passionate feelings of progressives to protect the less well-off among us, they will have to make a MUCH stronger argument to persuade moderates.
In the end, Cons and Mods don't need progressives to make a deal. Moreover, a deal that would mollify progressives wouldn't be able to attract a majority--either in the political sense or the public opinion sense.
Okay, let the name-calling and ad homenim attacks commence...
Here are the only OFFICAL budget numbers from the CBO - (United States Congressional Budget Office):
2000 - 236 Billion SURPLUS under Clinton
2001 - 128 Billion SURPLUS under Clinton
2002 - 158 Billion deficit under Bush with republican congress
2003 - 378 Billion deficit under Bush with republican congress
2004 - 413 Billion deficit under Bush with republican congress
2005 - 318 Billion deficit under Bush with republican congress
2006 - 248 Billion deficit under Bush with republican congress
2007 - 161 Billion deficit under Bush with republican congress
2008 - 459 Billion deficit under Bush with Dem congress
Source : CBO Historical Budget Data
http://cbo.gov/ftpdocs/108xx/doc10871/historicaltables.pdf
Reagan increased our debt an average of 22% yearly...he tripled it from 934B to 2.6T (178%)
Bush increased our debt an average of 11% yearly...he doubled it from 5.7 to 10.6 trillion (86%)
Obama increased our debt 16% in his first year from 10.6 to 12.3 trillion (to stop a great depression)
(Data from the US Treasury Bureau of Public Debt - http://www.treasurydirect.gov/NP/NPGateway
FACTS SHOW THAT REPUBLICANS DO THE OPPOSITE OF WHAT THEY CLAIM...THEY CREATE RECORD DEFICITS AND RECORD DEBTS AND BLAME IT ON DEMOCRATS
DAVID STOCKMAN, Raygoon's Budget Director
Unemployment doubled from 4.2% to 8.2%
Budget went from a 236 billion surplus to a 1.2 TRILLION deficit (a 1.4 trillion drop)
National debt doubled from 5.7 trillion to 10.6 trillion (a 4.9 trillion increase)
Dow Jones plunged 25% from 10,587 to 7949
Gasoline tripled from 1.44 to 4.11 per gallon (peaked July 2008)
Economy losing 700,000 jobs monthly
Economy in total freefall
(Republicans try to confuse people by saying democrats took over in Jan 2007 and started the recession, but they can not name one thing democrats did to hurt the economy)
This is what is most aggrevating about all this...the co-chairs pre-empted the official recommendations and the MSM is shouting to the hills as if it is the final recommendations.
The truth is they (the co-chairs) are simply driving the conversation the way they want it to go, contrary to the will of the commission. I say that nullifies the commission altogether.
, but cutting benefits.
is what I meant to put there.
So your whole premise is attacking this proposal, because it will be gutted??? You could pretty much say that about any idea. Eliminating the tax deductions (which really is a subsidy for one person and not one for another, not exactly fair) would allow you to raise a lot more revenue. Just for the fact that Hedge Fund Managers and dividends will be taxed at ordinary rates under the Plan would establish this. The Erskine-Simpson plan is the fairest plan and helps the middle class a lot more then instituting a horrible VAT. The Dems claim to care about the middle class and the poor, but want a tax like the VAT, which disproportionately hurts the poor enacted. Very sad. They are in line with conservatives like Glen Beck and Bill O'Reilly who have called for a national sales tax (another name for the VAT). Of course the idiots in Washington will argue that giving preferential tax breaks on dividends and to hedge fund managers somehow magically creates more jobs then taking money out of every American's hands every time they buy something. That certainly sounds more pro-business/pro-jobs (sarcasm dripping).
Why wasn't a financial transaction tax part of the Bowles-Simpson deficit reduction proposal?
It would raise substantial revenue and has desirable properties in terms of cooling speculative money flows.
I guess the problem is that the tax falls largely on the wrong people -- those who can afford to pay it.
The US Commercial Service are the trade professionals on the front lines fighting to open up foreign markets to our exports and battering down unfair trade barriers to US products. Without them there is no one out there promoting our economic interests and protecting trade-related jobs. To cut a program that more than pays for itself through economic growth and resultant tax base growth is stupid - self-defeating. Instead of looking to simply cut we need to be smart and put our money where it pays off.