Symbolic Blather: Washington's Congenital Disease
This Congress potentially could be the most productive in over forty years. It has passed the largest recovery plan in the nation's history. It extended health care to millions of children. It passed Obama's first budget with its significant down payment on education and energy. The House just passed the comprehensive energy bill. Health care reform and the most extensive financial reform since the New Deal are next up.
Yet this same Congress will take the time to debate legislation that might best be considered symbolic blather. Its only effect is symbolic and the symbolism is loony.
The best example of this is the bill championed by Blue Dogs in the House and Senate -- the conservative Democrats that the media labels "moderates" -- called PAYGO. Paygo is the Washington shorthand for a rule that requires the Congress to pay for any expansion of entitlements (guaranteed benefits like Social Security Medicare) or decrease in taxes. It's supposed to "discipline" the Congress on spending. Although discretionary spending -- the appropriations that Congress approves annually for the running of the government -- is not covered, the rule is designed to put significant pressure on Congress to limit spending.
Now House Blue Dogs are pushing to pass this self-imposed rule into legislation. At a time of unprecedented deficits, they want to parade their righteous commitment to cutting spending and balancing the budget. Since Democrats have already imposed paygo rules on their actions in the House and Senate, the legislation is purely symbolic. And the symbolism is utter blather.
For one thing, Blue Dogs are the first to line up to vote for massive spending on wars and adventure abroad, all of which is exempt from paygo rules. Thus Bush's three trillion dollar war in Iraq would not have violated paygo, nor does the special supplemental to fund the continuing war in Iraq and the escalating one in Afghanistan.
Beyond that, the message sent by the bill is wrong headed. In the short term, it puts an emphasis on cutting spending and balancing the budget. But we're in the midst of fighting the worst economic collapse since the Great Depression. In these conditions, with consumers and businesses cutting back, workers getting laid off, families losing their homes, the federal government must step in to boost the economy. Deficit spending is essential, not evil. In fact, as unemployment heads to double digits, states and localities face staggering cutbacks, banks aren't lending, businesses are cutting capacity not expanding it -- we will need to borrow more money to spend on a second stimulus plan. (as Paul Krugman among others argues) Paygo heads exactly in the wrong direction.
In the long term, paygo puts the focus on controlling "entitlement" costs. But virtually the entire long term structural deficit problem comes from projected soaring health care costs. We don't have an entitlement problem; we have to get health care costs under control. Ironically, the same Blue Dogs like Sen. Max Baucus that champion paygo are the ones doing the most to weaken the public option in health care reform, which will do the most to control costs by offering a choice to private insurance.
Paygo also is translated into the need to cut spending and limit tax cuts to balance the budget. In fact, as Clinton's experience showed, the way to balance the budget is to get the economy going. Without growth, budget deficits will increase and should do so.
Washington's dirty little secret is that we need more investment, not less. We're running a debilitating public investment deficit -- failing to invest adequately in areas vital to our future from modern infrastructure to research and development to new energy and education. In the new economy emerging out of the calamity, we need progressive tax reform with the wealthy paying far more in taxes than they do now, and increased public investment.
Finally, as economist Dean Baker argues, paygo is an atavistic throwback to the conservative economics that led us off the cliff. Growth, we were taught, comes from balancing the budget, sustaining a high dollar, deregulating banking, adhering to corporate trade policies, and ignoring the inequality and loss of good manufacturing jobs that resulted. That didn't work out so well. One would have thought that even the Blue Dogs understood that.
This week, progressive legislators will try to figure out where they stand on this lemon. At the very least, they should demand something sensible as a price for holding their noses as the symbolic blather passes. They could demand an investment bank or a capital account in the budget. Either would put the US in the same position as a family or state and local governments, financing investments in buildings or homes or education or research and development rather than budgeting their entire costs in the first year.
Speaker Pelosi supports paygo as a way of keeping the Blue Dogs as least partially on the leash. The question is why do the Blue Dogs so stridently demand it? It's like an ideological tic. They don't seem to understand how deep a hole we are in nor have a clue about how to get out. They simply want to croon the old ditties of a bygone and tawdry age.
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Common sense will tell you that Government investment is only redistribution of wealth not economic growth. When the government spends what it doesn't have, the payment will come in future tax increases, since the poor do not pay taxes this increases the middle class and high income tax payers to pay for the stimulus of the government. We are seeing the result of the first stimulus, in that the consumer and businesses no the taxes are coming and they are not spending in fear that to maintain even close to they same living standard they must get out of debt and save money. That stops the economy cold as we are seeing it now.
If you want to grow the economy give businesses and consumers confidence that they will not be taxed higher in the future so they will not prepare for worse things to come. That causes them to not spend and save more as they are doing. Economic policy has consequences as do unknowns. Fear of the governments passing the cap and trade and fear of universal health care costs coupled with the first stimulus and you the result is high unemployment.
It is NOT "redistribution of wealth". The "payment will come in future tax increases" is incorrect. The stimulus is designed to create jobs that have been lost. Create jobs and you have people that will generate tax revenues. Also, your statement that the poor don't pay taxes is completely false. The poor might not pay much, if any, in income taxes, but they do pay their fair share of payroll taxes (it's a flat rate). The people that don't pay any taxes are the ones that are jobless...
Let's say the workforce is 200 million people. Let's say unemployment is 10%...thus 20 million people are unemployed and not paying any taxes. Let's assume that we could get half of those people working again at an average of $25,000/year. At even a 15% tax rate the tax revenue generated from those people equals $37.5 billion (25,000 x 15% x 10 million people). Now also realize that there are billions upon billions of capital gains dollars that would have been taxed at 20% if not for Bush and his cronies pushing through a tax cut to 15% when he started in office. How many billions of dollars have been lost because of that.
Boy are you off track. First of all any job the government creates will be temporary. Also the government does not create wealth which builds up the GDP. In fact the opposite happens and that is the GDP falls. Can you point out one time that government spending stopped a recession or a depression? No not even FDR could do that his unemployment never dropped below 15% until we sent millions of men to war.
Second yes the poor if they work do pay a withholding tax. However at the end of the year they get a check back that is larger than the taxes withheld. I had this happen to me one year thought the IRS made a mistake so I called them and they said no that was correct. So that is wealth redistribution.
Finally that tax cut Bush did when he took office took the recession that was starting and turned it into a robust economy.
If you honestly believe that the stimulus package formulated by Nancy and her merry band was "designed to create jobs", would you be interested in buying this bridge I have in Brooklyn? Have you read the legislation? Over 8000 earmarks! Creating jobs??? Please tell me how a study on some rodent in Northern California is going to create a bunch of jobs. You've been drinking too much of the Kool-aid. They had a chance to put money into projects that would create jobs and instead put politics before jobs.
The stimulus is designed to create temp jobs, not permanent ones. "Shovel ready" bridge repairs in rural Wisconsin? Once those are completed.
Of course PAYGO doesn't apply to military spending or corporate welfare. It only applies to spending that helps the other 98% of Americans, like health care.
Paygo only doesn't apply to appropriations; I'm unsure of what constitutes "corporate welfare", but I'd imagine that it isn't appropriations that you're referring to. Unless you mean the Omnibus bill, herded through Congress by Democrats and one of the major (though interestingly unsung) pieces of legislation passed this year, in which case I agree.
Mr. Borosage, I too find the bludogs pretty annoying, and we're stuck with an over abundance of them as a result of groups among the Democrats and MoveOne, of which I'm a member, who worked extensively the past couple years to put any Democrat into offices being held by Republicans. It was a positive measure to rid our Senate & House of Bush Republicans, but now we're stuck with these "not a lot better than Republicans" weak Democrats and have to deal with them. Let's hope these same groups find a way to deal with these half measure Democrats and convince them it is best to vote with our own Liberal, Democratic cause.
Robert you wrote, "They could demand an investment bank or a capital account in the budget. Either would put the US in the same position as a family....
Doing so, as a family, requires debt free income. Solvent families do not borrow to fund their needs. The Federal government, operating on the same principle, would have to have debt free currency.
We did have that at one time but were bamboozeled out of it by the Money Trust in 1913. Now, we have the Federal Reserve, from which the Federal Government must borrow its own printed money at interest. How stupid is that?
The least the Dems could do is to legislate a mandatory moritorium on interest charged to the government by the Federal Reserve Banks.
Solving our fiscal problems has to begin with monetary reform. In the absence of which nothing else really works; We can't grow fast enough to generate the revenue needed to finance current debt service, nor can we be taxed or have programs cut in any balanced way to finance debt service. Moreover, Paygo, would impact only discreationary funding not the entire package of appropriations for any fiscal year.
So, we are left with the Lincoln alternative, finance the nations needs with debt free U.S. Dollars not Federal Reserve Notes. Redeem all exisiting debt instruments, liquidating same to eliminate the threat of inflation. Taxes could be reduced even eleiminated since a revenue stream would not be needed to finance debt and debt service.
See Robert L. Borosage's Profile
Solvent families always finance their major needs. That's why mortgages, student and auto loans exist. You don't have to be a wastrel to carry debt.
Second, paygo doesn't apply at all to discretionary spending, only to taxes and entitlements.
As I understand your suggestion, you simply want to print money to payoff the debt. That's the road to Weimar. IF we get the economy going again -- no small thing -- and get health care costs under control -- a very big thing -- then this country doesn't face a real debt problem. We still should raise taxes to cover necessary expenditures -- it is ridiculous pretending to be an advanced country and raising 17% GDP in taxes. We'll have to pay for the investments vital to our future from modern infrastructure to excellent education to health care. If not, we can decline to a shabby, inefficient tourist center -- something like Britain after the world wars exhausted and bankrupted the country.
So your argument is that we need to spend another XXX Billion dollars in order to "stimulate" the economy and to "control" health care costs. Then we need to institutionalize this spending by raising taxes so that we can be an "advanced" country.
I am interested in the modern evidence that government spending can get the economy going. Most attempts to do so, including the most recent one, seem to be obvious failures.
I am also interested in the evidence - or even the rational argument - that somehow government intervention can control health care costs. Our impending entitlement crisis is not caused by the evil, greedy insurance companies. It is caused by a systemic failure of government to face reality. We have known for decades that the demographics didn't add up and yet politicians continued to buy votes by expanding these programs. Increasing the size and influence of government will not solve this problem.
Sir,
Yes, solvent families always finance their major needs, however, solvent families do not increase their debt year after year after year as our federal government has done. Solvent families pay down their debt and/or maintain a cushion of liquid asset to provide for the day when earnings decline. No sign of intelligent life in Washington nor in your column.
Actually, one could argue we ARE an advanced country BECAUSE we've historically looked to keep taxes as a percent of GDP low. Well....un
With DINOs like that, who needs Republicans to muck it up some more?
DLC/BLUE DOGS = CHAMBER OF COMMERCE pocketpoolplayers
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