Sunday, February 27, 2011

Wisconsin - Latest Front in the Public Worker Battle, A Budget Compromise of Sorts?, What Are Our Spending Values?

Of Public Pensions and Unions
This battle has been brewing for a long time. It started in Washington DC, where former School Superintendent Michelle Rhee battled the teacher's unions over merit pay and tenure. It moved to New Jersey, where rising star Governor Chris Christie demanded that public workers contribute to their benefits. It moved to San Diego, where the township abandoned traditional pensions in favor of 401K matches, And it spilled over into the streets in Wisconsin, where public worker angrily protested a plan by the Republican majority to force public unions to decertify, essentially stripping public workers of the ability to unionize.

The battles is over public unions and the cost of public benefits. First, let's examine a brief history lesson. The strength of the union movement in this country, which began in the manufacturing sector, reached its height in the 1950s and 1960s, as steel workers, auto workers and other manufacturing workers, who numbered in the millions, joined up to demand better pay and benefits, shorter work hours and improved safety. Since that time, unions in the private sector have been on a steady decline. Manufacturing jobs have left for overseas or been lost to automation. And what workers remain in manufacturing have abandoned unionization more and more as federal regulators have largely dealt with the extreme safety and environmental violations of years past and manufacturers have wised up and offered better pay and benefits to non-union employees to discourage organization. In fact, union membership in the US is at an all-time low, with a mere 8% of workers now members of a union local.

The last vestige of union power in this country is among public workers. Teachers, police officer, fire fighters, garbage collectors, you name it, most government employees are unionized. And those unions have been effective. While the private sector is almost completely through a 20 year migration away from defined benefit pensions, free health care and other plush benefits of years past, they are still in full force in the public sector. And state and local governments, while they have been quick to agree to generous pensions, have been very slow to fund them, with up to $15 trillion in unfunded pension liabilities saddled on the backs of state governments by some estimates.

Now, as the recession and the housing collapse have sapped state coffers, the battle over those generous benefits is in full force. And it is on display in Wisconsin, which has taken the most radical step to date, of moving to legally prohibit state workers from joining a union.

A few thoughts. First of all, I'm no great fan of modern unions, especially public employees unions. Opposing merit pay for teachers and opposing the dismissal of corrupt police officers and incompetent DMV employees isn't a great way to earn my love. Neither is failing to recognize the economic reality of the times or the obligations that public employees have to the taxpayers.

Having said that, I think the whole Wisconsin thing is an overreach. I have a radical idea. Rather than forcing the Wisconsin unions to decertify, couldn't the GOP just simply not agree to their demands? No pay or benefits package can or will exist that is not agreed to by the government. Unions or no unions, the government holds all the cards, they simply have to play them.

Full on display have been the worst of both parties. Union members comparing themselves to Egyptian protestors (as if!) and their democratically-elected Republican officials to Hitler (aren't we all a little tired of those intellect-insulting comparisons?). On display by the right? A naked attempt to sap the Democratic union power base and debasement of the protestors first amendment rights.

Can't we all grow up a little?

Boehner: No Shutdown Looming
John Boehner is no fool. Unlike Newt Gingrich, the Speaker of the House realizes the damage that was done to the GOP when it went toe-to-toe with then President Clinton over the budget in 1995, a battle that led to a government shutdown that helped to lead to a resounding re-election victory for Clinton in 1996. Boehner was explicit today that he would do everything possible to prevent a government shutdown, when the current continuing resolution expires next Friday and showed an openness to agree to a short-term measure to keep the government operating while Republicans negotiate a compromise with Senate Democrats and the President, although he was clear that any such measure would be at a reduced rate of spending.

Boehner is also now on record that the Republican budget proposal will address entitlement reform. This is progress. Entitlement reform (along with defense spending reform, which Boehner was notably silent on) will be the key to solving the deficit, not the nickels currently being argued over around discretionary spending. Let's just hope the GOP plan doesn't include a privatization of Social Security, an idea which makes the funding gap worse and subjects the federal safety net to the risks of the market. Stick to retirement age, tax ceilings and the tax rate, Mr. Boehner, and don't look to gamble with poor seniors primary source of income.

On the budget, I predict the GOP will get most of what it wants. President Obama has shown little backbone on economic issues, as evidenced by the "compromise" on the Bush (now Obama) tax cuts, where the President gave ground on essentially everything. Plus, the fact remains, the President can't get a budget that doesn't pass the GOP-controlled House, so they still hold all the cards.

What Spending Tells Us About Values
This past weekend, I was at my parent's house for lunch and dinner. My father, a retired defense contractor, is a committed economic conservative. He has voted Republican most of his life, hates high taxes and detests government spending on almost everything except the military. We agree on some things economic (farm subsidies drive both of us nuts!) and disagree on others (I would like a lot less military spending, he has long been a defense hawk.) But when we talked health care, he had a pleasantly pragmatic view.

You see, he had several back surgeries about a year ago. He noted that if he had paid for them himself, the total cost would likely have been close to a hundred thousand dollars. That's untenable for any private party to manage, he conceded - people have to have access to insurance. He also isn't a fan of single payer: "in the UK, they would just write me a prescription for some narcotics and send me on my way" he said, also a solution he didn't like. "So what do we do?", I asked. "I think," he said, pausing to consider the options, "that we are all going to have to get used to spending more on health care than we are used to."

And there you have the rub. You can't have world class care for everyone and not pay a premium for it. You can't continually reduce costs and improve care. We have to decide what kind of system we want. And that involves choices. Cost versus quality. Access versus innovation. How we balance these things reflect our values and determine our economy. The problem is, we are still having a sound-bite debate. This isn't about individual mandates or Medicare reimbursement rates. It is about how we design a system we can afford that contains choices that reflect our values. And that is no easy task. Obamacare doesn't solve it. But the GOP has offered no real alternative, other than the status quo, which is even more unsustainable.

Stay tuned. This issue isn't going away.

Monday, February 21, 2011

61 Billion Things to Debate, 2012 Congressional Showdown

House GOP Passes a 2011 Budget
We are very late in the season to be talking about the budget for the year. You see, the government's fiscal 2011 budget actually began on October 1st of 2010, but as the Democratically controlled Congress of the time essentially punted on the budget, here we are.

Not that all of the Democrats reasons were bad. Don't ask, don't tell repeal, debating the Bush/Obama tax cuts (not the ending I would have liked, but an important issue nonetheless), and the START Treaty consumed the waning days of the last Congress. And not that they didn't try - an omnibus bill was on the agenda for the lame duck session of Congress, but was too expensive for the tastes of Senate Republicans, who preferred to let the incoming, more conservative congress determine the rest of the budget. In place of a budget, Congress simply put in place a couple of continuing resolutions that, in essence, kept government funded at least years levels through March 4th. Hence the showdown that we see now.

What passed the House was more or less true to the pledge that Republicans had made to cut $100B in domestic discretionary spending in year one. I say more or less, because the budget they passed cuts only $61B from the current levels of funding, but cuts $100B from the original request that President Obama had made for the year. ToMAto, Tomato.

I've written many times, but will make the point once more that this is, in large measure, a sideshow to the real budgetary choices that will have to be made. Those involve entitlement reform and military spending. You could cut 100% of domestic discretionary spending and not balance the budget. In fact, the $61B in cuts reduces this year's deficit by a whopping 4%. But I digress.

The budget cuts are brutal. Cuts to traditional conservative targets, to be sure. Planned Parenthood is axed. So is NPR and PBS. Home heating oil subsidies for poor people? Massively cut. Health care implementation funds? Forget it. Interestingly, Amtrak funding somehow survived the bevy of amendments that were debated in the House.

The final product passed the House 235-189 with all 186 Democrats who were present voting against the bill, joined by 3 Republicans, with the balance of the GOP members of the House voting in favor.

The bill has been essentially labeled a non-starter by Senate Democrats, who, in spite of a weakened majority in the Senate, are still strong enough to block bills they don't like.

Congress is in recess this week, which means it won't reconvene until February 28th. The current continuing resolution expires on March 4th, which means that Congress has one week to work out some sort of deal. I see three possibilities:
(1) Democrats and Republicans come to a fast deal
This seems unlikely and would almost certainly have to involve Democrats giving most of the ground on proposed GOP cuts. The GOP isn't in the mood to give too many concessions, given the strength of their showing in the past election and their belief that their charter is to cut spending. Democrats might give a lot of ground in order to prevent a government shutdown (look how fast they caved on extending the Bush tax cuts) but this scenario seems unlikely.
(2) Agree to pass another temporary measure
Fund the government for another month while they work something out. This seems like the most likely scenario and one that the GOP appears somewhat open to, although they are unlikely to agree to an extension at current levels of spending unless they had firm commitments on what the final budget might look like.
(3) Shutdown the government
While some on the far right seem to be itching for a government shutdown, they would be wise to remember the battles the GOP lost with President Clinton over government shutdowns. This scenario seems more likely than a fast deal for the whole year but less likely than a temporary funding measure.

Also looming is the need in late April to raise the debt ceiling. Some of the tea party loyalists want the debt ceiling hike to be voted down. But they have offered no credible plan for how the government could continue operating without continuing to accrue debt, at least in the short-term (are you going to cancel Social Security for current recipients tomorrow? Lay off all of the military? No good short-term options), so in all likelihood, the debt ceiling hike will pass fairly easily, assuming a deal is struck on the budget -- hard not to vote for the debt ceiling if you voted for the budget that caused it to need to be raised.

At least we are finally having a debate about deficits and spending. That was my hope with the divided Congress.

2012 - A Tough Senate Map for the Democrats
Every Senate election cycle is an echo to the cycle 6 years earlier -- that is, each party has to defend the seats it gained 6 years prior. 2006 was a great year for the Democrats, which makes 2012 a tough year on the map. Here is a preview of the key races.

Likely Democratic Holds (10)
California - Diane Finestein is up for re-election and even in a cycle as strong as 2010, Republicans have shown no capability to win at the statewide level in Cali.
Delaware - Tom Carper is up for re-election in another state the Dems held in 2010. Maybe if they nominate a Mike Castle, they could have a shot, but if you are Mike Castle, do you want anything to do with a state GOP that bumped Christine O'Donnell ahead of you in 2010?
Hawaii - Daniel Akaka is an institution in the Senate and in the liberal state of Hawaii. His seat should be safe.
Maryland - Ben Cardin has not yet announced his intentions, but either way, Maryland is not exactly a hotbed of conservatism, with Cardin winning fairly easily last cycle and Barbara Mikulski winning in a near walk in 2010.
Michigan - While Michigan has historically been more purple than pure blue, Debbie Stabenow has the advantage of incumbency and the benefit of demographic shifts in the state that will likely make it more liberal by 2012.
Minnesota - Could be in play in a big GOP year, but more than like Amy Kloubachar is safe in the home of Walter Mondale.
New Jersey - sure we elected Chris Christie to the state house, but in the arena of national politics, New Jersey is still a reliable blue vote. Bob Menendez should win fairly handily, especially with the only state GOP star in the Governor's mansion.
New York - Kirsten Gillebrand has to run for a full term, since the election she won last November was a special election for the last 2 years of Hillary Clinton's term. She won easily in the GOP-dominated 2010, so there is no reason to think that she won't again, especially being buoyed by victory on the 9/11 first responders bill and Don't Ask, Don't Tell repeal.
Rhode Island - Sheldon Whitehouse toppled liberal Republican Lincoln Chafee 6 years ago. Rhode Island hasn't gotten any more conservative and Whitehouse is now an incumbent.
Washington - Maria Cantwell should be safe in the home of the green movement. Washington is a fairly reliable Democratic state.
Wisconsin - Herb Kohl got 67% of the vote in the last cycle. Even assuming that 2012 won't be as good a year for Democrats as 2006 was, he should win handily.

Lean Democratic Holds (3)
West Virginia - Joe Manchin has to run for a full term. West Virginia is a right-leaning state, but Manchin is a right-leaning kind of Democrat, who managed to win against a GOP tidal wave in 2010.
Ohio - Sherrod Brown will likely face a stiff challenge in this swing state, but he has the advantage of incumbency and is relatively well-liked in the state.
Pennsylvania - Bob Casey Jr.'s brand of socially and economically moderate policies and the brand name he has carried on from his father should make him a favorite in 2012.

Democratically Controlled Seats Likely to Be Competitive (7)
Florida - Bill Nelson is running for re-election and has already drawn three Republican challengers. There is chum in the water after Marco Rubio's resounding win in 2010 and Florida is a classic swing state.
Missouri - Claire McCaskill faces a similarly crowded GOP field...and Missouri is to the right of Florida in its politics.
Montana - Jon Tester eeked out a 1% win in the Democratically-dominated 2006 cycle, but he is running in libertarian conservative Montana and his politics are clearly to the left of the state. It'll be a tough fight for Tester.
Nebraska - Ben Nelson often separates himself out as the most moderate member of congress and the most conservative Democratic Senator. But he also cast the crucial vote for health care reform, which will no doubt be front and center in the campaign in this very conservative state.
New Mexico - Jeff Bingamin is retiring, leaving the race wide open in this swing state.
North Dakota - Kent Conrad is retiring, which probably makes this the single most at-risk seat for the Democrats. Given North Dakota's conservative politics, it is almost hard to imagine a scenario where the Democrats hang on to this seat.
Virginia - Jim Webb's retirement (possible to replace Robert Gates at Defense when he finally retires, although that is just speculation) opens the door to the man he ousted - former Governor and former Senator George Allen. If former Democratic Governor Tim Kaine runs, this race feels like a toss-up, if he sits it out, the dynamics seem to favor the GOP.

Likely Independent Holds (1)
Vermont - Bernie Sanders is an institution in Vermont. The only proud, avowed Socialist in congress, he'll likely go back for 6 more.

Independent Seats Likely to be Competitive (1)
Connecticut - Joe Lieberman is retiring, which will likely put this seat back in Democratic hands. Such a pick-up wouldn't shift the operating majority in the Senate.

Likely Republican Holds (5)
Indiana - Richard Lugar may face a primary challenge but either way, the seat seems unlikely to fall into Democratic hands. Sure Indiana voted for Obama, but it is still far more conservative than the country as a whole.
Mississippi - If Roger Wicker even draws Democratic opposition, it will be fairly token...this is probably the GOP's safest seat.
Tennessee - Bob Corker should be safe in heavily Republican Tennessee.
Texas - in spite of Kay Bailey Hutchinson's retirement, Texas is a reliably Republican state and the GOP field appears stronger than the Democratic field. Not likely to change hands.
Utah - This IS Orrin Hatch's seat and he is running for another term. He won 62% of the vote in heavily Democratic 2006.
Wyoming - John Barasso won 73% of the vote in 2008 in the special election for his seat. Given that 2008 was a pro-Democrat year, he should do about as well in election for a full term.

Lean Republican Hold (2)
Arizona - Jon Kyl is retiring, leaving the field wide open. But Arizona is still right of center and the Arizona GOP has one of the strongest organizations in the country.
Maine - Olympia Snowe is running as a Republican in a Democratic state. But she is also a moderate and has historically been popular back home, wining a whopping 74% of the vote in 2006. If she loses a primary challenge from the right, all bets are off.

GOP Held Seats Likely to Be Competitive (2)
Massachusetts - Scott Brown has to reprise his miracle win in a special election that rested control of Ted Kennedy's seat from the Democrats. Not an easy task in deep blue Massachusetts, where he is sure to draw a strong competitor.
Nevada - a swing state to be sure and John Ensign has had his share of scandal while in office, but he still holds the advantage of incumbency and has no announced challengers yet.

A very tough map for the Democrats. 2 to 4 competitive races for GOP seats and 7 to 10 seats to defend. If it's a strongly Democratic year, they might hold the Senate, if it's a strong GOP year, they could be down to 44 seats or less. In a middle of the road year, you'd expect them to lose around 3 seats, just enough to give the GOP control of the Senate.

The House is another store, because it is an echo to 2010, not 2006, and, of course, the GOP already has the majority. Also, add in the layer of complexity of redistricting, which, given population trends in the census, should give a boost to the GOP, and you have a year where the Democrats may make some small inroads, given that the GOP won virtually every competitive seat in 2010, but are unlikely to gain the majority.

Obviously, a great deal more to come. Stay tuned.

If you like this site, tell your friends.

Sunday, February 13, 2011

The Great Spending Showdown, The Never-Starting 2012 Presidential Race, Freedom in Egypt

Note: My apologies for lack of recent posting activity. I have been very busy with my real job and the political news has been very slow. I intend to post more frequently, hopefully at least once per week, until the Presidential campaign really picks up, at which point my posts should come fast and furious.

Mark Your Calendar for March 4th
The pending battle over government spending was preordained in the lame duck session of Congress late last year, when a temporary continuing resolution, which kept the government funded through March 4th was passed instead of a full budget. The Senate GOP wanted this battle - they wanted the coming House GOP majority and enhanced minority in the Senate to have a crack at the budget rather than simply allowing Democrats to pass one more budget before the incoming congressional class made it to town.

Couple this budgetary showdown with the looming fact that the federal government will hit its legal borrowing limit, possibly sometime in April, and will require a raising of the debt ceiling to continue operating, and you have quite a philosophical showdown on your hands.

What all of this sets up is an interesting showdown of sorts. The GOP had pledged to cut $100B from the federal budget in year one, a Herculian task if you take entitlements and defense spending out of the mix, two areas that are almost sure not to be touched in the next three weeks. After initially waffling on the pledge, the GOP has proposed bold cuts to the budget that slash deep, including major cuts in federal education funding, assistance to the poor, agriculture subsidies and a whole host of other things. President Obama, for his own part, seems surprisingly receptive to major cuts in the federal budget. My suspicion is that the House GOP will get most of what they really want. Why? The control the purse strings. President Obama can't spend a dollar that the GOP House doesn't authorize. That's what shared accountability is.

My perspective on this is that while it is encouraging to see focus on reducing the deficit beyond campaign season, the cuts being discussed now are a very small baby step. Consider this -- the tax cuts just extended by Congress and the President cost over 4 times annually the maximum amount that is being discussed as on the table for spending cuts. I don't question the opportunity to reduce domestic discretionary spending, It's just that the very painful cuts that are being proposed solve less than 1/15th of the federal budget deficit. The real money is in tax reform (read tax increases or minimally repealing the Bush/Obama tax cuts), defense spending (read reduction of foreign operations and military weaponry) and entitlements (read Medicare and Social Security.) I'm okay with this as an opening salvo, but the political community better get to the heart of the issue after this year's budget is established.

President Obama missed a big opportunity in his State of the Union speech by not embracing the proposal of the deficit reduction commission that he pushed for. They came back with substantial ideas that, while they may not be perfect, were a very good first cut at significantly reducing the deficit. But their proposal is being allowed to wither on the vine and it is likely nothing will come of it. What a shame.

When Will 2012 Start?
The nation's largest gathering of conservatives, the CPAC convention is just wrapping up and it strikes me, as straw polls are held (Ron Paul, whose energetic supporters devote a lot of energy to winning symbolic straw polls, was the winner again, followed by Mitt Romney), that this cycle's Presidential campaign is off to a VERY slow start.

In 2007 (the correlated year in last cycle to 2011), then-Senator Barack Obama declared his candidacy on February 10th. It is now February 13th and there is not a single declared GOP candidate. We don't really Newt Gingrich in? Is John Huntsman's resignation as ambassador to China a precursor to a Presidential bid? And what in the world will Sarah Palin do?

It's that last question -- the intention of the former Alaska Governor, that probably accounts for a large measure of the uncertainty. Whether Palin runs or not dramatically changes the field, given her passionate group of hardcore conservative supporters. If she gets in, other right-wing candidates will likely sit it out as moderates such as Mitt Romney and TIm Pawlenty will set-up a moderate vs. conservative battle. If she stays out, other conservative candidates such as Mike Huckabee and Newt Gingrich have a much more real shot.

People complained last time around about the never-ending campaign. It is certain at this point that the 2012 campaign will be shorter than the one in 2008. How short still remains a question.

I expect many of the candidates...Pawlenty, Gingrich, Huckabee, Romney, to get in the race in either March or April, but high-profile possibles like Palin could conceivable wait longer. The debates start in June, so I expect the whole field to be filled in by then.

Personally, I can't wait for the campaign to start. I live for this sort of thing.

Freedom in Egypt
We can all root for this to end well. Grass roots protestors, risking life and limb to stand up to an authoritarian government, have succeeded in toppling it. What happens next is anyone's guess. A temporary military government could pave the path for true Democracy in Egypt or it could be a precursor to even more authoritarian and radically religious government. We all should root for the people of Egypt who seek to breathe the free air.