Bipartisan Gridlock Is Striking the Right Balance
To the casual observer and most members of the mainstream media, or political system looks an utter mess as it relates to the federal budget. In the past two years, we have almost shut the government down just to agree to pay our bills, we have gone down to the wire to agree to a tax policy for this year and we have implemented across-the-board spending cuts without rhyme or reason and trade-offs of government programs.
Taking a step back, while the process is certainly not working perfectly, the split control of the budgeting process between House Republicans and the President is producing positive results.
First, let's think about the deficit. The only modern role model for a balanced budget that we have is during the Clinton administration. During that time period, spending averaged between 19% and 20% of GDP and taxation also averaged between 19% and 20% of GDP. The tax side was achieved through the 1993 tax hikes, which included an increased gas tax and increased income taxes, including the creating of a 39.6% bracket for those making over $250K. The revenue side was contained by cuts to defense and welfare reforms, as well as a booming economy that led to low costs of things like unemployment benefits.
Fast forward to 2011. Revenues had fallen to 15.4% of GDP, a Post-World War 2 low. This was a combination of the Bush tax cuts and the Obama payroll tax cuts, which created historically low tax rates and, through various exemptions and deductions, excluded a large percentage of the tax base. Spending, meanwhile, had grown to 24.1% of GDP, increased by heightened military spending, new Medicare drug benefits, extended unemployment benefits, homeland security spending and growing entitlement costs as boomers retired (Obama's stimulus package and Bush's TARP program had both largely concluded their costs by this point.) Essentially, up 4-5% of GDP in spending, down 4-5% of GDP in revenue from when we were in balance.
Those of us who would take a rational, fact-based approach, would say that we clearly had a problem of wanting the government to do a whole bunch of new things (drug benefits, wars) combined with more expensive existing things (Medicare, Social Security) while paying less for them. Not a sustainable path. The obvious path would be to try to get back to Clinton-era levels of taxation and revenue. That sounds easy but isn't - we were still entangled in Iraq and Afghanistan, entitlements were going to inherently be more expensive if nothing systemic was done and people had reset the baseline in their mind and would consider Clinton-era rates a massive "tax hike".
The gridlock in 2011, while walking on the edge of a knife, produced a spending agreement that substantially reduced federal discretionary spending out of the gate and produced the sequester. The recent fight between the President and congress produced higher tax rates, both a repeal of the Obama payroll tax cut and a partial repeal of the Bush tax cuts for higher earners. The sequester further reduced spending.
So what has happened? The 2013 budget year, which runs October 2012 - September 2013 paints an incomplete picture as the changes are only partially implemented (the tax hikes will only be effective for 9 of the 12 months and the sequester spending cuts for only 7 of the 12 months.) Even so, in fiscal 2013, revenues have risen to 17.8% of GDP and spending has fallen to 23.3% of GDP. Next year, revenues will further rise to 18.7% of GDP and spending will further fall to 22.6% of GDP, leaving a deficit of only 3.9% of GDP, versus the 2011 level of 8.7% of GDP.
In other words, the range of budget fights have increased taxes by 3.3% of GDP and cut spending by 1.5% of GDP. That's fairly balanced, although there is clearly more work to do. The big area of spending opportunity is clearly entitlements, which to-date have been untouched. There are also still large opportunities in the defense budget, which is still running way above 1990s era levels.
But what about the arbitrary nature of the spending cuts? While there has been a lot of hand-wringing over the across-the-board nature of the cuts, this is not that different from what happens in private industry all the time. If you work in a private corporation, have you ever experienced a travel ban or a freeze on all raises? These are private sector examples of exactly the same behavior - it may not be the most precies way to cut spending, but it is simple to implement and allows each department manager to make trade-offs within the budget that they know the best. The sequester isn't a bad thing in this regard.
We are making progress on the budget. But Congress and the President must be willing to make some uncomfortable choices about entitlements over the next few years. Entitlements are sucking up more and more federal money as the population ages and Medicare inflation continues to rise.
Rob Portman: Late to the Party, But Right
Rob Portman's revelation that he has a gay son and that he has come to support gay marriage is courageous for a man who is viewed as a leading elected conservative. His personal story of coming to understand his son's orientation and reconciling it with his previous held religious and social beliefs is insightful and touching.
Portman may be late to the party, but to his credit, he is but a few months President Obama in coming around.
What is most fascinating to me about Portman's shift is that there isn't much anger among prominent conservatives on the issue. While there are still screaming so-called "values voters", more and more young conservatives are embracing the notion of the GOP as the party of liberty and realize that embracing that notion means providing liberty to everyone, not just straight people.
While I could criticize Portman for not coming forward with these views last year when he was a contender for the VP spot, I could make the same criticism of President Obama for not supporting this view in 2008, when gay marriage support would have been a clearer political negative.
I welcome Rob Portman to the fold of those fighting for marriage equality and hope more conservatives follow his and Dick Cheney's lead on this issue.
If you like this site, tell your friends.
Showing posts with label Bush Tax Cuts. Show all posts
Showing posts with label Bush Tax Cuts. Show all posts
Sunday, March 17, 2013
Wednesday, December 15, 2010
Might the Lame Duck Be Less Lame Than I Thought?
The Unfunded Giveaway Advances
Last week, I went through in great detail, all the reasons why I thought and still think that the deal reached between President Obama and Congressional Republicans was a bad deal for America. The deal appears inevitable at this point, receiving massive support in final passage in the Senate, by a whopping 81-19 margin, with only 13 Democrats, 5 Republicans and Independent Bernie Sanders of Vermont, who entered Senate folk lore with an impassioned eight and a half hour speech on the Senate floor this past weekend that picked apart the provisions of the deal one by one.
The measure now moves to the House, where a vote is expected early next week, and save for a few liberal holdouts (and possibly a couple of Conservatives that don't like the unemployment extension provision), it seems sure to pass by a broad margin. The one potential hiccup is that some liberal House members are vowing to vote on an amendment to modify the estate tax provision. Rich dead people are unpopular enough in a House that is still Democratic for another couple of weeks, that it could actually pass, which might break apart Republican support for the overall measure. But my guess is that House leadership ultimately whips most of the liberals in line and the measure will pass basically unmodified.
Interesting constitutional note: students of the constitution no doubt know that it states that bills impacting taxes and spending must originate in the House of Representatives, not the Senate. One might wonder who then the Senate can have first passed a bill which will now be voted on in the House that has exactly those impacts. The answer lies in technical legislative process. The Senate bill is technically an amendment to a non-controversial air travel infrastructure bill that the House had already passed. The constitution allows the Senate to amend tax and spending bills already passed by the House, so the Senate has simply amended the air travel bill to incorporate the tax and spending measures and the House will actually be voting to concur with the Senate amendment. Hardly seems like what the founders intended in terms of control of the purse strings, but it is technically within the constitutional rules.
Lots of Action Yet to Come
With the deal on taxes and spending, the deck has been cleared for all sorts of action on other fronts, as a unified Senate GOP caucus had vowed to filibuster ALL legislation until a deal was reached on taxes and spending. The Democrats have a short couple of weeks before this congress ends, but it actually appears there is the potential to do a few big things.
(1) The START Treaty
Continuing our constitution lesson, treaties require ONLY Senate approval (the House does not vote on them), but require a 2/3rds vote for ratification. The START treaty renews nuclear reduction efforts with Russia that have been through many rounds, dating all the way back to the Reagan Administration. It is a significant deal that would reduce stockpiles of the US and Russia by 25% over the coming couple of decades. And it appears that there may be sufficient bipartisan support to obtain the 67 votes that are needed for passage. The Senate just voted tonight to commence debate on the treaty. Filibuster is not at issue in this case as the 67 votes needed for ratification exceed the 60 vote requirement to cut off debate.
Odds of Passage? High.
(2) Don't Ask, Don't Tell
Amazingly, this outdated and discriminatory policy may finally die this year. The original strategy had DADT repeal tied to the Defense authorization bill, but that has been bogged down in the Senate as it is a complex bill that touches on many aspects of defense policy and even some repeal supporters didn't like it muddying the waters of other defense issues.
The new strategy, of a standalone bill that repeals the policy, seems to be bearing fruit. The House has already passed the measure today, by a 250-175 vote, mostly along party lines (15 Republicans voted for, 15 Democrats voted against, all of the rest voted the party line.) And the support seems to be there in the Senate. The last 4 Moderate Republicans standing: Susan Collins and Olympia Snowe of Maine, Scott Brown of Massachusetts (who has been quite a pleasant surprise in his willingness to work across the aisle) and newly crowned Tea-Party killer Lisa Murkowski of Alaska have all expressed support for the standalone measure (in a technical sense, she is an elected Republican until January, at which point she becomes an elected Independent who caucuses with the GOP.) It appears that at least 55 of the 56 Democrats in the Senate support repeal (Ben Nelson, as usual, is a question mark) and both Independents (Joe Lieberman and Bernie Sanders) have been vocal advocates of repeal. By my math, this gives the repeal bill the support of 61 current Senators, more than the 60 needed to stop a GOP filibuster.
Odds of Passage? Surprisingly, high.
(3) The DREAM Act
The Obama Administration-backed effort to provide a path to citizenship for people whose families came to the US illegally when they were children and who serve in the armed forces appears to potentially have the votes to pass. Passage in the House appears assured if it is brought to the floor prior to January 5th (when the new GOP majority arrives) and there appears to be 55 committed "yea" votes in the Senate, including conservative Republican Senator Orrin Hatch of Utah, who is one of two primary sponsors of the bill. If the Democratic leadership can get the fence-sitting Democrats to vote yea, Hatch's support, along with the support of Bob Bennett of Utah, Lisa Murkowski of Alaska and Dick Lugar of Indiana would potentially give the bill 62 votes, more than the 60 needed to break a filibuster.
The headwinds the bill faces are several though. Firstly, it is clearly a lower priority on the Senate category than the START treaty and DADT repeal. Secondly, 3 Democrats, Ben Nelson of Nebraska, Mark Pryor of Arkansas and Jon Tester of Montana are committed "nay" votes, meaning that at this point there really are only 59 votes for passage, not 62. And Kay Hagan of North Carolina and Max Baucus of Montana are leaning nay votes. So, now you are down to 57. This makes getting to 60 difficult, although there may be a few more Republicans (such as Susan Collins) that break for the bill.
Odds of Passage? I'm having trouble making the math work, so I'll say low-to-moderate.
Also on the docket before the end of the year is passage of a bill to fund government operations for the rest of this fiscal year (through next September.) Regrettably, once again, Congress failed to pass the requisite appropriations bills prior to the start of the fiscal year this past October, so what we have had is a cobbled-together set of continuing resolutions (I've written extensively over the past year on how destructive this process is, you can refer back to my posts from last September and October for more information), with the latest expiring this week. The House has passed a full-year continuing resolution, which basically keeps Fiscal 2011 spending at 2010 levels by a narrow 212-206 margin (Republicans felt that cut should be more significant as did some Blue Dogs, some liberals wanted a higher level), but has yet to be debated in the Senate. There is still significant disagreement over how to proceed, with many Senate Democrats preferring to pass an omnibus budget rather than simply continuing last year's funding levels (I agree in principle, although the Senate-drafted bill appears to be laden with pork not contained in the House bill.) The Senate is not scheduled to take up debate on the measure until Friday and bill opponents have threatened to force the entire bill, which nears 2,000 pages, to be read aloud prior to debate (Senate rules call for all bills to be read on the floor and while this requirement is routinely waived without objection, only 1 Senator has to object to require the reading), which could potentially push voting on the bill into the middle of next week.
So, there are still some potential significant accomplishments on the table for the lame duck congress. But there is also a lot to sort out in a few short days. Congress was attempting to be home by Christmas, but that may not be possible if they want to finish all of this business.
It should be a busy couple of weeks in Washington.
If you like this site, tell your friends.
Last week, I went through in great detail, all the reasons why I thought and still think that the deal reached between President Obama and Congressional Republicans was a bad deal for America. The deal appears inevitable at this point, receiving massive support in final passage in the Senate, by a whopping 81-19 margin, with only 13 Democrats, 5 Republicans and Independent Bernie Sanders of Vermont, who entered Senate folk lore with an impassioned eight and a half hour speech on the Senate floor this past weekend that picked apart the provisions of the deal one by one.
The measure now moves to the House, where a vote is expected early next week, and save for a few liberal holdouts (and possibly a couple of Conservatives that don't like the unemployment extension provision), it seems sure to pass by a broad margin. The one potential hiccup is that some liberal House members are vowing to vote on an amendment to modify the estate tax provision. Rich dead people are unpopular enough in a House that is still Democratic for another couple of weeks, that it could actually pass, which might break apart Republican support for the overall measure. But my guess is that House leadership ultimately whips most of the liberals in line and the measure will pass basically unmodified.
Interesting constitutional note: students of the constitution no doubt know that it states that bills impacting taxes and spending must originate in the House of Representatives, not the Senate. One might wonder who then the Senate can have first passed a bill which will now be voted on in the House that has exactly those impacts. The answer lies in technical legislative process. The Senate bill is technically an amendment to a non-controversial air travel infrastructure bill that the House had already passed. The constitution allows the Senate to amend tax and spending bills already passed by the House, so the Senate has simply amended the air travel bill to incorporate the tax and spending measures and the House will actually be voting to concur with the Senate amendment. Hardly seems like what the founders intended in terms of control of the purse strings, but it is technically within the constitutional rules.
Lots of Action Yet to Come
With the deal on taxes and spending, the deck has been cleared for all sorts of action on other fronts, as a unified Senate GOP caucus had vowed to filibuster ALL legislation until a deal was reached on taxes and spending. The Democrats have a short couple of weeks before this congress ends, but it actually appears there is the potential to do a few big things.
(1) The START Treaty
Continuing our constitution lesson, treaties require ONLY Senate approval (the House does not vote on them), but require a 2/3rds vote for ratification. The START treaty renews nuclear reduction efforts with Russia that have been through many rounds, dating all the way back to the Reagan Administration. It is a significant deal that would reduce stockpiles of the US and Russia by 25% over the coming couple of decades. And it appears that there may be sufficient bipartisan support to obtain the 67 votes that are needed for passage. The Senate just voted tonight to commence debate on the treaty. Filibuster is not at issue in this case as the 67 votes needed for ratification exceed the 60 vote requirement to cut off debate.
Odds of Passage? High.
(2) Don't Ask, Don't Tell
Amazingly, this outdated and discriminatory policy may finally die this year. The original strategy had DADT repeal tied to the Defense authorization bill, but that has been bogged down in the Senate as it is a complex bill that touches on many aspects of defense policy and even some repeal supporters didn't like it muddying the waters of other defense issues.
The new strategy, of a standalone bill that repeals the policy, seems to be bearing fruit. The House has already passed the measure today, by a 250-175 vote, mostly along party lines (15 Republicans voted for, 15 Democrats voted against, all of the rest voted the party line.) And the support seems to be there in the Senate. The last 4 Moderate Republicans standing: Susan Collins and Olympia Snowe of Maine, Scott Brown of Massachusetts (who has been quite a pleasant surprise in his willingness to work across the aisle) and newly crowned Tea-Party killer Lisa Murkowski of Alaska have all expressed support for the standalone measure (in a technical sense, she is an elected Republican until January, at which point she becomes an elected Independent who caucuses with the GOP.) It appears that at least 55 of the 56 Democrats in the Senate support repeal (Ben Nelson, as usual, is a question mark) and both Independents (Joe Lieberman and Bernie Sanders) have been vocal advocates of repeal. By my math, this gives the repeal bill the support of 61 current Senators, more than the 60 needed to stop a GOP filibuster.
Odds of Passage? Surprisingly, high.
(3) The DREAM Act
The Obama Administration-backed effort to provide a path to citizenship for people whose families came to the US illegally when they were children and who serve in the armed forces appears to potentially have the votes to pass. Passage in the House appears assured if it is brought to the floor prior to January 5th (when the new GOP majority arrives) and there appears to be 55 committed "yea" votes in the Senate, including conservative Republican Senator Orrin Hatch of Utah, who is one of two primary sponsors of the bill. If the Democratic leadership can get the fence-sitting Democrats to vote yea, Hatch's support, along with the support of Bob Bennett of Utah, Lisa Murkowski of Alaska and Dick Lugar of Indiana would potentially give the bill 62 votes, more than the 60 needed to break a filibuster.
The headwinds the bill faces are several though. Firstly, it is clearly a lower priority on the Senate category than the START treaty and DADT repeal. Secondly, 3 Democrats, Ben Nelson of Nebraska, Mark Pryor of Arkansas and Jon Tester of Montana are committed "nay" votes, meaning that at this point there really are only 59 votes for passage, not 62. And Kay Hagan of North Carolina and Max Baucus of Montana are leaning nay votes. So, now you are down to 57. This makes getting to 60 difficult, although there may be a few more Republicans (such as Susan Collins) that break for the bill.
Odds of Passage? I'm having trouble making the math work, so I'll say low-to-moderate.
Also on the docket before the end of the year is passage of a bill to fund government operations for the rest of this fiscal year (through next September.) Regrettably, once again, Congress failed to pass the requisite appropriations bills prior to the start of the fiscal year this past October, so what we have had is a cobbled-together set of continuing resolutions (I've written extensively over the past year on how destructive this process is, you can refer back to my posts from last September and October for more information), with the latest expiring this week. The House has passed a full-year continuing resolution, which basically keeps Fiscal 2011 spending at 2010 levels by a narrow 212-206 margin (Republicans felt that cut should be more significant as did some Blue Dogs, some liberals wanted a higher level), but has yet to be debated in the Senate. There is still significant disagreement over how to proceed, with many Senate Democrats preferring to pass an omnibus budget rather than simply continuing last year's funding levels (I agree in principle, although the Senate-drafted bill appears to be laden with pork not contained in the House bill.) The Senate is not scheduled to take up debate on the measure until Friday and bill opponents have threatened to force the entire bill, which nears 2,000 pages, to be read aloud prior to debate (Senate rules call for all bills to be read on the floor and while this requirement is routinely waived without objection, only 1 Senator has to object to require the reading), which could potentially push voting on the bill into the middle of next week.
So, there are still some potential significant accomplishments on the table for the lame duck congress. But there is also a lot to sort out in a few short days. Congress was attempting to be home by Christmas, but that may not be possible if they want to finish all of this business.
It should be a busy couple of weeks in Washington.
If you like this site, tell your friends.
Friday, December 10, 2010
An Awful Deal on Taxes and Spending
It's often been said that you know you have reached a good compromise when you find a deal that nobody likes but everybody is willing to accept. The negotiating process starts with two sides with opposing goals and leaves with both sides feeling that they got some things they didn't like in exchange for some things that they did. The sausage making itself is often pretty ugly, but the sausage itself doesn't taste all that bad at the end of it.
I wish I could say that this is the case with the deal that the President cut with Republicans on the Bush era tax cuts. Sad to say, I think this is a case where the compromise was actually worse than the starting point for either side. It isn't often that I oppose virtually every provision of a bi-partisan bill (I'm usually the one advocating for them), but just about everything about this deal is wrong.
Let's start with the tax cuts. $900 billion in reduced revenue over the course of the next two years and no permanent solve around our tax structure. In other words, we are pissing away $900 billion and are going to find ourselves in precisely the same place come 2012. Do any of you have ANY hope that cool heads will reach a reasonable compromise in a Presidential election year?
But don't tax rates need to be maintained to protect the fragile economy? This popular line is proven nonsense. President Clinton passed a large tax increase on the heels of the 90/91 recession and it didn't sink the economy...in fact, we had one of the strongest periods of economic growth in our history. Ronald Reagan signed a significant tax increase package in 1985. It would be hard to argue with the success of the second half of the 80s. Taxes don't spur recessions, unless they are very extreme. Asset bubbles and monetary crises do. If you give me the choice between lower taxes and a smaller deficit, I make the same choice every time, and it isn't for the tax cuts.
And look at the package...tax cuts for the rich...and not just the living rich either, huge breaks in the estate tax, basically a giveaway to the dead rich. Explain to me how encouraging people not to spend money while they are alive helps stimulate the economy again?
Now, on to the spending hikes. And make no mistake about it, extending unemployment benefits BEYOND 99 weeks is a spending increase. After nearly a full two years, if you are taking government money, it is no longer unemployment insurance, it is welfare. And we have no money to fund it.
But don't we need extended unemployment insurance because of the lack of jobs out there? Beyond the ordinary 26 weeks, absolutely. But beyond 99 weeks? It isn't like there are NO jobs out there...minimum wage jobs abound. Sure, there may not be a job in your town in your field at the income you want. But after two years, it's time to take a dose of reality and move, change fields or accept lower pay. A far better path would be an expanded Earned Income Tax Credit. Then we would be subsidizing the people who DO take the minimum wage jobs and helping them provide for their families, rather than paying people not to take said jobs.
This compromise is the height of irresponsibility. Lower taxes AND higher spending when we just saw a deficit reduction commission report on how much we need to CUT spending and RAISE taxes? Where are the deficit hawks? Heck, where are the people who can do basic math?
I voted Republican (for the first time in a long time) during the mid-terms to force the parties to the table to address the deficit. So far, I'm decidedly unimpressed with both the GOP and President Obama.
I wish I could say that this is the case with the deal that the President cut with Republicans on the Bush era tax cuts. Sad to say, I think this is a case where the compromise was actually worse than the starting point for either side. It isn't often that I oppose virtually every provision of a bi-partisan bill (I'm usually the one advocating for them), but just about everything about this deal is wrong.
Let's start with the tax cuts. $900 billion in reduced revenue over the course of the next two years and no permanent solve around our tax structure. In other words, we are pissing away $900 billion and are going to find ourselves in precisely the same place come 2012. Do any of you have ANY hope that cool heads will reach a reasonable compromise in a Presidential election year?
But don't tax rates need to be maintained to protect the fragile economy? This popular line is proven nonsense. President Clinton passed a large tax increase on the heels of the 90/91 recession and it didn't sink the economy...in fact, we had one of the strongest periods of economic growth in our history. Ronald Reagan signed a significant tax increase package in 1985. It would be hard to argue with the success of the second half of the 80s. Taxes don't spur recessions, unless they are very extreme. Asset bubbles and monetary crises do. If you give me the choice between lower taxes and a smaller deficit, I make the same choice every time, and it isn't for the tax cuts.
And look at the package...tax cuts for the rich...and not just the living rich either, huge breaks in the estate tax, basically a giveaway to the dead rich. Explain to me how encouraging people not to spend money while they are alive helps stimulate the economy again?
Now, on to the spending hikes. And make no mistake about it, extending unemployment benefits BEYOND 99 weeks is a spending increase. After nearly a full two years, if you are taking government money, it is no longer unemployment insurance, it is welfare. And we have no money to fund it.
But don't we need extended unemployment insurance because of the lack of jobs out there? Beyond the ordinary 26 weeks, absolutely. But beyond 99 weeks? It isn't like there are NO jobs out there...minimum wage jobs abound. Sure, there may not be a job in your town in your field at the income you want. But after two years, it's time to take a dose of reality and move, change fields or accept lower pay. A far better path would be an expanded Earned Income Tax Credit. Then we would be subsidizing the people who DO take the minimum wage jobs and helping them provide for their families, rather than paying people not to take said jobs.
This compromise is the height of irresponsibility. Lower taxes AND higher spending when we just saw a deficit reduction commission report on how much we need to CUT spending and RAISE taxes? Where are the deficit hawks? Heck, where are the people who can do basic math?
I voted Republican (for the first time in a long time) during the mid-terms to force the parties to the table to address the deficit. So far, I'm decidedly unimpressed with both the GOP and President Obama.
Saturday, December 4, 2010
On Tax Cuts, The Filibuster and Our Narrow Thinking, Encouraging News on the Deficit Panel
The lame-duck Senate today is voting for cloture on two Democratic proposals, one to extend the Bush era tax cuts for all individuals with income under $200K and all married couples under $250K and another to do the same for all earners under $1 million. The votes seem assured to fail as all 42 Republicans (because the election in Illinois was a special election, Mark Kirk is already seated for the lame duck session) vowing to hold out for a bill that extends all Bush era tax cuts.
Here is the honest truth that neither party is telling you...we simply cannot afford to extend ANY of the tax cuts to earners at ANY level. The cost of extending to those under $200/$250K is approximately $4 trillion over the next 10 years. The cost of extending to those above that level is an incremental $700 billion.
I like a tax cut as much as the next person. But we can't afford any of them. Not with red ink spilling as far as the eye can see. It's time for all of us citizens to grow up and realize that you can't have huge government spending on two wars, Social Security and Medicare as it exists today AND have low taxes for everyone.
But neither party will tell you that. On 85% of the cost of the extension measure, the parties are in violent agreement. On the other 15% (the tax cuts for high earners), I suspect that the GOP will ultimately get its way, at least for 2011. What a shame that we continue to borrow from China because we aren't grown up enough to pay our bills.
By the way....isn't it ironic that the Bush Tax Cuts were passed under reconciliation so as to prevent a Democratic filibuster but that the Democratic changes in the rules of reconciliation now prohibit them from using this tactic to get their version of the extension? Democrats tightened reconciliation rules when they came to power to limit reconciliation to appropriations bills and deficit-reducing bills. Since the base case is that all the tax cuts expire on Jan 1, this clearly does not meet either of those criteria. The net effect of not being able to pass a deficit-increasing bill under reconciliation is likely to be that an even more deficit-increasing bill is ultimately passed.
Where is Ross Perot when you need him? Or even John McCain from a few years ago, a man who opposed the Bush Tax Cuts on the basis of their impact on the deficit.
Some Reason to Be Encouraged
While the bi-partisan deficit reduction panel didn't reach the 75% bar it set for itself (14 out of 18 members voting for the proposal), it did ultimately get 11 out of 18 members to back a very tough set of spending cuts and tax increases that would reshape the course of our nations budget.
I've written previously about why I support many of the key provisions of their plan, including raising the Social Security retirement age, eliminating or severely curtailing the home mortgage interest deduction and making meaningful cuts in defense spending. At the time, I lamented that it would probably quickly fall by the wayside as spineless Republicans and Democrats, who have seemed unwilling to ask even the most basic sacrifices of the population to balance our budget, would all find something to hate in the bill.
Maybe I was too hasty in my judgement.
On the deficit panel, liberal Senator Richard Durbin voted for the plan. So did conservative Senator Mike Crapo. So did conservative former Senator Alan Simpson. So did moderate Democrat Erskine Bowles.
Since the release of the report, 13 additional Senators, 12 Democrats and Independent Joe Lieberman have all urged support for the proposal.
I'm encouraged, but obviously we are a long way from passage. I strongly urge President Obama to work with the new GOP leadership in the House and Democratic leadership in the Senate to build support for key elements of this proposal early in the new year.
The best thing that we could do for the nation's long-term prosperity is to deal with the structural issue of the deficit. This is an issue that will require sacrifice and needs Presidential leadership. Let's hope the President can show some.
Here is the honest truth that neither party is telling you...we simply cannot afford to extend ANY of the tax cuts to earners at ANY level. The cost of extending to those under $200/$250K is approximately $4 trillion over the next 10 years. The cost of extending to those above that level is an incremental $700 billion.
I like a tax cut as much as the next person. But we can't afford any of them. Not with red ink spilling as far as the eye can see. It's time for all of us citizens to grow up and realize that you can't have huge government spending on two wars, Social Security and Medicare as it exists today AND have low taxes for everyone.
But neither party will tell you that. On 85% of the cost of the extension measure, the parties are in violent agreement. On the other 15% (the tax cuts for high earners), I suspect that the GOP will ultimately get its way, at least for 2011. What a shame that we continue to borrow from China because we aren't grown up enough to pay our bills.
By the way....isn't it ironic that the Bush Tax Cuts were passed under reconciliation so as to prevent a Democratic filibuster but that the Democratic changes in the rules of reconciliation now prohibit them from using this tactic to get their version of the extension? Democrats tightened reconciliation rules when they came to power to limit reconciliation to appropriations bills and deficit-reducing bills. Since the base case is that all the tax cuts expire on Jan 1, this clearly does not meet either of those criteria. The net effect of not being able to pass a deficit-increasing bill under reconciliation is likely to be that an even more deficit-increasing bill is ultimately passed.
Where is Ross Perot when you need him? Or even John McCain from a few years ago, a man who opposed the Bush Tax Cuts on the basis of their impact on the deficit.
Some Reason to Be Encouraged
While the bi-partisan deficit reduction panel didn't reach the 75% bar it set for itself (14 out of 18 members voting for the proposal), it did ultimately get 11 out of 18 members to back a very tough set of spending cuts and tax increases that would reshape the course of our nations budget.
I've written previously about why I support many of the key provisions of their plan, including raising the Social Security retirement age, eliminating or severely curtailing the home mortgage interest deduction and making meaningful cuts in defense spending. At the time, I lamented that it would probably quickly fall by the wayside as spineless Republicans and Democrats, who have seemed unwilling to ask even the most basic sacrifices of the population to balance our budget, would all find something to hate in the bill.
Maybe I was too hasty in my judgement.
On the deficit panel, liberal Senator Richard Durbin voted for the plan. So did conservative Senator Mike Crapo. So did conservative former Senator Alan Simpson. So did moderate Democrat Erskine Bowles.
Since the release of the report, 13 additional Senators, 12 Democrats and Independent Joe Lieberman have all urged support for the proposal.
I'm encouraged, but obviously we are a long way from passage. I strongly urge President Obama to work with the new GOP leadership in the House and Democratic leadership in the Senate to build support for key elements of this proposal early in the new year.
The best thing that we could do for the nation's long-term prosperity is to deal with the structural issue of the deficit. This is an issue that will require sacrifice and needs Presidential leadership. Let's hope the President can show some.
Saturday, September 25, 2010
Election Update, The Watered Down Contract with America, The Democrats Have No Backbone
An Update on November
As expected, polling has picked up a lot post-Labor Day and we we have new polls in 20 Senate races this week. The updated averages are below. Of note, race rating changes are highlighted in blue or red, with blue meaning that the race rating moved from Democratic and red meaning the rating moved more Republican.
Major changes since last week:
(1) Although it is still razor close, Sharron Angle is now leading Harry Reid in our average of averages for the hotly contested seat in Nevada.
(2) Joe Miller appears to be settling in to a more comfortable lead in Alaska, even with Lisa Murkowski running as a write-in candidate. It is worth noting that Murkowski is actually polling ahead of the Democrats, although history makes me suspicious of whether people who poll for a write-in candidate will actually follow through.
(3) The second New York seat, presently held by Kirsten Gillebrand is getting a lot closer, at least according to some polls. One poll last week actually had the spread at 1%, although there was wide variation in the polling and all polls still showed her ahead. Definitely a race to watch going forward.
My Projection: 49 Democrats, 49 Republicans, 2 Independents
Realclearpolitics (no toss-ups): 50 Democrats, 48 Republicans, 2 Independents
Electionprojection: 50 Democrats, 48 Republicans, 2 Independents
Electoral-Vote: 49 Democrats, 48 Republicans, 1 Independent, 1 Tie
In the House, our average of averages is the generic vote stands at GOP +4.2%, which projects in my model:
My Projection: 223 Republicans, 212 Democrats
Realclearpolitics (splitting toss-ups): 220 Republicans, 215 Democrats
Electionprojection: 218 Republicans, 217 Democrats
Electoral-Vote (splitting toss-ups): 237 Republicans, 198 Democrats
In aggregate, all of the major projection sites are yielding very similar results in Senate projections, net a seat here or there on the very close races. All project Democrats to retain control of the Senate, but with a much reduced majority. Assuming Bernie Sanders and Joe Lieberman remain in the caucus (which seems highly likely at this point), Democrats would have between 51 and 52 caucus votes. They need 50, with Vice President Biden's tie-breaking, to retain operating control.
In the House, 3 of the sites, including this one, project a narrow Republican takeover, with 218-223 seats. Electoral-Vote.com is projecting a stronger GOP majority. Either way, we are looking at a very different House from the one that passed the stimulus bill and health care reform.
The Pledge to America is Weak
The GOP "Pledge to America", released this week really covers very new little ground. The key tenants, as I can see them are:
(1) Repealing Obamacare
(2) Extending all of the Bush tax cuts
(3) Freezing all spending at pre-stimulus, pre-TARP levels, excluding military, veterans, social security and medicare
(4) Attacking the federal deficit
Okay, a few problems here. There is a legitimate debate to be had about the size of government and the associated taxes and how we should balance the budget (what combination of spending cuts and tax increases.) But the GOP "plan", as published CAN'T work. Why? Because item #3 effectively puts 70% of the federal budget off limits. Combined with #2, you would need negative spending on all other spending in order to balance the budget.
Simply put, it is IMPOSSIBLE to balance the budget while simultaneously extending the Bush tax cuts and not touching entitlements or defense.
I wish, instead, that the GOP had put forward credible plans to reform entitlements. Clearly, the GOP philosophy is not going to allow them to promote some of the solutions that I have proposed in this space, such as lifting the cap on Social Security taxes. However, there are things that are aligned with GOP core values that would help to solve the budget issue such as:
(1) Raising the retirement age for both Social Security and Medicare to 70 over time
(2) Indexing Social Security payouts to inflation instead of wage growth
These would be great ideas over which to have a debate. But we aren't having the debate. Neither party is proposing credible deficit reduction proposals because they are scared to death of going after either seniors or military spending. And that is a shame, because this is a debate we need to have.
Spineless Democrats
They have punted on the budget until after the election. Now, they are punting on the debate over the Bush tax cuts until after the election. If you are too petrified to take the Republicans on about taxes for those making over $250K per year, then you probably deserve to lose the election, because you clearly don't have the courage of your convictions.
As expected, polling has picked up a lot post-Labor Day and we we have new polls in 20 Senate races this week. The updated averages are below. Of note, race rating changes are highlighted in blue or red, with blue meaning that the race rating moved from Democratic and red meaning the rating moved more Republican.
Major changes since last week:
(1) Although it is still razor close, Sharron Angle is now leading Harry Reid in our average of averages for the hotly contested seat in Nevada.
(2) Joe Miller appears to be settling in to a more comfortable lead in Alaska, even with Lisa Murkowski running as a write-in candidate. It is worth noting that Murkowski is actually polling ahead of the Democrats, although history makes me suspicious of whether people who poll for a write-in candidate will actually follow through.
(3) The second New York seat, presently held by Kirsten Gillebrand is getting a lot closer, at least according to some polls. One poll last week actually had the spread at 1%, although there was wide variation in the polling and all polls still showed her ahead. Definitely a race to watch going forward.
My Projection: 49 Democrats, 49 Republicans, 2 Independents
Realclearpolitics (no toss-ups): 50 Democrats, 48 Republicans, 2 Independents
Electionprojection: 50 Democrats, 48 Republicans, 2 Independents
Electoral-Vote: 49 Democrats, 48 Republicans, 1 Independent, 1 Tie
In the House, our average of averages is the generic vote stands at GOP +4.2%, which projects in my model:
My Projection: 223 Republicans, 212 Democrats
Realclearpolitics (splitting toss-ups): 220 Republicans, 215 Democrats
Electionprojection: 218 Republicans, 217 Democrats
Electoral-Vote (splitting toss-ups): 237 Republicans, 198 Democrats
In aggregate, all of the major projection sites are yielding very similar results in Senate projections, net a seat here or there on the very close races. All project Democrats to retain control of the Senate, but with a much reduced majority. Assuming Bernie Sanders and Joe Lieberman remain in the caucus (which seems highly likely at this point), Democrats would have between 51 and 52 caucus votes. They need 50, with Vice President Biden's tie-breaking, to retain operating control.
In the House, 3 of the sites, including this one, project a narrow Republican takeover, with 218-223 seats. Electoral-Vote.com is projecting a stronger GOP majority. Either way, we are looking at a very different House from the one that passed the stimulus bill and health care reform.
The Pledge to America is Weak
The GOP "Pledge to America", released this week really covers very new little ground. The key tenants, as I can see them are:
(1) Repealing Obamacare
(2) Extending all of the Bush tax cuts
(3) Freezing all spending at pre-stimulus, pre-TARP levels, excluding military, veterans, social security and medicare
(4) Attacking the federal deficit
Okay, a few problems here. There is a legitimate debate to be had about the size of government and the associated taxes and how we should balance the budget (what combination of spending cuts and tax increases.) But the GOP "plan", as published CAN'T work. Why? Because item #3 effectively puts 70% of the federal budget off limits. Combined with #2, you would need negative spending on all other spending in order to balance the budget.
Simply put, it is IMPOSSIBLE to balance the budget while simultaneously extending the Bush tax cuts and not touching entitlements or defense.
I wish, instead, that the GOP had put forward credible plans to reform entitlements. Clearly, the GOP philosophy is not going to allow them to promote some of the solutions that I have proposed in this space, such as lifting the cap on Social Security taxes. However, there are things that are aligned with GOP core values that would help to solve the budget issue such as:
(1) Raising the retirement age for both Social Security and Medicare to 70 over time
(2) Indexing Social Security payouts to inflation instead of wage growth
These would be great ideas over which to have a debate. But we aren't having the debate. Neither party is proposing credible deficit reduction proposals because they are scared to death of going after either seniors or military spending. And that is a shame, because this is a debate we need to have.
Spineless Democrats
They have punted on the budget until after the election. Now, they are punting on the debate over the Bush tax cuts until after the election. If you are too petrified to take the Republicans on about taxes for those making over $250K per year, then you probably deserve to lose the election, because you clearly don't have the courage of your convictions.
Monday, July 26, 2010
The Shrinking Obama Presidency, Extending Tax Cuts -- Really???
What a Bad Trend Line Looks Like
What do tanking poll numbers look like? Check out the averages below. For the first time in his Presidency, Barack Obama faces some sustained negative numbers...his disapproval rating is now clearly higher than his approval rating. The trend in the past month is unmistakable, a 6 point deterioration in his numbers over the course of the past month, the worst fall of his Presidency since his first couple of months (where a big drop-off is normal.) Shirley Sharrod, continued unemployment woes and lingering concerns over the administrations handling of the deficit and the BP oil spill are all dragging on his numbers.
The monthly numbers show a similar, but less dramatic trend. After one good month in May, the President had a sharp decline in June and now has a negative average for July.
So can he turn it around?
Of course. Lots of Presidents who have been unpopular two years into office have gone on to resounding re-election victories, most notably in recent history, Ronald Reagan and Bill Clinton. In fact, popularity two years in has very little predictive power in terms of ultimate re-election chances.
But these numbers definitely show that the President is struggling. And it will hurt his party in November, undoubtedly. It puts races that shouldn't be competitive, like California, Wisconsin and Washington into place. It makes made-to-order toss-ups like Pennsylvania, Ohio and Missouri lean Republican. It makes a Rand Paul or a Sharron Angle candidacy even possible (they'd be jokes in most years, and may still be this year.)
The Democrats are going to have to hope for some quick turnaround in poll numbers or for a few of the Pauls and Angles to crazy it up enough to keep them in power. But it's going to be a tough road to hoe in November for the Dems.
More Tax Cuts for the Rich?
Sen. Kent Conrad (D-ND) and Sen. Evan Bayh (D-IN) have come out in support of extending all of the Bush tax cuts for at least 18 to 24 more months. Conrad is not up for re-election this year and Bayh is retiring. All of which causes me to go say: huh?
Democrats have spent the better part of the last decade explaining why we a. couldn't afford the Bush tax cuts, b. they were bad anyway since they disproportionately favored the well-to-do and c. that they would repeal them at their first chance. Now, in the critical hour when the cuts are set to expire, two Democrats who aren't even at risk of losing anything are suddenly in favor of tax cuts that they never voted for? I just don't get it. Do they really think that having a top marginal rate of 39.6% versus 35.0% will sink the nascent recovery? Did they sleep through the 90s? Did they stop worrying about the deficit?
I don't favor extending ANY of the Bush tax cuts, but I accept that the President has committed to extending them for the middle class (a nice giveaway that we certainly can't afford at the moment.) I certainly hope that he has the courage to veto any bill that goes further and that he makes those intentions clear.
Incidentally, does anybody understand the GOP position that we can't afford unemployment benefits but we CAN afford to extend tax cuts for those making over $250K? My next post will address myths about supply side economics and the famous Laffer Curve, including some wisdom from Laffer himself.
If you like this site, tell your friends.
What do tanking poll numbers look like? Check out the averages below. For the first time in his Presidency, Barack Obama faces some sustained negative numbers...his disapproval rating is now clearly higher than his approval rating. The trend in the past month is unmistakable, a 6 point deterioration in his numbers over the course of the past month, the worst fall of his Presidency since his first couple of months (where a big drop-off is normal.) Shirley Sharrod, continued unemployment woes and lingering concerns over the administrations handling of the deficit and the BP oil spill are all dragging on his numbers.
The monthly numbers show a similar, but less dramatic trend. After one good month in May, the President had a sharp decline in June and now has a negative average for July.
So can he turn it around?
Of course. Lots of Presidents who have been unpopular two years into office have gone on to resounding re-election victories, most notably in recent history, Ronald Reagan and Bill Clinton. In fact, popularity two years in has very little predictive power in terms of ultimate re-election chances.
But these numbers definitely show that the President is struggling. And it will hurt his party in November, undoubtedly. It puts races that shouldn't be competitive, like California, Wisconsin and Washington into place. It makes made-to-order toss-ups like Pennsylvania, Ohio and Missouri lean Republican. It makes a Rand Paul or a Sharron Angle candidacy even possible (they'd be jokes in most years, and may still be this year.)
The Democrats are going to have to hope for some quick turnaround in poll numbers or for a few of the Pauls and Angles to crazy it up enough to keep them in power. But it's going to be a tough road to hoe in November for the Dems.
More Tax Cuts for the Rich?
Sen. Kent Conrad (D-ND) and Sen. Evan Bayh (D-IN) have come out in support of extending all of the Bush tax cuts for at least 18 to 24 more months. Conrad is not up for re-election this year and Bayh is retiring. All of which causes me to go say: huh?
Democrats have spent the better part of the last decade explaining why we a. couldn't afford the Bush tax cuts, b. they were bad anyway since they disproportionately favored the well-to-do and c. that they would repeal them at their first chance. Now, in the critical hour when the cuts are set to expire, two Democrats who aren't even at risk of losing anything are suddenly in favor of tax cuts that they never voted for? I just don't get it. Do they really think that having a top marginal rate of 39.6% versus 35.0% will sink the nascent recovery? Did they sleep through the 90s? Did they stop worrying about the deficit?
I don't favor extending ANY of the Bush tax cuts, but I accept that the President has committed to extending them for the middle class (a nice giveaway that we certainly can't afford at the moment.) I certainly hope that he has the courage to veto any bill that goes further and that he makes those intentions clear.
Incidentally, does anybody understand the GOP position that we can't afford unemployment benefits but we CAN afford to extend tax cuts for those making over $250K? My next post will address myths about supply side economics and the famous Laffer Curve, including some wisdom from Laffer himself.
If you like this site, tell your friends.
Subscribe to:
Posts (Atom)
Posts
