GOP Offers Debt Ceiling Sanity....for a few months
Coming out of the House GOP retreat, where they are presumably discussing their strategy and vision for the next 2 years and specifically how they are going to hold on to the House in 2014, comes word that the GOP will offer up a more or less "clean" increase of the debt ceiling to ward off default.
It comes with a few strings attached. The extension would only be for 3 months, meaning that we would be having the same discussion again in May or June. It would require both houses of Congress to pass a budget by April 15th or forfeit pay, something that the Senate has not done in several years, a fact that has been a talking point for the GOP.
It is possible that President Obama and the Democrats will have some issue with the proposal. The 3 month extension falls far short of the kind of extension or even elimination of the debt ceiling that the President had sought, hoping to avert having to deal with debt ceiling issue again in his Presidency. And Senate Democrats might balk at needing to pass a budget resolution.
But it seems like a savvy move for the GOP. It would be a tough sell for Democrats to vote against the debt ceiling increase they asked for. And I don't know very many people who would be too concerned about the possibility of Representatives and Senators not getting paid for a little while.
1 Term Down, 1 To Go
President Obama's will celebrate his second inauguration on Monday. It will be a more subdued ceremony than the celebration four years ago, when the country was less divided and we hadn't endured such a long economic malaise. But it will be a unifying moment for supporters of the President and a day of patriotism for all.
While the inauguration is on Monday, the official start of the President's second term is at noon tomorrow, as dictated by the constitution and the President will privately retake the oath of office then, before going through the ceremony on Monday.
Being at the end of the President's first 4 years, I thought it would be a good time to take stock of how the President has done.
(1) Did He Keep His Promises?
Politifact.com (run by the Tampa Bay Times) has did a great job of tracking all of the promises that the President made in the 2008 campaign and how they have turned out.
There were 508 documented promises made and of those, 239 were fully kept, 130 were partially kept and 139 were not kept. Those not kept were not kept for a variety of reasons - either the President changing his position (closing Gitmo, for instance), simply not pursuing something he promised to do (giving a State of the World address, for instance) or his desired policies changing as a result of negotiation with Congress (extending the Bush tax cuts for upper income limits for instance.)
Giving the President 100% for promises fully kept and 50% for those partially kept, the President gets 304 points out of a possible 508 or a score of 60%.
I said at the beginning of his term that it would be an A-worthy performance if the President could do half of the things he promised to do in 2008. A score of 60% certainly qualifies.
Grade: A
(2) Did He Achieve His Major Policy Goals?
The President had articulated six clear policy goals for his first term at the outset:
a. Implement a meaningful stimulus
On this issue, the American Recovery and Reinvestment Act achieved almost all of what the President set out to achieve. It provided aid to states, funds for infrastructure improvements and targeted tax cuts. Couple this with the (just expired) temporary Social Security tax rate reductions that the President was able to get in 2010 and you have to say the President basically implemented what he set out to implement. There is much debate on the effectiveness of those policies, but here we are grading whether he did what he set out to do.
Grade: A
b. Implement Health Care Reform That Achieves Universal Coverage
The coverage is not quite universal (2% are excluded), the plan doesn't contain a public option, it does contain a mandate (something he opposed on the campaign trail) and the President gave up very early on including abortion coverage in the plan (another thing he campaigned on.) Still, President Obama was successful where Presidents Johnson, Nixon, Carter and Clinton failed (President Reagan and both Presidents Bush were not advocates for such a program.) The carefully negotiated program was passed through congress narrowly and was narrowly upheld as largely constitutional by the Supreme Court. It is the law of the land and will roll out over his second term. We will all get to see how successful it is or isn't.
Grade: B+
c. Repeal the Bush Tax Cuts for Those Making Over $250K
The President completely punted on this once, agreeing to a 2-year extension in late 2010, in exchange for some other goodies, such as the Social Security Tax deal. The President did better recently, at the end of his term, cutting a deal that let the rates rise on individuals making over $400K and couples making over $450K, about half of the population the President was targeting to contribute more.
Grade: C
d. Pass Meaningful Legislation to Deal with Carbon Emissions
A Cap and Trade bill passed the House in 2009 but was never even taken up in the Senate and there has been virtually no leadership from the President on making this stated priority happen. There were smaller steps that did happen, such as tax credits for energy efficient homes and appliances and extensions of wind and solar subsidies. But all-in-all, the President hasn't made much progress here.
Grade: D+
e. Provide for Comprehensive Immigration Reform
Perhaps it will be a second term issue. But the President never even proposed a package of immigration reform, something which he had stated he would do in his first year in office. He took some action by executive order, such as the regulatory version of the Dream Act, but these actions were taken very late in his term and fall far short of comprehensive reform.
Grade: D
f. End the War in Iraq and Provide Additional Troops, on a Timetable in Afghanistan
The President basically did everything he said he would here. We are out of Iraq. We did surge in Afghanistan, but are now winding down our involvement, in line with the time table the President set.
Grade: A
Overall Grade on Priorities: B-
(3) How Did We Fare Economically?
This is a quite complicated question, given the deep recession that was underway at the start of his term. By some economic measures, the President doesn't make the grade, by others he does.
Average Annual GDP Growth During His Term: 2.1% (average 20 years prior to Obama = 3.8%)
Average Unemployment Rate During His Term: 9.0% (average 20 years prior to Obama = 6.0%)
Stock Market Return During His Term: 12.1% (average 20 years prior to Obama = 9.9%)
By the standards of economic growth and unemployment, the last 4 years have not been among our better ones. Following a deep recession, we have had slow growth with sustained high unemployment over several years. While unemployment is now falling, it is doing so painfully slowly and at least in part due to less people in the workforce. By these measures, President Obama doesn't rate well.
However, putting those numbers in proper context is difficult since anyone could have predicted following the financial crisis that unemployment would be elevated and growth depressed, at least for a period of time. This is where the stock market return comes in. The stock market price reflects both present economic circumstances and expectations around future economic performance. On this measure, the President is doing great, far exceeding normal market returns and, given that those are nominal returns and inflation has been very low, real returns exceed by an even greater margin.
Of course, stock market expectations can be wrong. The stock market was wildly over-priced in 1999 and wildly under priced in 1982. So while some of change in expectations can be due to averting crises or sounder policies, some is also due to mean reversion or, in common language, irrational panic or optimism abating.
So, it is difficult as we stand here today to judge the President's economic performance. We didn't fall off a cliff and into a depression, something that seemed like a real possibility in 2008. But we also haven't had a "V-shaped recovery" where the economy grows quickly after purging the less efficient elements in a recession. It is a mixed bag.
Grade; C
The President has a lot to tackle in his second term. The deficit is still out-of-control, with no path to balance in sight. Immigration and climate change remain unsolved issues. The economy, while not in crisis, is certainly not healthy, particularly for the lower-middle class.
I wish him luck as he begins his second term, for all our sakes.
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Showing posts with label debt ceiling. Show all posts
Showing posts with label debt ceiling. Show all posts
Saturday, January 19, 2013
Saturday, January 5, 2013
Our Elected Leaders Punt Yet Again On Real Deficit Reduction, Boehner Narrowly Holds On To Speaker Job, Christie Goes Ballistic
The Fiscal Cliff Deal Isn't Much of a Deal at All
I guess there are things that all sides can claim victory in the fiscal cliff "deal" that was negotiated early in the new year, which was primarily a by-product of discussions between Vice President Joe Biden and Senate Minority Leader Mitch McConnell.
For Republicans, they can feel good that for 99.2% of Americans, the tax cuts that President Bush pushed for in 2001 and 2003, that the vast majority of Democrats and even some Republicans opposed at the time, have no become a permanent reality. They are law forever. They can also feel good that the military cuts that were part of the sequestration deal last year are now put off, albeit for only two months. They can also feel good that they will get another bite at the spending apple in short order with the pending fights over the second half Fiscal 2013 budget and the debt ceiling coming up directly.
For Democrats, they can feel good that they successfully raised taxes on the wealthiest 1% (actually the wealthiest 0.8%, to be precise, but you get the point), that they averted the fiscal cliff cuts for domestic programs, albeit for only two weeks, that unemployment insurance was extended for another year, that renewable energy tax credits were extended for another year and that they really didn't have to agree to any spending cuts to get the deal done.
As for me, I don't feel particularly good about any of this.
Let's introduce a reality into the equation. The deficit last year was $1.128 trillion. We took in $2.435 trillion in taxes, 46% from individual income taxes, 35% from Social Security and Medicare Taxes, 10% from Corporate Taxes and 9% from the miscellaneous set of other federal taxes that the government collects, such as excise taxes on gasoline, cigarettes, alcohol, permitting costs, etc. We spent $3.563 trillion, 45% on Social Security and Medicare/Medicaid, 23% of Defense and Military expenses, 10% on unemployment and other income security measures (such as subsidized school lunches), 6% on interest on the national debt and 16% on everything else.
So what did the fiscal cliff "deal" do? It allowed the temporary payroll tax reduction on Social Security to lapse, which effectively boosts Social Security payroll tax income by 19%, since the total tax (including both employer and employee) rises from 10.4% to 12.4%. This raises about $120B per year in additional revenue, versus the last two years.
The cliff deal also raised income taxes from 35% to 39.6% for individuals making over $400K and married couples making over $450K and raises capital gains and dividend taxes on those individuals from 15% to 20%, as well as capping deductions on those over $200K/$250K. Collectively, this raises about $60B per year in additional revenue.
So, all else being equal (and it is obviously not because not everything else is static, but everything else is pretty well in balance), we took a $1.128 trillion deficit and solved 16% of it. On the 2012 basis, this woud give us about $2.615 trillion in revenue, not quite enough money to fund Social Security, Medicare/Medicaid, Defense and interest on the debt, if you cancelled every single other government program (no FAA, no SEC, no EPA, no FDA, no USDA, no OSHA, no federal court system, no power at the White House, etc.)
In other words, this was a totally and grossly insufficient bill to solve the structural problem that we had.
It amazes me that Democrats now accept 99.2% of the Bush tax cuts that they once opposed, and that we have never been able to afford. It also amazes me that they reject out of hand even the most modest GOP proposals to rain in entitlement spending, such as shifting the chained CPI for Social Security increases, which would save a ton of money over time and make the system much more stable while having only a gradual effect on today's seniors.
It also astonishes me that the GOP continue to fight for low taxes without a serious, specific proposal on how they would cut spending. Since today's revenues don't even cover Defense, Entitlements and Interest and they want even lower revenues than today, to be credible to me, they would need to present a budget that makes deep, deep cuts in Defense and Entitlements to even get close to balance. They have not, as of yet and, in fact, most have strongly opposed defense cuts, while skirting the issue of entitlements.
Let's not forget also the underlying dynamics that make the future budget reality worse. The population is getting older and health care costs are still rising (albeit the rate of health care inflation has slowed from the pace of the past decade) so entitlement costs will rise faster than revenues. Interest rates are at 200 year historic lows, meaning that it is highly probable that interest rates and therefore interest expense will rise in the future, especially with a rising federal debt. There are some positives - unemployment insurance costs are likely to drop as the economy improves along with some other social programs and the wind-down in Afghanistan will save some on the military budget. But in balance, the trajectory is towards a worse budgetary situation, not a better one.
Both parties to date are taking unserious positions. There are only four levers to manage our current situation:
(1) Raise Taxes of Some Form in Meaningful, Broad Way
You can't tax the 1% and get us into balance. To make a meaningful impact on the deficit, you would need to raise taxes on the majority of the population in some form, either in the form of higher income tax rates, higher payroll taxes or a national sales or VAT tax.
(2) Structural Reforms to Entitlements
Higher participation ages, lower benefits, etc. You have to "bend the curve" on entitlement spending.
(3) Meaningful Cuts to Defense
We spend 5 times the next nearest country (China) on our military. Would we be unsafe at 3 times their spending?
(4) Default in Some Way Shape or Form
This is a nuclear option that would cause a depression. There are two ways to do this - either simply don't pay the bills which would be an utter disaster to financial markets that would immediately spark a deep financial and economic crisis or print money to pay the bills (i.e. have the fed buy up and forgive treasury debt), which would likely spark hyper-inflation. Neither of those options is at all appealing, even compared to 1-3.
My other disappointment (or maybe I should be happy, since I didn't love the deal) with the cliff deal is that it doesn't really solve anything. The federal budget still expires March 1st, so there is another, immediate fight over spending. Sequestration cuts still hit March 1st also. And, approximately the end of February, the federal government won't be able to pay its bills unless congress increases the debt ceiling. In other words, get ready for more melodrama, stern rhetoric and down-to-the-wire posturing that solves nothing before another 11th or 12th hour deal that doesn't do nearly enough.
My final disappointment is in President Obama's inability to lead or paint a vision. He wasn't even a participant in most of the talks that cut the deal. He has painted no clear vision for how we get where we need to go with the budget and seems to have no sense of urgency about reducing the deficit. Joe Biden showed far more leadership that the President in this case, and even Biden's leadership was just to cut a deal in the end, not to really solve the problem.
Prepare to be disappointed again in the coming year.
Boehner Holds On With 2 Votes to Spare
John Boehner will be the House Speaker for the next two years, after successfully beating back dissent from about 8% of his caucus. While there was no Republican actively running against Boehner, a cast of 17 Republicans (excluding Boehner, who did not vote, as is tradition) either cast protest votes, voted "present" or did not vote. Some were clear protest votes, for the likes of Alan West (who isn't in the House any more as he lost re-election) and Colin Powell (who has never been in the House), some were semi-serious votes, including 3 for Majority Leader Eric Cantor, who many of the far right view as more sympathetic to their cause than the pragmatic Boehner. Boehner needed an outright majority in order to not force a second ballot on the issue, which required 218 votes. The 220 he received was sufficient - barely, to keep him with the Speaker's gavel for the next two years.
All of this supports what I have long said about Boehner - he is a conservative but not a wing nut as many think. He is hemmed in by a caucus that is well outside the mainstream. The fact that he almost lost his Speakership simply for supporting the deal he did speaks volumes about where the right-wing in the House sits. Heck, a significant number of House Republicans even opposed the Hurricane Sandy aid package that was finally passed on Friday (more on that in a second.)
My advice to Boehner? You know you are never going to be the darling of the right wing, so take your re-election as an opportunity to try to go solve the problems. The hard-liners will hate it, but they already don't support you. So cement your legacy and get something done.
Chris Christie Lets Loose on the House GOP
The fiscal cliff deal on January 2nd was the last thing the outgoing House of Representatives did before disbanding to make way for the new House, which was sworn in yesterday. This greatly upset lawmakers from New York and New Jersey, who had been hoping for and believed they had secured agreement for aid for the battered coastal areas impacted by Hurricane Sandy.
Why the House didn't take the issue up before disbanding is inexplicable to me. Perhaps John Boehner couldn't swallow asking his conservative members to vote on a spending package right on the heels of a painful vote on the fiscal cliff. But, come on, when did relief for people made homeless by a hurricane become a partisan issue?
Christie was specific, and named names in his criticism, stating:
"There is only one group to blame for the continued suffering of these innocent victims, the House majority and their speaker, John Boehner."
Boehner scrambled to pull a vote together on the bill, with an initial aid package rapidly set for a vote yesterday and the balance to be voted on January 15th. The initial package passed the House 354-67, with all 67 "no" votes coming from Republicans. It is shocking to me that there were 67 members of the new House majority willing to vote no on this bill. The bill passed the Senate, which always seems much more reasonable an bi-partisan, without a single "no" vote.
The initial aid package contained only $9B, the bigger $51B package is to come in the January 15th vote. Could that package be in serious jeopardy, given the delay and vote on the first bill? If it is, it would be utter political suicide for the House GOP. Nothing makes you look like a wing nut like pushing hard to keep tax cuts on capital gains for people making millions of dollars and then opposing federal funds to help people made homeless by a hurricane.
If you like this site, tell your friends.
I guess there are things that all sides can claim victory in the fiscal cliff "deal" that was negotiated early in the new year, which was primarily a by-product of discussions between Vice President Joe Biden and Senate Minority Leader Mitch McConnell.
For Republicans, they can feel good that for 99.2% of Americans, the tax cuts that President Bush pushed for in 2001 and 2003, that the vast majority of Democrats and even some Republicans opposed at the time, have no become a permanent reality. They are law forever. They can also feel good that the military cuts that were part of the sequestration deal last year are now put off, albeit for only two months. They can also feel good that they will get another bite at the spending apple in short order with the pending fights over the second half Fiscal 2013 budget and the debt ceiling coming up directly.
For Democrats, they can feel good that they successfully raised taxes on the wealthiest 1% (actually the wealthiest 0.8%, to be precise, but you get the point), that they averted the fiscal cliff cuts for domestic programs, albeit for only two weeks, that unemployment insurance was extended for another year, that renewable energy tax credits were extended for another year and that they really didn't have to agree to any spending cuts to get the deal done.
As for me, I don't feel particularly good about any of this.
Let's introduce a reality into the equation. The deficit last year was $1.128 trillion. We took in $2.435 trillion in taxes, 46% from individual income taxes, 35% from Social Security and Medicare Taxes, 10% from Corporate Taxes and 9% from the miscellaneous set of other federal taxes that the government collects, such as excise taxes on gasoline, cigarettes, alcohol, permitting costs, etc. We spent $3.563 trillion, 45% on Social Security and Medicare/Medicaid, 23% of Defense and Military expenses, 10% on unemployment and other income security measures (such as subsidized school lunches), 6% on interest on the national debt and 16% on everything else.
So what did the fiscal cliff "deal" do? It allowed the temporary payroll tax reduction on Social Security to lapse, which effectively boosts Social Security payroll tax income by 19%, since the total tax (including both employer and employee) rises from 10.4% to 12.4%. This raises about $120B per year in additional revenue, versus the last two years.
The cliff deal also raised income taxes from 35% to 39.6% for individuals making over $400K and married couples making over $450K and raises capital gains and dividend taxes on those individuals from 15% to 20%, as well as capping deductions on those over $200K/$250K. Collectively, this raises about $60B per year in additional revenue.
So, all else being equal (and it is obviously not because not everything else is static, but everything else is pretty well in balance), we took a $1.128 trillion deficit and solved 16% of it. On the 2012 basis, this woud give us about $2.615 trillion in revenue, not quite enough money to fund Social Security, Medicare/Medicaid, Defense and interest on the debt, if you cancelled every single other government program (no FAA, no SEC, no EPA, no FDA, no USDA, no OSHA, no federal court system, no power at the White House, etc.)
In other words, this was a totally and grossly insufficient bill to solve the structural problem that we had.
It amazes me that Democrats now accept 99.2% of the Bush tax cuts that they once opposed, and that we have never been able to afford. It also amazes me that they reject out of hand even the most modest GOP proposals to rain in entitlement spending, such as shifting the chained CPI for Social Security increases, which would save a ton of money over time and make the system much more stable while having only a gradual effect on today's seniors.
It also astonishes me that the GOP continue to fight for low taxes without a serious, specific proposal on how they would cut spending. Since today's revenues don't even cover Defense, Entitlements and Interest and they want even lower revenues than today, to be credible to me, they would need to present a budget that makes deep, deep cuts in Defense and Entitlements to even get close to balance. They have not, as of yet and, in fact, most have strongly opposed defense cuts, while skirting the issue of entitlements.
Let's not forget also the underlying dynamics that make the future budget reality worse. The population is getting older and health care costs are still rising (albeit the rate of health care inflation has slowed from the pace of the past decade) so entitlement costs will rise faster than revenues. Interest rates are at 200 year historic lows, meaning that it is highly probable that interest rates and therefore interest expense will rise in the future, especially with a rising federal debt. There are some positives - unemployment insurance costs are likely to drop as the economy improves along with some other social programs and the wind-down in Afghanistan will save some on the military budget. But in balance, the trajectory is towards a worse budgetary situation, not a better one.
Both parties to date are taking unserious positions. There are only four levers to manage our current situation:
(1) Raise Taxes of Some Form in Meaningful, Broad Way
You can't tax the 1% and get us into balance. To make a meaningful impact on the deficit, you would need to raise taxes on the majority of the population in some form, either in the form of higher income tax rates, higher payroll taxes or a national sales or VAT tax.
(2) Structural Reforms to Entitlements
Higher participation ages, lower benefits, etc. You have to "bend the curve" on entitlement spending.
(3) Meaningful Cuts to Defense
We spend 5 times the next nearest country (China) on our military. Would we be unsafe at 3 times their spending?
(4) Default in Some Way Shape or Form
This is a nuclear option that would cause a depression. There are two ways to do this - either simply don't pay the bills which would be an utter disaster to financial markets that would immediately spark a deep financial and economic crisis or print money to pay the bills (i.e. have the fed buy up and forgive treasury debt), which would likely spark hyper-inflation. Neither of those options is at all appealing, even compared to 1-3.
My other disappointment (or maybe I should be happy, since I didn't love the deal) with the cliff deal is that it doesn't really solve anything. The federal budget still expires March 1st, so there is another, immediate fight over spending. Sequestration cuts still hit March 1st also. And, approximately the end of February, the federal government won't be able to pay its bills unless congress increases the debt ceiling. In other words, get ready for more melodrama, stern rhetoric and down-to-the-wire posturing that solves nothing before another 11th or 12th hour deal that doesn't do nearly enough.
My final disappointment is in President Obama's inability to lead or paint a vision. He wasn't even a participant in most of the talks that cut the deal. He has painted no clear vision for how we get where we need to go with the budget and seems to have no sense of urgency about reducing the deficit. Joe Biden showed far more leadership that the President in this case, and even Biden's leadership was just to cut a deal in the end, not to really solve the problem.
Prepare to be disappointed again in the coming year.
Boehner Holds On With 2 Votes to Spare
John Boehner will be the House Speaker for the next two years, after successfully beating back dissent from about 8% of his caucus. While there was no Republican actively running against Boehner, a cast of 17 Republicans (excluding Boehner, who did not vote, as is tradition) either cast protest votes, voted "present" or did not vote. Some were clear protest votes, for the likes of Alan West (who isn't in the House any more as he lost re-election) and Colin Powell (who has never been in the House), some were semi-serious votes, including 3 for Majority Leader Eric Cantor, who many of the far right view as more sympathetic to their cause than the pragmatic Boehner. Boehner needed an outright majority in order to not force a second ballot on the issue, which required 218 votes. The 220 he received was sufficient - barely, to keep him with the Speaker's gavel for the next two years.
All of this supports what I have long said about Boehner - he is a conservative but not a wing nut as many think. He is hemmed in by a caucus that is well outside the mainstream. The fact that he almost lost his Speakership simply for supporting the deal he did speaks volumes about where the right-wing in the House sits. Heck, a significant number of House Republicans even opposed the Hurricane Sandy aid package that was finally passed on Friday (more on that in a second.)
My advice to Boehner? You know you are never going to be the darling of the right wing, so take your re-election as an opportunity to try to go solve the problems. The hard-liners will hate it, but they already don't support you. So cement your legacy and get something done.
Chris Christie Lets Loose on the House GOP
The fiscal cliff deal on January 2nd was the last thing the outgoing House of Representatives did before disbanding to make way for the new House, which was sworn in yesterday. This greatly upset lawmakers from New York and New Jersey, who had been hoping for and believed they had secured agreement for aid for the battered coastal areas impacted by Hurricane Sandy.
Why the House didn't take the issue up before disbanding is inexplicable to me. Perhaps John Boehner couldn't swallow asking his conservative members to vote on a spending package right on the heels of a painful vote on the fiscal cliff. But, come on, when did relief for people made homeless by a hurricane become a partisan issue?
Christie was specific, and named names in his criticism, stating:
"There is only one group to blame for the continued suffering of these innocent victims, the House majority and their speaker, John Boehner."
Boehner scrambled to pull a vote together on the bill, with an initial aid package rapidly set for a vote yesterday and the balance to be voted on January 15th. The initial package passed the House 354-67, with all 67 "no" votes coming from Republicans. It is shocking to me that there were 67 members of the new House majority willing to vote no on this bill. The bill passed the Senate, which always seems much more reasonable an bi-partisan, without a single "no" vote.
The initial aid package contained only $9B, the bigger $51B package is to come in the January 15th vote. Could that package be in serious jeopardy, given the delay and vote on the first bill? If it is, it would be utter political suicide for the House GOP. Nothing makes you look like a wing nut like pushing hard to keep tax cuts on capital gains for people making millions of dollars and then opposing federal funds to help people made homeless by a hurricane.
If you like this site, tell your friends.
Thursday, December 27, 2012
Let's All Go Cliff Diving But Please Don't Mess With the Federal Debt Limit
So, it certainly appears that we are headed over the fiscal cliff (kind of a misnamed and bad analogy if you ask me...modest across the board tax hikes and spending cuts are hardly a "cliff", but I'll go with the commonly understood language), barring an eleventh hour deal.
There are a few ways that things could still play out differently - Speaker Boehner could decide to allow a vote on extending lower tax rates for those below $250K, which seems almost sure to pass with near universal Democratic support and a smattering of Republicans who think that something is better than nothing. I could also still see a "kick the can down the road" type of bill that delays the sequestration.
But frankly, I'm happy to go cliff-diving. It'll be fun to watch the federal deficit shrivel up to a fraction of its former self overnight. We'll actually be living within our means (or closer to it) when the cliff happens.
Alas, it will almost surely be temporary. President Obama is no doubt looking ahead to January 3rd, when the new Congress goes into session and he has more House and Senate seats to work with. He still obviously won't have a majority in the House or the 60 seats to stop a filibuster, but the difference between having to win over 17 House Republicans instead of 25 and 5 Senate Republicans instead of 7 will make a difference in how good a deal the President can get.
Regardless, we will survive a few weeks of Clinton-era tax rates, fragile economy and all.
The meatier issue staring us in the face is the debt-ceiling, which the country is scheduled to hit on Monday. There is a little time on the clock - similar to last year, the Treasury can buy some time by not making pension contributions and delaying paying for other expenditures - typically these tricks can buy about two months, although they will likely buy longer than that if we also go over the cliff and borrowing needs are a lot less.
Coinciding with the debt ceiling issue is the issue of the remaining budget for Fiscal 2013. The continuing resolution that everyone agreed to in order to avoid this showdown at election time covered funding of the federal government through March of 2013. Beyond that, new legislation will need to be passed.
I mention these two issues together, because it poses an obvious question - why are Republicans threatening to mess with the debt ceiling again? They have control over what we spend beyond March. The House can choose to pass much smaller appropriations, if it deems fit to do so. Charge less on the credit card if you wish, but quit threatening not to pay the bill. The whole notion that congress can refuse to permit the debt that is necessitated by laws it passed seems absurd every time it comes up. And failure to raise the debt ceiling will have much more severe consequences over the long term than going over the fiscal cliff for a few weeks.
Let's hope rational heads prevail and it doesn't come to another default showdown. But given the history, anything is possible.
If you like this site, tell your friends.
There are a few ways that things could still play out differently - Speaker Boehner could decide to allow a vote on extending lower tax rates for those below $250K, which seems almost sure to pass with near universal Democratic support and a smattering of Republicans who think that something is better than nothing. I could also still see a "kick the can down the road" type of bill that delays the sequestration.
But frankly, I'm happy to go cliff-diving. It'll be fun to watch the federal deficit shrivel up to a fraction of its former self overnight. We'll actually be living within our means (or closer to it) when the cliff happens.
Alas, it will almost surely be temporary. President Obama is no doubt looking ahead to January 3rd, when the new Congress goes into session and he has more House and Senate seats to work with. He still obviously won't have a majority in the House or the 60 seats to stop a filibuster, but the difference between having to win over 17 House Republicans instead of 25 and 5 Senate Republicans instead of 7 will make a difference in how good a deal the President can get.
Regardless, we will survive a few weeks of Clinton-era tax rates, fragile economy and all.
The meatier issue staring us in the face is the debt-ceiling, which the country is scheduled to hit on Monday. There is a little time on the clock - similar to last year, the Treasury can buy some time by not making pension contributions and delaying paying for other expenditures - typically these tricks can buy about two months, although they will likely buy longer than that if we also go over the cliff and borrowing needs are a lot less.
Coinciding with the debt ceiling issue is the issue of the remaining budget for Fiscal 2013. The continuing resolution that everyone agreed to in order to avoid this showdown at election time covered funding of the federal government through March of 2013. Beyond that, new legislation will need to be passed.
I mention these two issues together, because it poses an obvious question - why are Republicans threatening to mess with the debt ceiling again? They have control over what we spend beyond March. The House can choose to pass much smaller appropriations, if it deems fit to do so. Charge less on the credit card if you wish, but quit threatening not to pay the bill. The whole notion that congress can refuse to permit the debt that is necessitated by laws it passed seems absurd every time it comes up. And failure to raise the debt ceiling will have much more severe consequences over the long term than going over the fiscal cliff for a few weeks.
Let's hope rational heads prevail and it doesn't come to another default showdown. But given the history, anything is possible.
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Monday, August 1, 2011
A Good Bargain for America
I know that the compromise struck between President Obama and Congressional Republicans will make a number of people unhappy. Tea Party members will be livid that the cuts aren't deeper and faster and that tax cuts will be on the table for the joint select committee. Liberals are livid that there are no revenue increases in day 1. But, make no mistake about it, this is a very good deal for the country.
The details of the deal are as follows:
* $917B of defined cuts over the course of the next 10 years. Basically these cuts are the cuts agreed to early on in the Biden deficit discussion and impact both Defense and Domestic Discretionary spending.
* $1.2T in cuts to be identified by a bi-partisan select committee comprised of 6 Democrats and 6 Republicans. The committee must report back recommendations by Thanksgiving and Congress must act by December or draconian across-the-board spending cuts will be imposed across the budget, including both entitlements and defense.
Would I have liked to see an upfront end to the Bush Tax Cuts? Absolutely.
Do I think we could have gone deeper, faster with cuts in Defense and wasteful spending such as agricultural subsidies? Sure.
Do I wish that we'd just passed Erskine-Bowles instead of appointing YET ANOTHER committee to find out what we already know we need to do? Of course.
But this ensures a significant reduction in the deficit and provides the ammunition to force a real compromise that addresses both entitlements and tax reform. And, most importantly, it ensures default. Everything is on the table as it should be. I am the most optimistic that I've been that we will address the deficit in a responsible way that I have been in over a decade.
Let's hope the thing passes.
The Senate should not be an issue as there is broad support for the deal. The House is a slight question mark with the progressive caucus and the tea party caucus both in firm opposition for precisely opposite reasons, the progressives because the cuts are too deep for their liking and there is no immediate tax changes and tea party members because they don't feel the cuts go deep enough and don't touch entitlements immediately.
This is the best possible deal given the circumstances. President Obama, Senator Minority Leader Mitch McConnell and House Speaker John Boehner deserve credit for finding common ground, even though it took way too long.
House voting begins in about 30-40 minutes. I predict passage. I don't believe Speaker Boehner would be holding the vote if he didn't think he could get to 216. I would guesstimate that the bill will get in the neighborhood of 240 votes, with bi-partisan support, although with more GOP support than Democratic support. It should sail through the Senate with 70+ votes.
I'll keep you posted.
The details of the deal are as follows:
* $917B of defined cuts over the course of the next 10 years. Basically these cuts are the cuts agreed to early on in the Biden deficit discussion and impact both Defense and Domestic Discretionary spending.
* $1.2T in cuts to be identified by a bi-partisan select committee comprised of 6 Democrats and 6 Republicans. The committee must report back recommendations by Thanksgiving and Congress must act by December or draconian across-the-board spending cuts will be imposed across the budget, including both entitlements and defense.
Would I have liked to see an upfront end to the Bush Tax Cuts? Absolutely.
Do I think we could have gone deeper, faster with cuts in Defense and wasteful spending such as agricultural subsidies? Sure.
Do I wish that we'd just passed Erskine-Bowles instead of appointing YET ANOTHER committee to find out what we already know we need to do? Of course.
But this ensures a significant reduction in the deficit and provides the ammunition to force a real compromise that addresses both entitlements and tax reform. And, most importantly, it ensures default. Everything is on the table as it should be. I am the most optimistic that I've been that we will address the deficit in a responsible way that I have been in over a decade.
Let's hope the thing passes.
The Senate should not be an issue as there is broad support for the deal. The House is a slight question mark with the progressive caucus and the tea party caucus both in firm opposition for precisely opposite reasons, the progressives because the cuts are too deep for their liking and there is no immediate tax changes and tea party members because they don't feel the cuts go deep enough and don't touch entitlements immediately.
This is the best possible deal given the circumstances. President Obama, Senator Minority Leader Mitch McConnell and House Speaker John Boehner deserve credit for finding common ground, even though it took way too long.
House voting begins in about 30-40 minutes. I predict passage. I don't believe Speaker Boehner would be holding the vote if he didn't think he could get to 216. I would guesstimate that the bill will get in the neighborhood of 240 votes, with bi-partisan support, although with more GOP support than Democratic support. It should sail through the Senate with 70+ votes.
I'll keep you posted.
Saturday, July 30, 2011
Watching Rome Burn
Why Everyone Should Be Ashamed About the Debt Limit
So, here we stand. 72 hours before the Treasury Department says that the government will run out of money to fund the operations of the Federal Government. And there is no deal in sight. No one has proposed a plan that would even remotely balance the budget for this year. The budget compromise, agreed to by all sides just a few months ago, is off by over 40 cents on the dollar. Even the most aggressive spending reduction plan out there, the Ryan plan, wouldn't come close to balancing the budget anytime in the next 10 years. Yet there is no deal in sight.
This is a very high stakes game of chicken. Over $750 billion worth of wealth has been wiped out in the past week as stocks have faltered, fearing a US default may actually happen. All other policy discussion in Washington has been put on hold for this debate. And no one is leading.
The GOP criticizes the Obama Administration for not proposing a detailed plan for deficit reduction. They are 100% right. In fact, the lack of any meaningful administration attention to our disaster of a balance sheet was the primary reason that I voted Republican in the mid-terms in 2010. The GOP taking of the House did succeed in bringing the issue into focus, but has not sparked the grand compromise that all sides should want. I would further criticize Obama heavily for pushing very hard for the Erskine-Bowles deficit reduction commission, then largely ignoring their very good proposal for months, rather than pushing for adoption at a moment in time when he had broad bi-partisan support from the center for a package that included sensible spending cuts, tax reform that would increase revenues and make the tax system far more efficient and necessary entitlement reforms. In other words, entitlements from the left and taxes from the right becoming third rails is entirely Obama's fault because he did not seize the moment. Finally, Obama literally handed the GOP his best leverage in this discussion by agreeing to an awful tax cut bill at the end of last year while not even asking for a debt ceiling hike at the same time.
Oh, my friends at the GOP, where do I start? Taxes are the lowest they've been since the Eisenhower administration, yet they oppose eliminating special tax breaks for Exxon Mobil? If that isn't an extreme point of view, I don't know what is. And other than the freshman, where exactly where these spend thrifts when federal spending grew by 15% (as a % of GDP) during the Bush administration while taxes were cut by 25%? The people who signed up for Medicare Part D and two wars while asking the American people to pay LESS are suddenly offended when the check comes? What a joke.
The world won't end if a bill isn't passed by August 2nd. The Federal government may have a few more days than the original estimate, thanks to higher than expected tax revenues. And if we do breach the limit, there are short-term options. In leaks to the press, it appears clear that the Obama Administration would avoid the worst catastrophe, failing to make payments on US Bonds, but they would do so at a brutal price to the most vulnerable, delaying social security and unemployment checks and other payments that can be deferred. But don't think for a second that the consequences won't be severe. We have a very fragile economy, which has been teetering on the verge of a double-dip recession and heightened interest rates as well as income lifeline being cut off to the working class could very easily plunge us back into recession, which would ultimately make the deficit problem a whole lot worse.
Let's hope that there is a deal this weekend. Almost any deal is better than no deal. And let's hope eventually the GOP gets serious about compromise and Obama gets a real plan.
If you like this site, tell your friends.
So, here we stand. 72 hours before the Treasury Department says that the government will run out of money to fund the operations of the Federal Government. And there is no deal in sight. No one has proposed a plan that would even remotely balance the budget for this year. The budget compromise, agreed to by all sides just a few months ago, is off by over 40 cents on the dollar. Even the most aggressive spending reduction plan out there, the Ryan plan, wouldn't come close to balancing the budget anytime in the next 10 years. Yet there is no deal in sight.
This is a very high stakes game of chicken. Over $750 billion worth of wealth has been wiped out in the past week as stocks have faltered, fearing a US default may actually happen. All other policy discussion in Washington has been put on hold for this debate. And no one is leading.
The GOP criticizes the Obama Administration for not proposing a detailed plan for deficit reduction. They are 100% right. In fact, the lack of any meaningful administration attention to our disaster of a balance sheet was the primary reason that I voted Republican in the mid-terms in 2010. The GOP taking of the House did succeed in bringing the issue into focus, but has not sparked the grand compromise that all sides should want. I would further criticize Obama heavily for pushing very hard for the Erskine-Bowles deficit reduction commission, then largely ignoring their very good proposal for months, rather than pushing for adoption at a moment in time when he had broad bi-partisan support from the center for a package that included sensible spending cuts, tax reform that would increase revenues and make the tax system far more efficient and necessary entitlement reforms. In other words, entitlements from the left and taxes from the right becoming third rails is entirely Obama's fault because he did not seize the moment. Finally, Obama literally handed the GOP his best leverage in this discussion by agreeing to an awful tax cut bill at the end of last year while not even asking for a debt ceiling hike at the same time.
Oh, my friends at the GOP, where do I start? Taxes are the lowest they've been since the Eisenhower administration, yet they oppose eliminating special tax breaks for Exxon Mobil? If that isn't an extreme point of view, I don't know what is. And other than the freshman, where exactly where these spend thrifts when federal spending grew by 15% (as a % of GDP) during the Bush administration while taxes were cut by 25%? The people who signed up for Medicare Part D and two wars while asking the American people to pay LESS are suddenly offended when the check comes? What a joke.
The world won't end if a bill isn't passed by August 2nd. The Federal government may have a few more days than the original estimate, thanks to higher than expected tax revenues. And if we do breach the limit, there are short-term options. In leaks to the press, it appears clear that the Obama Administration would avoid the worst catastrophe, failing to make payments on US Bonds, but they would do so at a brutal price to the most vulnerable, delaying social security and unemployment checks and other payments that can be deferred. But don't think for a second that the consequences won't be severe. We have a very fragile economy, which has been teetering on the verge of a double-dip recession and heightened interest rates as well as income lifeline being cut off to the working class could very easily plunge us back into recession, which would ultimately make the deficit problem a whole lot worse.
Let's hope that there is a deal this weekend. Almost any deal is better than no deal. And let's hope eventually the GOP gets serious about compromise and Obama gets a real plan.
If you like this site, tell your friends.
Sunday, July 17, 2011
All Sizzle and No Steak, Could Perry Disrupt the GOP Race?
How the "Grand Deal" is Rapidly Turning Into NothingIt's quite an interesting narrative around the debt ceiling. Historically, debt ceiling increases have been non-events in American politics. The right of the government to borrow is authorized by law. From the country's inception until 1917, Congress individually reviewed every bond issuance. In 1917, realizing that the country's affairs and balance sheet had become far too complex for such micro-management, Congress passed the Second Liberty Bond Act, which authorized blanket federal borrowing, up to a preset limit, at the time, $8 billion. Since that time, Congress has continually raised the limit as inflation and deficit spending have driven the debt up over time. Historically, these increased have passed easily. Congress passed debt increases in 2002, 2003, 2005, 2007, 2008, 2009 and 2010 with little fanfare (do you even remember a debt ceiling debate during the Bush Administration?)
This time however, the newly minted House GOP majority, buoyed by Tea Party activists, saw an opportunity to set the stage for their fiscal policy goals by demanding major deficit reduction in return for the ceiling increase. House Speaker John Boehner set the standard that at least $1 in debt-reducing initiatives must pass for every $1 increase in the debt ceiling. Rep. Paul Ryan laid out the House GOP blue-print which called for radical changes to entitlements and a whole bunch of non-specific cuts to discretionary spending (the Ryan Plan set targets but did not actually say WHAT it would cut beyond entitlements.)
It now appears that the GOP was bluffing and doesn't actually want a deal. Why do I say that? Because President Obama has embraced their somewhat silly position around the debt ceiling (the debt ceiling is a product of laws Congress already passed, so why do they suddenly act shocked and demand cuts when the check comes?) and pushed for a grand bargain, a $4 trillion deal over 10 years that would include 85% spending cuts and 15% new revenues, with the new revenues being generated solely by closing corporate and wealthy tax loopholes. He even put entitlements on the table.
No dice, says the GOP. "Everything" is on the table say John Boehner and Eric Cantor, "everything" that is except tax increases. With taxes sitting at their lowest level in 60 years and the President proposing only the most symbolic of tax hikes, the GOP position is somewhat absurd.
Now it is the GOP, led by Senate Minority Leader Mitch Mcconnell, who are pushing for either a much smaller deal or a gimmick by which Congress would agree to debt ceiling increases in a way that allows the GOP to vote against them but still let them happen.
I've been critical of President Obama's negotiating tactics in the past - I thought he cut a horrible deal on the Bush Tax Cuts and gave away a ton of leverage and I thought that he gave the GOP 80%+ of what they wanted in the Fiscal 2011 budget. But, I admit, I was wrong about this one. He has played it masterfully.
The GOP looks hypocritical and is stuck defending why they would walk away from $3+ trillion in spending cuts because they don't want Exxon-Mobile or private jet owners to lose their special tax exemptions. They look unserious about deficit reduction and like they are simply pandering and playing politics.
In short, the GOP is losing the debate and is scrambling to figure out there new position. Boehner, who actually wants a deal, is wedged by Eric Cantor, who has no interest in legislation. Several others in the GOP have expressed openness to closing tax loopholes, including conservative Tom Coburn and moderate Lindsey Graham. But it looks like there will be no deal.
So, the can gets kicked down the road and the GOP loses credibility. What a shame.
Rick Perry Could Make Waves
It looks increasingly likely the Texas Governor Rick Perry will enter the GOP 2012 Presidential field. He is a compelling candidate in many ways - he obviously has executive experience, he has strong conservative credentials (which is obviously very helpful in GOP primaries and caucuses) and he is a good speaker. In short, he is Michelle Bachmann with more credibility.
His entry would clearly be bad for Bachmann as they would be fighting for the same set of voters. Moderates and those most interested in general election victory would still back Mitt Romney, although conservatives who were holding their nose and supporting Romney because they viewed him as the only credible general candidate, might jump ship.
So, in short, how relevant Perry would become depends on where he pulls his support from. If he steals support mostly from Bachmann, he will simply solidify Romney's national lead. If he stills primarily from Romney, he could win or he could open the door for Bachmann to win with a plurality of Tea Party voters and talk radio listeners.
Either way, in what has become kind of a ho-hum field, Rick Perry's entrance adds an element of excitement.
This time however, the newly minted House GOP majority, buoyed by Tea Party activists, saw an opportunity to set the stage for their fiscal policy goals by demanding major deficit reduction in return for the ceiling increase. House Speaker John Boehner set the standard that at least $1 in debt-reducing initiatives must pass for every $1 increase in the debt ceiling. Rep. Paul Ryan laid out the House GOP blue-print which called for radical changes to entitlements and a whole bunch of non-specific cuts to discretionary spending (the Ryan Plan set targets but did not actually say WHAT it would cut beyond entitlements.)
It now appears that the GOP was bluffing and doesn't actually want a deal. Why do I say that? Because President Obama has embraced their somewhat silly position around the debt ceiling (the debt ceiling is a product of laws Congress already passed, so why do they suddenly act shocked and demand cuts when the check comes?) and pushed for a grand bargain, a $4 trillion deal over 10 years that would include 85% spending cuts and 15% new revenues, with the new revenues being generated solely by closing corporate and wealthy tax loopholes. He even put entitlements on the table.
No dice, says the GOP. "Everything" is on the table say John Boehner and Eric Cantor, "everything" that is except tax increases. With taxes sitting at their lowest level in 60 years and the President proposing only the most symbolic of tax hikes, the GOP position is somewhat absurd.
Now it is the GOP, led by Senate Minority Leader Mitch Mcconnell, who are pushing for either a much smaller deal or a gimmick by which Congress would agree to debt ceiling increases in a way that allows the GOP to vote against them but still let them happen.
I've been critical of President Obama's negotiating tactics in the past - I thought he cut a horrible deal on the Bush Tax Cuts and gave away a ton of leverage and I thought that he gave the GOP 80%+ of what they wanted in the Fiscal 2011 budget. But, I admit, I was wrong about this one. He has played it masterfully.
The GOP looks hypocritical and is stuck defending why they would walk away from $3+ trillion in spending cuts because they don't want Exxon-Mobile or private jet owners to lose their special tax exemptions. They look unserious about deficit reduction and like they are simply pandering and playing politics.
In short, the GOP is losing the debate and is scrambling to figure out there new position. Boehner, who actually wants a deal, is wedged by Eric Cantor, who has no interest in legislation. Several others in the GOP have expressed openness to closing tax loopholes, including conservative Tom Coburn and moderate Lindsey Graham. But it looks like there will be no deal.
So, the can gets kicked down the road and the GOP loses credibility. What a shame.
Rick Perry Could Make Waves
It looks increasingly likely the Texas Governor Rick Perry will enter the GOP 2012 Presidential field. He is a compelling candidate in many ways - he obviously has executive experience, he has strong conservative credentials (which is obviously very helpful in GOP primaries and caucuses) and he is a good speaker. In short, he is Michelle Bachmann with more credibility.
His entry would clearly be bad for Bachmann as they would be fighting for the same set of voters. Moderates and those most interested in general election victory would still back Mitt Romney, although conservatives who were holding their nose and supporting Romney because they viewed him as the only credible general candidate, might jump ship.
So, in short, how relevant Perry would become depends on where he pulls his support from. If he steals support mostly from Bachmann, he will simply solidify Romney's national lead. If he stills primarily from Romney, he could win or he could open the door for Bachmann to win with a plurality of Tea Party voters and talk radio listeners.
Either way, in what has become kind of a ho-hum field, Rick Perry's entrance adds an element of excitement.
Sunday, July 3, 2011
Time to Gerrymander, The Path to Success on the Debt Ceiling, Looking at the Party Factions, Reasons to Celebrate American Independence
43 States Full of Gerrymandering
In the early 1800s, Democratic-Republican Governor of Massachusetts Elbridge Gerry, working with allies in the state legislature, crafted a map of State Senate districts that was designed to thwart the Federalists by building as many majority Democratic-Republican districts as possible. The 12th District, designed in the Boston area, closely resembled a salamander. Hence, the terry Gerrymander was born as a symbol of designing districts not on the basis of any rational grouping of towns and neighborhoods, but with the specific intent of benefit the party in power.
And it has been thus for the past two centuries. It is a time-honored tradition, used by both Democrats and Republicans alike, to shape Congressional districts to benefit ones own party.
The 2012 Congressional elections will be the first with newly drawn districts based on the 2010 Census. All 50 states will have to redraw, including not only the ones that are gaining or losing seats, but also the ones where the seats are staying the same, as population shifts have still made current districts uneven.
Seven states have laws on the books to protect against Gerrymandering. These states use a bi-partisan commission to draw districts in logical ways to avoid this effect. Arizona, Hawaii, Idaho, New Jersey, California, Minnesota and Washington all fall into this category. For a 7 other states, Gerrymandering is irrelevant as they hold a single at-large seat. Delaware, Vermont, North Dakota, South Dakota, Montana, Wyoming and Alaska fall into this category.
In the remaining 36 states, however, it is open season. Of the largest of these redistricting prizes: Texas, New York, Florida, Pennsylvania, Ohio, Illinois, Michigan, Georgia, North Carolina and Virginia, only 1 (Illinois) is a Democratically-controlled legislature and only 2 others (New York and Virginia) have divided legislatures; 7 of these 10 states are firmly controlled by Republicans.
Whatever your personal views on Gerrymandering (I support the bi-partisan commissions, most partisans seem to favor those when they are out of power and oppose them when they are in power), the dynamics of this year show the huge intrinsic advantage that Republicans have in the House in the 2012 elections. Not only are Republican states by and large picking up seats: Democratic-leaning states are losing 7 seats, GOP-leaning states are gaining 6 (Nevada, a swing state, is gaining the 7th seat), but they will largely control the redistricting process, which could swing as many as a dozen seats to the advantage of the GOP.
So, any hope the Democrats had that higher turnout in 2012 will help them overcome 2010 GOP gains has to be blunted by a intrinsic GOP advantage of almost 20 seats going in.
How About This Compromise?
The impasse on raising the debt ceiling and the associated deficit reduction package that the Congressional GOP have demanded has come down to one basic issue: taxes.
At issue: Democrats want tax changes to be part of the deficit reduction package, namely the elimination or reduction of tax credits and exemptions for rich corporations and individuals. Republicans with a few exceptions (Sen. Tom Coburn (R-OK) and Sen. Lindsey Graham (R-SC) being the most notable) have stated opposition to any proposal that increases total tax revenues, even if they do not increase marginal rates. Democrats are loathe to support massive spending cuts without something on the tax side.
In the spirit of Grover Norquist (who I detest, but that's another discussion), how about this compromise? Put through the spending cuts (on discretionary spending, nothing significant is going to happen with entitlements, unfortunately), incorporate reductions of tax loopholes for the wealthy and corporations, but offset those with reductions to taxes for middle-income Americans. This holds to the GOP pledge of not increasing net taxes, but throws the Democrats a bone on income equality.
What do you say, Eric Cantor and Harry Reid?
Who Unites the Factions Best?
Ronald Reagan famously swept into office over incumbent Jimmy Carter by winning over moderates who came to be known as "Reagan Democrats". In every election, there is a core of support for each party which is complemented by how well the unite the factions that can go either way. In recent years, it seems party loyalties have become even more complex, so I thought it might make sense to take stock of the membership factions of each party to understand how each party might to try to build a winning coalition next November. I'll also assess the risk of each group dumping their home party in a given election.
1. The Democrats
Democrats rely on a number of different factions:
a. Social Justice Liberals
This group includes those whose primary issues are civil rights-related, including gay rights. This group has been around since at least the 60s and tend to be passionate voters with a strong moral bent to their voting.
Risk Level: Low
b. Socialists
Those seeking economic justice, they tend to have core issues such as universal health care, social assistance, education spending and income equality. These are not all full-blown socialists, but are generally people that admire the social safety net of large European countries.
Risk Level: Low
c. Feminists
This group tends to overlap heavily with the Social Justice Liberals, but they tend to have a single voting issue that overrides everything else: abortion-rights.
Risk Level: Low
d. Doves
This group is the anti-war gang. They strongly opposed Iraq and now want out quickly of Afghanistan and oppose involvement in the conflict in Libya. They turned out big for Obama in 2008
Risk Level: Medium (but only because the GOP isn't likely to run as the party of peace against President Obama)
e. Populist Hispanics
Hispanics in general, and Mexican-Americans specifically favored the Democrats heavily in the past on the basis of their economically liberal views and support for immigration reform. But Democrats part ways with this heavily Catholic group on social issues such as abortion and gay rights.
Risk Level: Medium (the economy hasn't improved and the President has largely ignored this Hispanic base, although he did nominate Sonia Sotomayor to the Supreme Court)
f. Social Libertarians
Those that favor not only abortion-rights but hate the Patriot Act, Gitmo, want to legalize Marijuana and prostitution and generally want the government completely out of social issues.
Risk Level: High (the President hasn't closed Gitmo, has extended the Patriot Act and the Tea Party seems to have co-opted the social libertarian message)
Republicans
a. The Corporatists
The Goldman-Sachs, Exxon-Mobil wing of the GOP isn't as concerned with true free markets as they are with making the government business-friendly. They favor tax breaks and subsidies and limited government regulation.
Risk: Low (this group hates the President)
b. Christian Conservatives
The social-issue focused group opposes gay marriage, abortion rights and affirmative action and is far more interested in traditional values than economics.
Risk: Low
c. The Tea Party / Economic Libertarians
This group generally opposes government involvement in the economy and favors far lower government spending, lower taxes and less regulation.
Risk: Low-to-Medium (they won't support Obama, but they could stay home if a more Corporatist Republican takes office)
d. The Neo-Cons
Remember when the Neo-Cons were the big new thing? The first Republicans in ages to support such concepts of nation-building, this new way of Republican thinkers was prominent during the Bush Administration. They are a lot quieter these days after a decade of war, but they are still around.
Risk: Low
e. Northeastern Republicans
This socially liberal but economically conservative bunch, wants less government but things the Tea Party and the Christian Conservatives are a little out there. There are a lot less of these pragmatists than the used to be, but they are still around.
Risk: Medium-to-High
f. Establishment Republicans
This group likes Medicare, Medicaid and Social Security but opposes Universal Healthcare. A nuanced, but large group, they are resistant to change in general, they are the classic Reagan Democrats. They want our existing social programs maintained, but don't want new ones, and sure don't want their taxes going up.
Risk: Medium
There are many other groups (true Libertarians and all shades of moderates) out there, but each party is going to have to shore up a complex base to win.
Why America is Great
As we celebrate 235 years of the Untied States of America on July 4th, here are a few of the reasons why America is great:
1. The Best Capital Markets
Why are the most innovative companies in the world based in the US? Our innovative spirit, to be sure. But also, we have the best capital markets in the world. Venture Capital, Angel Investing and strong property rights all make the US one the best place in history to turn an idea into a business.
2. The Most Diverse, Integrated Population Ever
We are a truly diverse nation. Black, White, Hispanic, Asian, Native American, protestant, Catholic, Jewish, Muslim, gay, straight, bisexual, and on and on. Sure, other countries have elements of diversity -- there is a sizable Muslim population in France and lots of people from Fiji in Australia. But can you name anywhere else that has existed in history where the population is so well economically and socially integrated? Sure, we still have our problems, but can you imagine the election of a guy like Barack Obama in Europe?
3. The Bill of Rights
Nothing before or since anywhere in the world has established the rights of the citizenry so uniquely. Free speech? Good luck with that in Germany. Bearing arms? Have fun in Great Britain. We have the strongest spirit of individual rights of anywhere in the world and it leads to the most open dialogue about social and political issues of anywhere on Earth.
4. The University System
Sure, it's too expensive. Sure, the tenure system is broken. And yes, the funding system is unfair to middle-class savers. But there is a reason that people from all over the world come to our colleges and universities. Because they are the best.
5. Class Mobility
Maybe its less than it was for some a generation ago, but it isn't gone. But take a look at the stories of Chris Gardner (the subject of the book and film "The Pursuit of Happyness" who went from homeless to running an investment management group), Oprah Winfrey (who grew up poor in Chicago to build a media empire), Bill Clinton (born poor to a single-mother in rural Arkansas to become President of the United States) and David Geffen (who grew up in poverty in Brooklyn and rose to be the biggest name in the music business), rags-to-riches stories simply don't happen with the prevalence that they do in the United States anywhere else.
Happy Independence Day, everyone. I hope you get a long weekend.
In the early 1800s, Democratic-Republican Governor of Massachusetts Elbridge Gerry, working with allies in the state legislature, crafted a map of State Senate districts that was designed to thwart the Federalists by building as many majority Democratic-Republican districts as possible. The 12th District, designed in the Boston area, closely resembled a salamander. Hence, the terry Gerrymander was born as a symbol of designing districts not on the basis of any rational grouping of towns and neighborhoods, but with the specific intent of benefit the party in power.
And it has been thus for the past two centuries. It is a time-honored tradition, used by both Democrats and Republicans alike, to shape Congressional districts to benefit ones own party.
The 2012 Congressional elections will be the first with newly drawn districts based on the 2010 Census. All 50 states will have to redraw, including not only the ones that are gaining or losing seats, but also the ones where the seats are staying the same, as population shifts have still made current districts uneven.
Seven states have laws on the books to protect against Gerrymandering. These states use a bi-partisan commission to draw districts in logical ways to avoid this effect. Arizona, Hawaii, Idaho, New Jersey, California, Minnesota and Washington all fall into this category. For a 7 other states, Gerrymandering is irrelevant as they hold a single at-large seat. Delaware, Vermont, North Dakota, South Dakota, Montana, Wyoming and Alaska fall into this category.
In the remaining 36 states, however, it is open season. Of the largest of these redistricting prizes: Texas, New York, Florida, Pennsylvania, Ohio, Illinois, Michigan, Georgia, North Carolina and Virginia, only 1 (Illinois) is a Democratically-controlled legislature and only 2 others (New York and Virginia) have divided legislatures; 7 of these 10 states are firmly controlled by Republicans.
Whatever your personal views on Gerrymandering (I support the bi-partisan commissions, most partisans seem to favor those when they are out of power and oppose them when they are in power), the dynamics of this year show the huge intrinsic advantage that Republicans have in the House in the 2012 elections. Not only are Republican states by and large picking up seats: Democratic-leaning states are losing 7 seats, GOP-leaning states are gaining 6 (Nevada, a swing state, is gaining the 7th seat), but they will largely control the redistricting process, which could swing as many as a dozen seats to the advantage of the GOP.
So, any hope the Democrats had that higher turnout in 2012 will help them overcome 2010 GOP gains has to be blunted by a intrinsic GOP advantage of almost 20 seats going in.
How About This Compromise?
The impasse on raising the debt ceiling and the associated deficit reduction package that the Congressional GOP have demanded has come down to one basic issue: taxes.
At issue: Democrats want tax changes to be part of the deficit reduction package, namely the elimination or reduction of tax credits and exemptions for rich corporations and individuals. Republicans with a few exceptions (Sen. Tom Coburn (R-OK) and Sen. Lindsey Graham (R-SC) being the most notable) have stated opposition to any proposal that increases total tax revenues, even if they do not increase marginal rates. Democrats are loathe to support massive spending cuts without something on the tax side.
In the spirit of Grover Norquist (who I detest, but that's another discussion), how about this compromise? Put through the spending cuts (on discretionary spending, nothing significant is going to happen with entitlements, unfortunately), incorporate reductions of tax loopholes for the wealthy and corporations, but offset those with reductions to taxes for middle-income Americans. This holds to the GOP pledge of not increasing net taxes, but throws the Democrats a bone on income equality.
What do you say, Eric Cantor and Harry Reid?
Who Unites the Factions Best?
Ronald Reagan famously swept into office over incumbent Jimmy Carter by winning over moderates who came to be known as "Reagan Democrats". In every election, there is a core of support for each party which is complemented by how well the unite the factions that can go either way. In recent years, it seems party loyalties have become even more complex, so I thought it might make sense to take stock of the membership factions of each party to understand how each party might to try to build a winning coalition next November. I'll also assess the risk of each group dumping their home party in a given election.
1. The Democrats
Democrats rely on a number of different factions:
a. Social Justice Liberals
This group includes those whose primary issues are civil rights-related, including gay rights. This group has been around since at least the 60s and tend to be passionate voters with a strong moral bent to their voting.
Risk Level: Low
b. Socialists
Those seeking economic justice, they tend to have core issues such as universal health care, social assistance, education spending and income equality. These are not all full-blown socialists, but are generally people that admire the social safety net of large European countries.
Risk Level: Low
c. Feminists
This group tends to overlap heavily with the Social Justice Liberals, but they tend to have a single voting issue that overrides everything else: abortion-rights.
Risk Level: Low
d. Doves
This group is the anti-war gang. They strongly opposed Iraq and now want out quickly of Afghanistan and oppose involvement in the conflict in Libya. They turned out big for Obama in 2008
Risk Level: Medium (but only because the GOP isn't likely to run as the party of peace against President Obama)
e. Populist Hispanics
Hispanics in general, and Mexican-Americans specifically favored the Democrats heavily in the past on the basis of their economically liberal views and support for immigration reform. But Democrats part ways with this heavily Catholic group on social issues such as abortion and gay rights.
Risk Level: Medium (the economy hasn't improved and the President has largely ignored this Hispanic base, although he did nominate Sonia Sotomayor to the Supreme Court)
f. Social Libertarians
Those that favor not only abortion-rights but hate the Patriot Act, Gitmo, want to legalize Marijuana and prostitution and generally want the government completely out of social issues.
Risk Level: High (the President hasn't closed Gitmo, has extended the Patriot Act and the Tea Party seems to have co-opted the social libertarian message)
Republicans
a. The Corporatists
The Goldman-Sachs, Exxon-Mobil wing of the GOP isn't as concerned with true free markets as they are with making the government business-friendly. They favor tax breaks and subsidies and limited government regulation.
Risk: Low (this group hates the President)
b. Christian Conservatives
The social-issue focused group opposes gay marriage, abortion rights and affirmative action and is far more interested in traditional values than economics.
Risk: Low
c. The Tea Party / Economic Libertarians
This group generally opposes government involvement in the economy and favors far lower government spending, lower taxes and less regulation.
Risk: Low-to-Medium (they won't support Obama, but they could stay home if a more Corporatist Republican takes office)
d. The Neo-Cons
Remember when the Neo-Cons were the big new thing? The first Republicans in ages to support such concepts of nation-building, this new way of Republican thinkers was prominent during the Bush Administration. They are a lot quieter these days after a decade of war, but they are still around.
Risk: Low
e. Northeastern Republicans
This socially liberal but economically conservative bunch, wants less government but things the Tea Party and the Christian Conservatives are a little out there. There are a lot less of these pragmatists than the used to be, but they are still around.
Risk: Medium-to-High
f. Establishment Republicans
This group likes Medicare, Medicaid and Social Security but opposes Universal Healthcare. A nuanced, but large group, they are resistant to change in general, they are the classic Reagan Democrats. They want our existing social programs maintained, but don't want new ones, and sure don't want their taxes going up.
Risk: Medium
There are many other groups (true Libertarians and all shades of moderates) out there, but each party is going to have to shore up a complex base to win.
Why America is Great
As we celebrate 235 years of the Untied States of America on July 4th, here are a few of the reasons why America is great:
1. The Best Capital Markets
Why are the most innovative companies in the world based in the US? Our innovative spirit, to be sure. But also, we have the best capital markets in the world. Venture Capital, Angel Investing and strong property rights all make the US one the best place in history to turn an idea into a business.
2. The Most Diverse, Integrated Population Ever
We are a truly diverse nation. Black, White, Hispanic, Asian, Native American, protestant, Catholic, Jewish, Muslim, gay, straight, bisexual, and on and on. Sure, other countries have elements of diversity -- there is a sizable Muslim population in France and lots of people from Fiji in Australia. But can you name anywhere else that has existed in history where the population is so well economically and socially integrated? Sure, we still have our problems, but can you imagine the election of a guy like Barack Obama in Europe?
3. The Bill of Rights
Nothing before or since anywhere in the world has established the rights of the citizenry so uniquely. Free speech? Good luck with that in Germany. Bearing arms? Have fun in Great Britain. We have the strongest spirit of individual rights of anywhere in the world and it leads to the most open dialogue about social and political issues of anywhere on Earth.
4. The University System
Sure, it's too expensive. Sure, the tenure system is broken. And yes, the funding system is unfair to middle-class savers. But there is a reason that people from all over the world come to our colleges and universities. Because they are the best.
5. Class Mobility
Maybe its less than it was for some a generation ago, but it isn't gone. But take a look at the stories of Chris Gardner (the subject of the book and film "The Pursuit of Happyness" who went from homeless to running an investment management group), Oprah Winfrey (who grew up poor in Chicago to build a media empire), Bill Clinton (born poor to a single-mother in rural Arkansas to become President of the United States) and David Geffen (who grew up in poverty in Brooklyn and rose to be the biggest name in the music business), rags-to-riches stories simply don't happen with the prevalence that they do in the United States anywhere else.
Happy Independence Day, everyone. I hope you get a long weekend.
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