It Isn't Going to Happen
It seems that not a week goes by that some journalist or political commentator finds the need to discuss the possibility of President Obama dumping Vice President Joe Biden to put Secretary of State Hillary Clinton on the ballot as his VP candidate in 2012.
The case goes something like this - Biden is flub-prone and doesn't do a lot for the ticket. Secretary Clinton is wildly popular, as evidenced by a myriad of polls that show her respect. Plus, you get the bonus of having the still-beloved ex-President Bill Clinton out, more actively fighting for the ticket.
All interesting, but it isn't going to happen. It is nearly unprecedented for a sitting President to stand for re-election with a new Vice-President. FDR did it, but it was after two full terms in office. Gerald Ford ran with a different guy (Bob Dole) than the sitting VP (Nelson Rockefeller), but that was an unusual administration, as neither Ford nor Rockefeller had stood for election for either office (Ford had been appointed VP by President Nixon after Spiro Agnew's resignation in 1973, Rockefeller was appointed by Ford after taking the reins from Nixon after his Watergate resignation.) McKinley ran for re-election with a new VP (one Teddy Roosevelt) but his original VP, Garrett Hobart, had died in office.
To find a situation where a sitting President ran for a second term with a new VP candidate when his first-term VP candidate was still alive, you have to go all the way back to Ulysses S. Grant in 1872. Simply put, it isn't done.
And with good reason. Vice Presidents have only a marginal impact on Presidential races - after all, can you name one race that was largely decided on the basis of the VP candidate? And don't say 2008 - Sarah Palin isn't what sunk John McCain, a sour economy did.
What would the upside to President Obama be? He would look disloyal and weak. And that big benefit that Clinton would supposedly bring to the ticket? Can you name a single swing state he would win BECAUSE of Clinton? Does Clinton fundamentally change the key issues or the reasons President Obama has high disapproval numbers? And does anyone really think Clinton would be as popular as she is now if she were a candidate for public office, re-subjected to the scrutiny the press reserves for politicians?
It isn't going to happen, Pete Dupont (the former governor of Delaware and one-time Presidential aspirant, who is the latest to purvey this theory), so let's just stop talking about it.
The Solution: Do Nothing!
Think the deficit problem is incredibly complex and that the failure of the super committee just shows how intractable our deficit problem is? Nonesense!
Let me show you how easy it is to balance the budget. And our politicians don't even have to do a thing.
Here's the simple math.
This year's deficit is estimated to be around $1.099 trillion.
All you have to do is the following:
1. Let the Bush tax cuts expire (all of them) - $400B per year
That's right, the Bush tax cuts (really Bush-Obama cuts at this point) cost the treasury about $400B per year. Of this, about $100B is associated with the cuts to the top bracket, the rest associated with the cuts to the Clinton bracket. By doing nothing, and allowing the "temporary" cuts to expire at the end of this year, the treasury will collect approximately $400B more.
2. Let the Obama tax cuts expire - $110B per year
President Obama's "temporary" reduction in Social Security taxes by 2% for this year is costing the treasury $110B, as general revenues are being used to cover the gap in the social security trust fund. Just allow the cut to expire, and that's $110B more in the coffers.
3. Don't extend unemployment benefits beyond statutory maximum - $44B per year
Under ordinary circumstances, people get unemployment benefits for 6 months. Since the recession started, Congress has been routinely extending those benefits for 2 full years. Stopping this practice would trim $44B in cost from the budget.
4. Allow the Iraq war to wind down - $159B per year
The Iraq war is costing us a lot of money in both direct costs to the military and costs to the contractors. The troops are scheduled to leave. This should be easy spend to wind down.
5. Don't "fix" the alternative minimum tax - $120B per year
The alternative minimum tax was created to keep the very wealthy from using loopholes to reduce their tax rate too far. The AMT amount was not indexed to inflation, but Congress routinely passes "fixes" aimed to keep the AMT focused squarely on the very wealthy. Allowing it to not index, as current law allows, would essentially take those same loopholes away from upper-middle class taxpayers. This yields $120B per year in savings.
6. Allow the Sequester Cuts - $120B per year
Since the deficit panel failed, the automatic "sequester" cuts of $120B per year are scheduled to kick in in about 14 months, with 50% applying to defense and 50% applying to non-entitlement domestic spending. These cuts happen automatically, unless Congress acts to change the law.
Total savings from doing nothing: $953B per year.
Okay, I didn't totally solve the deficit - there would still be a $146B shortfall. But $146B is a mere 1.0% of GDP, a rate at which the overall debt would decline significantly (we can expect GDP growth plus inflation to be equal about 5-6%, even using conservative estimates, meaning a 4-5% reduction in the effective debt levels.)
The approach is balanced ($323B in spending cuts and $630B in tax "increases", with all the tax increases being the expiration of "temporary" cuts.)
And all the government has to do to make it happen is nothing.
If you like this site, tell your friends.
Showing posts with label federal spending. Show all posts
Showing posts with label federal spending. Show all posts
Saturday, November 26, 2011
Wednesday, November 9, 2011
Why the CBO Won't Use GOP Growth Estimates, Red State Socialism
Do Lower Taxes Mean Higher Tax Revenues?
The idea that you can cut tax rates and gain higher revenue by increasing economic growth is not a new idea. President John F. Kennedy argued for the reduction of top marginal rates in order to spur economic growth (albeit when top marginal rates were over 90%.) Ronald Reagan famously fought for lower rates, to the consternation of his eventual Vice President and Successor to the Presidency, George Herbert Walker Bush, who, in perhaps the most famous political quotation of the past 30 years, called Reagan's plan "Voodoo Economics". Economist Arthur Laffer sketched a curve on a napkin for Reagan once that showed tax revenues declining after a point when you increase rates.
I've written extensively before on this topic. But it is becoming a burning issue today. Congressional Republicans are attempting a very nuanced method of proposing a path to financial sustainability. We all know that they have been in favor of significant spending cuts (other than defense spending.) They have also opposed any tax increases. Their latest line of argument is that they are supported increased revenue by supporting decreased taxes. They have been bemoaning the fact that the non-partisan Congressional Budget Office (CBO) refuses to consider increased revenues as a result of increased economic growth from tax cuts.
At the extremes, the GOP hypothesis is easy to understand. The so called Laffer curve, which shows tax revenues going up quickly when the first few taxes are instituted, then flattening out and eventually declining makes sense in that we would all agree that a 1% tax will generate more revenue than a 0% tax, since 0% will always yield no money and 1% will always yield at least some money. Similarly, a 100% tax, I think we would all agree would crush an economy. So the question isn't if the Laffer curve theoretically works, it is if it is meaningful in the range of taxes that we are talking about in this country.
From 1934 through today federal taxes have ranged between 4.8% of GDP (in 1934) and 20.9% of GDP (in 1944). For most of post-World War 2, they have stayed in a relatively narrow range between 14.4% (in 1950) and 20.6% (in 2000). Taxes right now are right at the lowest level they have been since World War 2, at 14.9% of GDP in both 2009 and 2010.
Utilizing the tax data (from the CBO) and GDP growth data (from the BEA) I went searching for a correlation. The scatter plot of the two data series is below:
It is very hard for me to see any sort of correlation in these data, but there is a mild one. A simple regression line shows that higher taxes do, in general lead to economic growth. For every 1% increase in taxes as a percentage of GDP (approximately a 7% tax increase at today's rates), there is a reduction in GDP growth by about 0.6%. This relationship explains only about 12% of the total difference between GDP growth in the years shown.
The Pre-World War 2 and World War 2 data may distort the information for a couple of reasons. Prior to World War 2, government spending was at such a low level (keep in mind, there was no Medicare or Medicaid) and economic growth was so distorted from the great depression that the data may not be meaningful. Similarly, World War 2 itself was a period of unprecedented and unequaled government spending which would likely distort the statistics.
If I limit the data to 1945 and beyond, the scatter plot looks as follows:
As you can see from this chart, there is no correlation in the Post-World War 2 data. A regression line explains exactly 0% of the variation. In other words, there is no meaningful evidence in the range that we are currently operating in that level of taxes within that range (from 14% to 21% of GDP) has any impact on economic growth whatsoever.
I'm fully prepared for a deluge of comments from the right on this chart. I'd ask this - send me numbers not arguments. If I'm not looking at the data correctly, I'd love to discuss it. What I'm not interested in is partisan talking points. The evidence, of yet, doesn't bear them out.
No wonder the CBO won't score the GOP's budget proposals with big extra growth assumptions backed in: there is no evidence it will happen.
Why the Republican States Are Socialist Republics
Okay, I'll admit it, the headline is deliberately extreme to grab your attention. Plus, I thought conservatives would already be seeing red (no pun intended) after reading my above post on taxation that I'd just go ahead and get all the anger out of the way at once. The issue I'm bringing to light is about how federal money gets collected and how it gets spent.
You see, the dirty little secret is that most conservative states are heavily subsidized by the federal government at the expense of most liberal states. It isn't a deliberate conspiracy and there are many reasons. Firstly, conservative states tend to, in general, be a lot poorer than liberal states. Mississippi, Alabama, Arkansas, Louisiana, etc. all have very high rates of poverty and low incomes while states like California, Connecticut, New York and New Jersey tend to sport lots of high income individuals and while all have pockets of heavy poverty, it is nothing like the level seen in the deep south. Secondly, conservative states tend to be smaller (think of all the red flyover states) and due to the structure of the Senate (two senators per state) therefore get a disproportionate share of the federal dole. Finally, our system of agriculture subsidies tends to favor red states, since big ag tends to live in red states and receives big dollars from the government for growing crops (or not growing crops.)
For purposes of this exercise, I'm going to categorize states as "red", "blue" or "purple". A "red" state will be a state that voted for the Republican Presidential candidate in the last 3, a "blue" state one that has voted for the Democrat in the past 3 cycles and a "purple" state one that has split its Presidential vote.
By that measure, the following 18 states are categorized as blue:
Washington, Oregon, California, Hawaii, Minnesota, Wisconsin, Michigan, Illinois, Pennsylvania, Maryland, Delaware, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, Vermont and Maine
The following 22 states are categorized as red:
Alaska, Arizona, Utah, Idaho, Montana, Wyoming, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Texas, Missouri, Arkansas, Louisiana, Mississippi, Tennessee, Alabama, Kentucky, Georgia, West Virginia and South Carolina.
The following 10 states are categorized as purple:
Nevada, Colorado, New Mexico, Iowa, Indiana, Ohio, Virginia, North Carolina, Florida, New Hampshire
There are probably some quibbles you could make with this list. It seems weird to not have Pennsylvania on the list of purple states. It's also odd that Indiana qualifies but Missouri (a traditional swing state does not.) But minor questions aside, I think most would agree that in general this methodology generates a good breakdown of the country.
The figures below use research from The Tax Foundation, which is publicly available here.
On average, for every $1 in federal taxes paid, the states receive the following benefits by category:
Red States: $1.40
Purple States: $1.10
Blue States: $0.94
The figures don't appear to average to $1 since the blue states that pay heavy taxes relative to their benefits are much larger than the small states that receive a disproportionate share of the benefits.
The most subsidized states?
New Mexico (a purple state) because of the cost of Indian reservations and systemic poverty in rural areas plus a large number of military bases and Mississippi (a red state) because of extreme poverty - they receive $2.03 and $2.02 respectively for each dollar in taxes paid.
The most subsidizing states?
New Jersey (a blue state) due to high levels of wealth and relatively few urban areas and Nevada (a purple state) due to heavy taxation on gaming revenues - they receive $0.61 and $0.65 respectively.
So if we are going to have a conversation about smaller government, let's start with a discussion about state equality. If every state only received the level of government benefits that New Jersey and Nevada do, we could balance the budget today.
The idea that you can cut tax rates and gain higher revenue by increasing economic growth is not a new idea. President John F. Kennedy argued for the reduction of top marginal rates in order to spur economic growth (albeit when top marginal rates were over 90%.) Ronald Reagan famously fought for lower rates, to the consternation of his eventual Vice President and Successor to the Presidency, George Herbert Walker Bush, who, in perhaps the most famous political quotation of the past 30 years, called Reagan's plan "Voodoo Economics". Economist Arthur Laffer sketched a curve on a napkin for Reagan once that showed tax revenues declining after a point when you increase rates.
I've written extensively before on this topic. But it is becoming a burning issue today. Congressional Republicans are attempting a very nuanced method of proposing a path to financial sustainability. We all know that they have been in favor of significant spending cuts (other than defense spending.) They have also opposed any tax increases. Their latest line of argument is that they are supported increased revenue by supporting decreased taxes. They have been bemoaning the fact that the non-partisan Congressional Budget Office (CBO) refuses to consider increased revenues as a result of increased economic growth from tax cuts.
At the extremes, the GOP hypothesis is easy to understand. The so called Laffer curve, which shows tax revenues going up quickly when the first few taxes are instituted, then flattening out and eventually declining makes sense in that we would all agree that a 1% tax will generate more revenue than a 0% tax, since 0% will always yield no money and 1% will always yield at least some money. Similarly, a 100% tax, I think we would all agree would crush an economy. So the question isn't if the Laffer curve theoretically works, it is if it is meaningful in the range of taxes that we are talking about in this country.
From 1934 through today federal taxes have ranged between 4.8% of GDP (in 1934) and 20.9% of GDP (in 1944). For most of post-World War 2, they have stayed in a relatively narrow range between 14.4% (in 1950) and 20.6% (in 2000). Taxes right now are right at the lowest level they have been since World War 2, at 14.9% of GDP in both 2009 and 2010.
Utilizing the tax data (from the CBO) and GDP growth data (from the BEA) I went searching for a correlation. The scatter plot of the two data series is below:
The Pre-World War 2 and World War 2 data may distort the information for a couple of reasons. Prior to World War 2, government spending was at such a low level (keep in mind, there was no Medicare or Medicaid) and economic growth was so distorted from the great depression that the data may not be meaningful. Similarly, World War 2 itself was a period of unprecedented and unequaled government spending which would likely distort the statistics.
If I limit the data to 1945 and beyond, the scatter plot looks as follows:
I'm fully prepared for a deluge of comments from the right on this chart. I'd ask this - send me numbers not arguments. If I'm not looking at the data correctly, I'd love to discuss it. What I'm not interested in is partisan talking points. The evidence, of yet, doesn't bear them out.
No wonder the CBO won't score the GOP's budget proposals with big extra growth assumptions backed in: there is no evidence it will happen.
Why the Republican States Are Socialist Republics
Okay, I'll admit it, the headline is deliberately extreme to grab your attention. Plus, I thought conservatives would already be seeing red (no pun intended) after reading my above post on taxation that I'd just go ahead and get all the anger out of the way at once. The issue I'm bringing to light is about how federal money gets collected and how it gets spent.
You see, the dirty little secret is that most conservative states are heavily subsidized by the federal government at the expense of most liberal states. It isn't a deliberate conspiracy and there are many reasons. Firstly, conservative states tend to, in general, be a lot poorer than liberal states. Mississippi, Alabama, Arkansas, Louisiana, etc. all have very high rates of poverty and low incomes while states like California, Connecticut, New York and New Jersey tend to sport lots of high income individuals and while all have pockets of heavy poverty, it is nothing like the level seen in the deep south. Secondly, conservative states tend to be smaller (think of all the red flyover states) and due to the structure of the Senate (two senators per state) therefore get a disproportionate share of the federal dole. Finally, our system of agriculture subsidies tends to favor red states, since big ag tends to live in red states and receives big dollars from the government for growing crops (or not growing crops.)
For purposes of this exercise, I'm going to categorize states as "red", "blue" or "purple". A "red" state will be a state that voted for the Republican Presidential candidate in the last 3, a "blue" state one that has voted for the Democrat in the past 3 cycles and a "purple" state one that has split its Presidential vote.
By that measure, the following 18 states are categorized as blue:
Washington, Oregon, California, Hawaii, Minnesota, Wisconsin, Michigan, Illinois, Pennsylvania, Maryland, Delaware, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, Vermont and Maine
The following 22 states are categorized as red:
Alaska, Arizona, Utah, Idaho, Montana, Wyoming, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Texas, Missouri, Arkansas, Louisiana, Mississippi, Tennessee, Alabama, Kentucky, Georgia, West Virginia and South Carolina.
The following 10 states are categorized as purple:
Nevada, Colorado, New Mexico, Iowa, Indiana, Ohio, Virginia, North Carolina, Florida, New Hampshire
There are probably some quibbles you could make with this list. It seems weird to not have Pennsylvania on the list of purple states. It's also odd that Indiana qualifies but Missouri (a traditional swing state does not.) But minor questions aside, I think most would agree that in general this methodology generates a good breakdown of the country.
The figures below use research from The Tax Foundation, which is publicly available here.
On average, for every $1 in federal taxes paid, the states receive the following benefits by category:
Red States: $1.40
Purple States: $1.10
Blue States: $0.94
The figures don't appear to average to $1 since the blue states that pay heavy taxes relative to their benefits are much larger than the small states that receive a disproportionate share of the benefits.
The most subsidized states?
New Mexico (a purple state) because of the cost of Indian reservations and systemic poverty in rural areas plus a large number of military bases and Mississippi (a red state) because of extreme poverty - they receive $2.03 and $2.02 respectively for each dollar in taxes paid.
The most subsidizing states?
New Jersey (a blue state) due to high levels of wealth and relatively few urban areas and Nevada (a purple state) due to heavy taxation on gaming revenues - they receive $0.61 and $0.65 respectively.
So if we are going to have a conversation about smaller government, let's start with a discussion about state equality. If every state only received the level of government benefits that New Jersey and Nevada do, we could balance the budget today.
Sunday, September 25, 2011
The "I Told You So" Edition
When you write about politics and specifically when you make political, economic and social projections, you get your fair share of things wrong. I've gotten a few minor things wrong (see North Dakota's projection in 2008, not massively wrong, but wrong nonetheless) and a few major things wrong (see my blog during the height of the financial crisis about how the economic recovery would be strong -- oops.) So, it's nice to know that I haven't lost my knack for identifying some of the things to come in the political world. Two cases in point this week.
Perry Candidacy Already on the Rails
Frequent readers will know that I never believed the hype around Texas Governor Rick Perry's prospects of becoming the GOP nomination. The media has been gaga over Perry and his sudden rise in the GOP field. One can understand why. Perry is a conservative, in line with the party faithful in his political beliefs. Perry has a good track record economically in Texas. On face, he looks like what today's GOP wants. But, as I wrote a few weeks ago when Perry got into the race, I'm not convinced Perry is ready for prime time or capable of leading the GOP.
And so it was on full display in the latest Republican debate, a Fox News hosted affair, where Perry looked bewildered, spoke in sentence fragments, stepped in it on perhaps his one moderate political stance by alienating the GOP base when he had an opportunity to make a unifying statement and generally fell completely flat. He hasn't been a rock star in the other debates, but this was, by far, his worst performance.
And GOP loyalists spoke. In the Florida straw poll, a poll Perry had spent heavily and campaigned strongly for, he got scorched by conservative talk show host and businessman Herman Cain and barely finished ahead of Romney, who had not campaigned hard or spent heavily in the poll. Now, I take these straw polls with a grain of salt. This is a poll of loyalists, not a poll of representative voters in a GOP primary. And you can certainly spend to up your standing. I don't think Cain is in any way the favorite in Florida. But let's analyze what it means.
The Tea Party wing isn't happy with Mitt Romney as a choice, primarily because of his moderate positions when he was Governor of Massachusetts, most notably his health care plan which looks a lot like President Obama's national plan. Consequently, they were ready to flock to Perry. The message from the Florida straw poll is that they are no longer happy with Perry as an alternative. They weren't willing to cross and vote for Romney, so they voted for Cain as a kind of second-choice protest. Of course, Cain has his supporters as well, but few believe a businessman with no political experience and a penchant for saying outrageous things will really be the nominee or could seriously take down President Obama.
So where does this leave the state of the GOP? The right wing still isn't happy with Romney, but it is very fragmented, since there isn't a clear good alternative with Perry looking like a hack. One possibility is that Perry ups his game and they decide to get behind him. Another is that another candidate, perhaps one already announced (Newt Gingrich? Michelle Bachman?) or one that hasn't (Sarah Palin?) is able to concentrate this support. The third, and I still think most likely scenario is that the Tea Party wing stays fragmented and Romney is able to win by being just conservative enough and strong enough a general candidate to get the nod.
Nominations doesn't get decided in September the year before. They will be decided in the first quarter of 2012, when everyone really tunes in. But it's shaping up to be an interesting, competitive race.
Another Shutdown Showdown
I told you that we'd be back here. We are a mere week before the start of the government's new fiscal year and there is no agreement on how to proceed with the Fiscal 2012 budget, leaving us at a logjam that yet again threatens a government shutdown. The issue this time is the level of funding for FEMA and how it will be paid for. Republicans want a less than $4B funding replenishment, paid for by offsetting spending cuts in other area. Democrats want closer to $8B, without the offset. The GOP plan passed the House narrowly and was soundly rejected in the Democratic Senate. The Democratic plan has not been voted on in either house.
The budgetary dysfunction continues. Even if they are able to come to agreement in the next week (expect another 11th hour deal that nobody likes), this will only kick the can down the road to Mid-November, right before the bi-partisan deficit commission is supposed to report back its recommendations. So we will have at least 3 more fights that create uncertainty, make long-term programs highly inefficient and threaten to shut down the government.
Many have noted recently that Congressional approval is around 12%, by far an all time low. The question is, who are the 12% who approve? Does anyone else just feel like voting against every incumbent regardless of party?
If you like this site, tell your friends.
Perry Candidacy Already on the Rails
Frequent readers will know that I never believed the hype around Texas Governor Rick Perry's prospects of becoming the GOP nomination. The media has been gaga over Perry and his sudden rise in the GOP field. One can understand why. Perry is a conservative, in line with the party faithful in his political beliefs. Perry has a good track record economically in Texas. On face, he looks like what today's GOP wants. But, as I wrote a few weeks ago when Perry got into the race, I'm not convinced Perry is ready for prime time or capable of leading the GOP.
And so it was on full display in the latest Republican debate, a Fox News hosted affair, where Perry looked bewildered, spoke in sentence fragments, stepped in it on perhaps his one moderate political stance by alienating the GOP base when he had an opportunity to make a unifying statement and generally fell completely flat. He hasn't been a rock star in the other debates, but this was, by far, his worst performance.
And GOP loyalists spoke. In the Florida straw poll, a poll Perry had spent heavily and campaigned strongly for, he got scorched by conservative talk show host and businessman Herman Cain and barely finished ahead of Romney, who had not campaigned hard or spent heavily in the poll. Now, I take these straw polls with a grain of salt. This is a poll of loyalists, not a poll of representative voters in a GOP primary. And you can certainly spend to up your standing. I don't think Cain is in any way the favorite in Florida. But let's analyze what it means.
The Tea Party wing isn't happy with Mitt Romney as a choice, primarily because of his moderate positions when he was Governor of Massachusetts, most notably his health care plan which looks a lot like President Obama's national plan. Consequently, they were ready to flock to Perry. The message from the Florida straw poll is that they are no longer happy with Perry as an alternative. They weren't willing to cross and vote for Romney, so they voted for Cain as a kind of second-choice protest. Of course, Cain has his supporters as well, but few believe a businessman with no political experience and a penchant for saying outrageous things will really be the nominee or could seriously take down President Obama.
So where does this leave the state of the GOP? The right wing still isn't happy with Romney, but it is very fragmented, since there isn't a clear good alternative with Perry looking like a hack. One possibility is that Perry ups his game and they decide to get behind him. Another is that another candidate, perhaps one already announced (Newt Gingrich? Michelle Bachman?) or one that hasn't (Sarah Palin?) is able to concentrate this support. The third, and I still think most likely scenario is that the Tea Party wing stays fragmented and Romney is able to win by being just conservative enough and strong enough a general candidate to get the nod.
Nominations doesn't get decided in September the year before. They will be decided in the first quarter of 2012, when everyone really tunes in. But it's shaping up to be an interesting, competitive race.
Another Shutdown Showdown
I told you that we'd be back here. We are a mere week before the start of the government's new fiscal year and there is no agreement on how to proceed with the Fiscal 2012 budget, leaving us at a logjam that yet again threatens a government shutdown. The issue this time is the level of funding for FEMA and how it will be paid for. Republicans want a less than $4B funding replenishment, paid for by offsetting spending cuts in other area. Democrats want closer to $8B, without the offset. The GOP plan passed the House narrowly and was soundly rejected in the Democratic Senate. The Democratic plan has not been voted on in either house.
The budgetary dysfunction continues. Even if they are able to come to agreement in the next week (expect another 11th hour deal that nobody likes), this will only kick the can down the road to Mid-November, right before the bi-partisan deficit commission is supposed to report back its recommendations. So we will have at least 3 more fights that create uncertainty, make long-term programs highly inefficient and threaten to shut down the government.
Many have noted recently that Congressional approval is around 12%, by far an all time low. The question is, who are the 12% who approve? Does anyone else just feel like voting against every incumbent regardless of party?
If you like this site, tell your friends.
Sunday, July 10, 2011
The Grand Deal Falls Through, How Republicans Have Changed the Subject, Why John Boehner is Good for the GOP, 2012: Romney or Bust
No Mega-Deal on the Debt
President Bill Clinton's Democratic Party was dealt a complete spanking in the 1994 mid-terms after public backlash against his proposed health care reform sparked the now famous Republican Revolution and Newt Gingrich's Contract with America. Clinton deftly adapted to the new political reality and negotiated with Gingrich to reform welfare and restrain government spending, which led to budget surpluses, a resounding re-election in 1996 and a lasting legacy for both Clinton and Gingrich.
President Barack Obama's Democratic Party was dealt a complete spanking in the 2010 mid-terms after public backlash against his adopted health care reform sparked a Republican takeover of the House and significant gains in the Senate. Some of us (myself included) hoped that this would lead to a grand deal on the deficit, built on the basis of the bi-partisan debt commissions recommendations.
It appears it is not to be, at least for now. The President and House Speaker John Boehner had been quietly attempting to negotiate a 10-year, $4 trillion deal that would have reportedly included not only tax changes but reforms to all three major entitlement programs. Such a deal would've been course-altering for the country and a major feather for both.
But, as is often the case, political reality got in the way. The House GOP wasn't going to bite on even the smallest of tax increases. Liberal Democrats in the House and Senate weren't going to go for entitlement reform. No compromise, no deal.
So, it appears we will likely get a deal half that size, that consists entirely of spending reductions. $2 trillion over 10 years really isn't as draconian as it sounds. It frankly wouldn't even get government back to the size of 5 years ago. But it's better than nothing. And based on the stated GOP principle that they will only vote to extend the debt ceiling only by the amount of spending that is reduced, $2 trillion would still be sufficient to get the country through the 2012 elections, all of which would set up a huge set of decisions for the population in 2012.
Just remember:
(1) The Bush Tax Cuts, extended by Obama, are slated to expire on January 1, 2013.
(2) Also on January 1, 2013, major tax changes take place as part of the Health Care reform act. These include a 0.9% Medicare tax increase on wages over $200K and a 3.9% tax on investment income for those making over $200K.
(3) Assuming a $2T increase, the new debt ceiling will be breached, likely in late 2013.
(4) The individual mandate tax for health care takes effect on Jan 1, 2014.
So, We, The People will likely have a lot to decide next November about the future of the country.
It's All About Spending, Baby
The 111th Congress, over the course of 2 years, passed 383 bills which became law. Granted, some of these were to name post offices and the like, but some very meaty legislation became law in 2009 and 2010, including:
* SCHIP Expansion
* The Lily Ledbetter Fair Pay Act
* The Stimulus Package
* Healthcare Reform
* Two major financial reform bills (the CARD Act and the Dodd-Frank Act)
* 9/11 First Responders Act
* Start Treaty
* Don't Ask, Don't Tell Repeal
In it's first 6 months, the 111th Congress has passed only 23 bills which have become law, or to put it another way, is only on pace to produce 24% as much legislation.
And this is just the way the GOP wants it. Their desire, coming out of the 2010 mid-terms, was to make the discussion all about reducing government spending. And they have succeeded, in spades. First, it was the Fiscal 2011 budget, in which they extracted over $80 million of spending reductions, albeit less than what they had hoped. Now, it is the debt ceiling increase, which will allow them to extract a large number of spending cuts and will consume all of the political air time until at least early August.
Then, lest we forget, Fiscal 2012 begins in October, and save for the House passing a Defense bill, virtually no work has been done on this opportunity for the GOP to extract more cuts.
When was the last time that you heard anyone talk about Immigration Reform, Environmental Policy or anything other than the budget?
John Boehner: Policy, Not Just Politics
House Speaker John Boehner is good for the GOP. Will Boehner and I disagree on a whole host of policy issues, I greatly respect the fact that he is about getting things done, not simply political grandstanding. It was Eric Cantor and whining wing of the GOP that caused the debt talks to break down (along with the liberal whining wing of the Democratic party), not Boehner. Boehner was willing to put everything on the table.
He also masterfully worked through deals with the White House to extend the Bush Tax Cuts and cut the deal that passed on the 2011 budget.
The more Republicans out there actually trying to make policy and strike deals versus simply scoring political points against the White House, the better off the nation and the GOP are.
Romney Is The Only One Who Can Win
Okay, maybe that's a little too bold a statement. If people actually knew Tim Pawlenty or Jon Huntsman, either would be a viable choice against President Obama, in what could wind up being a very close election in 2012. But that isn't going to happen. It's Romney vs. Bachmann unless someone else breaks out very quickly. And Bachmann can't win. I grant you that polling at this stage of the race is still very tenuous, but look at the average numbers this month:
Obama vs. Romney: Obama +5.5%
Obama vs. Gingrich: Obama +11.5%
Obama vs. Huntsman: Obama +14.0%
Obama vs. Pawlenty: Obama +14.2%
Obama vs. Bachmann: Obama +14.3%
Obama vs. Paul: Obama +18.0%
No polls yet on Obama vs. Thaddeus McCotter (go look it up, if you don't know what I'm talking about.)
It's actually quite amazing given how bad the economy is that President Obama still leads the field. Romney is within striking distance, no one else is even close. I expect things to tighten, particularly if we keep having jobs report like June's.
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Obama vs. Cain: Obama +19.0%
President Bill Clinton's Democratic Party was dealt a complete spanking in the 1994 mid-terms after public backlash against his proposed health care reform sparked the now famous Republican Revolution and Newt Gingrich's Contract with America. Clinton deftly adapted to the new political reality and negotiated with Gingrich to reform welfare and restrain government spending, which led to budget surpluses, a resounding re-election in 1996 and a lasting legacy for both Clinton and Gingrich.
President Barack Obama's Democratic Party was dealt a complete spanking in the 2010 mid-terms after public backlash against his adopted health care reform sparked a Republican takeover of the House and significant gains in the Senate. Some of us (myself included) hoped that this would lead to a grand deal on the deficit, built on the basis of the bi-partisan debt commissions recommendations.
It appears it is not to be, at least for now. The President and House Speaker John Boehner had been quietly attempting to negotiate a 10-year, $4 trillion deal that would have reportedly included not only tax changes but reforms to all three major entitlement programs. Such a deal would've been course-altering for the country and a major feather for both.
But, as is often the case, political reality got in the way. The House GOP wasn't going to bite on even the smallest of tax increases. Liberal Democrats in the House and Senate weren't going to go for entitlement reform. No compromise, no deal.
So, it appears we will likely get a deal half that size, that consists entirely of spending reductions. $2 trillion over 10 years really isn't as draconian as it sounds. It frankly wouldn't even get government back to the size of 5 years ago. But it's better than nothing. And based on the stated GOP principle that they will only vote to extend the debt ceiling only by the amount of spending that is reduced, $2 trillion would still be sufficient to get the country through the 2012 elections, all of which would set up a huge set of decisions for the population in 2012.
Just remember:
(1) The Bush Tax Cuts, extended by Obama, are slated to expire on January 1, 2013.
(2) Also on January 1, 2013, major tax changes take place as part of the Health Care reform act. These include a 0.9% Medicare tax increase on wages over $200K and a 3.9% tax on investment income for those making over $200K.
(3) Assuming a $2T increase, the new debt ceiling will be breached, likely in late 2013.
(4) The individual mandate tax for health care takes effect on Jan 1, 2014.
So, We, The People will likely have a lot to decide next November about the future of the country.
It's All About Spending, Baby
The 111th Congress, over the course of 2 years, passed 383 bills which became law. Granted, some of these were to name post offices and the like, but some very meaty legislation became law in 2009 and 2010, including:
* SCHIP Expansion
* The Lily Ledbetter Fair Pay Act
* The Stimulus Package
* Healthcare Reform
* Two major financial reform bills (the CARD Act and the Dodd-Frank Act)
* 9/11 First Responders Act
* Start Treaty
* Don't Ask, Don't Tell Repeal
In it's first 6 months, the 111th Congress has passed only 23 bills which have become law, or to put it another way, is only on pace to produce 24% as much legislation.
And this is just the way the GOP wants it. Their desire, coming out of the 2010 mid-terms, was to make the discussion all about reducing government spending. And they have succeeded, in spades. First, it was the Fiscal 2011 budget, in which they extracted over $80 million of spending reductions, albeit less than what they had hoped. Now, it is the debt ceiling increase, which will allow them to extract a large number of spending cuts and will consume all of the political air time until at least early August.
Then, lest we forget, Fiscal 2012 begins in October, and save for the House passing a Defense bill, virtually no work has been done on this opportunity for the GOP to extract more cuts.
When was the last time that you heard anyone talk about Immigration Reform, Environmental Policy or anything other than the budget?
John Boehner: Policy, Not Just Politics
House Speaker John Boehner is good for the GOP. Will Boehner and I disagree on a whole host of policy issues, I greatly respect the fact that he is about getting things done, not simply political grandstanding. It was Eric Cantor and whining wing of the GOP that caused the debt talks to break down (along with the liberal whining wing of the Democratic party), not Boehner. Boehner was willing to put everything on the table.
He also masterfully worked through deals with the White House to extend the Bush Tax Cuts and cut the deal that passed on the 2011 budget.
The more Republicans out there actually trying to make policy and strike deals versus simply scoring political points against the White House, the better off the nation and the GOP are.
Romney Is The Only One Who Can Win
Okay, maybe that's a little too bold a statement. If people actually knew Tim Pawlenty or Jon Huntsman, either would be a viable choice against President Obama, in what could wind up being a very close election in 2012. But that isn't going to happen. It's Romney vs. Bachmann unless someone else breaks out very quickly. And Bachmann can't win. I grant you that polling at this stage of the race is still very tenuous, but look at the average numbers this month:
Obama vs. Romney: Obama +5.5%
Obama vs. Gingrich: Obama +11.5%
Obama vs. Huntsman: Obama +14.0%
Obama vs. Pawlenty: Obama +14.2%
Obama vs. Bachmann: Obama +14.3%
Obama vs. Paul: Obama +18.0%
No polls yet on Obama vs. Thaddeus McCotter (go look it up, if you don't know what I'm talking about.)
It's actually quite amazing given how bad the economy is that President Obama still leads the field. Romney is within striking distance, no one else is even close. I expect things to tighten, particularly if we keep having jobs report like June's.
If you like this site, tell your friends.
Obama vs. Cain: Obama +19.0%
Sunday, March 20, 2011
Catching Up with the President's Numbers, Budget Malaise Continues, The Stimulus Winds Down, A US War in Libya?
The President's Numbers and the 2012 Race
As I've often said, the single most determining factor in a Presidential re-election is the incumbent President's approval. Therefore, while it's fun to watch the slow-motion race to the Republican nomination, it's probably far more relevant to look and see how the American public is judging President Obama's term in office.
Of course, that good old American public is fickle. Famously, President George Herbert-Walker Bush had a 91% approval (that was actually just in one poll, his average was something close to 80%, but you get the point) a year before one of the worst re-election showings in history, receiving a mere 38% of the popular vote. The thing that turns these numbers on a dime is the economy, and more specifically the 1.5% income growth rule...that is that President's that have the good fortune to see 1.5% income growth in the election year are generally re-elected, while those that see less are not.
Still, you have to know where you are before you can project where you are going.
So, let's look at the last 2 months of poll data. There is some noise along the way, but here is how I would generally explain the trend:
(1) The President CLEARLY got a real bump from his end of year legislative victories, including the ratification of the START treaty, the passage of the 9/11 first responders bill and the repeal of Don't Ask, Don't Tell (a policy change still mired in the pentagon maze, but that's another story for another day.) At the beginning of January (before the range on the chart), the President was average around -4%. By the end of January he was at around +7%, an 11% upswing - huge in the world of electoral politics.
(2) The bounce didn't last at those levels. As is often the case with big bumps like that, memories fade as time goes by. By the end of February, the President's averages were down to about +2.5%, still 6.5% better than where he was at the end of the year, but a 4.5% downgrade from his end of January numbers.
(3) He settled in at this higher level so far in March. So while the President has not maintained all of his bounce, he has certainly maintained at a higher level than he ended last year. This, in my opinion, is in large measure due to improving economic conditions.
Looking at his monthly numbers over his Presidency, we can February was the President's best numbers month since the first year of his Presidency, when there was a halo effect over his historic victory. The last 3 months have marked 3 months in a row in the black, following 6 straight months in the red.
So, what does all this mean for 2012? The President is back at an approval level where he could win, but it is far from a slam dunk. At number of +2.5%, he's right in the range where we could be in for a very competitive 2012 race. Of course, this could all change in either direction in a hurry.
Is This the Last CR?
It's amazing that the new Congress has been in session for nearly 3 months and with the exception of a few symbolic votes (the House voting to repeal Obamacare, for instance) and some non-controversial business, basically all it has done is to pass short-term extensions to the budget - 2 of them so far, but the 5th and 6th ones of a budget year that began October 1st and is almost half over. The latest, which extends government funding for 3 weeks, with $6B in domestic discretionary cuts, passed fairly easily with bi-partisan support, with opposition mostly coming from liberals who felt it went too far with the cuts and conservatives who felt it didn't go far enough with the cuts.
Both sides are saying this is the last one and the bi-partisan "gang of 6" is working towards a compromise, but it is very unclear still how exactly what the compromise they are driving towards will look like. Basically, with the 2 continuing resolutions passed so far, $10B of the $64B that the GOP sought to cut from the discretionary budget has already been passed. So the debate comes down to how much of the remaining $54B will be agreed to. I imagine that the final figure will be somewhere in the $30B range of additional cuts, but again, we are dealing with chump change, relative to the other aspects of the budget.
I continue to hold out hope that congress and the President will dispose of the domestic discretionary question relatively soon and have a real adult debate about entitlement spending, taxes and defense spending, the three levers that really matter when it comes to deficit reduction.
The Winding Down of the American Recovery and Reinvestment Act
Remember the stimulus? That $787B package of tax cuts, infrastructure investments and short-term entitlement enhancements that was more or less the first order of business when the President took office?
As I said at the time, it was really more a 3-year package of economic policy than a short-term shot in the arm to the economy. And, after over 2 years, it is reaching the end of its implementation. And while the GOP has talked tough about repealing its elements, it has more or less run according to its original plan. The latest numbers show the following dispersement of stimulus funds:
Tax Cuts: $260B out of $288B spent (90% spent)
Spending: $368B out of $499B spent (74% spent)
Overall: $628B out of $787B spent (80% spent)
The stimulus was really one of several pieces of key economic policy over the past 2+ years. Let's review all of them and their effectiveness:
(1) The Troubled Asset Relief Program
The $700B package of funding that was used to recapitalize banks, fund the transformation and bankruptcy of GM and Chrysler, bail out AIG and manage the massive losses at Fannie Mae and Freddie Mac was originally passed in the final days of the George W. Bush administration, but largely implemented during the Obama administration. Despite lots of, frankly very fair, criticism at the time, about the lack of limits on executive pay and the lack of help for the borrowers while lenders were being bailed out, the program has, in essence, been a pretty unqualified success.
The bank bailouts will turn a healthy profit and the auto bailout will likely yield only a small loss. With more substantial losses surrounding AIG and Fannie and Freddie, the total net tab for TARP is now estimated at $25B...a pittance to save our financial system.
Of course, neither TARP nor the Dodd-Frank financial reform bill that followed truly addressed the problem of banks getting too big to fail so the systematic risk still exists, but as a stabilization program, TARP worked exactly excellently.
(2) The American Recovery and Reinvestment Act
As discussed above, the stimulus dealt both a series of tax breaks and credits (think Cash for Clunkers and Energy Efficient Home Tax Credits), short-term expansions to unemployment and social welfare programs and infrastructure investments.
The success of the program is obviously the subject of a lot of debate and it is very hard to parse apart the impact of this program relative to other things happening in the macro-economy.
What I will say is that aspects of the program definitely contributed to the recovery. Cash for Clunkers provided a spike in auto sales that stabilized the auto industry and made the non-bankruptcy survival of Ford and the successful emergence from bankruptcy of GM possible. The energy efficient home tax credits have led to a boom in investments in windows, doors and insulation -- if you don't believe me, ask a contractor.
The bill was sold as preventing unemployment from exceeding 8%. It clearly did not do that. But, on balance, the country is better off with it than without it, in my opinion.
(3) The Obama Tax Cuts
Lost in all the debate over extending the Bush Tax Cuts (which I think we can now safely drop the Bush moniker from) was the fact that it's cost, over the next two years, actually exceeds the cost of the stimulus. The economic impact of extending the rate reductions passed during the Bush administration, along with the newly minted short-term reductions in Social Security taxes is yet to be determined. The deficit impact is obvious.
(4) The Federal Reserve
The role of the Federal Reserve in fiscal policy cannot be understated. In many ways, it's policy decisions have more significant impacts on the economy than any stimulus or tax package passed by our elected officials. The fed's policy over the past several years has been to maintain short-term interest rates near zero, indeed the short-term rate has been in the range of 0 to 0.25% since December of 2008.
The Federal Reserve has also embarked upon two rounds of what it has termed "Quantitative Easing". The program works pretty simply, the Federal Reserve buys US Treasuries, effectively printing money and using Treasuries as a mechanism to inject liquidity into the monetary system. The effect of these buys is to artificially suppress interest rates on treasuries and put more money into the system.
Both moves are basically designed with the same purpose...increase economic activity by making money cheap. It also has the side-effect of amping up inflation and reducing the relative value of the US Dollar.
Up to this point, overall inflation has been very tame during the recession, with the economy showing tons of available capacity in the labor market that might help to avert big inflation. But the dollar has been dropping and core commodities such as oil and grains have been spiking, yielding a concern that inflation may soon rise. The short-term impact of the Fed's actions have been positive to the economy - the long-term is a lot more questionable. I would hope the Fed will back off any further QE and consider raising rates in the not-to-distant future.
Airstrikes in Libya
Backed by French support and a UN resolution, the US is participating in Tomahawk launches and air patrols to enforce a no fly zone over Libya and offer support to rebel fighters. This action is in stark contrast to our actions in Iraq, where we went in alone and sent ground forces. This intervention is more akin to our actions in the former Yugoslavia during the 1990s, where we were able to support political and human rights interests with no American casualties by using our superior technology and air strength.
This is exactly the sort of military intervention that we should be leading - one where the free world is united and where our involvement can yield a large reward at a relatively lower cost.
Meanwhile, we are still trying to wind down Iraq and Afghanistan remains a massive cost both in financial and human terms, with no clear long term strategy in the region.
If you like this site tell your friends.
As I've often said, the single most determining factor in a Presidential re-election is the incumbent President's approval. Therefore, while it's fun to watch the slow-motion race to the Republican nomination, it's probably far more relevant to look and see how the American public is judging President Obama's term in office.
Of course, that good old American public is fickle. Famously, President George Herbert-Walker Bush had a 91% approval (that was actually just in one poll, his average was something close to 80%, but you get the point) a year before one of the worst re-election showings in history, receiving a mere 38% of the popular vote. The thing that turns these numbers on a dime is the economy, and more specifically the 1.5% income growth rule...that is that President's that have the good fortune to see 1.5% income growth in the election year are generally re-elected, while those that see less are not.
Still, you have to know where you are before you can project where you are going.
So, let's look at the last 2 months of poll data. There is some noise along the way, but here is how I would generally explain the trend:
(1) The President CLEARLY got a real bump from his end of year legislative victories, including the ratification of the START treaty, the passage of the 9/11 first responders bill and the repeal of Don't Ask, Don't Tell (a policy change still mired in the pentagon maze, but that's another story for another day.) At the beginning of January (before the range on the chart), the President was average around -4%. By the end of January he was at around +7%, an 11% upswing - huge in the world of electoral politics.
(2) The bounce didn't last at those levels. As is often the case with big bumps like that, memories fade as time goes by. By the end of February, the President's averages were down to about +2.5%, still 6.5% better than where he was at the end of the year, but a 4.5% downgrade from his end of January numbers.
(3) He settled in at this higher level so far in March. So while the President has not maintained all of his bounce, he has certainly maintained at a higher level than he ended last year. This, in my opinion, is in large measure due to improving economic conditions.
Looking at his monthly numbers over his Presidency, we can February was the President's best numbers month since the first year of his Presidency, when there was a halo effect over his historic victory. The last 3 months have marked 3 months in a row in the black, following 6 straight months in the red.
So, what does all this mean for 2012? The President is back at an approval level where he could win, but it is far from a slam dunk. At number of +2.5%, he's right in the range where we could be in for a very competitive 2012 race. Of course, this could all change in either direction in a hurry.
Is This the Last CR?
It's amazing that the new Congress has been in session for nearly 3 months and with the exception of a few symbolic votes (the House voting to repeal Obamacare, for instance) and some non-controversial business, basically all it has done is to pass short-term extensions to the budget - 2 of them so far, but the 5th and 6th ones of a budget year that began October 1st and is almost half over. The latest, which extends government funding for 3 weeks, with $6B in domestic discretionary cuts, passed fairly easily with bi-partisan support, with opposition mostly coming from liberals who felt it went too far with the cuts and conservatives who felt it didn't go far enough with the cuts.
Both sides are saying this is the last one and the bi-partisan "gang of 6" is working towards a compromise, but it is very unclear still how exactly what the compromise they are driving towards will look like. Basically, with the 2 continuing resolutions passed so far, $10B of the $64B that the GOP sought to cut from the discretionary budget has already been passed. So the debate comes down to how much of the remaining $54B will be agreed to. I imagine that the final figure will be somewhere in the $30B range of additional cuts, but again, we are dealing with chump change, relative to the other aspects of the budget.
I continue to hold out hope that congress and the President will dispose of the domestic discretionary question relatively soon and have a real adult debate about entitlement spending, taxes and defense spending, the three levers that really matter when it comes to deficit reduction.
The Winding Down of the American Recovery and Reinvestment Act
Remember the stimulus? That $787B package of tax cuts, infrastructure investments and short-term entitlement enhancements that was more or less the first order of business when the President took office?
As I said at the time, it was really more a 3-year package of economic policy than a short-term shot in the arm to the economy. And, after over 2 years, it is reaching the end of its implementation. And while the GOP has talked tough about repealing its elements, it has more or less run according to its original plan. The latest numbers show the following dispersement of stimulus funds:
Tax Cuts: $260B out of $288B spent (90% spent)
Spending: $368B out of $499B spent (74% spent)
Overall: $628B out of $787B spent (80% spent)
The stimulus was really one of several pieces of key economic policy over the past 2+ years. Let's review all of them and their effectiveness:
(1) The Troubled Asset Relief Program
The $700B package of funding that was used to recapitalize banks, fund the transformation and bankruptcy of GM and Chrysler, bail out AIG and manage the massive losses at Fannie Mae and Freddie Mac was originally passed in the final days of the George W. Bush administration, but largely implemented during the Obama administration. Despite lots of, frankly very fair, criticism at the time, about the lack of limits on executive pay and the lack of help for the borrowers while lenders were being bailed out, the program has, in essence, been a pretty unqualified success.
The bank bailouts will turn a healthy profit and the auto bailout will likely yield only a small loss. With more substantial losses surrounding AIG and Fannie and Freddie, the total net tab for TARP is now estimated at $25B...a pittance to save our financial system.
Of course, neither TARP nor the Dodd-Frank financial reform bill that followed truly addressed the problem of banks getting too big to fail so the systematic risk still exists, but as a stabilization program, TARP worked exactly excellently.
(2) The American Recovery and Reinvestment Act
As discussed above, the stimulus dealt both a series of tax breaks and credits (think Cash for Clunkers and Energy Efficient Home Tax Credits), short-term expansions to unemployment and social welfare programs and infrastructure investments.
The success of the program is obviously the subject of a lot of debate and it is very hard to parse apart the impact of this program relative to other things happening in the macro-economy.
What I will say is that aspects of the program definitely contributed to the recovery. Cash for Clunkers provided a spike in auto sales that stabilized the auto industry and made the non-bankruptcy survival of Ford and the successful emergence from bankruptcy of GM possible. The energy efficient home tax credits have led to a boom in investments in windows, doors and insulation -- if you don't believe me, ask a contractor.
The bill was sold as preventing unemployment from exceeding 8%. It clearly did not do that. But, on balance, the country is better off with it than without it, in my opinion.
(3) The Obama Tax Cuts
Lost in all the debate over extending the Bush Tax Cuts (which I think we can now safely drop the Bush moniker from) was the fact that it's cost, over the next two years, actually exceeds the cost of the stimulus. The economic impact of extending the rate reductions passed during the Bush administration, along with the newly minted short-term reductions in Social Security taxes is yet to be determined. The deficit impact is obvious.
(4) The Federal Reserve
The role of the Federal Reserve in fiscal policy cannot be understated. In many ways, it's policy decisions have more significant impacts on the economy than any stimulus or tax package passed by our elected officials. The fed's policy over the past several years has been to maintain short-term interest rates near zero, indeed the short-term rate has been in the range of 0 to 0.25% since December of 2008.
The Federal Reserve has also embarked upon two rounds of what it has termed "Quantitative Easing". The program works pretty simply, the Federal Reserve buys US Treasuries, effectively printing money and using Treasuries as a mechanism to inject liquidity into the monetary system. The effect of these buys is to artificially suppress interest rates on treasuries and put more money into the system.
Both moves are basically designed with the same purpose...increase economic activity by making money cheap. It also has the side-effect of amping up inflation and reducing the relative value of the US Dollar.
Up to this point, overall inflation has been very tame during the recession, with the economy showing tons of available capacity in the labor market that might help to avert big inflation. But the dollar has been dropping and core commodities such as oil and grains have been spiking, yielding a concern that inflation may soon rise. The short-term impact of the Fed's actions have been positive to the economy - the long-term is a lot more questionable. I would hope the Fed will back off any further QE and consider raising rates in the not-to-distant future.
Airstrikes in Libya
Backed by French support and a UN resolution, the US is participating in Tomahawk launches and air patrols to enforce a no fly zone over Libya and offer support to rebel fighters. This action is in stark contrast to our actions in Iraq, where we went in alone and sent ground forces. This intervention is more akin to our actions in the former Yugoslavia during the 1990s, where we were able to support political and human rights interests with no American casualties by using our superior technology and air strength.
This is exactly the sort of military intervention that we should be leading - one where the free world is united and where our involvement can yield a large reward at a relatively lower cost.
Meanwhile, we are still trying to wind down Iraq and Afghanistan remains a massive cost both in financial and human terms, with no clear long term strategy in the region.
If you like this site tell your friends.
Monday, February 21, 2011
61 Billion Things to Debate, 2012 Congressional Showdown
House GOP Passes a 2011 Budget
We are very late in the season to be talking about the budget for the year. You see, the government's fiscal 2011 budget actually began on October 1st of 2010, but as the Democratically controlled Congress of the time essentially punted on the budget, here we are.
Not that all of the Democrats reasons were bad. Don't ask, don't tell repeal, debating the Bush/Obama tax cuts (not the ending I would have liked, but an important issue nonetheless), and the START Treaty consumed the waning days of the last Congress. And not that they didn't try - an omnibus bill was on the agenda for the lame duck session of Congress, but was too expensive for the tastes of Senate Republicans, who preferred to let the incoming, more conservative congress determine the rest of the budget. In place of a budget, Congress simply put in place a couple of continuing resolutions that, in essence, kept government funded at least years levels through March 4th. Hence the showdown that we see now.
What passed the House was more or less true to the pledge that Republicans had made to cut $100B in domestic discretionary spending in year one. I say more or less, because the budget they passed cuts only $61B from the current levels of funding, but cuts $100B from the original request that President Obama had made for the year. ToMAto, Tomato.
I've written many times, but will make the point once more that this is, in large measure, a sideshow to the real budgetary choices that will have to be made. Those involve entitlement reform and military spending. You could cut 100% of domestic discretionary spending and not balance the budget. In fact, the $61B in cuts reduces this year's deficit by a whopping 4%. But I digress.
The budget cuts are brutal. Cuts to traditional conservative targets, to be sure. Planned Parenthood is axed. So is NPR and PBS. Home heating oil subsidies for poor people? Massively cut. Health care implementation funds? Forget it. Interestingly, Amtrak funding somehow survived the bevy of amendments that were debated in the House.
The final product passed the House 235-189 with all 186 Democrats who were present voting against the bill, joined by 3 Republicans, with the balance of the GOP members of the House voting in favor.
The bill has been essentially labeled a non-starter by Senate Democrats, who, in spite of a weakened majority in the Senate, are still strong enough to block bills they don't like.
Congress is in recess this week, which means it won't reconvene until February 28th. The current continuing resolution expires on March 4th, which means that Congress has one week to work out some sort of deal. I see three possibilities:
(1) Democrats and Republicans come to a fast deal
This seems unlikely and would almost certainly have to involve Democrats giving most of the ground on proposed GOP cuts. The GOP isn't in the mood to give too many concessions, given the strength of their showing in the past election and their belief that their charter is to cut spending. Democrats might give a lot of ground in order to prevent a government shutdown (look how fast they caved on extending the Bush tax cuts) but this scenario seems unlikely.
(2) Agree to pass another temporary measure
Fund the government for another month while they work something out. This seems like the most likely scenario and one that the GOP appears somewhat open to, although they are unlikely to agree to an extension at current levels of spending unless they had firm commitments on what the final budget might look like.
(3) Shutdown the government
While some on the far right seem to be itching for a government shutdown, they would be wise to remember the battles the GOP lost with President Clinton over government shutdowns. This scenario seems more likely than a fast deal for the whole year but less likely than a temporary funding measure.
Also looming is the need in late April to raise the debt ceiling. Some of the tea party loyalists want the debt ceiling hike to be voted down. But they have offered no credible plan for how the government could continue operating without continuing to accrue debt, at least in the short-term (are you going to cancel Social Security for current recipients tomorrow? Lay off all of the military? No good short-term options), so in all likelihood, the debt ceiling hike will pass fairly easily, assuming a deal is struck on the budget -- hard not to vote for the debt ceiling if you voted for the budget that caused it to need to be raised.
At least we are finally having a debate about deficits and spending. That was my hope with the divided Congress.
2012 - A Tough Senate Map for the Democrats
Every Senate election cycle is an echo to the cycle 6 years earlier -- that is, each party has to defend the seats it gained 6 years prior. 2006 was a great year for the Democrats, which makes 2012 a tough year on the map. Here is a preview of the key races.
Likely Democratic Holds (10)
California - Diane Finestein is up for re-election and even in a cycle as strong as 2010, Republicans have shown no capability to win at the statewide level in Cali.
Delaware - Tom Carper is up for re-election in another state the Dems held in 2010. Maybe if they nominate a Mike Castle, they could have a shot, but if you are Mike Castle, do you want anything to do with a state GOP that bumped Christine O'Donnell ahead of you in 2010?
Hawaii - Daniel Akaka is an institution in the Senate and in the liberal state of Hawaii. His seat should be safe.
Maryland - Ben Cardin has not yet announced his intentions, but either way, Maryland is not exactly a hotbed of conservatism, with Cardin winning fairly easily last cycle and Barbara Mikulski winning in a near walk in 2010.
Michigan - While Michigan has historically been more purple than pure blue, Debbie Stabenow has the advantage of incumbency and the benefit of demographic shifts in the state that will likely make it more liberal by 2012.
Minnesota - Could be in play in a big GOP year, but more than like Amy Kloubachar is safe in the home of Walter Mondale.
New Jersey - sure we elected Chris Christie to the state house, but in the arena of national politics, New Jersey is still a reliable blue vote. Bob Menendez should win fairly handily, especially with the only state GOP star in the Governor's mansion.
New York - Kirsten Gillebrand has to run for a full term, since the election she won last November was a special election for the last 2 years of Hillary Clinton's term. She won easily in the GOP-dominated 2010, so there is no reason to think that she won't again, especially being buoyed by victory on the 9/11 first responders bill and Don't Ask, Don't Tell repeal.
Rhode Island - Sheldon Whitehouse toppled liberal Republican Lincoln Chafee 6 years ago. Rhode Island hasn't gotten any more conservative and Whitehouse is now an incumbent.
Washington - Maria Cantwell should be safe in the home of the green movement. Washington is a fairly reliable Democratic state.
Wisconsin - Herb Kohl got 67% of the vote in the last cycle. Even assuming that 2012 won't be as good a year for Democrats as 2006 was, he should win handily.
Lean Democratic Holds (3)
West Virginia - Joe Manchin has to run for a full term. West Virginia is a right-leaning state, but Manchin is a right-leaning kind of Democrat, who managed to win against a GOP tidal wave in 2010.
Ohio - Sherrod Brown will likely face a stiff challenge in this swing state, but he has the advantage of incumbency and is relatively well-liked in the state.
Pennsylvania - Bob Casey Jr.'s brand of socially and economically moderate policies and the brand name he has carried on from his father should make him a favorite in 2012.
Democratically Controlled Seats Likely to Be Competitive (7)
Florida - Bill Nelson is running for re-election and has already drawn three Republican challengers. There is chum in the water after Marco Rubio's resounding win in 2010 and Florida is a classic swing state.
Missouri - Claire McCaskill faces a similarly crowded GOP field...and Missouri is to the right of Florida in its politics.
Montana - Jon Tester eeked out a 1% win in the Democratically-dominated 2006 cycle, but he is running in libertarian conservative Montana and his politics are clearly to the left of the state. It'll be a tough fight for Tester.
Nebraska - Ben Nelson often separates himself out as the most moderate member of congress and the most conservative Democratic Senator. But he also cast the crucial vote for health care reform, which will no doubt be front and center in the campaign in this very conservative state.
New Mexico - Jeff Bingamin is retiring, leaving the race wide open in this swing state.
North Dakota - Kent Conrad is retiring, which probably makes this the single most at-risk seat for the Democrats. Given North Dakota's conservative politics, it is almost hard to imagine a scenario where the Democrats hang on to this seat.
Virginia - Jim Webb's retirement (possible to replace Robert Gates at Defense when he finally retires, although that is just speculation) opens the door to the man he ousted - former Governor and former Senator George Allen. If former Democratic Governor Tim Kaine runs, this race feels like a toss-up, if he sits it out, the dynamics seem to favor the GOP.
Likely Independent Holds (1)
Vermont - Bernie Sanders is an institution in Vermont. The only proud, avowed Socialist in congress, he'll likely go back for 6 more.
Independent Seats Likely to be Competitive (1)
Connecticut - Joe Lieberman is retiring, which will likely put this seat back in Democratic hands. Such a pick-up wouldn't shift the operating majority in the Senate.
Likely Republican Holds (5)
Indiana - Richard Lugar may face a primary challenge but either way, the seat seems unlikely to fall into Democratic hands. Sure Indiana voted for Obama, but it is still far more conservative than the country as a whole.
Mississippi - If Roger Wicker even draws Democratic opposition, it will be fairly token...this is probably the GOP's safest seat.
Tennessee - Bob Corker should be safe in heavily Republican Tennessee.
Texas - in spite of Kay Bailey Hutchinson's retirement, Texas is a reliably Republican state and the GOP field appears stronger than the Democratic field. Not likely to change hands.
Utah - This IS Orrin Hatch's seat and he is running for another term. He won 62% of the vote in heavily Democratic 2006.
Wyoming - John Barasso won 73% of the vote in 2008 in the special election for his seat. Given that 2008 was a pro-Democrat year, he should do about as well in election for a full term.
Lean Republican Hold (2)
Arizona - Jon Kyl is retiring, leaving the field wide open. But Arizona is still right of center and the Arizona GOP has one of the strongest organizations in the country.
Maine - Olympia Snowe is running as a Republican in a Democratic state. But she is also a moderate and has historically been popular back home, wining a whopping 74% of the vote in 2006. If she loses a primary challenge from the right, all bets are off.
GOP Held Seats Likely to Be Competitive (2)
Massachusetts - Scott Brown has to reprise his miracle win in a special election that rested control of Ted Kennedy's seat from the Democrats. Not an easy task in deep blue Massachusetts, where he is sure to draw a strong competitor.
Nevada - a swing state to be sure and John Ensign has had his share of scandal while in office, but he still holds the advantage of incumbency and has no announced challengers yet.
A very tough map for the Democrats. 2 to 4 competitive races for GOP seats and 7 to 10 seats to defend. If it's a strongly Democratic year, they might hold the Senate, if it's a strong GOP year, they could be down to 44 seats or less. In a middle of the road year, you'd expect them to lose around 3 seats, just enough to give the GOP control of the Senate.
The House is another store, because it is an echo to 2010, not 2006, and, of course, the GOP already has the majority. Also, add in the layer of complexity of redistricting, which, given population trends in the census, should give a boost to the GOP, and you have a year where the Democrats may make some small inroads, given that the GOP won virtually every competitive seat in 2010, but are unlikely to gain the majority.
Obviously, a great deal more to come. Stay tuned.
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We are very late in the season to be talking about the budget for the year. You see, the government's fiscal 2011 budget actually began on October 1st of 2010, but as the Democratically controlled Congress of the time essentially punted on the budget, here we are.
Not that all of the Democrats reasons were bad. Don't ask, don't tell repeal, debating the Bush/Obama tax cuts (not the ending I would have liked, but an important issue nonetheless), and the START Treaty consumed the waning days of the last Congress. And not that they didn't try - an omnibus bill was on the agenda for the lame duck session of Congress, but was too expensive for the tastes of Senate Republicans, who preferred to let the incoming, more conservative congress determine the rest of the budget. In place of a budget, Congress simply put in place a couple of continuing resolutions that, in essence, kept government funded at least years levels through March 4th. Hence the showdown that we see now.
What passed the House was more or less true to the pledge that Republicans had made to cut $100B in domestic discretionary spending in year one. I say more or less, because the budget they passed cuts only $61B from the current levels of funding, but cuts $100B from the original request that President Obama had made for the year. ToMAto, Tomato.
I've written many times, but will make the point once more that this is, in large measure, a sideshow to the real budgetary choices that will have to be made. Those involve entitlement reform and military spending. You could cut 100% of domestic discretionary spending and not balance the budget. In fact, the $61B in cuts reduces this year's deficit by a whopping 4%. But I digress.
The budget cuts are brutal. Cuts to traditional conservative targets, to be sure. Planned Parenthood is axed. So is NPR and PBS. Home heating oil subsidies for poor people? Massively cut. Health care implementation funds? Forget it. Interestingly, Amtrak funding somehow survived the bevy of amendments that were debated in the House.
The final product passed the House 235-189 with all 186 Democrats who were present voting against the bill, joined by 3 Republicans, with the balance of the GOP members of the House voting in favor.
The bill has been essentially labeled a non-starter by Senate Democrats, who, in spite of a weakened majority in the Senate, are still strong enough to block bills they don't like.
Congress is in recess this week, which means it won't reconvene until February 28th. The current continuing resolution expires on March 4th, which means that Congress has one week to work out some sort of deal. I see three possibilities:
(1) Democrats and Republicans come to a fast deal
This seems unlikely and would almost certainly have to involve Democrats giving most of the ground on proposed GOP cuts. The GOP isn't in the mood to give too many concessions, given the strength of their showing in the past election and their belief that their charter is to cut spending. Democrats might give a lot of ground in order to prevent a government shutdown (look how fast they caved on extending the Bush tax cuts) but this scenario seems unlikely.
(2) Agree to pass another temporary measure
Fund the government for another month while they work something out. This seems like the most likely scenario and one that the GOP appears somewhat open to, although they are unlikely to agree to an extension at current levels of spending unless they had firm commitments on what the final budget might look like.
(3) Shutdown the government
While some on the far right seem to be itching for a government shutdown, they would be wise to remember the battles the GOP lost with President Clinton over government shutdowns. This scenario seems more likely than a fast deal for the whole year but less likely than a temporary funding measure.
Also looming is the need in late April to raise the debt ceiling. Some of the tea party loyalists want the debt ceiling hike to be voted down. But they have offered no credible plan for how the government could continue operating without continuing to accrue debt, at least in the short-term (are you going to cancel Social Security for current recipients tomorrow? Lay off all of the military? No good short-term options), so in all likelihood, the debt ceiling hike will pass fairly easily, assuming a deal is struck on the budget -- hard not to vote for the debt ceiling if you voted for the budget that caused it to need to be raised.
At least we are finally having a debate about deficits and spending. That was my hope with the divided Congress.
2012 - A Tough Senate Map for the Democrats
Every Senate election cycle is an echo to the cycle 6 years earlier -- that is, each party has to defend the seats it gained 6 years prior. 2006 was a great year for the Democrats, which makes 2012 a tough year on the map. Here is a preview of the key races.
Likely Democratic Holds (10)
California - Diane Finestein is up for re-election and even in a cycle as strong as 2010, Republicans have shown no capability to win at the statewide level in Cali.
Delaware - Tom Carper is up for re-election in another state the Dems held in 2010. Maybe if they nominate a Mike Castle, they could have a shot, but if you are Mike Castle, do you want anything to do with a state GOP that bumped Christine O'Donnell ahead of you in 2010?
Hawaii - Daniel Akaka is an institution in the Senate and in the liberal state of Hawaii. His seat should be safe.
Maryland - Ben Cardin has not yet announced his intentions, but either way, Maryland is not exactly a hotbed of conservatism, with Cardin winning fairly easily last cycle and Barbara Mikulski winning in a near walk in 2010.
Michigan - While Michigan has historically been more purple than pure blue, Debbie Stabenow has the advantage of incumbency and the benefit of demographic shifts in the state that will likely make it more liberal by 2012.
Minnesota - Could be in play in a big GOP year, but more than like Amy Kloubachar is safe in the home of Walter Mondale.
New Jersey - sure we elected Chris Christie to the state house, but in the arena of national politics, New Jersey is still a reliable blue vote. Bob Menendez should win fairly handily, especially with the only state GOP star in the Governor's mansion.
New York - Kirsten Gillebrand has to run for a full term, since the election she won last November was a special election for the last 2 years of Hillary Clinton's term. She won easily in the GOP-dominated 2010, so there is no reason to think that she won't again, especially being buoyed by victory on the 9/11 first responders bill and Don't Ask, Don't Tell repeal.
Rhode Island - Sheldon Whitehouse toppled liberal Republican Lincoln Chafee 6 years ago. Rhode Island hasn't gotten any more conservative and Whitehouse is now an incumbent.
Washington - Maria Cantwell should be safe in the home of the green movement. Washington is a fairly reliable Democratic state.
Wisconsin - Herb Kohl got 67% of the vote in the last cycle. Even assuming that 2012 won't be as good a year for Democrats as 2006 was, he should win handily.
Lean Democratic Holds (3)
West Virginia - Joe Manchin has to run for a full term. West Virginia is a right-leaning state, but Manchin is a right-leaning kind of Democrat, who managed to win against a GOP tidal wave in 2010.
Ohio - Sherrod Brown will likely face a stiff challenge in this swing state, but he has the advantage of incumbency and is relatively well-liked in the state.
Pennsylvania - Bob Casey Jr.'s brand of socially and economically moderate policies and the brand name he has carried on from his father should make him a favorite in 2012.
Democratically Controlled Seats Likely to Be Competitive (7)
Florida - Bill Nelson is running for re-election and has already drawn three Republican challengers. There is chum in the water after Marco Rubio's resounding win in 2010 and Florida is a classic swing state.
Missouri - Claire McCaskill faces a similarly crowded GOP field...and Missouri is to the right of Florida in its politics.
Montana - Jon Tester eeked out a 1% win in the Democratically-dominated 2006 cycle, but he is running in libertarian conservative Montana and his politics are clearly to the left of the state. It'll be a tough fight for Tester.
Nebraska - Ben Nelson often separates himself out as the most moderate member of congress and the most conservative Democratic Senator. But he also cast the crucial vote for health care reform, which will no doubt be front and center in the campaign in this very conservative state.
New Mexico - Jeff Bingamin is retiring, leaving the race wide open in this swing state.
North Dakota - Kent Conrad is retiring, which probably makes this the single most at-risk seat for the Democrats. Given North Dakota's conservative politics, it is almost hard to imagine a scenario where the Democrats hang on to this seat.
Virginia - Jim Webb's retirement (possible to replace Robert Gates at Defense when he finally retires, although that is just speculation) opens the door to the man he ousted - former Governor and former Senator George Allen. If former Democratic Governor Tim Kaine runs, this race feels like a toss-up, if he sits it out, the dynamics seem to favor the GOP.
Likely Independent Holds (1)
Vermont - Bernie Sanders is an institution in Vermont. The only proud, avowed Socialist in congress, he'll likely go back for 6 more.
Independent Seats Likely to be Competitive (1)
Connecticut - Joe Lieberman is retiring, which will likely put this seat back in Democratic hands. Such a pick-up wouldn't shift the operating majority in the Senate.
Likely Republican Holds (5)
Indiana - Richard Lugar may face a primary challenge but either way, the seat seems unlikely to fall into Democratic hands. Sure Indiana voted for Obama, but it is still far more conservative than the country as a whole.
Mississippi - If Roger Wicker even draws Democratic opposition, it will be fairly token...this is probably the GOP's safest seat.
Tennessee - Bob Corker should be safe in heavily Republican Tennessee.
Texas - in spite of Kay Bailey Hutchinson's retirement, Texas is a reliably Republican state and the GOP field appears stronger than the Democratic field. Not likely to change hands.
Utah - This IS Orrin Hatch's seat and he is running for another term. He won 62% of the vote in heavily Democratic 2006.
Wyoming - John Barasso won 73% of the vote in 2008 in the special election for his seat. Given that 2008 was a pro-Democrat year, he should do about as well in election for a full term.
Lean Republican Hold (2)
Arizona - Jon Kyl is retiring, leaving the field wide open. But Arizona is still right of center and the Arizona GOP has one of the strongest organizations in the country.
Maine - Olympia Snowe is running as a Republican in a Democratic state. But she is also a moderate and has historically been popular back home, wining a whopping 74% of the vote in 2006. If she loses a primary challenge from the right, all bets are off.
GOP Held Seats Likely to Be Competitive (2)
Massachusetts - Scott Brown has to reprise his miracle win in a special election that rested control of Ted Kennedy's seat from the Democrats. Not an easy task in deep blue Massachusetts, where he is sure to draw a strong competitor.
Nevada - a swing state to be sure and John Ensign has had his share of scandal while in office, but he still holds the advantage of incumbency and has no announced challengers yet.
A very tough map for the Democrats. 2 to 4 competitive races for GOP seats and 7 to 10 seats to defend. If it's a strongly Democratic year, they might hold the Senate, if it's a strong GOP year, they could be down to 44 seats or less. In a middle of the road year, you'd expect them to lose around 3 seats, just enough to give the GOP control of the Senate.
The House is another store, because it is an echo to 2010, not 2006, and, of course, the GOP already has the majority. Also, add in the layer of complexity of redistricting, which, given population trends in the census, should give a boost to the GOP, and you have a year where the Democrats may make some small inroads, given that the GOP won virtually every competitive seat in 2010, but are unlikely to gain the majority.
Obviously, a great deal more to come. Stay tuned.
If you like this site, tell your friends.
Sunday, February 13, 2011
The Great Spending Showdown, The Never-Starting 2012 Presidential Race, Freedom in Egypt
Note: My apologies for lack of recent posting activity. I have been very busy with my real job and the political news has been very slow. I intend to post more frequently, hopefully at least once per week, until the Presidential campaign really picks up, at which point my posts should come fast and furious.
Mark Your Calendar for March 4th
The pending battle over government spending was preordained in the lame duck session of Congress late last year, when a temporary continuing resolution, which kept the government funded through March 4th was passed instead of a full budget. The Senate GOP wanted this battle - they wanted the coming House GOP majority and enhanced minority in the Senate to have a crack at the budget rather than simply allowing Democrats to pass one more budget before the incoming congressional class made it to town.
Couple this budgetary showdown with the looming fact that the federal government will hit its legal borrowing limit, possibly sometime in April, and will require a raising of the debt ceiling to continue operating, and you have quite a philosophical showdown on your hands.
What all of this sets up is an interesting showdown of sorts. The GOP had pledged to cut $100B from the federal budget in year one, a Herculian task if you take entitlements and defense spending out of the mix, two areas that are almost sure not to be touched in the next three weeks. After initially waffling on the pledge, the GOP has proposed bold cuts to the budget that slash deep, including major cuts in federal education funding, assistance to the poor, agriculture subsidies and a whole host of other things. President Obama, for his own part, seems surprisingly receptive to major cuts in the federal budget. My suspicion is that the House GOP will get most of what they really want. Why? The control the purse strings. President Obama can't spend a dollar that the GOP House doesn't authorize. That's what shared accountability is.
My perspective on this is that while it is encouraging to see focus on reducing the deficit beyond campaign season, the cuts being discussed now are a very small baby step. Consider this -- the tax cuts just extended by Congress and the President cost over 4 times annually the maximum amount that is being discussed as on the table for spending cuts. I don't question the opportunity to reduce domestic discretionary spending, It's just that the very painful cuts that are being proposed solve less than 1/15th of the federal budget deficit. The real money is in tax reform (read tax increases or minimally repealing the Bush/Obama tax cuts), defense spending (read reduction of foreign operations and military weaponry) and entitlements (read Medicare and Social Security.) I'm okay with this as an opening salvo, but the political community better get to the heart of the issue after this year's budget is established.
President Obama missed a big opportunity in his State of the Union speech by not embracing the proposal of the deficit reduction commission that he pushed for. They came back with substantial ideas that, while they may not be perfect, were a very good first cut at significantly reducing the deficit. But their proposal is being allowed to wither on the vine and it is likely nothing will come of it. What a shame.
When Will 2012 Start?
The nation's largest gathering of conservatives, the CPAC convention is just wrapping up and it strikes me, as straw polls are held (Ron Paul, whose energetic supporters devote a lot of energy to winning symbolic straw polls, was the winner again, followed by Mitt Romney), that this cycle's Presidential campaign is off to a VERY slow start.
In 2007 (the correlated year in last cycle to 2011), then-Senator Barack Obama declared his candidacy on February 10th. It is now February 13th and there is not a single declared GOP candidate. We don't really know...is Newt Gingrich in? Is John Huntsman's resignation as ambassador to China a precursor to a Presidential bid? And what in the world will Sarah Palin do?
It's that last question -- the intention of the former Alaska Governor, that probably accounts for a large measure of the uncertainty. Whether Palin runs or not dramatically changes the field, given her passionate group of hardcore conservative supporters. If she gets in, other right-wing candidates will likely sit it out as moderates such as Mitt Romney and TIm Pawlenty will set-up a moderate vs. conservative battle. If she stays out, other conservative candidates such as Mike Huckabee and Newt Gingrich have a much more real shot.
People complained last time around about the never-ending campaign. It is certain at this point that the 2012 campaign will be shorter than the one in 2008. How short still remains a question.
I expect many of the candidates...Pawlenty, Gingrich, Huckabee, Romney, to get in the race in either March or April, but high-profile possibles like Palin could conceivable wait longer. The debates start in June, so I expect the whole field to be filled in by then.
Personally, I can't wait for the campaign to start. I live for this sort of thing.
Freedom in Egypt
We can all root for this to end well. Grass roots protestors, risking life and limb to stand up to an authoritarian government, have succeeded in toppling it. What happens next is anyone's guess. A temporary military government could pave the path for true Democracy in Egypt or it could be a precursor to even more authoritarian and radically religious government. We all should root for the people of Egypt who seek to breathe the free air.
Mark Your Calendar for March 4th
The pending battle over government spending was preordained in the lame duck session of Congress late last year, when a temporary continuing resolution, which kept the government funded through March 4th was passed instead of a full budget. The Senate GOP wanted this battle - they wanted the coming House GOP majority and enhanced minority in the Senate to have a crack at the budget rather than simply allowing Democrats to pass one more budget before the incoming congressional class made it to town.
Couple this budgetary showdown with the looming fact that the federal government will hit its legal borrowing limit, possibly sometime in April, and will require a raising of the debt ceiling to continue operating, and you have quite a philosophical showdown on your hands.
What all of this sets up is an interesting showdown of sorts. The GOP had pledged to cut $100B from the federal budget in year one, a Herculian task if you take entitlements and defense spending out of the mix, two areas that are almost sure not to be touched in the next three weeks. After initially waffling on the pledge, the GOP has proposed bold cuts to the budget that slash deep, including major cuts in federal education funding, assistance to the poor, agriculture subsidies and a whole host of other things. President Obama, for his own part, seems surprisingly receptive to major cuts in the federal budget. My suspicion is that the House GOP will get most of what they really want. Why? The control the purse strings. President Obama can't spend a dollar that the GOP House doesn't authorize. That's what shared accountability is.
My perspective on this is that while it is encouraging to see focus on reducing the deficit beyond campaign season, the cuts being discussed now are a very small baby step. Consider this -- the tax cuts just extended by Congress and the President cost over 4 times annually the maximum amount that is being discussed as on the table for spending cuts. I don't question the opportunity to reduce domestic discretionary spending, It's just that the very painful cuts that are being proposed solve less than 1/15th of the federal budget deficit. The real money is in tax reform (read tax increases or minimally repealing the Bush/Obama tax cuts), defense spending (read reduction of foreign operations and military weaponry) and entitlements (read Medicare and Social Security.) I'm okay with this as an opening salvo, but the political community better get to the heart of the issue after this year's budget is established.
President Obama missed a big opportunity in his State of the Union speech by not embracing the proposal of the deficit reduction commission that he pushed for. They came back with substantial ideas that, while they may not be perfect, were a very good first cut at significantly reducing the deficit. But their proposal is being allowed to wither on the vine and it is likely nothing will come of it. What a shame.
When Will 2012 Start?
The nation's largest gathering of conservatives, the CPAC convention is just wrapping up and it strikes me, as straw polls are held (Ron Paul, whose energetic supporters devote a lot of energy to winning symbolic straw polls, was the winner again, followed by Mitt Romney), that this cycle's Presidential campaign is off to a VERY slow start.
In 2007 (the correlated year in last cycle to 2011), then-Senator Barack Obama declared his candidacy on February 10th. It is now February 13th and there is not a single declared GOP candidate. We don't really know...is Newt Gingrich in? Is John Huntsman's resignation as ambassador to China a precursor to a Presidential bid? And what in the world will Sarah Palin do?
It's that last question -- the intention of the former Alaska Governor, that probably accounts for a large measure of the uncertainty. Whether Palin runs or not dramatically changes the field, given her passionate group of hardcore conservative supporters. If she gets in, other right-wing candidates will likely sit it out as moderates such as Mitt Romney and TIm Pawlenty will set-up a moderate vs. conservative battle. If she stays out, other conservative candidates such as Mike Huckabee and Newt Gingrich have a much more real shot.
People complained last time around about the never-ending campaign. It is certain at this point that the 2012 campaign will be shorter than the one in 2008. How short still remains a question.
I expect many of the candidates...Pawlenty, Gingrich, Huckabee, Romney, to get in the race in either March or April, but high-profile possibles like Palin could conceivable wait longer. The debates start in June, so I expect the whole field to be filled in by then.
Personally, I can't wait for the campaign to start. I live for this sort of thing.
Freedom in Egypt
We can all root for this to end well. Grass roots protestors, risking life and limb to stand up to an authoritarian government, have succeeded in toppling it. What happens next is anyone's guess. A temporary military government could pave the path for true Democracy in Egypt or it could be a precursor to even more authoritarian and radically religious government. We all should root for the people of Egypt who seek to breathe the free air.
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