government spending

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Trench Warfare, Or Something

The word monotony speaks to dullness, but it does fit the modern Republican party rather well. It is anything but dull. Were the Republicans developing military strategy they would have a constant response to any situation:

What should we do about the enemy troops storming down the hill?

Dig trenches!

What about those grenades they’re tossing?

Dig trenches!

And the long range artillery?

Dig trenches!

How about those tanks surging around our left flank?

Dig trenches!

And the bombs?

Dig trenches!

The rockets?

Dig trenches?

The cauliflower?

Dig trenches!

The sun seems always to rise in the east. What do we do?

Dig trenches!

You see, inside the right wing world they recognize only problems that their preferred response works to resolve. So when faced with other problems they either ignore them, or they assume they’re not real problems. Sometimes this produces oddities. Sometimes it produces right wing commentary that makes you scratch your head an wonder what they’re talking about.

Take the economy.

All the chatter right now is about the ‘fiscal cliff’. To me the problem the so-called cliff represents is that it is a massive contraction of fiscal policy right when the economy is weak. It results in such a deficit reduction that it threatens growth. We need, therefore, to mitigate the cliff’s impact, not amplify it.

You don’t get this from the right. To them the cliff is all about constraining government. They speak about the rapid growth in government payrolls that threaten the budget. This is despite the huge cuts in those payrolls. They talk about the need to put a cap on government revenues as a percentage of GDP to stop it surging out of control. This is despite the fact that revenues plunged in the crisis. And so on. They’re not actually talking about the deficit, what caused it, and its consequences. They’re talking about what they always want to talk about. Only they’re doing it in the context of the deficit. And, by so doing, they’re displaying an astounding lack of contact with reality. It also drives them into contortions as they retrofit our problems to their preferred solutions. They plan to raise taxes without, umm, raising taxes. They want to get rid of Medicare, without, you know, getting rid of Medicare. They want less government spending, but are opposed to legislation that allows the government to bargain to reduce costs. They want more defense spending, but they don’t want to pay for it from raising taxes. And they don’t want the deficit to go up, but they want more defense spending and don’t want to raise revenues to pay for it …

Ouch.

This makes resolving anything quite difficult. It becomes a parlor game. Those of us who want to make progress have to ask questions that the Republicans can answer without challenging their view of reality. That way we can get their buy in to our solutions.

Questions such as:

What’s a good way to plant potatoes?

Dig trenches!

See?

Now about this cliff …

Addendum:

Right on cue, Mitch McConnell illustrates my point. Today he submitted legislation intended to prove that the Democrats don’t have enough votes to raise the so-called debt ceiling. His bill would have allowed the president to lift the debt ceiling unilaterally unless two-thirds of Congress object. It was legislation he has proposed before. He was trying to make a point – he doesn’t think there are enough votes in the Senate to give such a sweeping power to the president. Initially the Democrats refused to countenance a vote, thus proving McConnell correct. Then they changed their minds and brought his bill up for a vote. It would have passed in a simple majority vote along party lines. Since McConnell is one of those who vehemently opposes giving the president such a power, he was forced to filibuster his own bill to stop it being voted on.

Get that?

 

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Cliff Walking

This is really irksome.

For most of this phony war, as the key players strut their stuff for public eyes but not for serious negotiation, the Republicans have been oddly coy about what their plan would be. They released no details, gave no hints, and merely repeated their continuing objection to the horror of a tax rate increase for the wealthy.

As a result no one, including most Republicans, had a clue about where the starting lines were being drawn in what was supposed to be a fairly short and intense negotiation. For those of us familiar with Obama’s history, particularly that from 2009 and 2010, the GOP silence was easily explained: he has a tendency to do all the negotiation with himself. Thus his starting position is already heavily leaning towards a Republican viewpoint, which makes him vulnerable to being bullied even further. This is why so much of the early legislation of the Obama administration was so lame from a left of center perspective.

Apparently, somewhere along the road since then, Obama has been given a copy of  basic negotiation handbook. So, while he is still prone to being far too centrist from the beginning of a debate, at least the total give-aways are now being avoided.

This flummoxed the Republicans and produced a great deal of confusion: they had to put something in writing.

That they have now done. And it’s rubbish.

This was predictable. The entire discussion about our so-called Federal deficit and debt crises hinges on the hope that the public don’t realize that there is no crisis. After all panic and doomsaying become a tad vacuous in the absence of anything to panic or predict doom about.

I have said this a myriad times – I too am allowed hyperbole in these circumstances – there is no crisis. None. This talk of a fiscal cliff is simply a neat trick cooked up by the right to force a discussion about entitlement cuts. Such a discussion is not needed and would not be happening without the neat trickery.

That Obama continues to play along with the right in their long term attempts to eviscerate our safety net is a tragedy. True leadership right now would not simply be to stiffen your spine and resist the Republican attacks before coming to some compromise. It would be to sing to the rafters that the entire debate is hollow. It is an outcome of a long playing and persistent attack on the poor, the elderly, the sick, and the very young by the hardcore of our ever more rightward right wing.

Our so-called deficit problem stems exactly from the defunding of government undertaken by the Republicans. The centerpiece of that defunding, as we all know, was the Bush tax cutting program. The first swathe of cuts, in 2001, was designed to eliminate the then surplus running on the Federal government’s books. The second swathe, in 2003, was positioned as a quasi-Keynesian stimulus. The first swathe was a stunning success. It certainly eliminated the Federal surplus. The second swathe was an abysmal failure. It failed to provide any substantial stimulus. The economy continued its rotten ways in the aftermath of 2003, meaning that the promised uptick in revenues provided by faster growth never arrived.

So we entered the crisis of 2008/2009 without any ammunition courtesy of Bush’s extraordinarily negligent fiscal policies.

From the nation’s point of view Bush was an unmitigated failure. From the hardcore right’s perspective he was a hero, albeit unsung because of his toxic public image. He had successfully, if,like a lot of his actions, unwittingly, accomplished the longed for defunding of government.

From then on it became an easy sell to a gullible media that we had some sort of national budgetary crisis and that we could no longer afford all those expensive entitlement programs. They had to be slashed. Such pronouncements of the need for cuts were always accompanied by a suitable amount of regret to indicate that no one actually wanted to cut anything, it was that we had to in order to be responsible. Apparently – and I need to mention this – we were all supposed not to notice that the right assumed we could continue, nay augment, our defense spending. We can afford to pay for generals and their toys. Just not for schools. That the homeland being defended by all those glittery hi-tech weapons is both ignorant and hollowed out never entered the discussion.

Toss in a few frightening articles about the upcoming tsunami of baby-boomer retirements and the stage was set for a right wing victory and the long hoped for roll back of the welfare state.

The fiscal cliff, and all the discussions surrounding it, is simply a veil covering this attack on entitlements. The Republicans have never, ever, been interested in the deficit or the debt. Except where those things are useful in undermining centrist and left wing objections to entitlement reform. This explains all the extraordinary flip flopping the Republicans have done on the deficit throughout the years. It was Reagan’s henchman who barked out that “deficits don’t matter” not a crazy leftist. Reagan and Bush remain the only two American presidents to add to the deficit without a war or economic cause. And all the current leadership of the Congressional Republicans supported Bush’s multiplication of our debt back in 2001 and 2003.

That they all plead fiscal rectitude now is both a hypocritical and a sick joke.

That the Obama administration is complicit in the game being played is even worse.

There needs to be no change in Social Security. The tax code surely needs cleaning up, but that will be a long, arduous, and most likely lobbyist undermined project. Raising tax rates is more simple, clean, and resistant to tampering. Our defense spending needs to be cut to conform with a less imperial foreign policy. And health care spending needs to be controlled.

This is simple stuff.

Obama’s plan, which alters the fiscal balance by around $1.6 trillion, contains details that match fairly well to my list above ex, of course, any serious defense spending cuts. It actually has details, which is important to note. Because the much hyped Republican plan has no details. It is just a rehashing of the Ryan plan without any explicit reference to Medicare vouchers. It is full of hot air and vapor. It promises things such reform of tax deductions – which are alleged to provide an additional $800 million in revenues – without actually saying what those reforms are. And so it goes on. The Republican plan is no plan. It is a wish list. It’s only details are those aimed squarely at the elderly and poor. Medicare gets a revision of its age eligibility, and Social Security gets a change in its annual inflation indexing. Together these changes to the entitlement programs net about $300 million in cold hard cash. Those fixes for the tax code linger in the warm and fuzzy world of pipe dreams.

Given that the fiscal cliff isn’t a cliff, but a contrivance aimed at engendering a debate about entitlement reform, it ought not surprise us that the Republican budget plan isn’t a plan, but a proposal to reduce entitlements.

At least we could all be clear about that.

Then we could all get on with the task of defending those entitlements, and avoid unnecessary chatter about the dangers of walking too close to cliffs.

But that wouldn’t be centrist enough for our media. So the cliff walking continues.

Addendum:

All the evidence suggests that the Republicans will find it tough to keep a coherent negotiating position in place. Hence the vagueness of their supposed plan. It is already under attack from right wing groups. Some of those groups even acknowledge it as unacceptable. Of course, they don’t seem to offer up anything better. Then again with their anti-debt credentials being tattered and their anti-entitlement colors flying strongly it must be difficult to develop a plan that isn’t toxic to the electorate.

Still, it’s worth reading what they say. Here’s a quote from the Heritage Foundation, a hard right think tank:

“[T]he Republican counteroffer, to the extent it can be interpreted from the hazy details now available, is a dud. It is utterly unacceptable. It is bad policy, bad economics, and, if we may say so, highly questionable as a negotiating tactic.”

Ouch.

 

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Down The Fiscal Rabbit Hole

A few quick things on the current hyperventilation regarding the so-called ‘fiscal cliff’.

It isn’t a cliff.

Not at all. It is a roll out of a series of things that have cumulative effect, but which can be undone over a sensible timeframe. There is no sudden drop-dead moment when the lights go out. Yes, the Bush tax increases come into effect. And note my language: this is a tax increase imposed on us by the Republicans under George Bush. It is the offset to his disastrous tax cut. So it is an increase. Moving on: that increase hits everyone on January 1st. But since its impact will be on the amount deducted from incomes, its full impact will accumulate through the year. Households will react to the loss of purchasing power at different times throughout 2013, so there is no single moment when the impact smashes into GDP. There is no cliff, but there is a steady slide.

All that cash withdrawn from paychecks will suck demand from the economy. That means that sometime in 2013 we will most likely head into recession. This is what vexes business and is why it now has found its anti-austeirty voice. I find this amusing for the simple reason that by getting into a tizzy over the loss of demand big business has declared its allegiance to Keynes. Anyone who worries about the impact of a rise in taxes on GDP, and concludes that such an impact will be the loss of demand and hence will lead to contraction, is a Keynesian. Pure and simple. Notice also that this position implies that big business is not concerned that the deficit is too high. Postponing tax increases means the deficit will go up, not down. Since that’s what big business is now calling for, they are actually arguing that the deficit might be too small, not too large. Nice huh?

No it isn’t possible to raise revenues and lower tax rates at the same time. At least not if narrowing the deficit is your goal. Tax rates are already too low. Especially on high income earners. Rates need to go up. We have defunded government, we have not expanded it. We can afford what we spend once we get rid of that defunding effort. Our social programs have not suddenly become too much of a burden, we have deliberately stopped paying for them.

This was, of course, a long term strategy driven by the right and not opposed by a compliant left. Both parties sat at the table when the game was played. One wanted to eliminate entitlements by defunding them and then crying about our inability to pay for them; the other was too timid to fight back. Indeed, under Clinton, the so-called left actually added to the defunding momentum.

Oh and all this talk about raising revenues through closing loopholes is daft. Each loophole is well defended by an army of lobbyists – usually the people who bought Congress to put the loophole there in the first place – so it isn’t credible to imagine we will close many, if any. Besides the biggest loopholes are those that fund the middle class: the antiquated subsidy of home owners via the tax credit in mortgage interest, and the deduction they get for state, local, and property taxes. These aren’t listed as outlays in the budget because no one wants to embarrass the middle class by showing how much welfare gets pumped into it each year. So they are buried in the budget reports and called ‘tax expenditures’. Any drive to raise revenues without raising rates will have to do away with such things. Thus middle class taxes will go up significantly. The ruse of keeping tax rates down is simply so that the Republicans can save face with their rabid base. Taxes are going up one way or another.

One last thing: the fear mongering talk about ‘cliffs’ is designed to make it difficult to defend entitlements. It also means that debate will be truncated. In that fervid atmosphere mistakes will be made, which is why we all ought to slow things down and avoid hyperbole. In the midst of such an artificial crisis things like Social Security become sitting ducks. Already we are hearing talk about raising the retirement age again. This is because life expectancy has risen way beyond what it was when the program was introduced. Alan Simpson of Simpson-Bowles notoriety is a major advocate of such a move. He has been an outspoken opponent of entitlement programs since his election it Utah. Of course he doesn’t have to worry. His twenty years in Congress earned him lifetime health benefits and a full pension. He just thinks other sought to work longer and harder to get what he has. Sounds fair, right?

Let’s think twice though. This is because much of the increase in life expectancy is an illusion.

Yes we live longer on average. But much of the increase in overall life expectancy comes as a result of better care for infants, making life expectancy at birth much higher than it used to be. But it is that portion of life beyond retirement that we ought focus on, and which represents the actuarial problem, so gains made for infants are irrelevant. When we focus this way, we find that the gain is much less, indeed for low wage earners the gain is minimal. So the increase in retirement age from 65 to 67 has already solved a considerable part of the problem – such as it is – and little more is needed. The actuaries calculating the retirement age saw this coming as far back as 1946. And in the revamp of 1985 they nailed it. What they missed, though, is the inflation of incomes. The payroll tax funding the program has a cap of around $110,000. Incomes above that level are free of payroll tax. Adjusting for the underestimate of the impact of inflation on incomes by removing that upper cap or raising it significantly is all that is needed to solve the program’s minor difficulties.

Medicare is a whole different issue. There the problem is the lack of cost control and low productivity in the health care industry. Bending the trajectory of future cost increases is the primary goal, and, parenthetically, the last year or two have seen major strides in that direction – health care cost have risen more slowly, so we need not panic.

And this ought be our theme throughout: no panic. There is no cliff. The world will not end if we don’t hammer out an urgent bargain. We can afford to be sensible on this one. So don’t listen to the hyperventilating pundits. They’re the ones who called the election close. They were wrong then. They’re wrong now.

Stay calm.

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The Answer Is: No

Huh?

No appeasement.

We have already moved on from the Democrats sweeping victory in Tuesday’s election. And have no doubt the win was indeed sweeping. The margins were small in some states, tiny in Florida, but that they existed at all is the fact to focus on. Obama ought never have won this election. The economy is weak and unemployment still lingers in a zone that, in the past, spells doom for incumbent presidents. But he won. Handily. Not only this, but in a year when the Democrats were expected to lose control of the Senate they actually added to their majority.

Something went horribly wrong for the Republicans. It wasn’t that Romney, despite his vaunted business and analytical acumen, ran an ineptly organized campaign. It was, to put it bluntly, a day of reckoning for the extreme right. Their wild eyed radical agenda, from their misogynistic views on social issues, to their emphasis on ever more defense spending, on through to their open desire for the wholesale destruction of entitlement spending, was rejected. It was rejected wherever is was explicit. It was rejected in toto.

Yet a legacy of Obama’s own inept management of his early years was that in 2010 Republicans surged into power at the state level. This allowed them to rig upcoming Congressional elections via the time honored tool of re-drawing the boundaries of Congressional districts in order to make them Republican friendly. This paid off handsomely on Tuesday. Despite being handily beaten at the polls in terms of numbers of votes cast, the Republicans kept hold of the House.

So we enter the next two years with a split government.

This has brought forth a rush of calls for Obama to make a deal with the Republicans on the so-called upcoming fiscal cliff. This is the self-inflicted budget crisis that is also a legacy of the deadlock we suffered through during the last four years and in particular is a result of the breakdown in negotiations over budget policy in 2010 and 2011. Basically the ‘cliff’ is a term describing a series of spending cut and tax increase measures that automatically come into law on in January 2013 unless alternative, and presumably more sensible, measures are agreed to beforehand. With beforehand meaning the next few weeks.

The danger of rushing to cut a deal in a few weeks – a deal that would re-define our tax and spending profile for the best part of a decade – is that there is no time for a considered discussion. A grand bargain of such importance surely needs to be the outcome of a few months not a few weeks of negotiations.

Worse, the psychology of such a compressed debate gives the upper hand to the extremists who can force concessions from their more moderate counterparts by waiting to the last moment to make a deal. Brinkmanship becomes the order of the day and undermines the likelihood of the ultimate bargain not containing some very bad deals.

This, of course, is less of a problem were Congress not infested with a phalanx of Tea Party extremists.

Therein lies the reason for no appeasement.

The central problem we all face as we seek to strike a deal on the budget is that the extreme right is not concerned about the deficit. Despite what they say publicly about burgeoning debt and other right wing red flags, they have never been worried about the level of debt or the size of the annual deficit. These issues are simply a veil over the real agenda: the destruction of the welfare state. In recent decades it has been the Republican Party responsible most for the emergence of a long term rise in the deficit. First under Reagan and then under George W. Bush they forced through massive reductions in government revenues  without tackling a concomitant cut in spending. Reagan oversaw a massive defense build up that was paid for, not through taxation, but through borrowing. Then, after Clinton had stabilized the budget and even produced a rather lucky surplus, Bush used the existence of that surplus to argue that the government was taking in too much revenue and thus could cut taxes. He cut taxes way beyond the level needed to balance the books. In a deliberate effort to defund government and thus produce a budget crisis he cut taxes drastically in two rounds. Each added to the deficit. Each was supported wholeheartedly by the entire Republican delegation in Congress.Some of those Republicans, in a stunning volte face, have become the most vocal champions of deficit reduction. So we know that the Republicans do not worry about deficits. Recall it was Dick Cheney who said that deficits don’t matter.

Creating a funding crisis was the goal. It was a strategy that succeeded and then some when the economy fell to pieces and the long term deficit was compounded by the normal short term deficit associated with a recession. The extremists had set the game up perfectly for themselves. The chatter amongst our elite became the burden represented by the entitlement programs whose cost now looked unbearable in the context of all that lost revenue. Social Security was quickly branded as being on the verge of bankruptcy. Medicare was declared impossibly costly. The handwringing began. Earnest and sober people began to regret the harsh reality that America could no longer afford the New Deal and New Society programs. Yes, we were told, we would like to protect the poor, the young, the elderly, and the sick, but we just can’t afford it anymore. Something has to give. Someone has to pay the price for America’s diminished fiscal capacity. Just not the wealthy job creators and their friends in Wall Street.

Thus the sick, the poor, and the elderly, and the children were singled out for punishment. They were to be sacrificed so that we could get our fiscal house in order.

All the pronouncements, reports, and analyses that have flooded Washington these past two years as we began the debate over the budget have had the same target. All have taken as a truth that we have a diminished revenue raising capacity. Yes they have all talked about raising revenues, but they all, ultimately, throw the burden on the same target: the weakest parts of our society.

In other words the enormity of the Republican Party’s cynical strategy has been overlooked. The radical agenda is perilously close to being fulfilled. Had Romney won on Tuesday victory for the far right would have been certain. The credit markets and the plutocrats would have protected their privilege and the rest would have been made to pay.

But democracy is a funny thing. It gives the weak a chance to express what they think.

And they thought poorly of the entire radical right’s enterprise. They realized that they were being sold a bill of goods. Only one in ten voters mentioned the deficit as an issue. Seven in ten thought job creation was the priority. In my mind that’s a fairly good indicator for what public policy ought to be doing.

Stimulus. Not austerity.

So. As we are rushed headlong into this unnecessary panic called the ‘fiscal cliff’ we ought to listen to the voters.

Say no to cuts in entitlements. No.

Do not allow this artificially and carefully crafted moment be the excuse for ending the welfare state.

No appeasement of extremists. It never works. They always want more.

If that means going over the cliff, so be it. There is nothing that cannot be undone later. Let taxes go up. Put the blame on the intransigence of the right. Then cut them back where needed and bask in the victory of handing a tax cut to the middle class. Raise capital gains tax to the same level as income tax. After all income is income so tax it all the same. Stretch the tax code out progressively. After all the research shows definitively that higher taxes on the wealthy has no effect on the economy. Fix the tax code to plug loopholes for big business. Use the revenue to lower tax rates if you want. Get rid of the cap on payroll taxes to juice revenues into Social Security, but extend last year’s payroll tax cut as a stimulative measure. The list goes on.

But never, ever, appease the extremists. This is their last chance to execute the Reagan/Bush agenda. This is our chance to end the entire Reagan era. The stakes extend way beyond the mere budget. This is the time to re-define the American social contract.

So start by resisting the temptation to rush into a hasty deal.

The answer is: no.

 

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The FEMA Worm Turns

Every time you have an occasion to take something from the federal government and send it back to the states, that’s the right direction, and if you can go even further, and send it back to the private sector, that’s even better. – Mitt Romney, June 2011

Oh Dear.

That phrase, music to the ears of right wingers at the time, has come home to roost. Big time. Romney has been dogged by packs of reporters since hurricane Sandy blew into town asking him whether he still believes what he said back last year in the heat of the Republican primary race.

That was before hurricane Irene. That was before hurricane Sandy. Two once-in-a-lifetime events in back to back years. Once in a lifetime my foot.

The current Republican party imbibes deeply from the orthodox economic cup. It believes whole heartedly that whatever a government thinks it can do, private enterprise can do better. Except for massive and expensive defense spending of course. On all matters civilian it is GOP gospel that the government is both costly and inefficient. This is because there is not such thing as a costly or inefficient private sector bureaucracy. I guess none of them have been to the bank lately.

So, with this philosophy driving the search for right wing voters, Romney stood tall in one of the primary debates and, to a rousing round of applause, turned his ideological guns on FEMA which is that part of government responsible for disaster relief.

Poor old FEMA gets the butt end of Republican extremism all the time. Long serving employees must get whiplash. Father Bush trashed the place and stuffed it full of incompetent cronies. Bill Clinton rescued it, gave it competent leadership, and a budget worthy of its responsibilities, only for son Bush to trash it again, starve it of money and put the legendarily useless Brown in charge. After the humiliating failure of a response to hurricane Katrina Obama resuscitated the place just in time for Irene and Sandy. And so it will likely continue.

The Republicans see things like FEMA as wholly unnecessary. They argue that the states themselves are better positioned to deal with crises like hurricanes. If the Feds want to help then they can chip in with cash. But crisis management and response ought be left to the locals. Even better, as Romney said when he was playing to the extremist crowd, crisis response is one of those things best left to a private company.

Really?

I have no idea how to envisage a business model for disaster relief that works. Who would pay for it? How would it manage across a crisis the size of Sandy? Where would all that equipment come from? The questions go on.

It doesn’t matter. FEMA is getting glowing reports as it gets to grips with Sandy. And one of its biggest fans now happens to be Chris Christie governor of the much stricken state of New Jersey. His plaudits for FEMA, and for Obama, have been both profuse and heartfelt. They have been plastered across the media and repeated on every major news channel. Governor Christie just loves President Obama. He loves the help he’s getting from the Feds. Loves it.

Which is fun to hear.

Christie is a Republican. Not just any Republican, but one with well known ambitions for the presidency in 2016. He gave the keynote speech at the Republican convention nominating Romney. He has gone on the election trail on behalf of Romney. Just a week ago he, in a speech to boost Romney, called Obama all sorts of names and particularly pointed to Obama’s ineptitude as leader. Obama is, Christie told us in that speech, someone who fumbles in a crisis.

Whoops.

This is typical of modern Republicans. Welfare and aid is great when it flows into their pockets. It is immoral and a scourge when someone else gets help. It builds debilitating dependence on the government on the one hand, yet is vital and life-saving on the other.

So they tell their rabid supporters that hate things like FEMA, and then reach out for a helping hand when they need to.

There is nothing unusual about this. It follows a well known and documented pattern. Staunchly Republican states thrive off Federal aid and welfare programs. And continue to send extremists to Washington determined to kill off those very programs. Its a weird pathology.

Meanwhile it will be fun watching Romney dodge the reporters asking him whether he still believes we should get rid of FEMA. Add it to the growing list of topics he is trying to avoid.

My how the worm turns.

 

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