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No budget for old white men

Speaking of herds of cats:

In a chaotic scene characterized by shouting more typical of the British parliament, the Republican Study Committee’s (RSC) alternative to Rep. Paul Ryan’s (R-Wis.) 2012 budget went down in a 119-136 vote.

It was gaveled shut only after Democratic leaders started pushing members to switch their “no” votes to “present,” in order to force a face-off between conservatives and the Republican leadership. A total of 176 lawmakers voted “present.”

That’s from the Hill.

To illustrate just how dishonest the Republican budgets really are, read Jason Kuznicki’s “Return to Normalcy” budget:

It’s got four basic parts:

  1. Return to Clinton-era rates of taxation, or at least something like them. As Ezra Klein has noted, this is very likely to happen in any event, because we’d need sixty Senate votes to extend the Bush tax cuts. We’ll just let them expire. As we’ll soon see, our Senators will be busy enough elsewhere.
  2. Remove the cap on the Social Security payroll tax. Yes, that means raising taxes. Yes, on the rich. Someone call the Koch brothers!
  3. Cap Medicare spending at GDP plus 1%. This is a doozy, I know. Can we do it? We’ll probably have to, like it or not, in any balanced budget plan.
  4. Reduce military spending to 1990s levels. In other words, bring the troops home. From everywhere. Let the force shrink by attrition. Cut spending on new weapons systems. Tell the world — much of it industrialized and friendly — that they will have to pay for their own defense, because we can’t afford it anymore. We’ve been doing way more than our fair share for way, way too long, and they can hardly say otherwise.

More or less, the plan would look like this.

This is similar to John’s do-nothing budget, or the do-nothing budgets of Annie Lowrey or David Leonhardt, or my budget. All these budgets have one thing in common: the end of the Bush tax cuts. To help illustrate where that will put us in the Big Scheme of Things, a chart!

bushtaxcuts

Surely letting the cuts expire will lead to America becoming Somalia. A much more Serious idea would be to let the poor and elderly fend for themselves and get rid of all these pesky healthcare entitlements.








Actual seriousness about the deficit

David Leonhardt has an excellent column on the deficit. In it, he suggests that if Congress simply did nothing we would be on a firmer fiscal footing than if we adopted the Ryan budget. With an economic recovery underway, he argues, Obama should refuse to extend the Bush tax cuts when they expire at the end of 2012. If Republicans stick to their all-or-nothing guns and refuse to extend the cuts only for those making $250,000 or less, all the cuts would expire going into 2013.

This change, by itself, would solve about 75 percent of the deficit problem over the next five years. The rest could come from spending cuts, both for social programs and the military.

Over the longer term — 20 years — letting all of the Bush cuts lapse would close only about 40 percent of the budget gap. But 40 percent is a great start. No one is seriously suggesting that all deficit reduction should come from higher taxes. Much of it will have to come from slowing the growth rate of medical spending, which is the main cause of the long-term deficit.

Leonhardt admits there are better ways to raise taxes and reform the tax code, and I agree, but closing popular loopholes is politically difficult. We should also consider making the income tax more progressive by increasing brackets at the top, and making corporate and capital gains taxes progressive. Eventually, in order to make our revenue more recession-proof, we should also consider something along the lines of a national sales tax or a VAT.

But again, 75% of the current deficit problem is solved simply by ending the Bush tax cuts. Bringing down defense spending to pre-Bush levels solves most of the remaining 25%. The ACA begins to address the fundamental flaws in healthcare spending (though by no means does it go all the way…yet.) Why isn’t this considered a Very Serious proposal?

I think it’s because pundits and politicians like drama. Ryan’s plan is dramatic. It’s also horrible and cruel. But it’s just so easy to replace words like “cruel” with words like “bold” when you are insulated from the cruelty.








The Tax-Cut Stimulus

I know this has already been discussed but I wanted to excerpt a few of these takes on the deal to extend the Bush tax cuts – even those for the wealthiest Americans – for another two years. Ezra Klein says it’s not such a bad deal after all:

It’s a lot better than I would’ve told you the White House was going to get if you’d asked me a week ago. There’s some new stimulus in the form of the payroll-tax cut and the expensing proposals. The older stimulus programs that are getting extended — notably the unemployment insurance and the tax credits — probably would’ve expired outside of this deal. The tax cuts for income over $250,000 are a bad way to spend $100 billion or so, and the estate tax deal is really noxious.

It’s bad news for the deficit, though the White House and Congress are right to make the deficit less of a priority than economic recovery. And speaking of that economic recovery? This isn’t enough, and it’s not well targeted.

Daniel Larison thinks progressives will take this as betrayal regardless of the unemployment benefits and stimulative effects of the tax cuts:

Obama’s cave-in on taxes will alienate more than vocal progressives. It could be far more politically damaging than that. This is not simply a matter of provoking the base with yet another compromise. This is a matter of abandoning a position that is widely and strongly held throughout his party. In some cases, Obama has angered progressives by doing exactly what he promised during the campaign, but in this case he would be openly repudiating one of the most prominent positions he took during the campaign.

This is probably true, but I think David Leonhardt is right that the alternative – expiration of all the Bush tax cuts for every income level – would have been both politically and economically a disaster:

Letting all of the tax cuts expire surely would have an economic effect, and not a positive one. At a time when the economy is weak, when job growth has proven disappointing yet again and when Europe is again struggling with debt crises, the national discussion would be dominated by an across-the-board tax increase. Households would have less money, and everyone would be talking about how households had less money. That situation seems very likely to push back the date when real improvement would begin and push back the date — still a long way off — when the economy would feel healthy again.

One politician, above all, would be hurt by those events: the president.

In a follow-up post, Leohnardt calls the deal a second stimulus:

What actually seems to be happening: Democrats and Republicans agree to extend all the tax cuts and also agree to an extension of unemployment benefits, a cut in the payroll tax and, according to my colleagues, “continuation of a college-tuition tax credit for some families, an expansion of the earned income tax credit and a provision to allow businesses to write off the cost of certain equipment purchases.” The amount of money pumped into the ailing economy: about $900 billion over [two] years.

This was smart politics from Obama even if it does mean he’ll have to fend off attacks from within his own party. Extending the tax cuts for the wealthiest Americans may be a bitter pill to swallow for many progressives, but it’s not that high of a price to pay for a serious shot of stimulus. I would actually like to see more stimulus in the form of direct payments to middle and low income Americans, followed by some long-term structural and tax reforms to shore up the long term deficit. But deficits, while important for our future, are a ways down the list during a recession. First comes economic recovery, then comes whatever necessary cuts and tax reforms necessary to get our fiscal ship in order.