Category Archives: debt

Blaming The Messenger

I was really disappointed to see the Washington Post article today about the Appropriations Bill in Congress which would cut the Census Bureau’s budget by 25 percent. Doing so would force the agency to cut survey’s that determine the unemployment data, overall growth in the economy (GDP), and of course the constitutionally mandated census report conducted every ten years.

The article said   “While the Obama administration has proposed reducing the agency’s budget from $1.15 billion to $1.02 billion, House lawmakers are considering a bill that would give the Census Bureau $885 million in 2012 — almost $300 million less. That is much deeper than the 6 percent cut being proposed for the Commerce Department, which oversees the bureau.

The Census Bureau has been criticized by some conservatives who argue its questions are intrusive. But lawmakers have said the cuts reflect economic realities, not any antagonism toward the bureau.”

I have two gripes here. The first is that these cuts do not reflect economic realities. A large amount of these surveys are conducted in person by people who the Bureau hired to knock on doors. During the recession last year thousands of people were hired to do this work which helped keep the unemployment rate below 9 percent. But more importantly, it put money in people’s pockets. If Congress doesn’t allow the agency to collect this data it will cut more money out of the economy and slow the recovery even further.

These funds are considered an actual stimulus for many people, and it’s not even extra debt the government is taking on. That’s the economic reality conservatives are refusing to believe.

What proponents of these cuts are also blind to is that this data is important. Brokers on Wall Street and businessman and women around the country look to see what the Census Bureau comes out with every month to determine their standing. It can sway them to whether to hire or lay people off. Whether it is to see what people buying, how much people are earning, or where businesses should focus their efforts to sell their products, this information has an enormous effect on the confidence of the people who, as Republicans like to say, are job creators.

There is also a more fundamental issue here. The reason why the census was written into the constitution was to see how many seats there should be in the House of Representatives. But it also tells all members of Congress who they represent and what kind of situation they are living in. It’s a starting point for serious negotiations on policy issues. Of course today these numbers are important for state legislatures so they can determine district lines.

But with the internet this data can be used for a lot of good. Not just for businesses but for non-profits who need to know where more help is needed, and who it is that needs it. Most studies are already slow and not as complete as what we get out of the Census Bureau, and more importantly we know it is an unbiased source of information which is getting harder to find. Of course without this data it becomes easier for politicians to escape the current economic reality, and allows them to blame the messenger when it does.

 

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Filed under debt, Deficit, economy

Triangulation On Taxes

Time is running out on playing politics and real decisions are going to have to be made. As the President and Speaker play golf, the rest of Congress needs to decide how to raise the debt ceiling without completely leaving the poor and working families in the dust, and both sides know more revenue is going to have to come from somewhere.

Before going into the first of four meeting this week to discuss the debt ceiling, Majority Leader Eric Cantor said “We have hit the point at which we are at some really tough stuff. Big numbers, everything as I have said before is on the table except tax increases.”

As negotiations continue, Republicans are asking for over one trillion dollars in cuts that won’t include Medicare or Social Security. So that means other programs that involve grants for research, food stamps, public housing, and infrastructure, are potentially on the chopping block. The GOP is serious about the cuts, but they’re not evil beings who want to see people suffer.

In this time of economic ups and downs, taxes need to be raised in order to keep the programs running that are helping people stay afloat, and Republicans know this. Even though their most conservative supporters don’t want them to raise taxes on anyone, the party that was built by Abraham Lincoln does not want to be become the party who turned its back to the poor.

A New York Times article on Monday discussed lowering the tax rate for multinational corporations who hold assets abroad, where they will bring the money back and invest it. The amount of money is worth billions, some by single companies, and is sitting in accounts around the world where they are barely touched. Republicans have always been in favor of lowering corporate tax rates, but many Democrats have argued these companies do not pay any taxes even under the current rules.

However, this proposal seems to be gaining momentum as Senator Chuck Schumer is negotiating a deal, with both sides, for lowering the rates into a jobs package being put together in the Senate that focuses on infrastructure. According to the article on CNN “While the repatriation holiday alone is a non-starter for most Democrats, pairing it with an infrastructure program could marshal labor support. It’s an approach backed by former Service Employees International Union president Andy Stern, who’s emerged as the most vocal proponent of the tax holiday on the left.”

But while corporate tax rates might be lowered, a part of the deal will be to close the loopholes corporations currently use to avoid paying them in the first place. But no matter how you cut it, say it, or write it, closing loopholes is a tax increase.

Once the deal is cut, Eric Cantor will be talking about how cutting spending and lowering the overall corporate rate will create jobs. But cutting spending has nothing to do with creating jobs, in fact, it could make the entire situation worse. Right now states want to hire people to strengthen their infrastructure but they need the money to do it. But banks aren’t lending, and since the GOP refuses to spend any money, states are stuck.

On the second point, if the overall tax rate is lowered, the IRS wouldn’t be collecting as much as they would now if they enforced the rules already on the books. But if the deal passes they would be collecting more money because the rules will be easier to enforce, and presumably there will be more money to collect. But politicians could be taking a huge gamble. There is no guarantee these corporations will bring back the money, or European governments won’t lower their taxes even further so those corporations keep their money where it is.

And don’t forget, most of Europe’s taxes are collected through a Value Added Tax System (VAT) which allows them to collect money before these large corporations accountants and lawyers figure out how to hide it.

Democrats will declare this a victory too. Many liberal economists are trying to figure out ways for the government to put more money in people’s pockets. One idea has been to lower the amount being taken away out of people’s paychecks for Social Security and Medicare. So yes, economists do consider tax reductions a stimulus. But the only stimulus that takes place is through the money that people spend when they receive their cut, which right now isn’t much. In this climate they are more likely to save it or spend it on necessities like rent, healthcare, and food (like that last one did), which only had a small and short impact on the overall economy.

The Tax Code is a complex monstrosity that should be put into a shredder and thrown into a furnace. But let us digress, and come to the realization that even if this plan does come together, there is no way to determine how many jobs will be created or how much it will reduce the deficit. It is a possibility for a short term solution, that requires long term thinking, and no one can say how much good it will really do. In the end it is just another example of how current economic models and the advice given to politicians are defunct.

 

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Filed under Budget, Congress, debt, debt ceiling, Democrats, Economics, Eric Cantor, Political Economy, Politics, taxes, VAT

Democracy At Work?

On Sunday, Eric Cantor announced the second round of his “You Cut” website, where people are given three options of federal programs they would like to see taken out of the budget. In general, I’m in favor of open government initiatives in hopes it gets people to pay more attention, and realize it’s not as simple as choosing which programs to cut. But Cantor goes about opening up the process entirely the wrong way.

Instead of having an honest discussion on how to balance the budget, You Cut lists three things the Majority Whip would probably like to see gone anyway, without any discussion. Besides voting which program they would like to see cut, the only other option people have is to submit another program to cut in a small box explaining why it should be eliminated. I’m also not a conspiracy theorist, but I seriously doubt those suggestions are taken seriously. As someone who just created and researched websites, small boxes indicate to people they don’t have a lot of room, and if you really want more thoughtful suggestions you want to make it clear to your viewers they can say as much as they want. Instead, there is only a biased blurb about each program and why it’s bad, and there is no room for people to discuss why one program should be cut over the other.

So let’s take a look at the options presented to us. The first is to reduce the number of federal employees by 10 percent, saving $139 billion. The first thing that stands out to me, and how you know Ryan is making the numbers up, is he doesn’t even list the number of employees that will be cut. Just because someone is retiring, doesn’t mean that their job wasn’t important. All the water treatment plants around the country need to be inspected, and if land is to be used to for new or growing businesses, their needs to be an assessment to make sure it is safe. If there are problems in the future in either of these areas, people will ask why no one was on top of the situation.

The second option is to eliminate the Economic Development Administration (EDA) within the Commerce Department. Yes, this is one of the recommendations by the Bowles-Simpson commission. One of the reasons for the EDA, and the blurb points out, was to build roads across the country that would create jobs. Well, the last time I checked the country’s infrastructure was graded a D. So instead of throwing out things we know have worked in the past, why don’t we try and use them again in a time we need more jobs?

The last item on the website is about the Department of Energy’s Weather Assistance Program (WAP). Cantor, without posting any links, says that “The program generated headlines for significant instances of waste, fraud, and abuse, including paying for shoddy and ineffective workmanship and payment for work not actually done.” But it doesn’t discuss news outlets in Mississippi telling its viewers about the program and how it can help them. Or in the winter when Chuck Schumer touts how this program is keeping residents in upstate New York warm. The truth is this program helps millions of people around the country stay cool in the summer and warm in the winter. By cutting it, Eric Cantor is telling all the people who apply to these grants, they should figure out how to pay for their energy bills themselves.

Obviously, as we have seen in recent events, there are ways politicians should and should not interact with their constituents. But the efforts people are taking to make the internet a platform where the government can interact with its people work long and hard hours figuring out ways to do so effectively. You Cut doesn’t accomplish any of the criteria those people are looking to accomplish. If Eric Cantor is serious about wanting to create a smart budget, he needs to figure out a better way to do it.

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Filed under Budget, budget ceiling, Congress, debt, economy, Eric Cantor, Government 2.0, Politics, Republicans

Boehner’s Pork

If you are arguing with your friends about how John Boehner doesn’t wield much power, here’s some ammunition. When the Republican’s took control of the House of Representatives last year, Speaker Boehner said he would put an end to all earmarks. Well, guess what? Lawmakers found a loophole for their own rule.

Instead of directly asking money from a committee, the committee members have set aside money for lawmakers where they can request money to be allocated for their district. Walter Pincus reported that the House Armed Services Committee reserved one billion dollars (that’s twenty zeros) for what has been dubbed the Mission Force Enhancement Fund (MFEF). In this Fund, members of Congress could request money for projects in their districts through the appropriate federal agency within the Defense Department. Ironically, or maybe not, even before the bill could be passed half of the money within MFEF was already allocated for members who sit on the House Armed Services Committee.

This proves two things. First, Speaker Boehner can’t handle his job. You don’t run on reducing the deficit and the size of government, then allow your members to spite you on those very issues. In the 90’s Tom Delay threatened to remove members of his own caucus of their chairmanship if he didn’t like what they were doing. If Boehner had the same control like The Hammer once did, the Committee chairs would be afraid of applying this run around.

Second, the Tea Party doesn’t have as much influence as they like to believe. If members really cared about reducing the deficit and America’s debt, they wouldn’t take place in this practice. Instead, Freshman members like Congressman Joe Heck walk a tight line between getting the funds their district needs, and making sure they don’t get a primary challenge for doing so. Congressman Heck, who is a member of the Armed Services Committee, realizes if a terrorist attack does occur in the high tourist area of Las Vegas, it could be detrimental to the local economy. As someone who recently went there for the first time (I broke even), and wouldn’t mind going back one day, I would like to know that I’m safe doing so. Also, as a tourist attraction for people and businesses around the world, you could give a good argument for why terrorists would want to attack the city.

If the Tea Party really had a major influence over what the Republicans were doing, these funds never would have been created. They only represent a tiny proportion of conservative Americans, and the GOP knows they can’t retain their majority by exclusively pandering to them. The current speaker hasn’t figured out how to handle either of these issues, and instead has let his caucus take votes that he knew would hurt them at the polls leading to its recent defeat in NY26.

Personally, I don’t mind members of Congress asking for money. It is part of their job, and if they weren’t their constituents would be asking them why they haven’t been doing anything. Which happens to be the case for this Congress anyway.

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Filed under Congress, debt, John Boehner, NY26, Politics, Pork

The Politics of Budgets

Did you know that America doesn’t actually have a budget? It’s true. Congress does not pass one big bill where all the spending is voted on. Instead, all the appropriations are voted on separately and the Congressional Budget Office (CBO) adds them all up. There are so many convoluted ways in which Congress creates America’s spending it is no wonder how it has a debt of thirteen trillion dollars.

Every year, the Office of Management and Budget (OMB) reports to the President on spending levels, the debt, and what economists are predicting for the coming year. After this analysis is complete, the President makes his priorities known. Decisions are made on what the tax levels should be, where spending should be cut, and where spending should be increased. Then the president starts pushing these ideas at the State of the Union address.

The CBO and OMB can sometimes come up with different numbers for how much a program can cost, how much the debt will be, or how much the economy will grow, but there usually isn’t that big of a difference. The CBO is a non-partisan office, and because of that, their recommendations carry a lot of weight. During the healthcare debate, the CBO estimated that if the healthcare bill passed Congress it would reduce the deficit. The Democrats jumped on this and the Republicans had no reason or will to fight this fact. Of course, they still managed to find other things to complain about.

In Congress, the appropriations committees are filled with members who have a direct interest in seeing money going to their districts. For instance, the House committee on Science and Technology (which oversees NASA), had to deal with one of President Obama’s priorities this past year. The president wanted to cut NASA’s budget in order to reduce the deficit. But the members of that committee refused to let it happen, and it didn’t. NASA was still fully funded for years to come, and for the members whose constituents didn’t have a direct effect on the vote, they got a big IOU from those that it did. Needless to say, it is very hard to reduce the deficit this way.

One of the most effective ways the deficit was reduced occurred was when President Nixon was in office. When Nixon was living in the White House, he had the ability to cut spending that he did not think was necessary. Similar to a line-item veto but after the budget was passed. However, while he was in office Democrats controlled Congress, and eventually took this ability away from him, and claiming he wasn’t cutting funding in Republican districts.

Before Obama introduces his budget and sets his priorities at the State of the Union, Congress is going to have to vote on its debt ceiling. A lot of pundits are making a big deal out of this because the debt was a big issue in the last election. But this same vote has happened every year for as long as there has been a deficit. And every year the minority party blames the majority party for increasing the deficit. But really, the ceiling is based on the coming years interest on what the government owns. So if a member voted for an appropriation last year that the CBO said would increase the deficit, they only have themselves to blame.

But that does not make it any less important for the debt ceiling to be raised. If it is not, the Treasury will be forced to default on the loans from China and other countries around the world. If you thought the financial crisis was bad, this will be one-hundred times worse. If the United States defaults (which amounts to claiming bankruptcy) the entire world economy will go into an unprecedented tail spin. It won’t be just where people invested that will be hurt, this time it will be all the businesses that borrowed money from banks (which is all of them) from all around the world.

If John Boehner wants to give a fight about this, he will be playing a very dangerous game. I know he will be all high and mighty after Pelosi hands him the gavel, but unless he wants to be responsible for what I just described, he will raise the roof.

 

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Filed under appropriation, bills, Boehner, Budget, budget ceiling, Congress, debt, Deficit, Economics