Category Archives: Deficit

Politics, Policies, and the Debt Ceiling

There’s been a lot of talk on left leaning blogs about how President Obama has moved to the right on the current debt ceiling negotiations. He has asked for more spending cuts than Republicans, along with reforms to Social Security and Medicare, which would, reduce the countries long term deficits. But what is missing in their arguments is the political reality that the White House is facing.

People who have read my past writings know I don’t always agree with the actions Obama has taken. But as both political parties like to say “elections have consequences” and we’re seeing one of them now. Not raising the debt ceiling would be catastrophic for the country. Standard and Poors lowering America’s credit rating would be the last thing America would have to worry about. The stock market would drop more than it did in 2008, and interest rates would be at an all time high. So if you thought banks weren’t lending money now, people wouldn’t be able to take any money because there would be no way they would be able to pay it back.

It’s clear that the Tea Party Republicans are the ones actually in charge of the House of Representatives, and Speaker John Boehner has no influence over them. The numbers simply aren’t there to increase the debt ceiling. But since our constitution says Congress has the power of the purse, Obama needs to find a way to get a majority. Most posts I have read blame the reason on the White House asking for tax increases which Republicans have pledged not to do, but when have Republicans ever wanted to raise taxes? This is nothing new and the left shouldn’t be acting like it is. What the major difference is, is that no matter what the Tea Party will refuse to raise the debt ceiling. They don’t believe the August 2nd deadline is real, even though Eric Cantor does, and believe tax increases will hurt the economy. They are zealots when it comes to these issues and no one is going to be able to change their mind. It forced Obama to make concessions to real Republicans, not Tea Party members but Conservatives, to get them to vote for an increase on the debt ceiling.

Raising the ceiling is a hard vote because the vast majority of people don’t want their elected officials to do it. It is much easier to say, like the Tea Party is doing, that they will not raise it and have a better shot at winning reelection. With the lack of leadership in Congress it makes it a lot easier for this minority to have a bigger voice and come up with small sound bites.

Mitch McConnell, realizing the disaster that would take place if the debt ceiling isn’t raised, was going to allow Obama to raise ceiling on his own, and then have Congress vote whether to veto this action. But this would be a loss for both sides. A vote would still have to be taken forcing all members to be on the record of increasing America’s debt. Republicans show they weren’t able to govern, and Democrats show how little influence they have even though they still control the Senate.

Where Obama screwed up is that he had bad timing. Both sides agree we need entitlement reform, but if done right it can be a progressive issue. When the think tank Third Way came out with a proposal on how to talk about reforming Social Security and Medicare one of their main points was to make it about small adjustments. “Democrats should invert the traditional messaging on entitlement reform, which has tended to emphasize the heroic, major sacrifices being proposed, and thus serves only to make it more politically painful and scary.” By emphasizing tax increases for the rich, and reminding the people currently receiving these benefits this is not about the present but the future of these benefits, it would have been a lot easier for him to make changes to the system. But now that Obama is lumping small changes in these entitlements with raising the debt ceiling, it makes it a big deal and wound up scaring a lot of people. If he really wanted to figure out a way to make sure Social Security and Medicare would be there for future generations, he should have done it earlier.

After Nancy Pelosi convinced the President not to cut much spending, at his press conference today Obama said he would like to see the $2.4 trillion in cuts that were being discussed in the Biden group as part of the debt ceiling deal. The $4 trillion he originally asked for was never mentioned, which is a win for liberals. What is considered big now is making changes to the safety net, as Obama said today “$2.4 trillion without any revenue would cut too many programs that would hurt people” and he’s right. The policies he is proposing aren’t crazy, it’s responsible, and many other Presidents, or Presidents to be, have wanted to do the same thing. It was Senator Truman and his commission who cut programs in the military that were deemed a waste on tax payer money. President Clinton also cut programs in the mid 90’s in order to reduce the deficit and emphasize the programs that worked.

If the Democrats were still in control of Congress the debt ceiling would still be a contentious vote because so much money has been spent. But the arguments would be much different. There wouldn’t be Tea Party Republicans refusing to cooperate. Instead there would be Blue Dog Democrats hoping enough moderates are in favor of the package being voted on so they could vote no. What the Democrats and Blue Dogs have in common is that they wanted to keep the majority while the Republicans want to take it.

Those politics don’t make for good policy when America’s economic structure is on the line. Obama has finally been using the bully pulpit much more recently, as he knows it will benefit him. He did so right before the fundraising quarter ended by holding a press conference, and has done it again three more press conferences in the past eleven days in order to look like the mature one in the room, and it’s worked. His campaign raised a lot of money and polls show Americans like the way he is handling this situation. But he hasn’t come out with a plan on his own that would give his opponents ammunition. What Obama is betting on is that neither side wants to see what will happen August 3rd, and I hope he’s right.

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Filed under Boehner, Congress, debt ceiling, Deficit, Economics, Eric Cantor, President Obama, Third Way

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

Blue Dogs Singing The Blues

In my desperate attempts to find news not about Anthony Weiner, I went to POLITICO’s website and found an article about Blue Dog Democrats, or I should say, the lack of Blue Dog Democrats in Congress. The Blue Dog Caucus was started in 1995 and was always a thorn on the side of liberal Democrats of the west coast and north east. Whenever it came to taxes, health care, and especially the farm bill, these moderates always seemed to have the upper hand.

Coming from the Dakota’s, Tennessee, Kentucky, and “Pennsyltucky,” these Congressmen and women would always use the same argument; our “rural” constituents don’t want more spending, so I can’t vote for this unless I can tell them how they will benefit from it. Or they would lay the guilt on the Democrats in safe seats and rant about how in order to keep the majority the liberals need to put together more moderate policy proposals. Well guess what, the Democrats did pass moderate legislation that benefited every single state in the union, and they still lost.

According to the article “The Blue Dog decline has been sharp, to put it mildly. Following the 2008 elections, the coalition counted 54 House members. When the dust settled from the 2010 midterms, just 25 remained.” Of course if they were real Republican’s it would be a lot easier for them to win reelection. They do come from more conservative districts, but I find it hard to believe Blue Dogs lost because of the policies that were passed between 2008 and 2010.

The hardest votes Speaker Nancy Pelosi had to get were for the bailout, stimulus, and health care, and had to work hard to convince the Blue Dogs. They were worried about keeping their job, and since the media and Republican’s hit the panic button whenever they get a chance, they have to go with the flow. The communications staff of House and Senate members (usually between 2-5 people) don’t have the time or tools to work on all the stories the media is covering. Most congressional offices have a policy of sticking to a limited amount of stories that make the member look good. But Blue Dogs can’t say the Democrat’s didn’t try to help them.

One of the biggest bills (and one that gets the least attention) was the Farm Bill in 2008, which is set to expire in 2012. It always carries huge subsidies for America’s least productive industry (1.2 percent of GDP) but there is never, ever, a debate of whether it should be passed. As far as the people who benefit from it are concerned, the more people who can benefit from it the better, and you can forget all that deficit stuff. The subsides in this law are with billions. I will also be writing a letter to Anheuser Busch. Since the law extended the tariffs for ethanol allowing local breweries to charge less to bars, I want to know why I still have to pay triple the price for a Budweiser.

Both Democrat’s and Republican’s need a wide variety of candidates in order to keep the gavel. The difference is while Democrat’s make a big deal out of their differences, Republican’s pretend there aren’t any. When the Democrats took back the House in 2006, there were stories coming out of Blue Dogs telling their leadership they were the reason they control the House. But the leadership should have reminded them about all the money they so the Blue Dogs could have their seat.

There will be Blue Dogs coming back in the next year, and yes it will help the Democrats get control of Congress, but that doesn’t mean the Democratic leadership should bow down to their every wish. If they wind up losing their seat it’s because their constituents didn’t see what their representative did for them. But if you look at what the GOP has accomplished this year (cut to Eric Cantor trying to fix his whip), and considering the seriousness of the issues coming up (cut to John Boehner crying), Democrats should stop singing the blues and replace it with rock and roll.

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Filed under Budget, Congress, Deficit, Democrats, Politics, Uncategorized

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

>Building A House

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Remember when Republicans were saying: government should act like American households when it comes to its budget? It was a great line. Short, easy to understand, and appealed to the GOP base (aka Tea Baggers) which allowed them to get excited. It then culminated with the recent shellacking this past election. The household analogy was used time and time again even though it was false. While it would be great to be able to print our own money (or if money grew on trees), we gave that right to the federal government when we ratified the Constitution.

But because elections have consequences, the two parties will be fighting to show who is most fiscally conservative. Obama announced today that he will be issuing a two year pay freeze that will save the federal government two billion during current fiscal year, twenty-eight billion over next five years, and sixty billion over ten years. While it sounds good on paper, it’s really a political move. It’s worth pointing out that it won’t really be known how much is being saved until President Obama is out of office. And it’s no accident. That way the White House can keep citing those numbers as a way to say the deficit is being reduced. Also, the pay of federal employees isn’t the problem, it’s the benefits they get that is driving costs up. That’s why Defense Secretary Robert Gates is looking at ways to raise funds for the militaries Tricare. Of course, the new health care law will help maintain some of those costs, but apparently most of the new GOP governors won’t enact the policy in their states.

This pay freeze announcement comes on the same day that several liberal think tanks are unveiling plans that are trying to tackle the federal deficit, all of which cut programs by federal agencies. In the meantime, government bureaucrats are always lobbying to keep their programs running. Think of it as an annual review where you have to tell your boss what you did this past year. You have to go through everything to show what you did while having to worry about keeping your job. Government agencies worry about the same thing, except it’s all the time. They will give grand presentations, trips, gifts, and anything else that is legal to make sure they get the funding they think they need. While Obama doesn’t have a J. Edgar Hoover problem, he still needs to make sure his employees are happy.

And do I even need to go into the special interest lobbyists like Jack Abramoff? There are plenty of those guys too. But whether you know it or not, you too have someone lobbying for you. For instance, do you want to save the environment? There are plenty of environmental groups out there who talk to members of Congress and their staff every day. Just look up The Environmental Defense Fund and read about how the Environmental Protection Agency was created.

One of the most contentious issues when it comes to the budget is taxes. No one likes them, and if a politician ever talks about them, he/she better say they will be lowered. But if you want a balanced budget someone’s gotta pay for it.

The White House is right on this one, extend the Bush tax cuts for the middle class and let them expire for the rich. When people earning over a million dollars get a tax cut, they don’t spend the money, and it does nothing for the economy. What makes raising taxes even more volatile this year is that state governments have had to raise their taxes over the last four years. So if Congress does nothing, the people who need help the most will be giving more than they can. Middle and working class Americans need the break and will spend it on the items they need to live, which will also help the economy. They deserve the extension.

It is baffling me how many Republican candidates are considering running for President in 2012. Just today John Bolton (who has never run for public office before) is thinking about running for President. Political Action Committees are already in the first couple of primary states for Mitt Romney, and Sarah Palin will probably run as an average Joe just to make a few more million. In the meantime, decisions need to be made, and the people who actually have to balance their budget are hurting the most.

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Filed under Budget, Deficit, President Obama, Public Policy, Republicans, Salary Freeze, Sarah Palin