Debt and taxes

By Carl 



It never ceases to amaze me, the ability of the uberrighteous to shoot themselves in the foot: 

Greenspan said he expected more turmoil on Wall Street.



"Considering the momentum in which the market went down over the last week, it's very unlikely — if history is any guide — that this isn't going to take a while to bottom out. So the initial reaction, in my judgment, is going to be negative," Greenspan said of S&P’s downgrade.



Treasury Secretary Timothy Geithner tried to reassure investors in a Sunday night interview but conceded he could not predict the reaction.



"It's hard to know what'll happen in this context," Geithner said on CNBC. "But, again, I think that everyone can be confident, both here and around the world, that treasuries are the most — these days — the most liquid — the strongest place to put your money at a time like this."

He said S&P "has shown really terrible judgment" and "a stunning lack of knowledge about basic U.S. fiscal budget math."

Actually, Mr.
Secretary, I think the S&P has this just right. After all, it's a
temporary arrangement that will have to be revisited sooner than you
expect, since the Federal tax on gasoline expires next month and budget
projections included that in the debt ceiling agreement. It is very
likely that tax will be at least scaled back if not eliminated, thanks
to the Teabaggers. You can't say this. S&P can.

We get the government we deserve. We are officially a banana republic.

A lot of fingerpointing went on this weekend, but ultimately, the blame rests in two places: The Bush administration and the Teabaggers.

After all, the only significant spending the Obama administration passed was the $787 billion stimulus package, a thickly-wrongheaded attempt to shore up the banking system when that banking system was responsible for the mess we found ourselves in AND will suffer now from the debt ceiling debacle, as interest rates will ratchet up.

Better he should have spent the money here, at home, on works projects designed to get people permanent jobs. There's so much we can use idle labor for, from replacing the national grid to upgrading bridges and tunnels, to just cleaning the damned streets. Jobs = income = spending = more jobs. It's not a hard calculation to make, and given how the banks rebounded better than expected...

How the Bush administration fits into all this? Well, the national debt in 2001 was somewhere around $6 trillion. It's now $14 trillion. Obama can rightly be blamed for $1 trillion or so (let's credit -- debit? -- him with the unnecessary extension of the Bush tax cuts, too), leaving... carry the one... $7 trillion dollars that Bush spent without the income to show for it.

Republicans: they do spend big.

The Teabagger mantra with respect to the debt ceiling was basically nihilist from the get-go: burn it down, let God sort it out.

All we have ever had to do was to roll back the Bush tax cuts, restore the Clinton tax rates (proven job creator, that) and history would have been happy and marked this as a remarkable time when the US yet again ducked a bullet. The idea of minimalist government is so ludicrous, so stupid, so moronic, that I seriously believe the "libertarians" who propose this ought to be locked away in a cage and put on display in the Coney Island freak show.

(Cross-posted to Simply Left Behind.)

On vacation, full of debt ceiling rage

By Michael J.W. Stickings

I'm currently on vacation and won't be blogging all that much over the next few weeks. Here and there, when the mood is right, but otherwise not. Rest, relaxation, and family are the priorities.

But, fear not, Richard and the gang will keep things rolling, and so I hope you keep checking back for new posts from my wonderful team.

Actually, though, I'm full of rage at the moment. I'm generally trying to avoid the news, and especially U.S. politics, but, well...

What has me enraged? The Deal, of course.

Yes, the new bipartisan deal to avert default by raising the debt ceiling and, to please Republicans, slash spending (of course, mostly spending that benefits the poor and downtrodden, the usual GOP targets, those no one in power seems to give a shit about).

Now, it's not yet a done deal. President Obama and the Democratic and Republican leadership have agreed to it, but not the rank and file -- and there are sure to be many on both sides who object to it.

Democrats have good reason to object. The deal is heavily Republican, a largely right-wing fix to a crisis created by Republicans. It's all about cuts, not revenue increases, and cuts that, again, will hurt those Democrats supposedly care about. Some Republicans will object as well, but only because -- let's put it kindly -- they're a bunch of petulant extremists who refuse to compromise and who are willing to let the country go into default, and face economic calamity, to get everything they want.

In fact, it has come to this largely because Republicans, from the top down (the leadership included), are bullies crazy enough to risk the country's health, so "patriotic" are they, having basically held the country hostage throughout this entire process.

Sure, I'm deeply critical of Democrats, including the president, for not fighting harder to prevent this, and for not standing up more determinedly for what they purportedly stand for, but, honestly, what were they supposed to do? Let the country go into default? Let the debt ceiling deadline pass, come what may? Sure, maybe. Maybe they could have spun that and kept the blame on the other side, and even come away with a political win, and maybe the impending crisis and public outcry would have forced Republicans back to the negotiating table with their tails somewhat between their legs, but... should they really have taken such an enormous risk?

Maybe Republicans were always going to win this, maybe it was inevitable, because all along they were willing to go further and risk more. That's the problem trying to negotiate with crazy people. They're willing to do things you're not. (Isn't that how Keyser Söze solidified his power?) In this case, Republicans were willing to sacrifice their country for their ideological demands. Democrats, being mature and rational and responsible, were not. And so they had to agree to a deal on Republican (i.e., insane) terms.

There was a brief time when Obama had the upper hand, after he had turned the tables on Republicans and back them into a corner, and with public opinion on his side, but he was only going to win this if he went all the way. And, say what you will about him, he wasn't prepared to play that game, not with so much at stake.

I suspect the deal will pass tomorrow. There will be major defections, but surely enough arms can be twisted, enough dissenters bought off, to make it happen.

And then? Crisis will have been averted, at least temporarily, but Republicans will declare victory -- for getting most of they want (loads of cuts, no new revenue).

The Democrats? They'll get nothing out of this politically.

Obama? Yes, probably. He'll be able to reinforce his credibility among independents by presenting himself as a bipartisan leader who got it done when it mattered (no matter the awful details of what got done).

But unless Democrats can gain control of the narrative and make the debate about ending the deeply unpopular Bush tax cuts for the wealthy and protecting deeply popular entitlement programs (Social Security, Medicare, etc.), this deal won't do them any political favors next year, with with Republicans set to hammer them, however dishonestly (as usual), for being tax-happy, spend-happy socialists.

At least for now, there is reason for cautious, extremely cautious optimism. The deal would allow the president to raise the debt ceiling by $2.4 trillion (with $900 billion in spending cuts):

That will be paired with the formation of a Congressional committee tasked with reducing deficits by a minimum of $1.2 trillion. That reduction can come from spending cuts, tax increases or a mixture thereof.

If the committee fails to reach $1.2 trillion, it will trigger an automatic across the board spending cut, half from domestic spending, half from defense spending, of $1.2 trillion. The domestic cuts come from Medicare providers, but Medicaid and Social Security would be exempted. The enforcement mechanism carves out programs that help the poor and veterans as well.

If the committee finds $1.5 trillion or more in savings, the enforcement mechanism would not be triggered. That's because Republicans are insisting on a dollar-for-dollar match between deficit reduction and new borrowing authority, and $900 billion plus $1.5 trillion add up to $2.4 trillion.

However, if the committee finds somewhere between $1.2 and $1.5 trillion in savings, the balance will be made up by the corresponding percentage of the enforcement mechanism's cuts, still in a one-to-one ratio.

Democrats say they're confident that the enforcement mechanism is robust enough to convince Democrats and Republicans to deal fairly on the committee -- to come up with a somewhat balanced package of entitlement reforms and tax increases. However, the White House assures them that if the committee fails to produce "tax reform" he will veto any attempt to extend the Bush tax cuts, which expire at the end of next year.

Again, the focus is on spending cuts, not revenue increases, but at least cuts to defence spending are on the table and at least it's possible that revenue increases will be part of any future deal.

Actually, scratch that. I'm still highly enraged. And there's really no good reason for optimism at all, even cautious optimism. Obama may want to use the Bush tax cuts for the wealthy in his re-election campaign, as a winning issue (assuming public opinion stays roughly where it is), but he has shown little to no willingness to stand up for progressive principles -- indeed, for principles that are simply not Republican, so much of a moderate Republican does he appear to be -- and, what's more, neither have most Democrats on Capitol Hill, it seems.

All of which is to say, if Obama and the Democrats have been willing to cave so much already, what should make us think anything will change?

The right-wing obsession with President Obama's "obsession" with raising taxes

By Michael J.W. Stickings

We're hearing it all the time from Republicans these days: Obama's "obsessed" with raising taxes. It's the same old tired partisan bullshit, of course, and a blatant lie, but the uninitiated, those unaware of how Republicans do their thing, might be excused for thinking, upon hearing this over and over again, that the president is maniacally trying to transform America into some sort of retro-Scandinavian dystopia, Scandinavia before right-wing neo-liberalism arrived on the scene.

Take James Pethokoukis, for example. In his latest smearfest of a post at Reuters, Pethokoukis opens, as usual, by stacking the deck against reasonable debate and an appreciation of the facts:

It's the great mystery of the debt ceiling debate: Why is President Barack Obama so darn adamant about raising taxes?

Really, that's "the great mystery"? Well, I suppose it's no mystery why Republicans, even those who should know better (and probably do) have caved in to the Tea Party and are pulling the country towards financial, fiscal, and economic catastrophe.

But how exactly is Obama "so darn adamant"? Dismissing progressives altogether, not to mention his party's base, the president has responded to the debt ceiling crisis by playing aggressively to the center. He has put Social Security, Medicare, and Medicaid on the table, much to our chagrin. He continues to negotiate with a Republican Party that refuses to compromise and that is essentially holding the process -- and the country -- hostage. Indeed, he appears to have positioned himself not as some sort of Big Government leftist (not that such leftists even exist anymore in the Democratic Party, or on the American left at all, they're just straw men created by the Republicans to scare people) but rather as a moderate Republican, as the sort of Republican who used to run the GOP. If this were the '90s, Obama, at least on economic policy, would be very much at home there.

Even now, even with Republicans doing poorly in the polls over the debt ceiling crisis, even with Republicans divided and on the run, even after he turned the tables and backed them into a corner, gaining the upper hand, Obama continues to push for a Grand Bargain that includes massive spending cuts and only relatively small revenue increases (mostly by closing tax loopholes, not by actually raising taxes). The so-called Gang of Six re-emerges yesterday with a $3.7 trillion deficit-reduction package, a package that while bipartisan is Republican in terms of its priorities, a package that if passed may not actually benefit him politically, and Obama showers it with praise.

Now, maybe Obama is being so kind to it because he knows it will never pass the GOP-led House of Representatives, and so maybe he's still just trying to appeal to independents by presenting himself as open to compromise and serious about getting something meaningful done -- and so when the package goes nowhere he can let Republicans take the fall for sinking it. But he's been pretty consistent on the policy and at no point has he even come close to appearing obsessed with raising taxes. Not now, not before, not ever.

If anything, Obama is just being responsible. He knows full well, even if Republicans do not (and Pethokoukis does not), that the only way to solve America's deficit/debt problem over the long term is to increase revenue. And that can be done in part by closing loopholes and letting the Bush tax cuts, and particularly the Bush tax cuts for the wealthy, expire. Though of course it was Obama who agreed with Republicans last fall to extend the tax cuts.

Pethokoukis also accuses Obama of violating Keynesianism by calling for tax increases. Well, I agree that the focus should be on economic stimulation (deficit spending) instead of deficit-cutting, but, again, Obama hasn't called for anti-stimulative tax increases. If anything, Obama wants more stimulus.

Obama's tax obsession becomes understandable when you realize the long game he's playing: Big Taxes to fund Big Government. Decade after decade. See, it's an almost universal belief among left-of-center journalists, economists, policymakers and politicians that Americans must pay higher taxes in coming years to cover the medical expenses of its aging population – not to mention all sorts of brand new social spending and green "investment." Dramatically higher taxes. On everybody. And if we have a debt crisis, maybe those tax increases come sooner rather than later.

This makes no sense at all. Across the board, taxes are at an extremely low level. Raising them slightly -- for example, by letting the Bush tax cuts expire -- would only mean a return to Clinton-era levels. And that was hardly an era of Big Government Socialism. In fact, it was a rather successful era for the economy. And if Obama's agenda is really all about "Big Government," what are we to make of his willingness to cut core entitlement programs? Is it all about health care? About, say, funding a government-controlled single-payer system? How could it be, given that the Affordable Care Act, while extending coverage to tens of millions, proposes only a reformed market-based approach to health insurance? Green investment? Please. Obama isn't even talking cap and trade anymore, and that, too, is a market-based approach to reducing greenhouse gas emissions, one that Republicans used to support (just as they used to support what's in the Affordable Care Act).

Okay, enough. I think you get the point. (If you don't, you need help.) Pethokoukis is just regurgitating the same old lies, the Obama-as-tax-loving-Socialist meme that has no basis whatsoever in reality.

If you really want to talk about obsession, look no further than these anti-Obama smearmongers on the right. They just keep repeating themselves, and looking increasingly desperate and stupid in the process.

Bush tax cuts cost $329,220 for each job created

Guest post by Publius

The Bush tax cuts cost $329,220 for each job it created. That, according to the math recently employed by The Weekly Standard in its analysis of the cost per job from Obama’s stimulus package.

The Weekly Standard argued that because the overall cost of the stimulus to date is $666 billion, and the number of jobs created since the stimulus was passed (according to the low estimate by the Council of Economic Advisors) is 2.4 million jobs, the cost per job from the stimulus equals $278,000 per job. The Weekly Standard went on to note that we could have simply written a check for $100,000 to everyone whose employment was allegedly made possible by the stimulus and come out $427 billion ahead.

Sounds pretty bad, right?

Well, using the exact same formula, the Bush tax cuts passed in 2001 were estimated by the Joint Committee on Taxation to cost about $864.2 billion from 2001-2008 (the first year of the Bush tax cuts through the last year of his presidency). During that period, according to The Wall Street Journal, 2,625,000 jobs were created. That comes out to a total cost of $329,220 per job under the Bush tax cuts. And that’s if we assume that every single job which was created during Bush’s presidency was attributable to the Bush tax cuts (pretty unlikely) AND if we exclude the costs of the 2003 tax cut (estimated to cost another $350 billion over 10 years). We could have written a check for $100,000 to each person who “allegedly” had their job created by the Bush tax cuts and saved $600 billion, but they wouldn’t have received it because the check was instead delivered to really wealthy people.

My point isn’t that the Obama stimulus was good because the Bush tax cuts were bad. Instead, my point is that the math employed by The Weekly Standard is absurd. This example highlights the absurdity.

It’s wrong to suggest that the sole purpose of the stimulus was to “buy jobs.” If that was the sole purpose, then yes- the cost would arguably have been $278,000 per job. As White House spokesperson Liz Oxhorn noted the other day, however:

[The Weekly Standard] study is based on partial information and false analysis. The Recovery Act was more than a measure to create and save jobs; it was also an investment in American infrastructure, education and industries that are critical to America’s long-term success and an investment in the economic future of America’s working families. Thanks to the Recovery Act, 110 million working families received a tax cut through the Making Work Pay tax credit, over 110,000 small businesses received critical access to capital through $27 billion in small business loans and more than 75,000 projects were started nationwide to improve our infrastructure, jump-start emerging industries and spur local economic development.

The concept of the stimulus was grounded in Keynesian economic theory- government countercyclical spending is critical to countermand the effects of a recession. Increased government spending increases GDP, frees up capital and, consequently, creates jobs. Jobs are part of the benefits of stimulus. They aren’t the direct purchase.

By most metrics, the stimulus was a success. According to the CBO, the stimulus increased GDP by 3.1%. It added as many as 3.6 million jobs to boot. It gave us new factories, roads, bridges, and other infrastructure which we benefit from each day. Boiling all of this down to a cost per job is just silly.

The Weekly Standard would also be wise to note that about $288 billion of the projected $747 billion stimulus came in the form of tax cuts (about 38.5% of total spending), despite the fact that according to many prominent economists (such as Mark Zandi), tax cuts are far less stimulative than other types of spending, such as food stamps, unemployment benefits and infrastructure spending (all of which Republicans opposed).

If The Weekly Standard wants to argue the stimulus could have been more effective, it won’t find many on the left who disagree. If it wants good ideas on how to make it more effective, step one is to stop believing tax cuts are the best solution to all economic ills.

(Cross-posted at The Fourth Branch.)

How you know Republicans aren't serious about tackling the deficit

By Michael J.W. Stickings

Is it when they fall in line behind their chief budget guru, wunderkind Rep. Paul Ryan, who once said the deficit was "too small" and now supports the Bush tax cuts, and especially those for the wealthy, that are perhaps the greatest impediment to addressing the deficit problem in a meaningful way?

Yes, sure.

But it's also when they pull out of bipartisan budget talks because, really, they have no interest at all in compromise given their extremist right-wing position on taxes:

After House Majority Leader Eric Cantor (R-VA) dropped out of the talks [yesterday] morning, Senator Kyl was the lone Republican in the group left. And with his withdrawal late [yesterday] morning, the group does not have a Republican negotiator left in the room.

That's right. Zero Republicans. There's what Republicans think of bipartisanship. And about tackling the deficit.

Although, I should say, a few Republicans realize that they have to be at the table and have to work constructively with Democrats to get something done -- or at least have to make it appear as if they're serious:

A Senior Democratic aide says, "Cantor and Kyl just threw Boehner and McConnell under the bus. This move is an admission that there will be a need for revenues and Cantor and Kyl don't want to be the ones to make that deal."

There you go. If only future generations of Americans could express their disgust. They're the ones, after all, who will be left with this mess.

Way to put your country before your partisan agenda, Republicans.

I'm glad he does, cuz I don't!

By Carl 

President Obama sees common ground on debt reduction and the budget: 

Democrats and Republicans agree that $4 trillion needs to be slashed over roughly a decade, Obama told a town hall-style event in Virginia. But the two parties disagree on what to cut to get there.

"The big question that is going to have to be resolved is: how do we do it?" Obama told students at a community college. "I don't want to lie to you, there is a big philosophical divide right now."

The president was promoting his plan for cutting the deficit a day after Standard & Poor's threatened to strip America of its prized triple-A credit rating. The Wall Street ratings agency cited concern that Washington's polarized politics would make it difficult to reach a debt deal before the 2012 presidential election.

Obama, who is traveling around the country this week to advocate his deficit proposals, did not show any greater flexibility over his demands that taxes go up for the wealthiest Americans. 

Unless by common ground, he means that the two sides agree on the $4 trillion, I don't see how there's common ground here. Republicans are between Iraq and a hard place, needing to make their Teabagger constituency happy without cutting defense spending, Medicare entitlements or raising taxes.

Democrats have the luxury of standing around, tapping their watches and sighing imaptiently.

Lest you think this is another political kabuki, this year's budget is it. This is the whole enchilada for the progressive movement in this nation. If we allow the Republicans to extend the Bush tax cuts, then we have no business being a movement.

Sure, there's some posturing involved: I don't think the Republicans can let this budget go without some attempt at face-saving for their centerpiece platform plank of lower taxes, which has proven over the past thirty years to neither create jobs nor improve the economy much. I think even they know it, and that they're shamelessly pandering to the corporatocracy and the orc minions who somehow believe if they're fervent enough, their overlords will shower gelt upon them.

Likewise, much of the "senior scarifying" that the Dems have been doing is a mask to the very real growth of Medicare and what that bodes for the future of the budget.

I'm not suggesting that we have to have entitlement cuts immediately (frankly, I haven't studied the problem enough to have an opinion) but what I am suggesting is, given the current anti-tax climate, it's going to be hard to justify the kinds of benefits we have to pay out in a few years. When does it become enough? At fifty percent of the budget? We're tracking perilously close to that, which means we're sopping up funds for other critical progressive programs like energy reform and infrastructure repair. I would like this not to have to come down to clean air for our children and grandchildren versus keeping me alive on a ventilator.

All that said, this is an urgently important budget coming upon us, because what grows out of it will impact the next decade's worth of budget proposals and likely the economic growth for the next century, and along with it, the income and well-being of every American.

As Ben Bradlee said during Watergate, "Nothing's riding on this except the... future of the country.

So if you've been holding onto someone's balls for a rainy day, well, the clouds have gathered.

(Cross-posted to Simply Left Behind.)