Fiscal Irresponsibility, Left And Right
American schoolchildren are not the best in the world when it comes to doing math. This is a fact which is proven over and over again by comparing test scores here with those achieved in other countries. The long-term problem with this, though, is one few people ever think about -- those kids grow up to be American adults, who still apparently can't do basic math. And, not to put too fine a point on it, this includes politicians. Either politicians can't do math themselves, or they cynically know that their constituents can't do math and exploit this when making promises to the public.
On both sides of the aisle, this leads eventually to the line of thinking which Vice President Dick Cheney was bold enough to put into words: "Deficits don't matter." If you're a Republican, then you drink the "supply-side" Kool-Aid, and convince yourself that down is up and it'll all magically take care of itself (forty years of proof to the contrary). If you're a Democrat, every time you actually try to solve the problem you are attacked so viciously for doing so that big changes never are deemed "politically possible." Or, from either side, you just don't care about handing a crippling debt to the next generation of Americans, because it is so much fun to put all the ever-popular "bread and circuses" stuff on the First Bank of China credit card.
Take taxes, for instance. In specific, take the oblate spheroid of tax policy and give it a good solid punt until after the elections. Democrats did just that today. So-called "moderate" Democrats, who are supposed to be the "fiscally responsible" ones -- and also the ones who "care about the deficit," for good measure -- just killed any hope of the Senate voting on extending the Bush tax cuts to everyone except the wealthy before the upcoming election. They'll vote on it after the election, they say, but quiver in their boots over the possibility that Republicans will run nasty campaign ads against them over their vote in the meantime.
The compromise they're offering is nakedly disingenuous, for anyone who cares to look. The compromise plan is supposed to be to extend the tax cuts on millionaires and billionaires for another two years ("until the economy recovers"), and then allow them to expire in 2012. You'll forgive me for saying: "Oh, puh-leeze." After all, 2012 is another election year. Does anyone think the Republicans are going to be in the mood to raise any taxes whatsoever in a presidential election year? Or "fiscally responsible" Democrats, for that matter? Make no mistake about it -- if the Bush tax cuts on the rich are "extended," they will never go away. Ever. At least, not until events force Congress' hand.
When a country piles up too much debt, and seems content to do so forever, then eventually the people buying that debt stop believing they'll ever get their money back. Which leads to some pretty Draconian reforms, including on tax policy, before the country's credit becomes believable again. When the country is a small one, this is usually the point when the I.M.F. steps in. In America, this may mean our biggest debtors forcing a more responsible fiscal policy on our country. Is that really where America wants to go? Having China dictate our tax policy to us? If you think this is far-fetched, then I admire your optimism. China already holds more of our debt than any other country, and that fact means they can threaten to destroy the international value of the dollar at any time -- all they'd have to do is stop buying our debt, start selling the debt they already hold on the international market, and tell the rest of the world they have no confidence in our ability to repay it. This would cause economic catastrophe in America. The only thing holding China back from doing so is the fact that it would also currently cause economic catastrophe in their own country, because they do so much business with us. But that is changing, as China develops other markets for its goods around the world.
Republicans, on the other hand, are much more blatant about ignoring simple mathematical facts. They're good at ignoring the math, since they've been doing it so long. Today, they just unveiled their campaign pledge to the country. Now, I haven't had time to read the full document, so I'm sure I'll have more to say about it later, but just looking at it from a math point of view, it is pretty laughable. Oh, sure, they say some nice things about attacking the deficit and the debt, but then they just ignore the sentiment for the rest of the document.
According to the document, the Republican plan is to (1) cut all federal spending on stuff they don't like to 2008 levels, and (2) tax cuts for everyone! There's a bunch of other stuff about repealing everything Obama's ever done (they would probably repeal his citizenship if they thought they could get away with it), but we'll try to keep it simple here. Assuming they do dismantle all things Obama, that would put our budget back to where Obama took office, which is coincidentally the 2008 date they use for their rollback. OK, when Obama took office, we had a yearly deficit of 1.3 trillion dollars. So if we cut everything (except the military, veterans, and other political landmines for Republicans, of course) back to 2008 levels, we've still got a huge problem. Then we extend the Bush tax cuts for 10 years. That will cost four trillion dollars. Let me just write that figure out for everyone: $4,000,000,000,000.00. Four million million dollars. Ah, but Republicans are attacking that deficit, of course, which they say will save $100 billion a year. OK, that means that the Republican plan will put us only three trillion dollars in a deeper hole than we are in today. Meaning each and every year, the net Republican addition to the deficit would be $300 billion.
To be blunt, this does not compute. Republicans are going to slash spending, and it won't do the deficit any good because at the same time they're blowing the deficit up with tax cuts.
But, as I said previously, Americans are notoriously bad at math. Meaning, politically, it probably makes perfect sense, even if mathematically it is nothing more than a bad joke. Politically, it seems, we're never going to raise anyone's taxes ever again. Until, of course, we have to (see previous comments on China). The Republican solution to all the red ink is more red ink. But the voters seem happy enough, so who's to care? Republicans used to have their own fiscal conservatives among their ranks who would occasionally point this stuff out (John McCain, speaking against the Bush tax cuts in the first place, for instance), but these voices have not only been silenced, they've seen the power of the Tea Party folks and are now fully in line with the "More tax cuts! Fix the deficit!" doublethink, at least for the foreseeable future.
The problem with attacking the deficit, after all, is that it's tough. Americans simply are not conversant with the concept of "sacrifice" any more, and we will not wake up from this somnolent state until it is imposed upon us by others, it seems. Yelling about "out-of-control spending" is lots of fun in a three-cornered hat at a rally, but the Tea Party folks have never cared all that much about the specifics. Which is why the Republican plan is so light on such specifics -- why go into detail when the people you're trying to reach don't care about details, after all?
The problem with solving "out-of-control spending" is, once again, mathematical. The federal budget is made up of a few very big-ticket items and a whole universe of small-ticket items. Let's start with the big-ticket items. The first is the Pentagon budget. Any Republicans for slashing this? No? I didn't think so. OK, next up is interest payments on our debt. See, already we are the children the Reaganites shoved all this debt onto, so we're already paying this off with a much bigger slice of the budget than most realize. We can't slash this, because if we stopped making good on our old debts, it would immediately trigger the China scenario I spoke of earlier. Next up are the three "entitlements," all pretty big-ticket items themselves -- Social Security, Medicare, and Medicaid. Using numbers before Obama's healthcare reform passed, adding up the Pentagon's budget, the payments on our debt, and the entitlements equals the amount the government takes in.
This means, to balance next year's budget (at least, without slashing Social Security and Medicare), you'd have to cut spending on everything else the federal government does by one hundred percent. Which is, obviously, why politicians don't like to talk specifics very often. Even taking the Republican plan's claim of $100 billion a year cut from spending at face value, this is less than eight percent of the yearly deficit. By some estimates, they'd have to cut all the things in the federal budget they didn't like (I can't see them cutting Border Patrol funding, for instance) by something like 20 percent. That's pretty drastic, and when the public finds out how broad the cuts will be (in other words, when we see actual specifics which make big cuts to things like farm subsidies and food safety programs and the National Park System and the like), they're likely going to have a problem with it. See previous comments on Americans' willingness to sacrifice.
Now, I realize that this is indeed election season, and that politicians (all politicians) are in the habit of promising the moon, the stars, and the sun to voters in order to get elected. But no matter which party is in control of Congress next year, eventually they're going to have to put some numbers on their plans. This is the point where we find out which is most important to the Tea Partiers -- reducing the deficit, or cutting taxes. From what I can tell, there are some Tea Partiers who will recoil at the size of the deficits the Republicans are planning, and there are some who will celebrate the tax cuts. The Tea Party is anything but homogenous, on many issues. But there's a good chance many of them are going to feel a bit of betrayal when they actually see the math, that's my guess. At this point, to be scrupulously fair, neither the Democrats nor the Republicans are being honest on the math. As I said, it is indeed election season. But après this particular election, there's going to be le déluge of red ink -- no matter who wins, it seems.
-- Chris Weigant
Follow Chris on Twitter: @ChrisWeigant
"In specific, take the oblate spheroid of tax policy and give it a good solid punt until after the elections."
"Oblate spheroid" is a shape like that of the earth: it bulges out slightly at the equator because of the centrifugal force of its rotation.
The things that people punt, at least in this country, are elongated along one axis. That type of shape is called "prolate spheroid".
The extreme case of "oblate" is "pancake". The extreme case of "prolate" is "stick"
"The compromise plan is supposed to be to extend the tax cuts on millionaires and billionaires for another two years ("until the economy recovers"), and then allow them to expire in 2012. You'll forgive me for saying: "Oh, puh-leeze.""
Dunno, it might work. If they're making the cuts on income below 250k* permanent, but only extending the rest, the part that comes up for renewal is a tax cut that's just for millionaires. That's a lot easier to win than the current fight, not only because it's a millionaires-only issue but because it's during a presidential campaign instead of an off-year campaign.
*We should be sure to point out that billionaires get a tax cut from the permanent part, too. It's just that they only get it on the first 250k.
"The first is the Pentagon budget."
Don't forget the off-budget military spending. The wars were paid for mostly via supplemental appropriations. However, Obama put most of the cost on-budget, so that as the wars start to wind down he can take credit for cutting the deficit by that amount.
"next up is interest payments on our debt. ... We can't slash this, because if we stopped making good on our old debts..."
We can't slash the interest cost from its current level any time soon. But we can make a huge difference in its future course. Long before China actually takes us into receivership, they (and our other creditors) start demanding a higher interest rate to cover the risk of default. As long as we look capable of paying off the current round of bonds, we don't have to pay that risk premium.
"Using numbers before Obama's healthcare reform passed ..."
Using those numbers as the baseline will let us point to another trillion dollars of deficit reduction over a ten-year period.
"But there's a good chance many of them are going to feel a bit of betrayal when they actually see the math, that's my guess."
Are you sure about that? If so, you're an incurable optimist.
dsws -
Really? Wow, guess I shoulda fact-checked that, I always thought oblate spheroid meant football-shaped, but then I wasn't all that good at higher geometry. Conic sections were about as far down that road as I went.
Mea culpa for the mistake, and my apologies.
I don't know, you make a rational case for raising taxes in 2012, but I can guarantee the Republican case will be mostly emotional -- "Dems want to RAISE TAXES!!!" -- without a whole lot of focus on actual details. You do make a good point about severing the two, though, and only the 250K+ ones being up for renewal then. My hope, at this point, is that if Dems actually do push through a compromise, it'll only be one year instead of two. I think 2011 might be a bit better atmosphere, but I could be wrong about even that, I fully admit.
As for the last bit, I really do think the TPers are going to feel betrayal at some point in the next year. I can't guarantee this will be the reason, but their goals are so contradictory, that in one way or another (especially if the GOP takes control of the House), the politicians the TPers send to Washington are bound to disappoint. Perhaps that is optimistic, though, I'll give you that.
:-)
-CW
I heard a very interesting interview yesterday on NPR with a professor talking about the black communities frustration w/ Obama. (Bear with me for just a second and I do promise to bring this back to your article, CW.)
Basically, he said that Obama is technically doing the right things, but either not making the right case for them or not communicating well enough - a point you emphasize often most recently by talking about Drew Westen.
The moral argument that is still getting out is that Obama's programs are handouts.
What this professor argued for is that he wanted to see a an approach similar to Reagan's. That is, Reagan had to sell tax incentives for the wealthy. A hard thing to sell. So Reagan made the case that the benefits trickle down. (Of course, statistics later showed this didn't happen. But it's a belief that still holds a lot of sway even today.)
What he said was that Obama needs to make the case for "trickle up". If you help the middle class and help the poor, then everyone benefits. It's not the producers that need help this time, but the consumers.
I say this because right now the debate is still being dominated by the Republican moral argument. Basically they're saying it's a "tax hike that penalizes the successful." This is straight out of the trickle down handbook.
I think the Dems gain some traction by separating out the 2% and calling that a tax cut for the rich. But this is a very negative framing. It lacks the foundation of how it will benefit the entire economy.
I believe the approach they should take is to talk about how, right now, we need to get money in the hands of consumers and stimulate demand. This is the best way to long-term ultimately benefit businesses. Give the money to the 98% that will put it back into play. Stats show that the top 2% by and large save this money and don't spend it.
Trickle up theory. (Really liked this idea, but folks here might have a better name for it.)
A few thoughts here on a Friday morning,
David
The problem with the Obama approach to governing is they he wants to enforce equality in results.
That is not the government's job.
The government's job is to enforce equality in opportunity...
In other words, you don't rob from the rich and give to the poor.
You insure that the poor has the same opportunity as the rich to create wealth.
Otherwise, we become nothing but a nation of pheasants...
http://www.realclearpolitics.com/articles/2010/09/23/a_nation_of_peasants_107275.html
Michale.....
Otherwise, we become nothing but a nation of pheasants...
Errr... that would be a nation of PEASANTS.
Michale.....
... a nation of pheasants ...
I like a nation of pheasants better!
And I'm honestly not trying to poke fun. This was just a really good typo. Cracked me up. Probably because I was picturing a lot of pheasants in clothes walking around. And sometimes we do seem to act like pheasants :)
The government's job is to enforce equality in opportunity... In other words, you don't rob from the rich and give to the poor.
Ok. Seriously. This is good, Michale. You're doing what I'm arguing Democrats should be doing. Making a moral argument.
Now I'm not saying I agree with your argument. But it is a moral argument and, I believe, the right way to go about things. And the Dems have not made a moral argument for extending the cuts to just 98% of folks.
Here's my stab: Cutting taxes for 98% of Americans is the best way right now to help the economy.
The idea of trickle down theory is that if you give to the rich, the benefits trickle down.
Problem is, it didn't happen. The rich put it in their pockets. Everyone else spent it. But don't believe me, listen to the economists.
http://www.bloomberg.com/news/2010-09-13/rich-americans-save-money-from-tax-cuts-instead-of-spending-moody-s-says.html
Right now, given our deficits, we should only be spending money where it's going to stimulate the economy. This is with consumers. Tax relief for lower and middle income folks goes straight into the economy.
What Obama should do is say this:
"Given our deficits, we shouldn't be giving out tax breaks to anyone right now. But if we're going to do it, we should do it for those people who are going to spend to help get our economy back on track."
And if Republicans protest based on "equality," I'd let the tax cuts equally expire for everyone.
I know it seems a bit counter-intuitive, Michale. At least on the surface, it sounds like giving tax breaks would help create jobs. But the data shows it doesn't.
Cheers
David
p.s. I liked the nation of peasants article. But what this author leaves out is that capitalism works up to a point and then starts to have problems.
This point is the point where businesses become monopolies and stifle competition. Think the robber barons of the 20s. Or Microsoft :). Or the banks of 00s.
At this point, I believe, is where government needs to step in and ensure fairness. This is not punishing the successful. This is making sure the entire system works.
This is the type of argument I want to hear from Obama. Good discussion as always! And I'm glad CW hasn't PiNG'd you yet :), whatever that means!
David,
Here's my stab: Cutting taxes for 98% of Americans is the best way right now to help the economy.
But who decides exactly WHAT is that 98%??
If you look at how the Obama Administration came up with that "3% of businesses" figure, you can easily see how such percentages can be easily contrived or falsified to fit whatever agenda one wants to put forth...
At this point, I believe, is where government needs to step in and ensure fairness. This is not punishing the successful. This is making sure the entire system works.
And, if the government DID ensure fairness in opportunity, then we would likely not be having this conversation.
But, in essence, the government wants to reward bad behavior and punish good behavior.. That is what it has done with it's bailouts, that is what it is doing with it's attacks on business...
This is the type of argument I want to hear from Obama. Good discussion as always! And I'm glad CW hasn't PiNG'd you yet :), whatever that means!
"PiNG"ed is an old diplomatic term (not diplomatic in the sense of being fair, but rather diplomatic in the context of Diplomatic Persons) where an undesirable was declared PERSONA NON GRATA or PNG'ed by host countries and, in essence, banned from the country..
I attended many a PiNG parties in my day.. :D Being PiNG'ed was a badge of honor, especially for us security types.... :D
Which is how I feel about being PiNG'ed from the afore mentioned blogs..
Honored and flattered that they fear me so much that they have to PiNG me.. :D
What was it that Ghandi said??
"First they ignore you, then they ridicule you, then they attack you and then you win."
That's how I feel about it.. :D Looks like I have won a lot in the blogs around here.. :D
Michale.....
Tsk, tsk, tsk, Michale. Did you call some folks Hitler? ;)
But who decides exactly WHAT is that 98%?
Me personally. I'd go to economists and ask them to help determine the cutoff point. I believe $250k a year is low. But this is just me.
And honestly, I'd have no problem w/ letting the Bush tax cuts expire. Period.
But I think we'd help the economy if we could get money in the hands of folks who will spend it.
And, if the government DID ensure fairness in opportunity, then we would likely not be having this conversation.
I agree. But I'm not sure certain folks (particularly those in charge of our largest corporations) would like what this would look like. It would involve breaking up the monopoly banks. It would involve bringing back things like Glass-Steagall. It would involve introducing more competition and going much further than the watered down financial reform which was passed.
Here's a question for you, Michale. Would you consider breaking up a monopoly an "attack on business"?
It introduces more competition and makes things better for consumers, but of course, a lot of folks in the business world (especially if you owned said monopoly) would consider this an "attack on business".
Cheers
David
a nation of pheasants? a-ha! i knew there was a perfectly good reason for cheney shooting his friend in the face, it's because he's a pheasant like the rest of us.
David,
Tsk, tsk, tsk, Michale. Did you call some folks Hitler? ;)
Here's a perfect example of the mentality that I deal with... :D
http://susiemadrak.com/?p=7396&cpage=1#comment-6958
But I think we'd help the economy if we could get money in the hands of folks who will spend it.
I agree...
And yet, the only way that the money WILL get into the hands of those who will spend it, is by creating jobs...
Something the Obama Administration has utterly IGNORED for the last 20 months...
Here's a question for you, Michale. Would you consider breaking up a monopoly an "attack on business"?
Depends on WHY it was being done...
It introduces more competition and makes things better for consumers
It CAN...
But, the way Obama et al has wielded this power is to take over the businesses in question.
This LIMITS consumer choice and makes other businesses less likely to DO business..
This, in turn, leads us to 10% unemployment...
Republicans can't do any worse than Democrats have done...
THAT is the deciding factor in the upcoming elections..
Michale.....
And yet, the only way that the money WILL get into the hands of those who will spend it, is by creating jobs.
Giving a tax break to the people who will spend it should give a nice boost to the economy.
But, the way Obama et al has wielded this power is to take over the businesses in question.
This was pretty much at the urging of said businesses. I'm not sure I agree with it but GM seems to be turning around. The banks likewise. And even AIG. And I think the administration's doing the right thing by gradually getting out.
All in all, I think things could be a lot worse. I like to listen to conservative radio - mostly just to see what conservatives are listening to but also because the sports shows are on the same channel. But lately it's gotten so negative that I find myself turning it off or putting on some Hendrix to remind myself that the world isn't such a bad place.
-David
Giving a tax break to the people who will spend it should give a nice boost to the economy.
From all indications, those people getting the tax breaks WON'T spend it.
They will hold onto it because of the uncertainty of the economy..
Which brings us back to the root of the problem..
The economic uncertainty...
On another note...
I read an article where everyone's favorite hero, Al Franken has proposed legislation that would prevent collection agencies from issuing "private party arrest warrants"..
I have been in security and law enforcement all of my adult life and I have NEVER heard of a private company being able to issue arrest warrants.
Have you heard of such a thing???
Michale.....
The economic uncertainty.
Now my memories not what it used to be :), but I'm pretty sure the problem we had with the economy was the collapse of our banking system.
This "economic uncertainty" stuff sounds more like Republican messaging than anything else. The economy is uncertain so what you need to do is vote for a Republican. Cue the music and voice over: Republicans: We Stand for Certainty!
I have been in security and law enforcement all of my adult life and I have NEVER heard of a private company being able to issue arrest warrants.
Sounds like Barney Fife's "Citizen's Arrest" :)
Haven't heard anything about this yet though, Michale. The Internet says that credit companies are using this tactic to go after debtors.