The fast track to a balanced budget
The state of the union, fiscally speaking, is perilous. Despite record deficits and dire warnings from Europe as to the consequences of sustained fiscal imbalance, our leaders have been unable to find common ground. The Simpson-Bowles Commission in 2010, the Gang of Six last summer and the misnamed Super Committee of this past fall were all bipartisan efforts to cut through the Gordian knot of budgetary gridlock. And all of them failed. Miserably.
Yet despite these failures, Congress now has the opportunity to move us onto a path toward prompt national consensus on fiscal reform. Congressional leaders are this week debating legislation to extend the payroll tax cut. If they are smart, they will include in that bill a small, but important, provision that grants the winner of the 2012 presidential election something called fast-track authority. This authority would allow the president — whoever he is — to submit fiscal reform legislation for an up-or-down vote in both the House and Senate on Jan. 21, 2013, the day after Inauguration Day. Indeed, fast-track authority would be a worthy quid pro quo for members of Congress reluctant to sign off on extending the payroll tax cut without some assurance of future progress on deficit reduction.
What’s promising about this proposal is not just what fast-track authority might deliver in 2013, but what its very existence could do to the presidential race. With fast-track authority granted, President Obama and his Republican challenger could each be expected to put forward during the presidential race a coherent and credible plan to move toward a balanced budget.
Fast-track authority is not unique to budget debates. It has a long history on Capitol Hill, and gives legislation a prompt and clean vote in both chambers. It thus circumvents the Senate filibuster and procedural maneuverings in the House that can block legislation. In the recent past, fast-track authority has facilitated congressional approval of international trade deals and military base closings — public policy challenges where there was agreement that national action was needed but vested interests were using congressional procedures to inhibit progress.
Our public finances present just this kind of problem. Both sides of the aisle agree that we need to return to a path of fiscal balance. But entrenched interests – on both the left and the right – stymie any sort of balanced package of entitlement reforms and revenue enhancements with procedural roadblocks. The only way forward is to change the rules of the game.
Here’s how fast-track authority could work in the context of a presidential election campaign:
Keystone XL’s organizing principle
In October 2011, National Journal surveyed energy experts about whether Obama was likely to approve the Keystone XL pipeline, which would carry Canadian tar-sands oil through the U.S. to the Gulf of Mexico. Ninety-one percent of the “energy and environment insiders” believed he would.
On Wednesday, Obama proved them wrong.
How could the experts have gotten it so wrong? The answer is twofold: Grassroots environmentalists were stronger, and congressional Republicans dumber, than anyone predicted.
Back in August of 2011, when author and activist Bill McKibben staged the first anti-Keystone rallies around the White House, political observers scoffed. These were, after all, the same environmentalists who had been rendered irrelevant by their cap-and-trade defeat and the stress of economic recession. No way they could stop a fossil fuel infrastructure project with big money behind it.
But McKibben kept at it. The movement he seeded grew, forging strategic partnerships with Nebraska farmers, social-justice groups and unions. Activists staged more rallies, hounded the president everywhere he went and uncovered serious questions about the relationship between the tar-sands industry and the State Department. As the crowds grew, big-money Democratic donors started weighing in on the issue. In November, under intense pressure, Obama announced that the final determination would be delayed until after the election. It was an unexpected display of muscle from the green grass roots.
Still, most observers assumed that Obama was just buying time (and the support of his environmental base) and would approve the pipeline in the spring. That’s where the dumb Republicans came in.
CapitalismSays,
Your textbook Economics get punted when OPEC decides to cut supply (i.e. artificially restrict) in the face of an increase in the supply of oil from Canada to keep prices high (as they have demonstrated numerous times in the past).
Like Mike said, oil companies have no interest in reducing the price of oil – whether it be Canadian oil firms, ExxonMobil in the U.S., or an OPEC oil sovereignty.
from David Cay Johnston:
Time to junk income taxes?
This is America's 100th year for individual income tax, a system as out of touch with our era as digital music is with the hand-cranked Victrola music players of 1912. It is also the 26th year of the Reagan-era reform for both personal and corporate tax, a grand design now buried under special-interest favors.
With U.S. elections in November, and the George W. Bush tax cuts due to expire at the end of 2012, it's time for a debate that goes beyond ginning up anger over taxes and the superficial issue of tax rates.
It's time to consider whether to get rid of income taxes, personal and corporate. What are the strengths and weaknesses of our current system? Should we tax individual and corporate income -- or something else?
We need to think about it. Whatever systems we consider, we should weigh up what it takes to raise the necessary revenue along with such other attributes as minimal compliance cost, leakage and economic distortion.
Times change. Tax systems must change with them or else their lubricating effect turns to sand, wearing down the gears of commerce.
Just as the Industrial Revolution transformed a nation of farmers and mechanics into a land of factory hands and office workers, so too the digital revolution and globalization are fundamentally remaking society.
We need for our tax system to serve our 21st century civilization and its needs, including the costs of aging infrastructure and an aging population, costs that will be borne one way or another.
i propose a simple and straight forward process for taxation(which would be it’s demise) – “income tax” not tax whatever’s left after taking umpteen deductions, credits, special deductions, credits, etc. pure and simple – tax income generated that year – both corporate and individual. the only deduction allowed would be corporate for that portion of income given as dividends or bond interest, so there’s only one taxation. i suspect the number to obtain a balanced budget would be in the 5% range, give or take. of course this would never fly, as the wealthy and corporations typically pay less than 5% of their gross income in taxes. the vast majority of us would benefit – another reason it would never happen in my opinion.
Stopping the Stop Online Piracy Act
Now that Congress has hit pause on its controversial Stop Online Piracy Act and nearly every argument about the merits and failings of the piece of copyright legislation has been made, it’s a good time to ask: what, in 2012, will it take to actually stop a bill like this?
Because despite the delay, the situation still isn’t looking so hot for those looking to bring down SOPA. Amendments to tone down the bill’s more disliked points have been routinely defeated in the House Judiciary Committee by numbers sufficient to pass the bill to the full House floor.
But, at this point in the process, numbers aren’t everything. In the wake of the Arab Spring, talk of censoring technology hits the ears differently. More important is that in SOPA’s short two-month life, opposition to it has catalyzed online and off. But to succeed, its opponents will have to both boost the volume of their public alarm and convince Congress that, in an Internet-soaked 2012, questioning SOPA needn’t be politically fatal.
Washington isn’t the land of Luddites it once was. Members of Congress, of course, love their smartphones; Twitter, Facebook, and YouTube are political staples. (Twitter says just over 85 percent of representatives in each chamber are on the service.) But the challenge for SOPA’s opponents has been to demonstrate that the power and joys of Facebook and, say, SOPA’s questionable domain-name filtering policy are two parts of the same webby whole.
We’re seeing that understanding catalyze amazingly quickly—at least among web users. Starting with a small band of early objectors, resistance to SOPA has been spreading out, gathering steam, and popping up in all sorts of places. There’s been a tsunami of Twitter traffic against the bill, much of it tagged with the #SOPA hashtag. That chatter has driven blog posts, given journalists fodder, and provided constant commentary on Congress’s often convoluted and confusing proceedings.
And, notably, the bill has prodded the entrepreneurs who run some of the Internet’s best-known sites into creative acts of protest. The blogging site Tumblr mock-censored itself. The file-sharing site Scribd posted a SOPA button that, when clicked, disappeared documents. Wikipedia is considering a temporary block on access to its millions of entries. Beyond that, heaps of calls have been made to Congress, engineers have written letters, and SOPA-doubting editorials have been penned by such newspapers as the New York Times and the Los Angeles Times.
Ronald Reagan engineered operation Plagiarized Indigantion to get rid of people hacking the Department of Defense and pentagon and he did a great job of it, ten years after his death it still serves globally.
Fed up with Bernanke
By Nicholas Wapshott The views expressed are his own.
There is one thing every Republican candidate agrees on. Once in the White House, the first thing they’d do is fire Ben Bernanke. His crime is to follow the legal brief of the Federal Reserve to maximize jobs and keep prices stable. To this end he has been printing money to keep interest rates low to boost business confidence to invest and thereby create more American jobs. For many conservatives and libertarians, who dominate the early GOP caucuses and primaries, Bernanke’s cheap money policy has dangerously devalued the dollar’s worth.
Guaranteeing cheap money is a Keynesian way of restoring health to an economy in recession, though Keynes himself was aware that low interest rates do not automatically lead to jobs. However cheap money is, you can’t force people to invest. Or, as he put it, “You can’t push on a string.” He compared it to buying a bigger belt to gain weight. The fact that Keynes backed easy credit is enough to make the policy treacherous in the eyes of many con-libs. (They are far more tolerant of another Keynesian remedy–slashing taxes.)
Bernanke, however, owes his allegiance not to Keynes but to Milton Friedman. To encourage growth without hyper-inflation, Friedman prescribed gradually increasing the money supply. That way, prices would rise slowly and predictably. Bernanke is also an expert on the 1929 Crash and the Great Depression, catastrophes he, like Friedman, attribute to the 1920′s Fed keeping money too tight for too long. As Bernanke told Friedman on the father of monetarism’s 90th birthday, “You’re right. We did it. We’re very sorry. But, thanks to you, we won’t do it again.”
The legislation setting up the Fed in 1913 went out of its way to ensure that the Fed would be free of political interference so that monetary policy could be independent of politicians with short-term aims. It stipulated that the Fed should fund itself, depriving Congress of its traditional means of starving programs and institutions it doesn’t like. It gave Fed board members long terms, 14 years, with the chairman serving for four.
The sole means of influencing the Fed are through appointments and Fed board salaries. Bernanke’s current term ends in 2014* (see editor’s note), when he or his potential successor, nominated by the president, must be approved by the Senate. (The GOP candidates’ demand that Bernanke leave before his term ends would trigger an ugly constitutional crisis much like Franklin Roosevelt’s failed attempt in 1937 to pack the Supreme Court.) By demanding Bernanke’s head on a plate, however, the con-libs have served notice that the Fed’s days of independence are numbered and that every new appointment, like those to the Supreme Court in recent times, will trigger a pitched battle.
The politicization of the Fed and the arguments about its role and its future is perhaps the most significant change in a generation to the way politics is pursued. And it runs counter to best practice in other countries, where politically directed central banks have bowed to short term political demands rather than achieve long term national goals.
Given Wapshott’s recent book his opinions here seem odd.
Bernanke has clearly failed at least in part due to his reliance on Keynesian assumptions. He did not take action to prevent the credit bubble from forming, did not even see the downturn, and when it did arrive failed to understand just how bad it really was. He continues to use methods and tools that are purely Keynesian that those influenced by Hayek would naturally object to and rightly fear.
I’m skeptical of assertions that but for his interventions all would be lost.
So given Bernanke’s record that he should be removed is hardly politicizing the Fed.
Further, a review of the views of the current Board at the Fed reveals a preponderance of people holding similar views as Bernanke. That this imbalance should be corrected with the adding to the Board of people sympathetic with the Hayekian point of view would also seem not to be so much politicization as restoring sound management.
If only Congress were less ambitious
By David Gordon and Sean West The opinions expressed are their own.
There’s a good reason that only paid staffers and blood relatives seem to approve of Congress, as Senator John McCain recently quipped. But it is not the simple reason that Congress continues to fail, as witnessed in the implosion of the supercommittee. Rather it’s that Congress continuously promises unachievable historic fixes when it should instead be focused on slow progress.
There’s nothing wrong with small-scale fixes when they are the best achievable outcome. Congress is hyperpolarized and both sides are fighting for a mandate to reform the entire economy in line with their competing visions. As underwhelming as the August debt limit deal was, in the current political environment, saving over $2 trillion one way or another was a positive result. The fact that Congress could agree to something this large this year is actually quite stunning.
Failure – and the ensuing loss of respect in the eyes of voters – is largely due to leaders on both sides pretending that massive overhauls are in reach when they clearly aren’t. The problem is that Congress isn’t content to just do its job — it can’t help itself but to overpromise and then underdeliver.
During the debt limit debate, voters were treated to a roller coaster ride of epic proportions: One day Congress was going to cut $4 trillion from the debt, the next day the US government was going to default. In March, Congress was going to let the government shut down unless historic spending cuts were put in place. Both situations were manufactured crises that were created with the promise of forcing historic fixes. Neither did.
The supercommittee demonstrates the danger of playing this game. Members spent way too much time pretending they were going to do something historic — trading $3 trillion plans back and forth — instead of simply working on the $1.2 trillion task before them. Failing to reach $1.2 trillion looks that much worse to the public because Congress continuously talked about achieving much broader taxation and entitlement reform.
Neither party has full control of the political process and neither has an incentive to secure a big deal so close to a presidential election, so when the crisis has real consequences (like a shutdown of the government or default) they come together for modestly-sized deals amid dire political circumstances. At the end of the day for the supercommittee, sequestration thirteen months in the future was not a big enough threat to force an agreement.
The Democrats’ opportunity in the supercommittee’s failure
By Nicholas Wapshott All opinions expressed are his own.
Thanksgiving, I don’t have to remind you, marks the settling of irreconcilable differences between the early settlers and the original Americans, the burying of the hatchet, as it were, between Christians and heathens. If only this Thanksgiving marked the same.
The Congressional supercommittee that was created to find $1.2 trillion in spending cuts has until November 23, the night before Thanksgiving, to find a way to pay down the national debt. But things look bleak. Former Bill Clinton chief of staff Erskine Bowles, whose own deficit cutting plan dribbled into the sand, told the committee the prospect of their reaching an agreement is no more than 50-50. If there is going to be any burying of the hatchet this Thanksgiving, it may be deep in someone’s cranium.
The arguments in the committee echo the ill-tempered debate in the summer over extending the federal debt ceiling. As before, the Democrats will only agree to entitlement cuts if the Republicans agree to raise taxes on the wealthy. As tax breaks for the rich have become an article of faith for Republicans, compromise seems unlikely. Intransigence is the order of the day.
But there is a significant difference between the obduracy on display in July and the obduracy that may doom an agreement this time around. In the summer, the Republicans were calling the shots: agree to a debt deal without tax increases for the top earners or we’ll allow the government to default on its debts and the dollar to be downgraded. This time failure to come up with a deal will automatically trigger $1.5 trillion in spending cuts, starting in January 2013. The slash and burn program was built in to the debt ceiling deal to spur the committee to agree. Neither side, it was thought, would want such brutal cuts, divided evenly between the military and benefits for the old and the unfortunate.
This would appear to give the advantage to the Republicans, the party of small government, who favor deeper cuts made more quickly. They should take care what they wish for, because there are considerable benefits to the Democrats if the scale and substance of the automatic cuts become real. The president set out on his reelection campaign in earnest two months ago when he demanded the Jobs Act, a $447 billion Keynesian stimulus by another name, be passed, despite knowing it never would be. Since then he has been on a bus tour to key election battlegrounds such as Ohio, Virginia, and North Carolina, telling his audiences he could find them the jobs they crave if only the Republicans would be reasonable.
The failure of the supercommittee would allow him a second line of attack. So far the putative Republican candidates have concentrated upon flash-card bromides to pander to their base, vague talk about deregulation and government waste, and the gimmickry of flat tax schemes. While they urge paying off debt and shrinking the federal government without delay, they have been notably quiet about exactly what they would like to see cut. This is treacherous territory. As the Tea Party sloganeering made clear, it is always easier to see someone else’s benefits cut or someone else lose their public sector job than have your own Medicare reduced or lose your own job.
The super committee is a sham. There will be no agreement.Mandatory cuts will be made. Then K Street will call Congress and tell them what to put back in the budget.
Did anyone see the new farm substidies. Tea party representatives are falling all over themselves to give that money away.
Congress isn’t impotent, it is bought and paid for.
What happens after Obama’s jobs bill dies?
By Nicholas Wapshott The opinions expressed are his own.
You can add to the list of hollow cries from history–such as “Ban the Bomb!” and “Bring the Troops Home!”–the president’s favorite refrain, “Pass the Jobs Bill Now!” Like the rest, Obama’s oft repeated demand is a sham, a mere slogan. Neither he nor his party, and certainly no Republican, believes Congress is going to pass even a small part of the bill, for it combines two elements his opponents detest the most: public works and higher taxes on the rich.
While the GOP squabbles over which of a barely electable field to pick as its candidate, Obama has already begun his reelection campaign in earnest. The simple message he is taking on the road is that Congress should “pass the jobs bill now!” That’s a plea he knows is sure to be ignored, leaving him in a position, he believes, to blame persistent joblessness on the Republican obstructionists. He is onto something. As Jimmy Carter found out, Americans hold their presidents to account when the economy is tanking; they expect them to improve the economy and are prepared to fire them when they don’t. It is a lesson for conservatives who believe that governments can’t and shouldn’t attempt to change the economic weather. Voters blame the government anyway, whether they intervene or not.
Obama, like Franklin Roosevelt, believes in trying to fix the symptoms of a broken economy, while his GOP opponent, whoever it turns out to be, must hold to the Hayekian orthodoxy insisted upon by the Tea Party and the Republicans’ fiscally conservative wing that there is nothing much governments can or should do to improve the economy and that stimulus spending either does not work at all or will only make the smallest of differences in the short term. As Obama gleefully knows, a rival promising austerity, the long haul, a far worse economy before it gets better, and a dim light at the end of a long, long tunnel will be running against the spirit of optimism that Americans feel and like to hear from their leaders.
Obama’s American Jobs Act is a thinly disguised second Keynesian stimulus designed to pump $450 borrowed billions into the economy to raise aggregate demand and give jobs to some of the 9.3 percent of Americans out of work. Obama’s task is to convince the American people that stimuluses work. The results of his first hurried stimulus, all $814 billion of it, are mixed. It set off a burgeoning cottage industry among conservative economists taking it in turns to prove that the stimulus did nothing or little to improve growth or job creation. Take Alan Reynolds of the Cato Institute: “There’s no evidence for the theory that state spending has shortened this or any other slowdown.” Or this, from John F. Cogan and John B.Taylor, of the Hoover Institution: “Beware of politicians proposing public works and other government purchases as a means to stimulate the economy. They did not work then and they are not working now.”
It is easier to show that Obama’s initial stimulus did not work well – the money went to pay off private debt, or went into private savings, or was spent on foreign goods, or replaced state and local government borrowing with federal government handouts – than the broader point: that stimuluses don’t work in any circumstances. So, will Obama’s stimulus work? We will never know, because it will not be enacted. If the president is reelected he will have to propose a new stimulus to suit the conditions of November 2012.
That leaves a whole year for his economic advisers to come up with a stimulus that works. There can be no excuse next time that the stimulus was flawed because to avert an imminent economic crisis it had to be brought in quickly without adequate planning. There is no need to find elusive “shovel ready” public works projects that can be started immediately as there is a whole year to find and design job-creating schemes that will not entail pouring billions into the sand. There is a whole year to find ways of giving cash only to those who will spend it on other Americans, not blow it on foreign consumer goods or hoard it as has happened the last time.
After the disaster of GWB he had the right plans to deal with the problems, but he was to nice, he tried to find consensus, he should not have…..In his road towards the next election he should include a lot of the principles behind the occupy movement, in my opinion that will strike home with a hell of a lot of American people. And he should go back to his initial plans for job creation and push them hard, after all he can now straight forward GOP and right wing democrats for the failure to do just that. May-be he could also bring forward the idea of doing away with lobbying, which after all is legal corruption.
from Ian Bremmer:
Obama’s secret for new jobs
Ian Bremmer sat down with Reuters' Paul Smalera to discuss President Obama's plans to boost the American economy. Watch here:
Pelosi or Boehner may still have to walk the plank
One of the ironies of America politics is that the House of Representatives, designed to be the “mob” of political power, is the top-down, well-run branch of government, and the Senate is the every man for himself body. Unlike the Majority Leader of the Senate, the Speaker has immense sway over the House and can, when necessary, bend it to her will.
With that type of power, it’s not surprising that its leaders have to ward off intra-party threats to their power. In John Barry’s The Ambition and the Power, Barry compares overthrowing a Speaker or Minority Leader to Regicide. And, though unlikely, both sides of the aisle are talking about just such an event.
Pelosi may be forced to, or even want to step down if her party loses the House. Even if the Democrats win, numerous Blue Dogs have intimated in the campaign that they will not vote for her (Heath Schuler claimed that he will run against her if no one else does). Others have talked about electing a whole new House team for the Democrats.
On the Republican side, there has been minor chatter about a Tea Party revolt against Boehner and Eric Cantor. This is extremely unlikely to occur if the Republicans win the House – though it could be possible if they don’t pick up enough seats to take over.
Revolts against the party leaders are not that rare, though these revolts are almost always taking place on the right side of the aisle.
For all their perceived disunity, the Democrats have historically stood behind their leaders. Tom Foley might have lost his job in his 1994 reelection race, but they did not overthrow the team—the Majority Leader Dick Gephardt stepped right up to serve as Democratic Leader. Historically, there is a regimented rank that members can rise up through—Whip to Leader to Speaker if they are in the majority—and Democratic leaders have stepped up through these ranks. When John Murtha (with the considerable backing of Nancy Pelosi) tried to jump the line in 2006 by running for Majority Leader against Steny Hoyer, Murtha was crushed nearly two-to-one. Though there are exceptions (in 1976, a scandal meant the Majority Whip had no chance of moving up) the battle for the Democrats has traditionally been for the Whip role (which itself has only been elected since 1986). No Democratic speaker or leader (either majority or minority) has been removed in an intraparty coup (though Jim Wright resigned due to scandal).
On the other hand, the Republicans may espouse Ronald Reagan’s eleventh amendment, but behind the closed doors of the House, the knives are out. Newt Gingrich is the most famous casualty – forced out as Speaker after the party’s unexpected poor showing in 1998. But Boehner got his job in a coup, taking down acting Majority Leader (and then-Majority Whip) Roy Blunt in 2006, following the resignation of Tom DeLay. In the past, other Republican leaders have been overthrown, including former Speaker Joe Martin (then in the role of Minority Leader) by Charles Halleck, who was himself overthrown by Gerald Ford. Going back in history the House was totally changed by a coup against Republican all-powerful Speaker Joe Cannon, resulting in major reforms.
@borisjimbo…yes, Obama has done a great job of effecting those changes and “closing the candy store” hasn’t he? No, debt and deficits have only ballooned to historical proportions.