Opinion

The Great Debate

from Judgement Call:

The fiscal crisis nears – or not

Few economists preach spending cuts as a cure for high unemployment. Yet that’s exactly what Congress decided when it imposed, starting March 1, across-the-board spending cuts (the “sequester”). Despite Friday’s mildly upbeat jobs numbers, the economy remains limp, with 15 million or so unemployed individuals who want to work. Federal spending cuts won’t make their plight any better.

Congress has known for quite some time that the federal budget will turn sour in 10 to 15 years, with expected outlays far outstripping expected revenue. For complicated, if not odd, reasons, Congress now feels compelled to do what it ordinarily shuns: cut federal programs and raise taxes. That might seem politically brave and responsible. But brushed up against facts, the case for Congress taking swift action wobbles, hitting wrong targets at the wrong time.

Of the many reasons politicians offer for cutting federal spending during economically straitened times, two cry out for attention. First, many liberals and conservatives say, Congress needs to stanch soaring federal spending. Second, conservatives say, federal programs are growing ever more intrusive, ever more threatening to private initiative.

Those are the theories. What are the facts?

Fact No. 1: Federal spending relative to the size of the economy is not, Congressional Budget Office reports show, spiraling out of control once the temporary impact of economic recession is factored out of the calculation. Federal spending relative to the size of the economy is expected to hover between 20 percent and 25 percent over the next few years – setting off no alarm bells during the time that the economy is expected to struggle.

Fact No. 2: Federal debt has risen to about 75 percent of national income and is on course to hit 90 percent over the next decade. Is that alarming? Alan Auerbach, director of the Center for Tax Policy and Public Finance at the University of California, Berkeley, makes the hard-to-dispute point that economists have no hard evidence that the economy will operate significantly worse with a federal debt overhang of 90 percent rather than 75 percent.

Obama’s political options

Fiscal crisis? What fiscal crisis? The stock market is up, unemployment is down and the deficit is shrinking.

The fiscal crisis is in Washington, and it’s a crisis of Washington’s own devising. All those deadlines! January 1: the fiscal cliff. March 1: sequesters. March 27: a possible government shutdown. Sometime in August:  the debt ceiling, again.

The unending fiscal crisis could take up the entire year. President Barack Obama desperately wants to end it. For one thing, more spending cuts could bring on a recession. For another, an unending fiscal crisis would monopolize the agenda. No time for Congress to take up immigration reform or gun control or the minimum wage or preschool education.

A sequestration solution for the Pentagon

The sequestration drama in Washington is less severe and intractable than you have heard. A partial solution: Block the across-the-board cut of $42.5 billion in military funds this year — the Pentagon’s portion of $85 billion due March 1 — and spread the savings over several years by tweaking military spending caps already on the books.

Because this option preserves deficit reduction without raising taxes and lets the military drawdown intelligently, a congressional majority might support it.

Pentagon leaders are sounding the alarm — warning about the impending sequester and the additional $500 billion reduction in spending over a decade. Furloughed civilian employees, extended deployments, reduced naval patrols and procurement delays, they say, will leave the military unable to perform its job and deter U.S. enemies.

Who controls Voting Rights?

This is part of the Reuters series on the future of the Voting Rights Act’s Section 5, which the Supreme Court may strike down this year. You can read other pieces in the series here.

On Wednesday the Supreme Court is set to hear oral arguments in Shelby County v. Holder, challenging the constitutionality of a key part of the Voting Rights Act. But in the wide public debate about this case, we are getting to the point where — as election law scholar Pam Karlan has noted — everything has been said, but not necessarily by everybody.

In addition to this Reuters symposium on “If the Court Strikes Down Section 5,” other symposia, commentaries and op-eds have considered whether the act still serves a vital purpose; whether the court should strike it down; and what should replace it if the court rules that Congress went too far in requiring certain states to continue to get federal permission when making changes in any voting rules until 2031.

Obama’s Two Choices: Good and Better

President Barack Obama must like the view from 1600 Pennsylvania Avenue right now. Politically speaking, the sky is clear, and the few clouds on the horizon have silver linings.

Because where things now stand with Congress, if he wins – he wins. And if he loses – he wins.

Getting Republicans to bend to his will on any of the banner issues this year – whether immigration reform, gun control or deficit reduction – will help enshrine him as a president of real achievement. If he fails, however, these same issues can be used as bludgeons to pound Republicans as heartless, even racist, knuckle-draggers who only want to service their rich masters.

When Republicans critique Obama, they critique their own policies

To all the vaunted traditions of the absurd partisan charade in Washington, we can now add another: Republicans attacking President Barack Obama for the results of their own policies. Most recently we saw it last Wednesday. No sooner did the Bureau of Economic Analysis (BEA) announce Wednesday morning that our gross domestic product had shrunk by 0.1 percent in the last three months of last year than Republicans began disseminating misleading talking points.

In an instant missive titled “President 0.1%,” the Republican National Committee complained, “Four years and $5.8 trillion later, Obama presides over an anemic economy.” Quoting Reuters, the RNC ominously warned, “The contraction ‘could spur fears of a new recession…” “Anti-growth policies and an anti-business White House produce just that — a lack of growth,” declared Representative Sam Graves, R-Mo., chairman of the House Small Business Committee. “The bottom line is that America’s economy continues to struggle primarily due to President Obama’s penchant for political brinkmanship and the pervasive uncertainty caused by his focus on higher taxes, regulation and Obamacare,” said Representative Kevin Brady, the Texas Republican and incoming chairman of the Joint Economic Committee.

On Friday, we learned that the economy added 157,000 jobs in January, 247,000 jobs in November and 196,000 in December, well above earlier estimates. The GOP was not so eager to discuss that.

Time for a serious deficit plan

 President Barack Obama pledged to cut the deficit in half by the end of his first term. But because he focused on political gimmicks, rather than real reform, we’ve seen trillion-dollar deficits and nearly $6 trillion added to the debt instead. Based on what we heard from the president at a news conference Tuesday, his unserious attitude is likely to continue.

That’s worrying. Unless we can get a handle on Washington’s overspending, and quickly, it will continue to undermine our economy and jeopardize our children’s futures.

Sadly, the White House is not yet serious about doing that. Instead, it has predictably suggested politically driven tax hikes as appropriate offsets for the sequester, including a tax on corporate jets. If that sounds like a poll-tested P.R. gimmick rather than a serious solution, that’s because it is. A permanent tax increase like that would take 10 years just to raise enough money to replace one week’s worth of the sequester.

A history (and future) of Congressional polarization

As the 112th Congress came to a close last year, bipartisanship made a rare showing. The U.S. inched its way up to the fiscal cliff, but Congress voted to yank the country back, with 85 House Republicans voting not to reinstate the Bush tax cuts for individuals who earn more than $400,000. It was a rare moment of bipartisanship, however begrudging, for a Congress that has steadily become more polarized in the past 30 years.

Using a statistical analysis of some 35 million individual campaign contributions from 1980 through 2012, we assembled Congress’ polarization ratings. Rather than base legislators’ ideology on how they vote, we instead infer ideology scores from the patterns of contributions made by their supporters. In deciding which candidates to support, the typical donor is strongly influenced by his ideological views. As a result, they give almost exclusively to like-minded candidates with similar voting records. The massive quantities of data on contribution records (with over $6 billion dollars contributed to federal elections during the 2012 election cycle alone) make for an exercise in big-data and politics.

When you put all the data together, Congress’ modern history of polarization looks something like this:

Post fiscal cliff: The fix is in

We’ve been trying to deal with the national debt in this country for 30 years now.  The fiscal cliff is just the latest failed gimmick.  We’ve had more failed gimmicks than professional wrestling.

Failed?  Yes, because the whole idea of the fiscal cliff was to force the federal government to put in place a long-term reduction of the national debt.  And look what happened.  Instead of reducing the national debt, the deal passed by Congress late Tuesday night will add $4 trillion to the deficit over the next 10 years, according to the nonpartisan Congressional Budget Office.

In the 1980s, we tried the Gramm-Rudman-Hollings law.  If the federal budget missed its deficit-reduction targets, the law triggered across-the-board spending cuts (“sequesters”).  Guess what?  It never happened.  Congress exempted 70 percent of the budget from sequestration.

Class war in the new Gilded Age

2012 was the first class-warfare election of our new Gilded Age. The first since the middle class has come to understand, in the words of new Senator-elect Elizabeth Warren (D-Mass.), that the “rules are rigged against it.” Business-as-usual may no longer be acceptable.

But Washington didn’t get the memo. Even as ballots were still being counted in Palm Beach, Florida, the two parties lurched into the fierce debate over the fiscal cliff, the noxious brew of automatic spending cuts and expiring tax cuts that would poison the recovery. The debate, a dismal sequel to the 2011 debt ceiling melodrama, focuses on deficits not jobs. Once more, Republicans are threatening to blow up the recovery unless Democrats make otherwise unacceptable concessions. Once more, President Barack Obama looks for a “grand bargain,” seeking bipartisan support for terms divorced from opinion outside the beltway. Once more, what Scott Galupo at The American Conservative called the “clown show” of the House Republican caucus blows itself up.

Republicans are the most clueless about this new reality. The election’s one clear mandate, confirmed in polls ever since, was for Obama’s oft-repeated pledge to let the Bush tax cuts expire on those earning more than $250,000. Yet, House Republicans stood staunch in defense of the very rich – refusing to pass their own speaker’s bill to extend the tax breaks on everyone except millionaires.

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