James Pethokoukis

Politics and policy from inside Washington

Now it’s the Domenici-Rivlin plan to cut the deficit

Nov 17, 2010 15:54 UTC

Alice Rivlin (who is on the Obama deficit commission) and former Senator Peter Domenici have cooked up their own plan to restore America’s long-term fiscal solvency. But first, a chart from the plan itself that says a lot:

domenici-rivlin

Liberals hated the Bowles-Simpson plan because it used some of the savings from eliminating tax breaks to lower tax rates. Well, this plan does the same thing — but it also tacks on a national sales that will raise nearly $20 trillion (for a net $6 trillion tax increase) between 2012 and 2040. Conservatives will not be happy:

drst

Will Roger Altman replace Larry Summers?

Nov 17, 2010 15:53 UTC

The latest buzz is that investment banker and former Deputy Treasury Secretary Roger Altman is the likely choice to replace Larry Summers as director of the National Economic Council.  A few thoughts:

1. He is another high-tax guy. At a symposium held by the Center for American Progress, I heard Altman advocate a large (like $500 billion) value-added tax ASAP to deal with the deficit.

2. Boy, if liberals were screaming about Bristol Palin making it to the “Dancing With the Stars” finale, this would make a terrible doubleheader. Not only is he a banker (from Wall Street!) who bought the tabloid National Enquirer in 1999, he is another ex-Clinton administration guy.

3. This would mean we would once again get to hear about  …. Whitewater (via NYTimes from 1994):

Roger C. Altman, a rising star in the Administration until Whitewater led both Democrats and Republicans in Congress to attack his truthfulness, submitted his resignation today as Deputy Treasury Secretary but said that it would not take effect until the Senate confirms his successor.

4. I guess this would be a sign of Obama reaching out to business. But this and a corporate tax cut would be more compelling.

Republicans grudgingly refuse pork with their tea

Nov 17, 2010 15:14 UTC

Zero pork is good for hawks. The grudging decision by U.S. Senate Republican leader Mitch McConnell to back a voluntary ban on earmarked funding for pet local projects is a win for his party’s Tea Party faction. But deficit worriers of all political stripes should welcome it, too. Financial pork may “only” cost some $17 billion a year, but it invites undisciplined spending.

Earmarks are federal funding commitments that members of Congress can discreetly direct to their home districts and states. They are quietly folded into massive spending bills, seldom with public debate or review, and have long been targeted by good government types and fiscal nitpickers alike. One of the most infamous examples was the $223 million “Bridge to Nowhere” that would have linked a sparsely populated Alaskan island to the mainland.

Tea Party groups made ending earmarks a big issue during the recent midterm election campaigns, pushing favored candidates to sign up to a ban. House Republicans have already said they will stop the practice when they take control of the lower chamber in January. In the Senate, the powerful McConnell, who has himself requested $114 million in earmarks so far this year, had resisted. But he acquiesced under pressure from outside groups and colleagues like South Carolina’s Jim DeMint and incoming Tea Party favorites such as Florida’s Marco Rubio and Pennsylvania’s Pat Toomey.

The importance of earmarks has little to do with their dollar value. They add up to only about 1 percent of the total federal budget, and are usually carved out of already-approved spending. But they have a corrosive effect on government. By their nature, they can easily turn into what amounts to legalized bribery in which elected representatives grab earmarks in exchange for campaign contributions.

The habit also serves to discourage spending discipline. If a member of Congress pushes for overall budget restraint or criticizes a “Bridge to Nowhere” project, he might find that federal money earmarked for a museum in his district suddenly gets axed.

It’s not even clear earmarks help the folks back home. A Harvard University study found a surge in a state’s earmark funds is often followed by a decline in business investment as the private sector gets “crowded out” by government. Ending earmarks won’t balance the U.S. budget, but it could make that tough task a bit easier.

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