Tag: federal deficit
When the sequester crisis that Congress created began to disrupt air travel, Congress moved quickly to fix the problem. U.S. Rep. Rick Larsen, D-Everett, says he wishes his colleagues would show similar concern about disruptions facing kids, military personnel and elderly people from sequester cuts.
In remarks delivered on the floor of the House, Larsen called Congressional action to fix air traffic controller staffing “somewhere short of a profile in courage.”
“Sequestration is a little bit like the person who kicks a boulder, and then blames the boulder for his broken toe,” Larsen said. “Congress created this problem. We need to fix it.”
By John Stark
Amid all the chatter about the trillion-dollar coin, Ross Douthat at the New York Times offers some sensible political analysis. He argues (convincingly, I think) that if Obama and his party were seen to be seriously considering such a move, they would look even crazier than the Republicans and shift the tide of public opinion back in the Republicans’ direction.
U.S. Rep. Rick Larsen, D-Everett, has issued a statement slamming House Republicans’ spending priorities, which he says would protect defense spending while slashing help for the poor and elderly.
Larsen’s press release:
WASHINGTON—Rep. Rick Larsen, WA-02, today (Thursday, May 11) voted to preserve food aid for low-income families and protect senior services in a budget debate today. Larsen voted against a Republican bill that seeks to eliminate automatic cuts to defense spending and replace them with greater cuts to domestic spending. The bill, which passed the House on a 218 to 199 vote, would undo the bipartisan Budget Control Agreement signed into law last August.
“House Republicans could not be more clear about where they stand. They want to shelter the richest Americans and let out-of-control spending continue at the Pentagon, all while cutting vital services for seniors, students and middle class Americans,” Larsen said.
“The bill Republicans approved today would give the Defense Department a free pass while cutting Meals on Wheels for 1.7 million seniors, cancer screenings for hundreds of thousands of women, and reducing or eliminating food stamps for nearly 50 million of the most vulnerable Americans.
“The ideological and stubborn support for unfettered growth in defense spending is as irresponsible as it is unnecessary. The Government Accountability Office recently reported that major defense programs had more than $44 billion in cost overruns last year. The Republicans now want to throw $8 billion more on top of that. We need to reshape the force for 21st century challenges, not just keep throwing good money after bad.
“Virtually every member of Congress I know agrees that we should replace automatic spending cuts with a structured deficit reduction package. I have long advocated for a bold and balanced approach to cutting the deficit. That will include a mix of spending cuts in defense and domestic spending as well as increasing revenue through fairer tax rates for the highest earners and elimination of tax subsidies to oil and gas companies and big agribusiness. The Democratic budget that I voted for would preserve vital job-creating investments in our transportation infrastructure and maintain support for students to go to college and seniors and veterans to get quality health care.”
End press release
Larsen’s district includes the city of Bellingham.
Okay. I’m officially confused. When the budget supercommittee was formed, we were told that its chances for success were high, because its failure would punish Congress (and America?) with automatic budget cuts and tax increases that were said to be unthinkable and draconian.
Now, some commentators are noting that the automatic measures will mean deficit cuts far beyond anything that has been seriously proposed so far, and they will accomplish this with one dollar of spending cuts for every three dollars in tax increases. Here’s a take from Fareed Zakaria at CNN, and from Ezra Klein at the Washington Post.
Some doves are also noting, with approval, the defense cuts that are supposed to be automatic in the wake of the supercommittee’s face plant. And even Republicans in Congress appear reluctant to mount an effort to spare Defense from the cuts they earlier agreed to make if the supercommittee failed in its Mission Impossible. The New York Times reports.
All of this leads some commentators to suggest that the automatic cuts will be a good thing, but there is still widespread concern that cutting spending and raising taxes will cut economic growth.
As the Nov. 23 deadline approaches for the Congressional supercommittee to come up with bipartisan concensus on a federal budget plan, we can probably expect more tension, brinksmanship, and gyrating stock markets as committee members try to reconcile their non-negotiable and irreconcilable differences on taxes and entitlement programs.
In other words, it may look a lot like last summer’s debt ceiling fracas.
The Washington Post has a clear and useful summary of the deadlines–and there are several. Even if the committee does meet its own Nov. 23 deadline, that will just start the deadline clock ticking for Congress to approve the committee proposal in a straight up-or-down vote, with no last-minute amending and rejiggering.
The Post concludes its presentation with a quick summary of the “automatic cuts” to federal spending that supposedly will take place if the supercommittee fails in its mission.
Defying the punditry consensus that his candidacy was not viable, Newt Gingrich seems to be reviving his campaign for the GOP presidential nomination.
Recently, he’s focused on the budget “supercommittee” of senators and representatives that is charged with resolving the seemingly unresolvable conflict between Democrats and Republicans on dealing with the federal deficit. In creating this supercommittee, Congress set up an automatic budgetary doomsday machine: If the Dems and Republicans on the committee can’t come up with a deal by Nov. 23, the federal budget will be subject to automatic cuts that supposedly will decimate both social programs and national defense.
In this report from The Washington Post, Gingrich says it was “maniacally stupid” to expect good government to result from this kind of an arrangement.
President Barack Obama seems to be making a belated attempt to regain some lost political momentum and get back in the national spotlight that GOP presidential contenders have managed to monopolize in recent weeks.
McClatchy provides an in-depth report on the President’s Thursday jobs speech, with a detailed breakdown of his proposals plus critiques from economists, who gave the plan mixed reviews.
Today, Obama was in Virginia urging a friendly audience to bombard Congress with appeals for action. USA Today reports.
In the wake of the debt ceiling showdown between President Barack Obama and congressional Republicans, Starbucks CEO Howard Shultz called on U.S. corporate executives to join him in refusing to contribute to political campaigns until the President and his foes agree on a long-term plan to reduce the debt and the deficit.
Now, Schultz says many executives are taking the pledge.
Schultz is taking this movement pretty seriously. He and his allies recently launched this website to promote the cause. It contains, among other things, Schultz’s Letter to America. (Clicking on the link takes you to the movement’s Facebook page.)
Schultz is asking his peers to do more than just zip their wallets when political fundraisers come calling. He is also asking them to join him in pledging to do some hiring and convert their cash reserves into payroll dollars for Americans who need jobs.
“Banks are afraid to lend. Record levels of cash are piling up in corporate treasuries, idling. That cash is not being used to expand operations, train new workers, underwrite new ventures, or spark innovation. The only way to break this cycle of fear is to break it,” Schultz says.
Sen. Patty Murray, a longtime defender of federal social spending, might seem to be an unlikely choice for the new “super committee” in charge of finding more ways to cut the federal debt.
As soon as Senate Majority Leader Harry Reid announced Murraay as one of his three nominees to the committee, GOP groups fired off press releases saying that Murray’s selection showed the Dems were not serious about tackling the challenges of curbing spending on Medicare and Medicaid.
But one could just as easily argue that having Murray on board as a co-author will help Reid sell what is likely to be a painful budgetary package to other Senate Democrats whose views align with Murray’s.
The super committee was one of the features of the deadline debt ceiling compromise between President Obama and Congressional Republicans. I’m still trying to figure out why anyone thought that the creation of another budgetary doomsday machine would be a good idea, but that’s exactly what this is. The Seattle Times calls it a “poison pill:”
“It has to agree on an unprecedented $1.5 trillion plan to reduce the deficit, through cuts, tax increases or both. Otherwise, automatic spending cuts to defense, Medicare and other programs will kick in — triggering a kind of a mutual fiscal poison pill for Democrats and Republicans.”
So we’ve reached a point where leaders in both political parties have to take the federal government (and the citizen taxpayers it is supposed to serve) hostage in order to motivate themselves to do what they are being paid to do.
This seems to be the perfect way to produce still more budgetary policy pigs wearing the lipstick of compromise. But what do I know?
On the Econbrowser blog, University of Wisconsin economist Menzie Chinn argues that there is no painless way to fix the debt crisis that afflicts both our government and the national private sector economy.
The only realistic fix, Chinn contends, involves increased federal revenues. As things stand now, reduced federal spending is likely to worsen recession and thereby reduce federal tax revenues even more.
“We lost the first decade of the 21st century by squandering our wealth and borrowing as if there was no tomorrow,” Chinn writes. “We risk losing this decade to an incomplete recovery and economic stagnation.”
He is among many economic analysts who note that the downgrade in the U.S. credit rating, being dubbed the “Obama Downgrade” by Republicans, is largely due to our government’s apparent inability to increase its revenue. Among other things, Standard & Poor’s analysts noted that they no longer expect the Bush tax cuts to be allowed to expire.
Chinn (and S&P) also note that the President and Congress have postponed any meaningful action on controlling the growth in Medicare, Medicaid and Social Security spending.
Chinn is excerpting his column in the New York Times, co-authored with Jeffry Frieden, professor of government at Harvard.
A CBS New York Times poll, conducted after the debt ceiling deal, shows that support for President Barack Obama is stagnating with an approval rating of about 48 percent, but support for the Tea Party has plunged.
In April 2010, 18 percent of Americans polled said they had an unfavorable view of the Tea Party. The most recent poll put the disapproval rating at 40 percent.
The poll also shows that while Obama’s ratings are nothing to brag about, he is well ahead of GOP House leader John Boehner and Congress in general.
The poll also indicates that a big majority of Americans think that job creation is more important than federal deficit-cutting, and 50 percent think the debt ceiling deal should have included steps to increase federal tax revenue. Sixty-three percent said taxes on wealthy households should be increased.
(My favorite part of the poll is where respondents were asked to describe their feelings about “the way things are going in Washington,” with “enthusiastic” being one of the choices. One percent chose “enthusiastic.” )
In the Washington Post, Ezra Klein has a thought-provoking column today reminding us that governments can have only limited impact on the state of the economy.
That has become painfully obvious this week, after the U.S. government more or less resolved the “crisis” that resulted from its own debt ceiling rules. Stock markets responded with a scary selloff that is continuing today, Aug. 4.
Governments here and abroad have no quick fixes for the fundamental problem of this economy: The prosperity that peaked in 2006-2007 was based on borrowed money. Money was borrowed and lent on the assumption that there was no limit to the rise in real estate prices. When that foolish assumption became demostrably false, there was a crash. Household mortgages were under water, banks had books full of bad loans, and the big financial firms were stuck with all kinds of complex instruments that multiplied their losses.
Now everyone is retrenching. Lenders have less to lend and are more cautious with what they do have. Consumers are (rightly) cautious about borrowing and spending.
The economy needs some real productivity to replace the collapsed economy based on borrowing and consumption. Eventually, we hope, entrepreneurs will provide that. But it won’t happen fast.
Here’s another good summary of the current situation from Fox.
Over at the Seattle Times, Jon Talton is always worth a read too.
Here, prominent conservative David Frum, on his blog FrumForum, suggests that events are proving that Paul Krugman, not the Wall Street Journal editorial page, has been proved right about the economy.
Amid the sighs of relief that the U.S. has avoided default on its debt payments, there are widespread fears in both the public and the private sector that curbs on government spending will push the economy back into recession.
In the U.S., the debate is pretty much colored by partisanship. The deficit hawks and the embattled band of economic stimulus advocates don’t agree on the facts, much less on policy. But on NPR this morning, I heard an interview with a private-sector Japanese economist who believes the U.S. is about to repeat the mistakes made in Japan in cutting back on spending at a time when the economy needs more stimulus–a position that President Barack Obama himself has abandoned.
I don’t know if this economist is correct, and neither do you. But we may all know in a year or so. If I were the Democratic president at this moment in history (and I’m glad I’m not) I would spin the debt ceiling compromise this way: “Okay, Republicans. You got the deal you wanted. Spending cuts. No tax increases. Let’s see if this stimulates the economy to create jobs. This economy is yours now. I invite you all to run on the economy’s performance in the second half of 2012.”
It’s also worth noting that the deal approved earlier this week reduces the rate of increase in the national debt. It does not put us on a path to eliminate that debt. Check out the chart on this report, also from NPR.
U.S. Rep. Rick Larsen, Democratic congressman representing the district that includes Whatcom County, has issued a press release saying he voted for the debt ceiling compromise because it averts a federal debt default and mostly protects Medicare and Medicaid.
“Now we need to start creating jobs,” Larsen said. “We must protect investments like college loans, research and development and other efforts that will help America maintain a cutting edge economy. These investments will help America stay ahead of the competition and set the foundation for future economic growth.”
He also observes that the federal government will eventually need to raise more revenue if national leaders are serious about balancing the budget.
Here is the full text from Larsen:
“Today I voted to avert a default crisis. The impact of default on the low-income, middle class, and seniors would have been far worse than any of the cuts that are found in this bill.
“The people I represent asked me to protect Social Security and assistance programs for the poor, and this bill does that. This package totally protects Social Security, Medicaid, veterans’ benefits, food stamps and other critical programs from the draconian cuts some members of Congress wanted to see.
“The package largely takes changes to Medicare off the table. It protects Medicare from becoming a voucher system – a serious threat that would have ended the guaranteed benefit and program as we know it. But providers could take an overall two percent cut in reimbursement.
“Compromise is never perfect.
“I am disappointed that revenue is not a part of the final package. A truly balanced approach to balancing the budget over the next ten years requires revenue.
“On the other hand, the package does not exclude revenue in the future, and the President still retains veto authority over extension of the Bush-era tax cut for the top income earners.
“This bill forms a bi-partisan congressional committee to identify a minimum of $1.2 trillion in deficit reduction over the next ten years. The committee must provide recommendations to both chambers of Congress for a clean, up-or-down vote.
“If the committee fails in its task, a trigger that is more like a hammer, will result in $1.2 trillion in across the board cuts. Half of these cuts will come from domestic programs and half from defense and security spending. That is a clear incentive for the committee to reach a compromise.
“Now we need to start creating jobs. We must protect investments like college loans, research and development and other efforts that will help America maintain a cutting edge economy. These investments will help America stay ahead of the competition and set the foundation for future economic growth.”
End press release
After weeks of excruciating, sometimes nauseating political maneuvering over the debt ceiling, a deal has been struck. Or has it? According to this story in the Washington Post, GOP Presidential frontrunner Mitt Romney has come out in opposition to the deal, a top Tea Party official has denounced it, and Michelle Bachman says she will vote no.
(As of 10 a.m. PDT, I see no comment yet from our own delegation, U.S. Rep. Rick Larsen and Sens. Patty Murray and Maria Cantwell.)
But amid all the commentary about who scored a political victory and who suffered a political defeat– written by D.C. reporters who cover national government as though it were a sporting event–it’s pretty hard to sort out how this deal will impact our economy and the people who depend on it.
Who could defend a government that depends on ever-increasing levels of debt to finance its operations? That approach, on a household level, caused the Great Recession we’re still trying to survive. It would, in the not t00 distant future, lead to a disaster in government financing as well.
But the relatively sharp cuts in government spending that are now in the works may have some awfully unpleasant side effects too. People who think this deal will help revive the economy may be in for a shock. As of this moment the Dow Jones is down another 100 points.