Wednesday, June 29, 2011
From the White House, National Journal’s Marc Ambinder reports that Obama believes he can get the Republicans to cave on taxes if he first lets the bond markets panic in late-July. Obama then hopes that Wall Street and the U.S. Chamber of Commerce will force Speaker John Boehner, R-Ohio, to compromise, like he did on the FY 2011 budget deal earlier this year.
Outside the White House, more and more prominent Democrats are questioning whether the debt limit is even constitutional. Sen. Chris Coons, D-Del., became the latest Democrat to raise the argument yesterday. If there is no debt deal, and bond markets do panic, what is stopping Obama from just ordering Treasury Secretary Tim Geithner to issue more debt? If Obama can just ignore the War Powers Act, why not the debt limit too?
That is a very dangerous game of chicken to play in lieu of actual leadership.
Everybody agrees that we need to promote economic growth. Liberals believe that you have to spend a ton of money now to increase aggregate demand so that people start spending and businesses start hiring. That will increase economic activity and therefore tax receipts and therefore the long-run will take care of itself. Conservatives believe that people are not spending and investing now because they are worried about the long run, so if you solve (as in reduce or eliminate) the long-tail liabilities people will be more willing to consume and take risks now and therefore the short-term will take care of itself. Liberals have had their way for almost four years, and it has not produced enough economic growth to make people secure enough in the future that they are willing to take risks now. So let's try the conservative way, with a bone to liberals to get the votes.
1. Increase the age of eligibility for Social Security and Medicare to 75 gradually, on a sliding scale. Add, say, three months to the retirement age for ever year a person is under 65 today.
2. Eliminate cost-of-living increases for Social Security, and thereby create a powerful constituency -- old people, and future old people -- who will oppose policies (fiscal, monetary, and regulatory) that promote inflation. There is no better way to prevent future debt bubbles, so it might save us a cycle of boom, bust, and bail out.
3. In return, repeal all the Bush tax cuts -- not just those for "rich" people.
That still leaves a lot of work to be done -- regulatory reform, the development of a rational system of taxation, re-fixing health care finance, deflating big state governments, and getting more bang for our buck out of the Pentagon -- but if our "public servants" just did those three things the world's capital and entrepreneurs would flood in and the American economy would explode with joy.
Why would not raising the debt ceiling panic the bond market?
There is still ample revenue pouring into Washington every month. Use that revenue to service the debt first and there is no default.
re your solutions:
I like one and two. I am wondering if there is a de facto freeze on Social Security increases as it is?
I don't think a tax increase on a dead economy is a good idea at all.
Sorry TH, but the numbers in your plan won't work. Not even close. The enormity of the gaps we have are staggering.
If USA interest rates start going up -- even a little -- it'd wipe out anything that you or Paul Ryan propose by way of cuts.
CBO estimates of deficits already assume that the Bush tax cuts expire after this year (or 2012, I forget which).
Obama's 2012 budget assumes over 4.0% GDP growth for the next several years. But if you backed out extraordinary fiscal and monetary policy, real private sector GDP would actuallly be in sharp decline.
Obama seems to want the Republicans to cave on "revenue enhancements by improving our spending through the tax code". Private jets have now been added to the oil industry as targets. He must realize that these things aren't even a drop in the bucket.
There's a definite threat to blow through the debt limit on August 3. Could you get a legal opinion that such new debt was legal? The relevant language in the 14th Amendment that the like of Coons and Ezra Klein cite is qualified by the phrase "authorized by law" Last I read, the House is supposed to have first control over spending. The House has passed a bill. The ball is in Harry Reid's court, ins't it. Que pasa?
Of course, I also oppose repeal of the Bush tax cuts and most other tax increases. But you can't get the votes for cutting off the long-tail liabilities without tax increases for the liberals. So, faced with that reality, do you support another generation of gridlock that condemns our children to a wretched standard of living, or a deal that -- however distasteful to those of us who want small government -- puts a big dent in the entitlements? Put another way, is there any amount of spending cuts that would, as part of a political compromise, be worth a tax increase? To me there is, but it has to be long-term and tough to reinstate, not short-term, or else it is a bad deal.
If you aren't dealing with Medicare and Medicaid, you aren't dealing with the long term problem. Social Security is nearly in balance long term (though the sum out of balance is enormous, because the program is enormous) and could be fixed with just a change in the inflation adjustment plus something along the lines of your gradual retirement age increase.
Medicare and Medicaid, because of their much faster than GDP growth rates, represent most of the problem. If we don't change their rate of growth to come close to GDP growth or less, we can't balance the budget or even get to primary balance long term. We could pay for their growth for awhile with a repeal of the Bush tax cuts for all earners, but that will reduce growth rates, and make the Medicare/Medicaid growth rate problem worse over the long run.
The market needs to be empowered to solve the cost growth problem. And that probably means we need to reform the FDA and medical school certification so we can get more doctors, more NPs, and more treatments/devices that reduce costs (even if they are only equally or even a little less efficacious). TH, this is your area - how can the FDA review process be improved to account for gradual improvements, cost reductions, productivity improvement, and other efficiency-oriented gains that aren't necessarily health gains?
'Bams presser today was flat out lies! The dems have no intention of cutting spending on anything!
If 'Bam were honest, he would agree to slash several trillion in spending and then dare the Republicans to fix the tax code. But, he is not honest!!
I regret supporting Obama in 2008; I will not make the same mistake again. My union may suffer from the flushing of the Obama government. The only way we may salvage anything is by running someone instead of Obama, maybe, Clinton, Cuomo, Biden or Kerry.
Obama went public today not to advance a negotiation, but to lay blame. He knows that
Boehner won’t agree to any tax raise. Boehner can’t, He doesn’t have the votes.
Constitution Art I, Section 7 says: All bills for raising Revenue shall originate in the House of Representatives. But there’s a meme going around that the House is somehow holding the Senate and President hostage. This ignores the shellacking that the Democrats took in November 2010.
So does Obama just blow through the Debt Limit? My bet is he does.
"Everybody agrees that we need to promote economic growth."
Where in God's name did you get this idea? The President most certainly does not agree we need economic growth. I've heard him say the growth would solve many problems and that growth would make his reelection easier, but I have never heard him say that he thinks economic growth is a positive enough virtue that he would act to "promote" it.
In fact, I think all the available evidence says he hates growth except tto the extent that economic growth promotes his idological agenda.
Anon 6:49 -- Good point -- I accept the correction. Although the political imperative is rising -- if we don't get economic growth, the Republicans could nominate [insert your choice for their lamest candidate] and have a good chance at winning.
Really enjoyed your constructive offering Tigerhawk. Great ideas and insight. A wealth of reason.
But the raising of taxation, removing the Bush Tax Cuts, will hurt Our Economy terribly. The Capital Gains Tax increase alone would be damning to the US Economy which is on the brink - still stuck in a disastrous Malaise largely exaggerated by Obama's policies.
The Clinton Tax Increases hurt Our economy tremendously, taking a long time to affect during the great economy he inherited. We finally felt the pinch after the bubble burst - in late 1999 and 2000. A wonderful Nobel Winner in Economics made the case quite soundly about how the Democratic Partisans hurt the US Economy by failing to return to a lower tax rate in the late 1990's when Recessionary evidence was growing more apparent (he made it clear they should have never raised the rates at all).
I have no problem with deals, but unfortunately the Democratic Partisan mantra of trying to raise taxation to grow revenue is a loser. Corzine is a prime example of this glaring mistake. It never works. You have to grow the economy, and thus you have to lower taxation.
Our Corporate tax rates are the highest in the Globe... Cut them.
The Democrats will continue to block any sanity anyhow. They are destined for disaster. We are going to be forced to ride it out. It will be painful, but it may just be the final nail on the Democratic Party for a long time - then you can actually make some sincere changes back to sanity and deal with the mess.
What Obama did today, a stunning effort in pure Partisan fraud, is a vivid reminder there will be no reasoning with this insanity.
It truly seems to be Mr. Obama's "Weiner" moment. That incredibly foolish moment when Anthony Weiner decidedly to boldly lie to the PRESS. The claim "I was hacked..." was the most insane political offering.
Obama blamed Congress for the insane Spending, for not handling the Deficit he is largely responsible for, and for playing politics - creating a "fuss" over a WAR he wages without their authority.
You simply cannot make it up, how the mighty, lofty, Hope and Change has fallen. The Seas were once going to rise. Now Obama is boldly offering lies about his War - insulting Members of the House and Senate whom all have far more experience in every aspect of life/business/government than he dreamed.
In fact, this display of the Democratic Partisan brilliance even tried to suggest jobs can be obtained by the "construction" of roads, bridges, etc - with more Government spending. That shovel ready nonsense is what he was just joking about a few weeks ago, more failure.
The Nation can handle a lot of garbage, the PRESS will enjoy helping their Partisan devotion to obscene levels, the spoiled Senators - Representatives can stay on a Partisan game plan even when it is nutty, but there is this looming LIMIT to it all.
Obama may have just crossed to the other side today. The hubris, the insulting demeaning, the childish class warfare, the endless blame, the utter denial and fraud, etc. It is all just too much.
A real Weiner moment in the Obama Presidency. This reminds me of the Carter Malaise all over again. Only a chump on the payroll, who is in a deep coma, would buy this fraud.
I'd rather privatize Social Security and Medicare, and take the limits off IRAs and HSAs. We're paying 7.65% of every paycheck top line in taxes to support current transfer payments to others, and the unfunded liability of SS is in the trillions (unfunded, I say: think those IOUs in the Trust Fund actually are going to get paid?) But wait: we can't handle our own retirement investments? Progressives have been saying all along that the average American is just too stupid to see to his own affairs: if only we could understand their message, we'd agree with them, and all controversy would evaporate.
Let us be required to commit those 7.65% to retirement investment vehicles of our own choosing; we can't do worse than the Feds have done, and we'll likely do a whole lot better. Put those 7.65% that employers pay on that same paycheck top line back in their hands. Imagine the results of a 7.65% reduction in the cost of doing business.
Now, retirement age becomes our choice and COLAs become irrelevant.
Next, an across the board reduction in spending of 10%. No exceptions. Then keep cutting, more selectively, until the deficit is eliminated. Cut some more until Ryan's (for instance) $6T reduction over his interval is achieved. With spending reduced below revenue, there is no current deficit, and so no current borrowing needs (beyond the usual cash flow, short term convenience needs), and so no need to raise the debt ceiling. Split the now surplus revenues exclusively into two purposes: debt paydown and a "rainy day" account equal to one year's topline (i.e. unadjusted) expenditures. This fund is untappable until the President certifies an emergency that needs to tap the funds. The debt just stopped going up; now it's actually coming down.
@E Hines, I would also like to privatize Social Security, but George Bush tried to make that happen with Congressional majorities and was not able. Since then we have had the financial crisis, which makes it very easy for Democrats to demagogue the privatization alternative. So politically I think that position, which I prefer, goes no where.
Health care will also take a lot to straighten out, because it will be very hard to take away the broadening in benefits under Obamacare. You'd need a massive GOP majority in the Senate, well above the filibuster threshold, and a Republican president.
So my interest is in the art of the possible. Where are the elements of a compromise, a trade, that significantly reduce the long-tail liabilities?
The Democrats seem convinced that they will win political points in letting the GOP follow through on their threat to stop an increase in the debt ceiling. That's because the first thing the President will do is stop SS checks from going out and stop paying Medicare reimbursements. He might even stop paying military salaries, though, on second thought, that might be too far a step even for him (who cares not a whit for his country generally).
If the GOP is serious about this, they need to decide right now what bills should be paid and which not, codify those instructions in a bill, pass it in the house and force the Senate to make the strategy obvious. If the administration then follows though on the strategy, their disgusting politicization will be clear for all to see.
Personally, I hate lines in the sand types of arguments, like this one, because everyone quite clearly loses when the fight gets to it's inevitable and often unavoidable climax. Neither side wants to give up "face", as a western interpretation of the Chinese concept would describe it, and so the argument takes on a life of it's own.
The GOP has made it's point: we cannot acheive real reform of entitlements with Democrats anywhere near the levers of power. I suggest they cave sometime over the next two weeks, while simultaneously and very publicly calling for an election mandate in 2012. I would even suggest they make the entire negotiation public over the next two weeks, put Ryan (their best debater) right in front of the cameras, and let the people see how disgusting the Democrats really are.
re repeal Bush tax cuts:
If you are a GOP House member and you vote for repeal of the Bush tax cuts, you need to consider that you could be challenged from the Right in the Primaries next year.
That means increased fund raising for a primary battle, an alienated base.... things incumbents are wise not to inflict on themselves.
Furthermore, agreeing to an economy slowing tax increase makes the GOP complicit in extending the economic downturn. It also would defuse the 'tax and spend' grenade they like to lob at dem candidates.
“Where are the elements of a compromise, a trade, that significantly reduce the long-tail liabilities?”
There are none.
This is covered like it’s a big qualitative he said – she said. Obama just wants some “balance”. If you move a few billion here, and just get the oil companies to cough up a little more – for the kids! Voila!
But it’s quantitative. If you look at the spreadsheet, and play with the variables you can’t make the numbers square. Not without radical change. That’s not Left vs Right. It just is. Thus, in just a few years, we will have a much bigger federal government or a much smaller one – the middle won’t hold – it’s not financeable.
Your typical American senses this – would rather not deal with it – and isn’t getting told it.
Obama must understand this, but what would Cesar Chavez do?
The upcoming fight over the Debt Limit isn’t about fixing the debt problem as much as it is about Power. Will Obama cut the House out of appropriations, or not.
Am I wrong?
The President is personnally popular, though ineffectual. So far as I can see, there are no indications that the debt ceiling game of chicken has hurt his electoral prospects and political standing.
The Congress is and has been unpopular, and the Democrats, seen by the public as agenda-driven ideologues, were forced to face the consequences of that perception, and took it in the electoral neck in 2010. The GOP is perilously close to falling into the same trap.
The GOP needs to focus attention on the Democrat Congressional failures, starting with their Senate leadership's inability to even propose a budget at any time in the last two years. Make this fight about Reid and Pelosi, not Obama. If the voters become convinced that as long as one Democrat is in the Congress our economy is at risk then we have a chance of fixing the multiplicity of problems the nutjobs have created. Focusing on the president, who has no ability to fix the problems anyway (since he doesn't even see a problem), is looking entirely in the wrong direction.
The people are slowly learning that our fiscal state is in crisis, and at some point the voters will decide who can best deal with the problems. President Obama, whose lack of leadership, focus on golf, regulatory overdrive, corruption and rhetorical screw-ups have not even touched him politically, will probably not have to take the fall for a failure in this dealmaking. The GOP needs to remember that this fight is not where we will win the war, and find a graceful way out.
Ed Morrissey says the President has declared negotiations at an end, "The White House effectively turned down an invitation by Republican Senate Leader Mitch McConnell for President Barack Obama to visit his members on Capitol Hill on Thursday to discuss raising the debt limit."
Press Secretary Jay Carney described the reason for the abrupt disinterest in America's fiscal mess as a "conversation not worth having."
No word on the impact this decision will have on open hours at the Andrews Base Golf Links.
TH at 0819: George Bush tried to make that happen with Congressional majorities and was not able. Obamacare was first tried under Clinton and he failed, albeit with less than Bush's majorities. Also, Bush didn't have the Tea Partiers demanding both spending cuts and to be listened to. 2010 was the result of that failure. Obamacare was passed the second time around, contributing to 2010. Certainly it'll be hard (and Bush's effort was a half-measure, too, as was Obamacare 1.0 under Clinton).
Today is different. Certainly it'll be difficult, but that's no reason not to try--"hard," after all, means "possible."
You ask where are the elements of compromise. Where indeed? The Democrats are perfectly willing to finish blowing up the economy if they can't get their tax increases. They've already refused to compromise. McConnell is right on this one: the niggles around the edges, eliminating these deductions, keeping those, are better in a general tax regime overhaul, not in a cut spending far enough to not need to keep borrowing bill.
Again, where is the compromise? On what basis do we compromise on the future of our grandchildren, on the future of our nation? Spending needs to be cut. The debt limit does not need to be raised.
Obama refuses on all counts. He, and the Democrats' "compromise" efforts are nothing different from Sophie's Choice.
What we see in Greece, we will see in America. What is happening in Greece?
I lived in Greece for over a year. Been there several times. It is a very very very socialist country. The Communist party is very active, huge, along with other socialist groups.
There is not enough money to fuel the Socialist Utopia in Greece. That is what is happening. The Unions demanded so much, all the time, which they all got---there is no more money to support it all. It is all smoke and mirrors.
Social Security, Medicare, Health care for everybody, unemployment insurance, All these entitlement programs, food stamps, et. al., is the Socialist Utopia. There is something towards 50 Trillion in unfunded liability for all this social programs in America.
There is NOT enough money in the whole world to fuel the Socialist Utopia in America. Fantasy is hitting Reality. There is still some 63 Trillion false security from the Credit Swap fiasco still floating out there!
Government is not about social programing. This great socialist Utopia is going to crash around your ears. It's all going to end and Obama is trying hard to crash the economy. The Economy will crash, soon.
I've given up on the spineless Repubs. They will vote more for the Debt and the Democrats will keep on spending. There is nothing that will stop this.
I just had to laugh when reading this comment from an anonymous Democrat:
"From yesterday's CBS Poll:
Most to Blame for the Condition of the Economy: Bush administration 26%, Wall Street 25%, Congress 11%, Obama administration 8"
Now you see, knowing CBS very well, this could mean they interviewed a number of their own employees at the Station in NYC, they found 26 employees who work as fake 'journalists' to blame GW Bush, 25 employees who work in the UNIONS as production labot to blame Wall Street, 11 interns at the Network blamed Republicans in Congress, and for the final 8 votes blaming Obama - they counted out of the near 20,000 unemployed Americans who applied for the ONE job being advertised as available at CBS that week. All 20,000 blamed Obama, but CBS only counted 8.
Someone posting a meaningless Partisan constructed Poll, attempting to defend a Democratic Partisan's utter failure, is a sign things are going very badly for the Democratic Party.
Of course, someone just joked, reading this silly CBS poll posted here, and amusingly stated, "Does that mean 26% blame GW Bush for not staying in the White House past his 2 Terms, thus stopping the disastrous Obama and the Democratic Partisans from making such a mess and saving the US Economy?"
In return for a tax increase, I would seek:
1. A significant broadening of the base (ie, a tax sheme that requires some payment from every one down to the poverty level) and elimination of the mortgage interest deduction for interest amounts greater than $25,000.
2. I would approve your proposal on raising the enrollment age for Medicare and SS, or something like it in the very frequently suggested alternatives. I could even get behind the Paul Ryan proposal, which is itself an Alice Rivlin/Brookings proposal (ie, Democrat in origin)
3. Most importantly, I would seek an emergency ten year hiatus on federal control of new oil drilling. That's right, I'd issue permits in batches unless the applicant is demonstrably a scumbag (environmental or other).
4. I would seek a three year freeze on new regulatory rules.
Do these things and our deficit will turn to surplus well before the end of President Perry/Bachman/fill-in-the-blank's first term.
"Do these things and our deficit will turn to surplus"
No it won't. Your proposals are laudable, but not even close to sufficient because the gaps are so staggering. They're staggering based on official White House projections that are laughable in their optimistic assumptions. I can credibly project $2 trillion or even $3 trillion annual deficits in 2012 to 2013 using the White House's own spreadsheet but using a set of pessimistic assumptions that run from probable to quite possible.
Come Aug 2, if Boehner doesn’t cave, Obama will have four choices:
1) Accede to some version of the House bill, which means big cuts to entitlements;
2) Pay interest to China, but not mail checks to seniors;
3) Mail checks to seniors, but not pay interest to China; or
4) Blow through the debt ceiling.
#3 would trigger an early End of Days. Obama is always better off with #4.
#2 can’t last for long, before Obama moves to #1 or #2. It’d serve as a stopgap stratagem to shift blame to the Republicans.
So his real choices are between #1 and #4.
Unless Boehner caves, the choices are this stark because of the Law of Large Numbers – you can’t solve this with your typical Congressional compromises. I don’t expect Boehner to cave. If you think Boehner’s weak, then you really haven’t been watching him. The Democrats will continue efforts to scare some Republican House congresscritters into breaking ranks to join in league with Nancy, Queen of Hearts, but I don’t expect that to work.
Obama won’t pick #1, given his ego and core beliefs. So expect #4.
Obama’s argument for #4 is that as President he needs to honor the promises made by past Congresses and Presidents, rather than accede to terrorists like Boehner. Forget the dead hand of the Constitution. Forget that election back in November. [ Flashback to the day after that election ]
Obama’s blowing through the debt ceiling will have momentous consequences. It’ll expose the stark political fault line between those of us who get government checks and those of us who pay for them.