Here we are again

I’ve been posting only sporadically for months. Partly, that’s been because my day job got a lot busier, but part of it I’m coming to realize was burn-out with the debt ceiling issue. That’s what was consuming most of my attention and posts. It was an important issue, and I tried to highlight what I saw as the most important aspects of it: 1) It was a manufactured crisis. Congress had been raising the debt ceiling without drama for dozens of years. Many of the same Republicans now refusing to raise it without a massive deficit-reduction agreement had voted to raise it seven times during the Bush presidency without batting an eye. 2) This manufactured crisis was an act of stunning, irresponsible insanity by one party that refused to negotiate the deficit-reduction agreement they demanded in good faith. They turned down multiple deals, any one of which would have been the most conservative approach to deficit-reduction ever passed with far greater ratios of spending cuts to tax increases than ever contemplated. This despite the fact that cutting government spending in the midst of the lingering after-effects of the Great Recession is, in itself, a pretty insane idea.

So, finally, Congress lurched to an irresponsible solution: The debt ceiling would be increased enough to get through to 2013 without another hostage crisis, but a congressional super committee was charged with finding a grand bargain to reduce the deficit by another $1.5 trillion – on top of a deal hammered out that cut nearly $2.1 trillion in spending. If the super-committee failed, both sides would have to swallow a poison pill in the form of automatic triggers: painful spending cuts in both social programs and defense spending.

But, predictably, the super committee ran into the same problem that Congress did during the debt-ceiling debate: Republican refusal to even consider tax increases. The entire deal would have to depend on deep cuts to Medicare and other social programs that benefit the poor and the elderly. The closest Republicans would come to a tax increase was to offer to close a few loop holes dealing with write-offs for corporate jets – but even that came at the cost of guaranteeing the extension of Bush tax cuts at a cost to the deficit of $3.7 trillion. So they offered up $3 billion in revenue increases for a guarantee for $3.7 trillion in revenue decrease. That’s how Republicans compromise.

So, essentially, we’re at the same point we were when my blogging idled: One party is demonstrably insane, refusing all attempts at reasonable negotiation, no matter the consequence to the economy or the nation. I’m starting to wonder if I cut back on the blogging because I was busy – or because writing about this crap is so depressing. Especially since, despite what Republicans say, none of this is actually about reducing the deficit. If it were, Congress could do nothing and practically eliminate the deficit within the next five years, as demonstrated by this enlightening chart from Talking Points Memo.

Doing that would require no massive cuts to Medicare, not cuts to Social Security, no further cuts at all. This is not the ideal course of action. Allowing the Bush tax cuts to expire would hit a lot of people who can’t really afford a tax increase right now. Phasing out the Bush tax cuts totally is, I’m convinced, the best course of action, but it should be done responsibly and over time, not in one shocking move during the midst of a fragile recovery.

If Congress were acting in the best interest of the nation rather than concentrating on partisan politics, the super committee would have come up with a balanced plan that reduced the long-term deficit through a balanced mix of spending cuts, tax increases and entitlement reforms while focusing in the short term on a large economic stimulus like President Obama’s jobs act that would put people to work rebuilding the nation’s crumbling infrastructure and injecting cash to the states to keep them from having to make further public sector job cuts that have been acting as a real drag on the economy.

The chances of that happening are effectively zero. The nation’s best hope right now is for the American people to see the GOP for what it has become and repudiate it absolutely in 2012.

But the 2012 election is a long way away. We need action now.

2 Responses to Here we are again

  1. James GIlligan says:

    Of course the democrats are blameless despite their failure to propose or enact a budget in the last three years even though they dominated both Houses of Congress and the White House during the first two years of Obama’s sad tenure. Despite your loyalty to discredited Keynesian economics we don’t have a revenue problem, we have a spending problem. S&P didn’t downgrade our financial instruments due to our failure to spend enough, it was because of our propensity to spend too much. If we fail to rein in entitlements, we will become a recapitulation of Greece and Italy and Spain.

    • Joe Mostowey says:

      James GIlligan wrote “Of course the democrats are blameless despite their failure to propose or enact a budget in the last three years even though they dominated both Houses of Congress and the White House during the first two years of Obama’s sad tenure.”

      Here you go with that sad, whiny refrain -Again!. Southern Blue dog Democrats, like their Midwestern counterparts are no more democrats than you are. What Obama had in the senate and house were enough Republicans, and republican lites (Blue dogs) to stall almost every initiative – Thats why most Blue dogs were voted out -they were too cowardly to call themselves republicans, and too republican to attract moderate independents and Democrats to vote for them.

      Obama has done exceptionally well considering the republican and blue dog opposition he faced.

      James GIlligan wrote “Despite your loyalty to discredited Keynesian economics we don’t have a revenue problem, we have a spending problem. S&P didn’t downgrade our financial instruments due to our failure to spend enough, it was because of our propensity to spend too much. If we fail to rein in entitlements, we will become a recapitulation of Greece and Italy and Spain.

      And again with the twisted tale- or maybe it’s willful ignorance..

      From S&Ps Press Release:

      http://blogs.wsj.com/marketbeat/2011/08/05/sp-downgrades-u-s-debt-rating-press-release/

      Quote:

      We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

      Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty, consistent with our criteria (see “Sovereign Government Rating Methodology and Assumptions,” June 30, 2011, especially Paragraphs 36-41). Nevertheless, we view the U.S. federal government’s other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.

      …..Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.

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