Saturday, April 30, 2011

About those free range little Krugmans and Manzis

There's an irony in Jim Manzi's moment of communion with Paul Krugman over Krugman's nostalgia for early-60s suburbia:
The safety and freedom that Krugman describe are rare now even for the wealthiest Americans – by age 9, I would typically leave the house on a Saturday morning on my bike, tell my parents I was “going out to play,” and not return until dinner; at age 10, would go down to the ocean to swim with friends without supervision all day; and at age 11 would play flashlight tag across dozens of yards for hours after dark.

Here's the thing: leaving aside demographic changes in Krugman's native Merrick, NY, most American suburbs today are very safe places. The murder rate nationally in 2009 was 5.4 per 100,000 people, vs. 5.1 in 1960. Violent crime rates nationally were at lower in 2009 than at any point since 1973. It's true that the 2009 violent crime rate remained  two and a half times that of 1960, but most of that crime was concentrated in poor inner city neighborhoods (and increased reporting of rape probably accounts for some of the difference over time). I doubt that most little Manzis or Krugmans living on suburban streets today are at significantly more risk of being crime victims than their grandparents were in 1960.

What's changed is parents' perception of risk -- and tolerance for it. Perhaps the crime-ridden 1980s changed the culture, or perhaps increased affluence (we'll get to that...) inevitably makes parents more risk averse, or perhaps we're just all made permanently jittery by too much information, or maybe our dual-action superparenting ethic renders us incapable of leaving them kids alone. As Megan McArdle points out, too, back then, neighborhoods full of stay-at-home moms increased the sense of on-the block safety.   In any case, as parents we've gone collectively insane. As Lenore Skenazy has documented, parents in many suburbs won't let their kids walk two blocks to school:

Friday, April 29, 2011

Inchoate moral intuition is not "hypocrisy"

UPDATE 5/4/11: Megan McArdle rebuts my points one by one; my response here.
Andrew Sullivan predicts that the assertion below from Robin Hanson, glossing a video in which students struggle to answer why students' GPA shouldn't be "redistributed" as pay is by taxation, will "piss off some liberal readers."  Boy is he ever right -- and Andrew, doesn't it piss you off? Just what was your position on the PPACA, or on the extra revenue called for in Bowles-Simpson? In any case, here's Hanson:
Most people believe that redistributing money within a nation is good, but that redistributing GPA within a school is bad, and if asked why these should be treated differently, have little to say. My point isn’t to say one can’t come up with reasons to treat these differently.  One could, for example, argue that we prefer differing school signals to help employers sort people into jobs, to achieve higher productivity so that the pie is bigger when we redistribute money. My point is that most people can’t think of such reasons, making it pretty unlikely that such reasons are the cause of their opinions...

We humans are much better at coming up with reasons for opinions than at choosing coherent sets of opinions – we clearly have a powerful inbuilt capacity for hypocrisy.
I should proceed with caution here, because I get the impression we're dealing with a very smart (if smug) cookie.  Still, in response to this challenge from Hanson added as a postscript...
Those who think it unfair to evaluate what students said on the spot, how much better do you think the reasons would have become if the students were given an hour to think about it by themselves?  A week?
Let me grant myself an hour. And I'm happy to share whatever grade I get.

1. GPA is more tightly tied to individual performance than earnings are. Granting that a) grading is an imperfect measure of the quality of student input, and b) earnings bear some relationship to performance, it's still true that student performance bears a closer relationship to grade than the social utility of the average person's work does to that person's earnings.  Also, we have the right as a community to take some pay back as price of admission, and no right because no motive to take GPA back. Collectively, we pay someone for performing a service because we want what they're selling. Taxing back a measure of that payment is as organic to human society as paying it out  in the first place, since tax of one kind or another is the price of admission to any human community. "Taxing" the measure of school performance, on the other hand,  only makes sense if you regard GPA as a commodity rather than as a condition for further learning.

Thursday, April 28, 2011

"Stand by" for a Ronald Reagan deficit reduction proposal

Peeking into Sitemeter this evening (okay, I admit it...), I saw that someone from the domain had landed on xpostfactoid through a Google search for "Reagan standby tax."  Searched with good reason!  Check out this throwaway proposal from the 1983 SOTU (cited in my post The Liberal Reagan):
And fourth, because we must ensure reduction and eventual elimination of deficits over the next several years, I will propose a standby tax, limited to no more than 1 percent of the gross national product, to start in fiscal 1986. It would last no more than 3 years, and it would start only if the Congress has first approved our spending freeze and budget control program. And there are several other conditions also that must be met, all of them in order for this program to be triggered.

Now, you could say that this is an insurance policy for the future, a remedy that will be at hand if needed but only resorted to if absolutely necessary.
Now try to imagine Barack Hussein Obama proposing a trigger for a tax hike, rather than for the across the board spending cuts he's proposed, if deficit reduction were not on target by 2014.  Capping that emergency tax at 1% of GDP means capping it at a cool $152 billion in additional yearly revenue at this year's estimated GDP -- maybe $160 billion by 2014. Levied over eight years following, that's more than the total tax increases envisioned either in Obama's plan or in Bowles-Simpson.

Wednesday, April 27, 2011

An unfortunate association

This is strange. Michael Scherer has a serious point to make about the reactionary paranoia fueling birthirism.  But he seems, in the process, to validate that paranoia.  Of birthers he writes:

They seek an emotionally satisfying outlet for their fury at their country’s decline, the decade-long collapse in the credibility of its institutions, and the rapidly changing demographic makeup of its leadership.

Scherer does not say, and I'm sure does not mean, that "the rapidly changing demographic makeup" of U.S. leadership is causally connected to the country's alleged decline and the "collapsed credibility of its institutions." But grouping the three together as comma-separated items does seem to imply a causal link, or an association of diversity with decline.

The interesting thing about Obama's birth certificate

is that his mother, Stanley Ann Dunham, apparently first signed her name "Ann Dunham Obama" and then added Stanley in parentheses up above. 

In the excerpt of Janny Scott's new book about Obama's mother published in last Sunday's New York Times Magazine, Obama had this to say:
“She was a very strong person in her own way,” Obama said, when I asked about Ann’s limitations as a mother. “Resilient, able to bounce back from setbacks, persistent — the fact that she ended up finishing her dissertation. But despite all those strengths, she was not a well-organized person. And that disorganization, you know, spilled over.
Yeah, maybe a little..or else Mrs. Dunham Obama just did not like her first name. And oh yes, she was 18 years old.

Nice strong signature, btw. Call the French analysts!

End of the Age of America? Not quite so fast...

China's GDP is a bit less than half that of the U.S by conventional measures.; its population is about four times as large, and its rate of annual GDP growth about triple.  The IMF is now forecasting that China's GDP will surpass that of the U.S. by 2016.

The IMF gets to that watershed so quickly in large part by adjusting current figures for "purchase power parity" (PPP)-- that is, adjusting for the artificially low exchange value of the yuan.  PPP-adjusted, the IMF pegs China's current GDP at about 74% that of the U.S., as opposed to approximately 40% in 2010 as conventionally measured, according to IMF figures.

Brett Arends, reporting this forecast in Marketwatch, concludes:
This is more than a statistical story. It is the end of the Age of America. As a bond strategist in Europe told me two weeks ago, “We are witnessing the end of America’s economic hegemony.”
I wonder if that is necessarily so. Certainly not immediately.  At present, the European Union's economy is larger than that of the U.S., but it projects nowhere near the comparable military or soft power.

While China's population is about  four times that of the U.S., its per capita income, by conventional measures, was a bit less than 1/10 as large in 2010, according to the IMF. Call it 1/6, PPP-adjusted.  China spends 2.2% of GDP on its military, compared to 4.7% in the U.S (Stockholm International Peace Research Institute).  It collects 17% of GDP in taxes, compared to 28% for the U.S (Heritage).

Sunday, April 24, 2011

A presidential power play in passive voice

It's a cliche of writing instruction to admonish students to prefer active voice verbs to passive ones.  There are obvious exceptions, such as when the writer wants to emphasize the object of the verb rather than the subject.

Normally, though, you'd think that active voice works better when you want to emphasize the agency of the subject. Not always!

Ever since the 2011 budget deal was struck at the literal 11th hour, Democrats have been bemused by the apparent perversity of the president taking credit for spending cuts that Democrats were presumably fighting tooth and nail to minimize.  As details emerged and the media pegged the value of the cuts at about half the original sticker price, the administration stepped up its bid to take credit both for minimizing the cuts (preserving key "investments") and for signing off on them -- boasting about "the largest annual spending cut in our history" (true only in absolute terms).

The outline of the president's long-term budget plan posted at extends this rhetorical act of taking ownership of the deal.  And, to return to grammar, the passive voice helps make the claim more emphatic:
The budget agreement negotiated by the President last week represented the largest one-year reduction in discretionary spending in our history, even as it invested in areas key to our long-run economic growth and competitiveness.
Why not write "The budget agreement that the President negotiated last week..."? Shouldn't a forceful president's activity be accorded the active voice? No.

Saturday, April 23, 2011

Studied ambiguity in tax reform negotiations

There is a good deal of confusion and obfuscation on both sides of the debate over tax reform  -- at least, over the kind of centrist tax reform outlined in the Bowles-Simpson plan and being negotiated by the Senate Gang of Six.
The basic premise is to vastly reduce targeted tax breaks both personal and corporate while simultaneously reducing marginal tax rates.  The battlegrounds are presumably how much to reduce which tax breaks and how much of the resulting revenue to devote to lowering rates as opposed to deficit reduction.

For Republicans, the taboo is to "raise taxes."  Their potential cover is to lower marginal rates while raising the government's net income, most easily measured as a percent of GDP.  That's the point of obfuscation -- will they or won't they?  Can Coburn/Chambliss/Crapo sell Republicans on raising more revenue in any given year than the current tax code would bring in? Will they try?

For Democrats, the loaded phrase is to raise taxes on the wealthy, which they are sworn to do.  The problem is that that goal is generally equated with (or let's say mainly symbolized by) letting the Bush cut in the marginal rate for the wealthiest 2% expire. Comprehensive tax reform of the sort envisioned by Bowles-Simpson would render debate over the Bush tax cuts moot -- all marginal rates would be lowered (while in Bowles-Simpson capital gains would be taxed at ordinary income rates -- a major hike on the rich). Can Obama and the Democratic leadership in Congress get behind a plan that will reduce the top marginal income tax rate on the wealthy? Will they try?

Friday, April 22, 2011

Obama: better hedge than wedge

John Judis makes a strong case that Obama has got the wrong strategy for reelection: that by focusing on deficits, he is playing on Republicans' turf; that he should focus relentlessly on jobs, which is what the electorate says it cares about; and that he should basically be working to slam the GOP relentlessly for blocking whatever sheaf of job-growth plans he puts out, as they will surely do.

Perhaps Judis is right. But an unspoken premise in his argument is that messaging matters more than policy. Obama knows that as of now he can't get any job growth plans through Congress. Should he run on Republicans' refusal to pass his proffered plans?

What I think Judis should at least acknowledge is that Obama has already taken the best shot he could, in the runup to 2012, at juicing the economy. His huge gamble was the tax cut deal of December 2010.  In exchange for a Democratic pearl of price -- early sunsetting of the Bush tax cuts for the wealthiest 2% -- he won an (under the circumstances) enormous jolt of fresh stimulus, the key components of which were 13 months of extended unemployment benefits, a bit more than a 32% cut in individuals' payroll tax,* and accelerated investment writeoffs for businesses.  Moody's Mark Zandi pegged the value of Democratic agenda items in that deal at $336 billion. Republican agenda items in that deal worsen the deficit for relatively little benefit -- they were less efficient stimulus, but stimulus nonetheless.

Thursday, April 21, 2011

Craving salt in the wounds of time...

Wondering about the sad propensity of aging men captured by OkCupid below?

Robert Frost perhaps can't tell us why, but he can tell us how it feels. The pivot comes halfway through at "now" (my crude emphasis below):

Medicare funding in perspective

Keith Hennessey's Medicare primer* highlights a rather obvious funding fact recently brought into sharp focus by James Kwak. First, the basics of Medicare funding, courtesy of Hennessey:

There are three main sources of financing the program.
  • There are three financing sources:  dedicated payroll taxes, beneficiary premiums, & general revenues (income taxes).
  • payroll taxes:  2.9% of all wages.  ½ paid by employee, ½ by employer.
  • premiums:  25% of “part B” costs ≈ $96-115 per month.  High income seniors (income > $85K/person) pay higher premiums.
  • premiums:  a % of “Part D” drug costs.  (complex formula). High income seniors pay higher premiums.
  • general revenues = total spending – (payroll taxes + premiums)
Then, an elegant solution to Medicare funding per se, courtesy of Kwak (my emphasis):
We have to recognize that there are two separate problems, and they are not equal. The primary problem is health care inflation. The secondary problem is the long-term Medicare deficit. That’s a secondary problem because it’s largely a result of the primary problem.

Of these two, the Medicare deficit is the easier problem to solve: index the payroll tax to actual health care costs. This should automatically solve the Medicare deficit because as Medicare’s costs go up, its funding will go up at the same rate.*

Wednesday, April 20, 2011

"MedPAC on steroids" is toxic to many...

Hey, we're having a real debate about controlling healthcare costs.

Some "responsible" conservative commentators, a.k.a. New York Times op-ed writers, who expressed queasiness about Paul Ryan's plan to convert Medicare into vouchers of ever-shrinking value nonetheless praised Ryan for opening up discussion of how to control Medicare costs specifically and healthcare costs generally. The same is true of Obama's counter-proposal, a centerpiece of which is strengthening the mandate of the Independent Payment Advisory Board (IPAB) created by the ACA to limit the prices Medicare pays for various treatments.  A strong IPAB was one of Obama's chief priorities in the legislation. He would not fight for a public option, but he fought for IPAB.

Surprise surprise: the Wall Street Journal editorial board does not like IPAB:
Mr. Obama, by contrast, is relying on the so far unidentified technocratic reforms of 15 so far unidentified geniuses who are supposed to give up medical practice or academic research for the privilege of a government salary. Since the board is not allowed by law to restrict treatments, ask seniors to pay more, or raise taxes or the retirement age, it can mean only one thing: arbitrarily paying less for the services seniors receive, via fiat pricing.

Tuesday, April 19, 2011

Chronicle of an early social contract

In his new book The Origins of Political Order: From Prehuman Times to the French Revolution, Francis Fukuyama considers the origins of the social contract that formed the state, and speculates whether it could ever have been the product of a conscious decision on the part of a tribal society. He does not take this discussion where I thought he would:
     Thomas Hobbes lays out the basic "deal" underlying the state: in return for giving up the right to do whatever one pleases, the state (or Leviathan) through its monopoly of forced guarantees each citizen basic security. The state can provide other kinds of public goods as well, like property rights, roads, currency, uniform weights and measures, and external defense, which citizens cannot obtain on their own. In return, citizens give the state the right to tax, conscript, and otherwise demand things of them. Tribal societies can provide some degree of security, but can provide only limited public goods because of their lack of centralized authority. So if the state arose by social contract, we would have to posit that at some point in history, a tribal group decided voluntarily to delegate dictatorial powers to one individual to rule over them. The delegation would  not be temporary, as in the election of a tribal chief, but permanent, to the king and all his descendants. And it would have to be on the basis of consensus on the party of all the tribal segments, each of which had the option of simply wandering off it didn't like the deal.

Fight and flight in response to the budget conundrum

It strikes me that there are two core emotional reactions to the U.S.'s structural budget deficit -- or at least, two writerly tropes that one encounters over and over.  The first is "we are facing societal collapse" -- call it Mitch Daniels hysteria (our debt is "the new Red Menace") -- and the second is, "all we have to do is x," where x is the author's personal brew of preferred spending cuts, tax hikes and program redesign.

For the latest in the hysterical school, here is Jim Manzi:
The long-term forecasts, however, illustrate the crucial point that we are sitting on the mother of all bubbles. Many, probably most, Americans anticipate a stream of consumption that will be provided for them into old age by the government (i.e., other taxpayers). Unfortunately, most American taxpayers do not anticipate the kind of enormous increase in taxes that would be required to pay for this stream of benefits. One or both of these expectations will not be met. Americans as a whole are simply less wealthy, in the most useful sense of rationally anticipatable future material consumption, than they think they are. And the size of this disconnect is vastly greater than, for example, the size of the housing price bubble that just popped.

Monday, April 18, 2011

Fallows & co. on offloading medical risk on seniors

James Fallows, trying to put his finger quickly on what is off-whack about Ryan's voucher replacement for Medicare, has recourse to Fiscal Times correspondent Merrill Goozner (Fallows' emphasis and comment following):
Here's the real argument young and middle-aged people need to hear, and the real reason why the "more skin in the game" argument can never work for seniors or other vulnerable populations, including them when they reach that age. Seniors and the poor account for over half of health care spending. Within those groups, 5 percent of the population accounts for 50 percent of health care costs; and 20 percent of the population accounts for about 80 percent. These costs come for the most part at times when economic incentives have no influence at all on medical decision-making: in medical crises; in treating chronic conditions; and, for most Medicare patients, in the last six months of life.

That's why a voucher program for Medicare, which will shift an increasing share of those inevitable costs onto the elderly themselves, can fairly be categorized as a 100 percent estate tax or death tax. People under 55 need to know that if the plan crafted by Rep. Paul Ryan were passed, most of them will never have a cent to leave to their children. It will all go to the health care industry to support the American way of dying.
Here's a bit of real world evidence supporting that view: Why is the savings rate so unbelievably high in China -- as much as 50 percent of the GDP? There are many reasons, crucially including exchange-rate policy. But a very powerful individual motivator is each family's knowledge that there is no Medicare-like system for their older members. Health care is on cash-payment basis there, and so every family must save like crazy against the risk that the parents or grandparents will require very expensive late-in-life care. More savings would be good for America, but that's not the right way to induce them. It's hard to believe that the Republicans will seriously embrace a plan to undo Medicare.
That evoked a lot of reader response, including from yours truly:
We [already] have that de facto "death tax" in connection with nursing care.

Every family that doesn't have a spare 100k/year effectively rolls the dice regarding how much of an estate may be eaten up by nursing care at the end of life. The only private remedies are 1) LTC [long-term care] insurance, a highly uncertain and problematic product, and 2) strategies to offload assets to children while there's still time.

Perhaps this system is the best we can do right now. There's certainly no will in the U.S. to tax ourselves to the extent that would be needed to provide something like universal LTC coverage. (In an ideal world, how about this bargain: a massive [by US standards] estate tax earmarked for LTC coverage.) But as you suggest, adding near-complete exposure to medical expenses for the elderly would make this risk burden intolerable. I can't believe we're seriously considering it. And in fact, we're not (unless we get a GOP president and Congress before the party changes course...

Teach your constituents well

Ezra Klein spotlights a potential problem for the GOP in 2012: in 2010, candidates incited the party's base and the nation's seniors to fear and loathe the Medicare spending reductions with which Democrats largely funded the Affordable Care Act -- and now, just a few months later, the party has backed Ryan's plan to privatize and radically devalue Medicare.  Klein further  notes a polling anomaly: Republicans are far more averse than Democrats to any attempts to reform Medicare:
Gallup poll released Wednesday underscored the tension in the Republican coalition. It asked Americans whether they “think the government should completely overhaul Medicare to control the cost of the program, make major changes to Medicare but not completely overhaul it, make minor changes to Medicare, or should the government not try to control the costs of Medicare?” Among Democrats, “minor changes” was most popular, followed by “major changes.”

You might assume that Republicans would be a lot friendlier to remaking the program. Not so. Among Republicans, “not try to control costs” was the most popular position, followed by “minor changes.” And to call Ryan’s plan anything less than a complete overhaul would be to insult it.

Sunday, April 17, 2011

It's a fair cop, guv'nor

I like to think of myself as impervious to marketing -- a false pride, because a) I still find myself singing commercials I heard a lot when I was five, and b) it's smart to be receptive to marketing that helps you locate what you want/need.

None of that is strictly relevant to an experience that ripened this morning -- a rare case of a mundane product working its way through to consciousness.

Saturday, April 16, 2011

The Wire's David Simon: "Statistics will always lie" when someone's job is at stake

Via The Dish, an interview with Bill Moyers in which Wire creator David Simon highlights the perverse effect of performance incentives:
One of the themes of The Wire really was that statistics will always lie. Statistics can be made to say anything. You show me anything that depicts institutional progress in America: school test scores, crime stats, arrest reports, anything that a politician can run on, anything that somebody can get a promotion on, and as soon as you invent that statistical category, fifty people in that institution will be at work trying to figure out a way to make it look as if progress is actually occurring when actually no progress is. I mean, our entire economic structure fell behind the idea that these mortgage-backed securities were actually valuable, and they had absolutely no value. They were toxic. And yet they were being traded and being hurled about, because somebody could make some short-term profit. In the same way that a police commissioner or a deputy commissioner can get promoted, and a major can become a colonel, and an assistant school superintendent can become a school superintendent, if they make it look like the kids are learning and that they’re solving crime. That was a front-row seat for me as a reporter, getting to figure out how once they got done with them the crime stats actually didn’t represent anything.

I can't help but note that when the Michelle Rhee testing scandal broke in late March, I used an episode of The Wire to illustrate Campbell's Law -- the principle that incentives corrupt:

Friday, April 15, 2011

Of presidential candidates and Langston Hughes

There's an irony behind the irony of Rick Santorum accidentally borrowing a campaign slogan from Langston Hughes:
Santorum by and large stayed on message but was tripped up a bit when a student asked him if he knew that the choice of his slogan, "Fighting to make America America again," was borrowed from the "pro-union poem by the gay poet Langston Hughes."

"No I had nothing to do with that," Santorum said. "I didn't know that. And the folks who worked on that slogan for me didn't inform me that it came from that, if it in fact came from that."
The really funny part is that Obama's favorite trope about America, his constant recourse to the paradox inherent in the phrase "a more perfect union," is embodied, in a bitterer vein, in Hughes' poem.

Let America be America Again. is a poem of fathomless pain, an anthem of the excluded. It begins with a pious, nostalgic wish that meets a harsh (anonymous) counterpoint:
Let America be America again.
Let it be the dream it used to be.
Let it be the pioneer on the plain
Seeking a home where he himself is free.

(America never was America to me.)

A gloss on a 'quote of the day'

The Dish frames up an emotionally satisfying reality check from  Joe Klein:
"It's painful when reality intrudes. Here is the reality: the Republicans have spent the past 30 years creating deficits and the Democrats have spent the past 30 years closing them. The unimportance of deficits became an article of faith during the second Bush Administration: "Reagan proved that deficits don't matter," Dick Cheney famously said. It has been rather hilarious for those of us with even a minimal grasp of recent history to watch these folks pull fierce 180-degree turns on the issue--and it is even more hilarious to watch them accuse Obama of hyper-partisanship after the dump-truck full of garbage they visited upon his head these past few years."
Klein was reacting to Republican fulminations such as this from Pete Wehner (link in the Klein post):
President Obama's speech today was both outrageous and insulting, a practically perfect combination of demagoguery and shallowness. It was not a serious substantive speech; it was a political missile whose intention is was to destroy, through libel, the House Republican's 2012 budget. It was not an effort to engage in a serious discussion; it was an effort to create a cartoon image of Obama's critics.
I suspect that whatever else Americans of any political stripe think of Obama, they know he's no rhetorical flame-thrower.  In a battle over which side is excessively partisan, he wins -- poll after poll shows that Americans trust him to compromise far more than they do the Republicans.  For a second reality check, note that in this speech Obama partially offset his "partisan" attack -- that is,  a frank expose of the Ryan Plan's values and likely effects, and a short history lesson about the debt amassed in the 80s and naughties --  with a sharing of credit for the deficit reduction successes in between:
To meet this challenge, our leaders came together three times during the 1990s to reduce our nation's deficit -- three times. They forged historic agreements that required tough decisions made by the first President Bush, then made by President Clinton, by Democratic Congresses and by a Republican Congress. All three agreements asked for shared responsibility and shared sacrifice. But they largely protected the middle class; they largely protected our commitment to seniors; they protected our key investments in our future.
That is in service of his apparent continued belief that he can, against all the odds, strike a deficit deal with Republicans today:

Thursday, April 14, 2011

I fear the "best news about Obama's budget plan" was a mirage

Yesterday, I celebrated this gloss on Obama's budget plan from Paul Krugman:
I don’t want to step too much on the administration’s selling point, but progressives upset by the claim that there are three dollars of spending cuts for every dollar of tax increases should be aware that there’s a bit of creative labeling going on. As I understand it, they’re counting both interest savings and reductions in “tax expenditures” — subsidies through the tax code — as spending cuts. It’s a much more balanced plan if you look at the balance between revenue increases and non-interest outlays.
On the basis of the administration's plan outline, this looks plain wrong to me. The plan itemizes $2.01 trillion in projected spending cuts over 12 years -- $770 billion in  discretionary spending, $400 billion in security, $480 billion  in healthcare on top of projected ACA savings, and $360 billion in other mandatory spending. It projects $1 trillion in saved interest payments, and another $1 trillion in new tax revenue.  That last figure would seem to include some conflation of sunsetting the Bush tax rates and reforming the tax code along Bowles-Simpson lines, albeit with some undefined skew toward reducing the tax reductions of the wealthy in particular. I see no indication that the administration is counting $1 trillion for the Bush sunset and another trillion in tax reform -- which would make no sense, the the envision reform would lower marginal rates, presumably (if Bowles-Simpson is a guide) to below current rates. 5 x 1 does not equal 4.

Update: Howard Gleckman notes the ambiguity and overlapping categories of of possible revenue sources  in more detail here.

Shorter Ryan

James Kwak reduces it to handy twitterable length:

The bottom line is that the Ryan Plan increases beneficiary costs more than it reduces government costs.
Unbelievable?  Here are the underlying CBO projections:

In 2030, under current law, a 65-year-old Medicare beneficiary’s health care will cost $60. (Obviously, this is using an index, not real dollars.) Medicare will pay $35 and the beneficiary will pay $25 in Part B premiums and cost sharing. Under the CBO’s more likely “alternative fiscal scenario,” her health care will cost $71, of which Medicare will pay $41. Under the Ryan plan, the same health care purchased in the private market will cost $100; “Medicare” will give her a $32 voucher, and she’ll pay the last $68 on her own.
Privatization, it's wonderful.

Read Kwak's whole post for some real clarity on the severable problems of Medicare funding and healthcare inflation.

Wednesday, April 13, 2011

Red meat, with a dash of bipartisanship

Jonathan Bernstein points out that Obama today delivered red meat to some very anemic-feeling progressives:
Liberals like to think of themselves as the grown-ups of the budget debate? Obama gave both a budget history lesson and some facts about the composition of the budget that positioned himself -- and liberals -- as serious, compared to those who talk about waste, abuse, and foreign aid.
True dat, but by way of counterpoint: while Obama quite pointedly blamed Bush for the enormous deficits and debt of today...
But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program -– but we didn't pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts -– tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.
He also biparti-parceled the credit for deficit reduction in the decade preceding:
our leaders came together three times during the 1990s to reduce our nation's deficit -- three times. They forged historic agreements that required tough decisions made by the first President Bush, then made by President Clinton, by Democratic Congresses and by a Republican Congress. All three agreements asked for shared responsibility and shared sacrifice. But they largely protected the middle class; they largely protected our commitment to seniors; they protected our key investments in our future.

As a result of these bipartisan efforts, America's finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt free, and we were prepared for the retirement of the Baby Boomers.

The best news about Obama's budget plan

Update: I fear this post is wrong -- Krugman seems to me to have been mistaken.

Paul Krugman has unraveled what struck me as the central mystery of Obama's deficit reduction speech -- and revealed the President's plan to be far more progressive than it looks.  My question (#3 in prior post): since Obama pegged the gain from sunsetting the Bush tax cuts for the wealthiest 2% at $1 trillion over 12 years, and also proposed reducing "tax expenditures" (targeted tax breaks) in a comprehensive tax code overall, how did that add up to just $1 trillion in total tax hikes?  Why does 1 + x = 1?*  Krugman:
I don’t want to step too much on the administration’s selling point, but progressives upset by the claim that there are three dollars of spending cuts for every dollar of tax increases should be aware that there’s a bit of creative labeling going on. As I understand it, they’re counting both interest savings and reductions in “tax expenditures” — subsidies through the tax code — as spending cuts. It’s a much more balanced plan if you look at the balance between revenue increases and non-interest outlays.
Just to clarify, the White House fact sheet explicitly counts interest savings in the 3:1 ratio. But counting reduced "tax expenditures" as spending cuts -- that really tips the ratio, and it's brilliant politics as well as a perfectly fair use of the English language.  It's brilliant because a) conservatives occasionally have flirted with the same concept -- Coburn, in a recent tussle with Grover Norquist, struggled to effectively define ending the ethanol tax credit as a spending cut -- and b) protesting that cutting a tax break is not a "spending cut" should tie the GOP in knots, since creating new tax breaks has been a preferred mode of social spending for two decades.

Four questions about Obama's deficit reduction plan

A speech is just a speech, and Ezra Klein seems to have an actual written plan outline from the White House [update: it's on the WH site, here].  On the basis of the speech, though, here are four questions about how Obama gets to $4 trillion in deficit reduction -- one partially answered by Klein:

1. Did Obama propose to cut $400 billion in defense spending?  Here is his wording: 
Just as we must find more savings in domestic programs, we must do the same in defense. Over the last two years, Secretary Gates has courageously taken on wasteful spending, saving $400 billion in current and future spending. I believe we can do that again.

Two sub-questions: 1) does "do that again mean "save another $400 billion," or just "take on wasteful spending"?  More to the point: while Gates did cut an alleged $400 billion out of projected budgets for planned projects, that still left defense with annual budget increases exceeding the inflation rate.  Will the next $400 billion in 'savings' also leave the defense budget growing? [Update: the White House outline says the plan "sets a goal of holding the growth in base security spending below inflation, while ensuring our capacity to meet our national security responsibilities, which would save $400 billion by 2023."  Holding growth below inflation is a departure; according to Bloomberg, 2/16/11, "The U.S. Defense Department’s five- year weapons-buying budget, while lower than the military planned last year, still results in annual, inflation-adjusted growth of about 2.6 percent, according to an analyst.

Tuesday, April 12, 2011

Running behind the Gang of Six

On the theory that presidential advocacy on a given issue polarizes the parties on that issue, I have more than once suggested half-seriously that when Obama decides to put forward a deficit reduction plan, we will know that he's thrown in the towel on a deficit reduction deal. The corollary to date has been that if there's any hope at all for such a deal before the 2012 election, it lies in the negotiations of the Senate Gang of Six, who are using Bowles-Simpson as a baseline. GOP Gang of Six members Saxby Chambliss and Tom Coburn have been bucking GOP orthodoxy by acknowledging that any deficit reduction plan will have to increase Federal revenue.  What they don't need is Barack Obama to make that case for them.

So  now Obama is primed to lay out a plan, and word is that it is to be based (to what extent?) on Bowles-Simpson and the Gang of Six negotiations.  Predictably, the very senators who a month ago were begging for presidential participation are now warning that a presidential endorsement could be the kiss of death:

"The largest annual spending cut" -- compared to what?

I am getting tired of reading about "the largest annual spending cut in our history", which has now become an obligatory tagline in stories about the just-concluded and soon-to-come budget battles.  The alleged $39 billion   cut represents about 1.1% of the Federal government's 2010 outlays.  Is that really the biggest cut ever? By what measure? It must be in absolute terms only.

I realize this may be an imprecise comparison, but according to OMB historical tables the by-now-infamous spending cuts of 1937, which threw the recovering economy back into a sharp recession, took spending down from $7.58 billion in 1937 to $6.84 billion in 1938.  While I await correction by someone with more than sixth grade math skills or better historical knowledge, that looks to me like a cut of 9.8%, about nine times the magnitude of the 2012 cut just negotiated.

That, incidentally, is kind of reassuring.  The spending cut is not only about one tenth the dollar value of the new tax cuts enacted at the end of 2010, but one ninth the scale of the disastrous spending cut enacted in 1937.  The cuts will doubtless inflict needless social costs and environmental costs. But perhaps their impact on the economy (as on the deficit) will be relatively minor.

Am I comparing apples and oranges?  Economists and historians, let me know.

UPDATE: at least one summary of the budget deal's emerging details -- Politico's -- suggests that there may be less to the cuts than meets the eye (a hope I've indulged more than once):
But down to the end, the giant labor, health and education chapter of the bill best defined ground zero — and the relentless give-and-take over dollars.

Coming into this year, discretionary spending in this portion of the budget was running at about $169.4 billion, and the House voted in February to cut this to under $144 billion, a 15 percent reduction that decimated many programs. The new bill allows spending closer to $159 billion, about $15 billion higher. And even then to fill the gap, $6.2 billion in alternative savings from mandatory spending programs are available to offset new appropriations.

Within this framework, the White House locked in about $1.5 billion in increases that the president wants—like “Race to the Top.” But even after making room for these additions, the real appropriations cuts from existing programs will be about a quarter of what the House proposed...

Pell Grants for low-income college students are protected against a shortfall. Title X family planning programs will survive, albeit at 2008 levels. New money to administer health care reform will flow to the Centers for Medicare & Medicaid Services, but through a round-about route that requires the dollars to go first to a different health administration account and then be transferred to CMS.

In the field of transportation and housing, the same pattern is repeated, though in less dramatic fashion.

A charitable hope for a President trying faith

Catching James Fallows by accident on NPR on Saturday, I sent him a note to say I shared his bemusement that Obama, announcing the budget deal, would positively boast about "the largest spending cuts in history." Fallows' response nicely captures my own faith-watered-to-hope:
This is a rough  time. We will hope that the qualities we admire in Obama outweigh the ones that make us nervous.

Come to think of it, if a leader is not a monster, fool, or knave, isn't this a wish for all seasons?

Monday, April 11, 2011

When all else fails, believe what he says?

Kevin Drum, nonplussed as all progressives are by Obama taking credit for the 2011 spending cuts wrung out by Republicans, circles round to an unconsidered explanation:
My best guess is also the most boring one: He actually thinks the cuts are a good idea. Macroeconomically they don't make sense, but as a signal they might be pretty guess is that (1) Obama is serious about wanting to rein in the long-term deficit, (2) he thinks the cuts in this year's budget are a good way of signalling his seriousness, and (3) he also thinks that a few tens of billions of dollars in lost spending will have such a minor macroeconomic effect that it's a small price to pay.
Isn't it pretty to think so?  Like Drum, I struggle (here, here) with the gravitational pull of trusting Obama (and on the weekend, I speculated that the tax cut binge of late 2010 may have increased Obama's urge to gesture toward offsetting spending restraint). On the yield side, I would add that his claim that the just-concluded deal preserves his priority investments (as outlined in the SOTU) is worth at least a look as details emerge this week (along with Democratic claims that $17 billion of the cuts were offloaded onto mandatory spending programs, if that's anything to be cheered about).

Sunday, April 10, 2011

Is Obama his own Grover Norquist?

As David Brooks noted in the midst of the 2008 campaign, Obama has put himself in a box on taxes. Here's David Plouffe on Meet the Press today:
--bring up taxes, though. Is-- in the President's plan as he envisions tackling the deficit, do taxes have to go up? Does that have to be part of this equation across the board?

Well, this is part of his budget for next year. He has said he believes-- taxes on the higher income, people over $250,000-- should eventually go up.

Enough with the "what would China think?" shame spirals

This "whatever can the Chinese think?" meme is getting tired fast.  On Friday, Kerry; today, Kristof:

A bewildered Chinese friend asked me how the world’s leading democracy could be so mismanaged that it could shut down. I couldn’t explain. This budget war reflects inanity, incompetence and cowardice that are sadly inexplicable.

How about "explaining" that when faced with hard economic times extending through two election cycles, the American public twice threw out a set of incumbent officials -- as free electorates do -- and ended up with divided government?  The result is a bitter battle over fiscal policy. Those charged with making policy, instead of knifing out their radically different prescriptions behind closed Politburo doors, fought them out in a public display of negotiating brinkmanship and came up with a settlement in which both sides yielded some (though I personally think that through their own folly Democrats have yielded far too much).  There's nothing here to be embarrassed about before ruthless autocrats who have responded to the latest wave of democratic ferment abroad with a ferocious wave of repression and intimidation of dissent.

Saturday, April 09, 2011

Donald Trump asserts faith in press, affirms Obama's U.S. birth

That is, if we read this part of his anti-Gail Collins screed literally:
For some reason, the press protects President Obama beyond anything or anyone I have ever seen. What they don't realize is that if he was not born in the United States, they would have uncovered the greatest "scam" in the history of our country.

How did we get to a $39 billion headline?

Taking up a question from one of yesterday's posts:
P.S. Watching Democrats apparently give ground yard by yard -- from accepting a reported $32-33 billion in cuts earlier this week to  $37-38 billion today, not to say even getting in this range in the first place  --  is so baffling that I wonder, by defensive reflex if nothing else, if there isn't more to this than meets the eye. Are some of those billions illusory, i.e. offloaded into areas Democrats don't care about or want to cut?  Has the weighting changed in some way that offsets the sticker amount?  
 And how, given the final sticker amount, can Obama find the "audacity" to claim this?
But beginning to live within our means is the only way to protect those investments that will help America compete for new jobs -- investments in our kids’ education and student loans; in clean energy and life-saving medical research. We protected the investments we need to win the future.
Here is a Dem answer -- or spin:
“1) $17 BILLION IN ‘CHIMPS’ -- WE SPREAD OUT THE CUTS ACROSS OTHER PARTS OF THE BUDGET. We insisted that meeting in the middle on cuts would require looking beyond domestic discretionary spending—and we prevailed. More than half—or $17 billion—of the final round of spending cuts came from changes in mandatory programs, or CHIMPs. The emphasis on this part of the budget staved off severe cuts to key domestic programs like education, clean energy, and medical research. 
"The CHIMPS," cried Mr. Rochester. "Deuce take me if I did not forget the CHIMPS!"*   Or make that Mr. Rogers (David), who explained back on April 3:

Obama owns the Tea Party cuts

I find it disturbing that in his statement about tonight's 2011 budget deal,  Obama not only accepts but takes ownership of the $39 billion in discretionary spending cuts:
Some of the cuts we agreed to will be painful. Programs people rely on will be cut back. Needed infrastructure projects will be delayed. And I would not have made these cuts in better circumstances.

But beginning to live within our means is the only way to protect those investments that will help America compete for new jobs -- investments in our kids’ education and student loans; in clean energy and life-saving medical research. We protected the investments we need to win the future.

Friday, April 08, 2011

Think again, Kerry

I admire the way John Kerry has comported himself since Obama took office -- re Afghanistan, re New Start, re Egypt -- but I think this is a foolish sentiment:
"They've got to be laughing at us right now" in China, said Senate Foreign Relations Committee Chairman John Kerry. "How terrific that the United States of America can't make a decision."
While Republicans and Democrats have been busy denouncing each other's policies and motives, the Chinese authorities have further reduced their tolerance for denunciation -- or criticism -- from anyone:

The palm goes to Boehner

If the rumored deal goes through tonight, it strikes me that Boehner is a winner.  I have to admit that I've been impressed with him in 2011.  In the endgame this week, he's managed to give the impression that a) he's being pushed from the right; b) he's faithfully representing the Tea Party agenda, and c) he does not want a shutdown. He's managed to rather massively move the goalposts on the Democrats (unless the spending numbers are jiggered and "40" somehow substantively equals "32") while holding out for the Tea Party riders to the point where prominent conservatives like Huckabee and Bachmann were urging him to deal.  He came home with at topline for cuts 33% higher than what Reid said earlier in the week was agreed on and an impression of having pushed as far as possible on the riders. For all the stories about Boehner being between a rock and a hard place, he seems to have wriggled through.

His victory, such as it is, may be a good thing. He didn't create, or elect, the Tea Party fanatics. He's a moderating influence.  He's given the (carefully meted out) impression that he can work with the President. And, to the extent possible in the age of GOP extremism, maybe he can.

Update, 11:38: a bit of supporting evidence from the Wall Street Journal:

Leaders of the small-government, tea-party movement are generally giving House Speaker John Boehner high marks for his leadership in the spending showdown, even though the agreement eventually reached Friday night fell short of the cuts the tea party once demanded.
Update, 4/9, 12:17: Weigel says it better:

Let’s go back to the raw politics. Can we say that Republicans got the better of the no-shutdown deal? Yes, because if there had been a shutdown, Republicans would have been blamed for it. The record was all cued up. Democrats spent months predicting that Boehner would have trouble controlling his new Tea Party members. They spent this week saying he had to put the Tea Party “horse back in the barn,” as Dick Durbin said. Well, there’s a deal – the implication is that he put the horse back in the barn. If the Republicans would have been blamed for a shutdown, it follows that they get credit for a shutdown being avoided.

One two three: what are we fighting for?

Not to deny that the House Republicans' cuts in discretionary spending will have negligible impact on the U.S.'s structural deficit, or that the near-$40 billion in cuts that it seems Democrats will inexplicably agree to won't cause unnecessary suffering and slow economic growth (Mark Zandi estimated that $61 billion in cuts would reduce employment by 700,000 through the end of 2012).  All that said, a brief zoom-out:

The Federal government spent $3.46 trillion in 2010.  Democratic proposals that became part of the late 2010 tax cut deal  (mainly the 13-month unemployment benefit extension, the payroll tax cut, and the stepped-up writeoff for business investment) were worth $336 billion, according to Zandi.  Last-minute Democratic concessions on the 2011 bill will probably take the spending cuts past the $34 billion that would make this comparison satisfyingly neat to someone with my sixth-grade math skills, but you get the idea.

Thursday, April 07, 2011

Time to throw in the towel and 'lead'?

In my last post, I suggested that Paul Ryan's extremist, intellectually dishonest long-range budget plan is a sideshow -- that if there's any chance at all of a long-range tax/budget agreement, it rests with attempts by Chambliss, Coburn and perhaps Crapo to convince fellow Republicans that tax reform will have to increase federal revenues.

Now, though, Ezra Klein relays some intelligence that suggests that Ryan's plan may kill that admittedly distant hope:
Two days ago, I predicted that Ryan’s budget would sell a lot of Democrats on the Simpson-Bowles plan. But James Pethokoukis says it’s also doing the reverse. “I hear what GOP support there was for Obama/Bowles/Simpson debt panel plan is collapsing thanks to Ryan Plan,” he tweets. If that’s true, then Ryan, by yoking Republicans to a radical and polarizing proposal that stands no chance of passage, may have set the deficit-reduction effort a very long way back. 

Wednesday, April 06, 2011

Forget Ryan -- watch Coburn and Chambliss

For those who believe that Obama has failed a s test of courage by not rolling out a detailed tax reform/deficit reduction plan early this year, a thought experiment: had he done so, would Tom Coburn have said this on the Senate floor? (link is to Greg Sargent; emphasis is his.)
Well, the message for America today is every program’s going to get hit. The Defense Department’s going to get hit, every program’s going to get hit. My taxes are going to go up. Sorry, they’re going to go up. This country cannot get out of this mess with the behavior that we’re exhibiting in this body, and if we fail to do what is necessary for our country at this critical time in our juncture, history will deem us absolutely incompetent. With that, I yield the floor.Maybe...I admit that the thought experiment yields no clear results.  But if Obama and Dems really do want a tax reform/deficit reduction deal, it's Coburn Chambliss & Crapo who are carrying the ball. Because this can't happen unless Republicans sign on to tax reform that raises revenues.  Which is almost to say that it can't happen, period.
The sine qua non for a bipartisan long-range budget deal is for Republicans to acknowledge that taxes will have to be raised, albeit as part of a deal that lowers marginal rates while drastically reducing targeted tax breaks. The bipartisan Senate Gang of Six currently negotiating the outlines of a deal is allegedly using the Bowles-Simpson plan as a baseline. While Bowles-Simpson was  criticized from the left for achieving too high a percentage of its projected deficit reduction from spending cuts (two thirds) as opposed to taxes (one third), the plan did envision raising Federal revenue by about $1 trillion over nine years.  Grover Norquist, meanwhile, is waving his bloody-sheet "no tax increases" pledge, signed by (he claims) 95% of House and 87% of Senate Republicans.

Tuesday, April 05, 2011

Ruth Marcus's false "false false choice" charge

Purporting merely to debunk an irritating and misleading rhetorical device, Ruth Marcus has struck at the heart of Obamaism. Her target is Obama's fondness for what she calls a "false false choice':
The false-choice dodge takes three overlapping forms. The first, a particular Obama specialty, is the false false choice. Set up two unacceptable extremes that no one is seriously advocating and position yourself as the champion of the reasonable middle ground between these unidentified straw men.

I will argue further down that most of the Obama false choice tropes Marcus takes on are valid.  But first I want to spotlight the seriousness of the charge.  The false choice trope is not merely a tool of rhetorical combat. Setting things up this way reflects a core tendency in Obama's personality and approach to problem-solving.

Sunday, April 03, 2011

Aliyah on an escalator

 Updated 4/4, below the jump

Writing in Scientific American, David Schroeder (hat tip to Sullivan) flags research indicating that we humans are literally elevated -- morally -- when we look up or step up.:

Building on research showing the power of metaphors to shape our thinking, Sanna and his colleagues noted that height is often used as a metaphor for virtue: moral high ground, God on high, looking up to good people, etc. If people were primed to think about height, they wondered, might people be more virtuous?

In a series of four different studies, the authors found consistent support for their predictions. In the first study they found that twice as many mall shoppers who had just ridden an up escalator contributed to the Salvation Army than shoppers who had just ridden the down escalator. In a second study, participants who had been taken up a short flight of stairs to an auditorium stage to complete a series of questionnaires volunteered more than 50 percent more of their time than participants who had been led down to the orchestra pit [referenced study here].

If that's true, cathedrals, and the world view that produced them, may really have given medieval Europeans a moral boost.  Here's C.S. Lewis inviting his reader to view the night sky with medieval eyes:

The unbearable lightness of me-ing

Thinking for a moment about a writer whose work I don't particularly enjoy though others whom I do like to read praise it highly, I started reflexively marshaling reasons for my dislike. Then I thought, why do this? Is it because I think that those who enjoy this work are seriously in error? No: I haven't paid it enough attention to ensure that my reasons are consistent or based in fact.  And why should I? If this person were promulgating serious errors of fact or logic or a depraved sensibility, a contra might be worthwhile.

But what's really behind this impulse, at least in this case, is something unsavory: a rooted belief that one's every preference is significant, worth broadcasting, cause for pride...a sign of one's superior sensibility or perception.  How can anyone like Brussels sprouts? They taste like condensed garbage.  Etc etc.  This impulse is evident on the playground: ew, you like Barney?

While writing this, I've really just been transposing a line of thought wonderfully dramatized and dissected by Milan Kundera in his novel Immortality:
An unfamiliar young woman entered the sauna and the moment she walked through the door began to order everyone about; she made them all sit closer together, then she picked up a pitcher and poured water on the stones. With much hissing, hot, steam started to rise, making the woman sitting next to Agnes wince with pain and cover her face. The newcomer noticed it, declared, "I like hot steam; it gives me that real sauna feeling," squeezed herself between two naked bodies, and at once began to talk about yesterday's television talk show featuring a famous biologist who had just published his memoirs. "He was terrific," she said.

Another woman nodded in agreement. "Oh yes! And how modest!

The newcomer said, "Modest? Didn't you realize how extremely proud that man was? But I like that kind of pride! I adore proud people!" She turned to Agnes: "Did you find him modest?"

Agnes said that she hadn't seen the program. As if interpreting this remark as veiled disagreement, the newcomer repeated very loudly, looking Agnes straight in the eye: "I detest modesty! Modest is hypocrisy!"

Agnes shrugged, and the newcomer said, "In a sauna, I've got to feel real heat.  I've got to work up a good sweat. But then I must have a cold shower. A cold shower! I adore that!  Actually I like my showers cold even in the morning. I find hot showers disgusting."

Saturday, April 02, 2011

How about a doctor's mandate in the health reform law?

The Times' Robert Pear today reports on a major roadblock to expanding health care access in the United States: in many states, few or no doctors in a wide array of specialties will see Medicaid patients.  And the Affordable Care Act aims to add about 15 million people to the Medicaid rolls, while cash-strapped states continue to cut Medicaid reimbursement rates.

I have a solution. It's simplistic, and perhaps someone will demonstrate to me that it's unworkable or unfair. It's surely politically impossible at this point, given the power of the doctors' lobby.  But here it is: require doctors to devote a minimum percentage of their practice to Medicaid patients.  At present, about 28% of doctors refuse to accept any Medicaid patients.  The percentages are doubtless much higher in some practice specialties and states.

Friday, April 01, 2011

2010 tax cuts vs. 2011 budget cuts

As it looks all but certain that Republicans will extract at least a $30 billion pound of flesh from the 2011 budget, endangering the recovery and thus likely boosting their own political fortunes, I thought I would re-pose a question I asked earlier this month: Which is likely to be stronger, the stimulative effect of the tax cut deal Obama cut with the GOP at the end of last year, or the destimulative drag of reduced short-term government spending?

Who won the lame duck?

The late great lame duck session of Congress in Nov-Dec 2011 was widely perceived to have been a season of accomplishment for the Democrats and President Obama. The rush of activity included repeat of Don't Ask Don't Tell, ratification of the New Start treaty -- and, on the economic front, a tax deal that, for the blood price of extending the Bush tax cuts for the wealthiest, bought Obama hundreds of billions in more efficiently stimulative tax cuts.

It was a busy time, and one thing the Democrats failed to do was pass a budget for FY 2011. That gave the incoming GOP House the opportunity to commence its budget-cutting orgy for discretionary domestic spending a year early.  That includes a head start on the drive to defund implementation and enforcement of the health care and financial reform laws.  And in its opening gambit, the Tea Party delivered.  Its proposed $61 billion in cuts would kill 700,000 jobs by the end of 2012 according to Moody's economist  Mark Zandi,, and shave 1.5-2% off GDP growth in the 2nd and 3rd quarters of this year by Goldman Sachs' estimates.  The Goldman analyst, Alec Phillips, also forecasts that actual cuts in FY 2011 will come in at about $25 billion and, once enacted, will slow growth by 1% of GDP, but that the effect of that sudden hit will fade quickly later in the year.

Question: would the U.S. economy -- and Democrats -- have been better off without the global tax deal but with a Democratic FY 2011 budget passed during the lame duck session?  Does the short-term destimulative effect of the 2011 budget we're likely to get (leaving aside any long-term damage to economic viability) fully offset, or more than offset, the stimulative effect of the tax cut package?