Sunday, July 31, 2011

Obama's uncertain trigger finger

The debt ceiling deal negotiated today relies heavily on triggers for future action. The finger on the final trigger is the president's. Hence, from a progressive's point of view, the deal is only terrible if you mistrust the president.  Unfortunately, the way the deal went down makes it very hard to trust the president.

As Jonathan Chait has been pointing out for weeks, progressives are better off with a cuts-only deal, end-stopped by the expiration of the Bush tax cuts on Dec. 31, 2012, than with the revenue-light grand bargain Obama was negotiating with Boehner. That deal would have raised only $800 billion in new revenue over ten years, roughly the amount that would be gained by letting the Bush cuts for the wealthiest 2% expire while leaving the bulk of the cuts in place. Expiration of all the Bush cuts, in contrast, would raise an estimate $3.6 trillion in new revenue of ten years.

The deal negotiated today calls for $900 billion agreed-on cuts in discretionary spending over 10 years and establishes a bipartisan committee of senators and MCs to propose a long-term plan that reduces the deficit by at least another $1.2 trillion. Congress must give that plan an up-or-down vote without amendments.  If the plan is voted down, or (I think) if the committee fails to agree on a proposal, that failure triggers $1.5 trillion in automatic spending cuts, split evenly (as of now) between domestic and defense spending. Ditto if the president vetoes the plan.  The Democrats failed to get tax increases included in the trigger, despite Harry Reid's announcement yesterday that they would not agree with a plan that failed to do so.

The trigger behind the trigger is the Bush tax cuts.  Obama, if he were a different person, could threaten to veto any any plan put forward by the committee that did not include tax reform yielding, say, $2 trillion in new revenue over ten years -- the amount proposed by Bowles-Simpson.  If no such plan materialized, and automatic cuts were triggered, he could also promise to veto any subsequent tax legislation that did not raise said $2 trillion (or whatever benchmark he chose). If no such legislation emerged, the Bush cuts would all expire, and the additional revenue, coupled with the triggered spending cuts, would put the budget in effective balance.

Obama is in fact indicating rather weakly he will use this this leverage:

Saturday, July 30, 2011

Reid draws a line

For those who worry that Democrats will agree to an enforcement mechanism in any pending debt ceiling deal that will empower Republicans to cut spending again without any tax increases in the second phase, an important assurance from Harry Reid:

"We have a closet full of triggers, people have suggested dozens of them but even though earlier this week, I was sitting talking to Jack Lew about triggers for an hour and a half and we can't get Republicans to move on any trigger. We're not going to have cuts on more programs without some revenue - that is a line we've drawn in the sand," Reid said.

Next question: in phase 2, will Democrats trade the pending $3.6 trillion tax hike that would result from letting the Bush tax cuts expire at the end of 2012 for some piddling amount of revenue, as Obama was prepared to do in a grand bargain with Boehner?

UPDATE: That didn't take long. Reid has signed off on a deal in which the triggers reportedly do not include new tax hikes. The only deterrent to prevent Republicans from rejecting the deficit reduction plan to be put forward by the Gang of 12, and so triggering automatic cuts, is to make half of those cuts in defense spending. And once again, with near-total victory nigh, Boehner is pushing back, insisting on fewer defense cuts in the trigger. 

Looks like another Dem cave, followed by another GOP balk, to be followed by further Dem concessions...

Friday, July 29, 2011

Bee balm in the rust belt

It's time again to celebrate a city besotted with gardening -- Buffalo, which hosts its annual Garden Walk this weekend.  370+ city households will throw open their front and back yards to thousands of visitors, who tour self-guided through neighborhoods tony and raggedy -- some of them revived in large part by gardening that's spread like a good virus block-by-block.  Lots of intense small urban spaces and often low-budget creativity.  My earlier paean here; albums here; update on the spreading fame and impact on the city in the Buffalo News here; info on the self-guided tours, maps, etc. etc. here.

My talisman, once more

No prognosticator is a prophet.  As the economic news has gone from bad to worse over the past 3-4 months, however, I find myself periodically grasping at the reed of a February 2011 forecast by Goldman Sachs economist Alec Phillips (I've noted this once before). At the time, the shutdown loomed and the House GOP was demanding $61 billion in cuts to FY 2011.  Phillips wrote:

Federal spending cuts deserve the most attention. They are the most likely of these issues to occur, and could have the largest magnitude. The assumption we incorporated into our recently revised budget estimates—discretionary spending cuts of $25bn and $50bn below the CBO baseline for FY2011 and FY2012 respectively—would shave nearly one percentage point off of the annualized rate of real GDP growth in Q2, but would fade quickly with a negligible effect on growth by year-end.
If Phillips was right, we may be at the nadir now. And none too soon, with Obama's approval rating hitting an all-time low of 40% today.

Thursday, July 28, 2011

Hostile takeover: Screwtape at News Corp.

Anthony Lane, reviewing various memoirs and other evidence of the culture and ethos at Murdoch's sleazy British tabloids, recounts an incident from Piers Morgan's memoir in which a victim of deliberate misrepresentation in the News of the World refuses to take it as a joke.  Lane sums up:
Such is the quintessence of the tabloid: to bruise and bully, and then to back off, exclaiming, Come on, we're only having a laugh. Can't you take a joke? The British sense of humor is both an invaluable broadsword and an impenetrable shield.
Screwtape lives, and still stalks the sceptered isle! C.S. Lewis  fans will recall the savvy counsel of this senior devil, provided to a junior colleague charged with tempting a Briton to perdition:

Hoping for less change

Ezra Klein today puts his finger on Obama's core underlying weakness in the budget battles. The expiration of the Bush tax cuts at the end of 2012 gives Democrats the ultimate leverage: if Republicans don't negotiate tax reform on their terms, we revert to Clinton-era rates and get $3.6 trillion in additional revenue over ten years. But as I've noted before (and again), Obama doesn't want that revenue:

Wednesday, July 27, 2011

Greenspan reverts to form

Alan Greenspan is as hard to follow as ever. Seemingly, too, as convinced of the transcendent wisdom of the market as ever.  Today, in a Financial Times op-ed, he argues that governments in wealthy countries overreach in trying to shield citizens from a variety of major risks. Along the way, he seems to equate strict earthquake-proofing standards for buildings, high capital ratios for banks, and a propensity to bail out banks that get in trouble as different manifestations of the same government malady. 

Those equations are hedged a bit. I don't think that Greenspan means to suggest that Japan's earthquake-proofing standards are as ill-advised as bank capital ratios that he regards as excessive or the bailout of Bear Stearns. But that's how I read it the first time:
The buffer may encompass expensive building materials whose earthquake flexibility is needed for only a minute or two every century, or an extensive stock of vaccines for a feared epidemic that may never occur. Any excess bank equity capital also would constitute a buffer that is not otherwise available to finance productivity-enhancing capital investment...

Tuesday, July 26, 2011

Was a debt ceiling hostage scenario unavoidable?

Jonathan Bernstein thinks I dreamed up an impossible counterfactual in suggesting that Obama might have refused to negotiate over the debt ceiling:

The ability of the president to force Republicans to separate deficit limitation from the debt limit, in Sprung's (or any other) scenario, is limited to the threat of invoking the 14th Amendment and running through the limit. Whatever the Constitutional status of that threat, I would have argued that it contained grave, serious threats to the president. Invoking the 14th now, or next week, after well-demonstrated GOP stubbornness and immanent danger, is one thing; declaring the debt limit unconstitutional by executive fiat right after a GOP landslide would have been seen by everyone except core partisans as an illegitimate overreach. Instead of constant reminders about presidents of both parties supporting increases in the debt limit, we would have been subject to constant reminders about how presidents of both parties accepted the limit, even when Congress delayed or attached stuff to it. At least that's my best guess. In my view, it would have handed the Tea Party House a huge gift: they, and not the president, would have been the reasonable ones.

Monday, July 25, 2011

Harsh words for Obama from Frum, frenemy

Since at least early 2008, former Bush Jr. speechwriter David Frum has been a trenchant critic of Republican extremism. He saw Sarah Palin for the unqualified fraud she is.  He saw the need for a Republican healthcare reform strategy beyond blocking/negating/demonizing the modified Romneycare put forward by the Democrats. He acknowledges the need for stimulus from both the Fed and the Federal government.

He has therefore earned some credibility as a critic of President Obama.  And his latest, Obama's 5 Big Mistakes, delivers a pretty devastating brief that Obama has failed to lead -- in fighting for further stimulus after the first dose, in coddling bankers, in negotiating away the store -- or more precisely, the debt ceiling. And worse, in ceding core Democratic priorities:

Thursday, July 21, 2011

Gone candystripin'

Once again trailing my (mid)wife on a medical mission, I'll be mainly out of blogging range until Monday. Very glad to see today, though, that Grover Norquist has blown a multi-trillion dollar loophole in his ridiculous and destructive no-new-taxes pledge, signed by over 90% of GOP Senators and MCs. Kudos to Chambliss and Coburn for softening him over the past few months with multiple challenges (per links below) to the ridiculous premise that every closed-out targeted tax break must be offset with an equal tax cut. 

Some Norquist chronicles:
Could ending the AMT square the circle?
Back to the future: Norquist's extortion
A GOP oath best kept in the breaking?
Coburn: ending the ethanol subsidy is (half?) a tax cut
Did Tom Coburn just quadruple the debt ceiling ransom?
Writhing out of Norquist's embrace, Part IV
Forget Ryan - watch Coburn and Chambliss
Writhing out of Norquist's embrace, Part III
Chambliss Seizes the freedom to acknowledge that 2+2=4
Chambliss, Coburn, Crapo to Norquist: Kowtow or brush-off?

Wednesday, July 20, 2011

(Un)pulping the bully approach to presidential politics

Early this year, we heard much about the Catch-22 of presidential leadership: that the president's advocacy for a given position guarantees that the opposing party will...oppose it.  Quantified by political scientist Frances Lee, this theory was  voiced to explain Obama's failure to lay out a detailed deficit reduction plan in the SOTU or shortly thereafter by Jacob Lew, Kent Conrad, and Obama himself.

Today, via Mike Allen's Playbook, we have a further endorsement from a GOP Senate aide:
--A Senate Republican leadership aide emails with subject line “Gang of Six”: “Background guidance: The President killed any chance of its success by 1) Embracing it. 2) Hailing the fact that it increases taxes. 3) Saying it mirrors his own plan.”

Tuesday, July 19, 2011

Could ending the AMT square the circle?

A clue here, I think, to why the sudden revival of the Senate Gang of Six's deficit reduction plan, modeled on Bowles-Simpson, won a "surprise jolt of bipartisan support" when presented to 50-odd Senators:
A key question remains whether the plan might receive any support in the House, where Republicans have strongly resisted any new proposal that could bring in new taxes. The gang's plan would bring in $1 trillion in new tax revenue over 10 years by narrowing several tax breaks. But Mr. Conrad said it would also lower tax rates and end the alternative minimum tax. He said the combination of tax changes would be viewed by budget experts as a $1.5 trillion tax cut (my emphasis).
Ending the AMT allows Republicans to wriggle out of Grover Norquist's no-new-taxes-ever straitjacket, as Jonathan Chait explained with regard to a somewhat smaller package that also proposed to offset modest tax and fee hikes by ending the AMT:

How the Journal editorialists measure Murdoch

Felix Salmon and Joe Nocera have effectively exposed the moral bankruptcy of the Wall Street Journal editorial board's aggressive defense of Murdoch and News Corp.  But leaving aside the apologists' they-did-it-toos and  it-wasn't-so-bads and we-know-our-boss-for-an-honest-man modes of denial, let's focus for a moment on the editorial board's expression of its true credo (my emphasis):
Our readers can decide if we are a better publication than we were four years ago, but there is no denying that News Corp. has invested in the product. The news hole is larger. Our foreign coverage in particular is more robust, our weekend edition more substantial, and our expansion into digital delivery ahead of the pack. The measure that really matters is the market's, and on that score Mr. Hinton was at the helm when we again became America's largest daily.
To be fair, this market fundamentalism from the Journal's opinion wing long predates the Murdoch takeover.  In an odd way, it suggests good faith in their defense of bad faith practices The market was measure for every scandal the Journal editorialists explain away even as the paper's top-notch reporters were breaking them. They pooh-poohed, in turn, the equity research scandal, the options back payments scandal, the insurance broker kickback scandal, and the subprime mortgage scandal. They were relentless in defense of corrupt investment bankers and analysts, corrupt insurance brokers, corrupt top executives and boards, and corrupt mortgage underwriters.

Monday, July 18, 2011

Call my bluff, Eric

Last week, fundraising emails from the DNC trumpeted Obama's alleged warning to Cantor, "Eric, don't call my bluff" as evidence that "the president and Democrats are holding strong against [GOP] obstinacy."

On trusting Obama, revisited

James Fallows, while expressing increasing consternation over the ground Obama has ceded in deficit reduction talks, airs the views of a couple of Obama faithful. Here's one:
And now he has taken the Republican stupid-assed, testosterone addled attempt to hold the debt ceiling hostage, and has judo-thrown them into forcing a discussion of the very problem that they've been purportedly complaining about.  He is using their own two-faced complaints about the deficit...and presenting them with a very sound, very practical, very compromised, totally solid proposal to deal with the long-term structural deficit, which any Republican four years ago would have leapt at, and which contains the very broad-based sacrifices that he promised in his inaugural address...

If he succeeds in his big picture deficit plan, he'll go into 2012 having tamed the long term deficit.  He'll be in a position to lambast the Republicans and hopefully, gain more control of Congress, and, when he's reelected, he'll have a powerful mandate to pursue his more adventuresome and long-term beneficial programs. It'll take a few more years, but he's  a long-term strategic thinker, and I think he'll get us there. The Republicans look like a lot of power-addled men who are really out of touch with the electorate.
Fallows' own response: "It is indeed pretty to think so [hmm...seen Midnight in Paris lately, JF?]. And perhaps this will turn out to be true."  As for my own somewhat shaken faith in Obama's moxie as a long-range strategist, here are the caveats and counter-caveats:

1) No one questions Obama's high intelligence and analytical approach to policymaking.  But smarts don't trump nature, they bend to it, and even the smartest are susceptible to confirmation bias.  Obama's greatest character strength is also his weakness: he has got where he is by deploying what Garry Wills called "omnidirectional placation, and which in a kinder interpretation (i.e., mine, a while back) might be recast as a bottomless confidence that he can always disarm, win over, find grounds for cooperation with the most seemingly implacable ideological foes.
That orientation has determined his strategy, for better or worse: he is hell-bent on appealing to Republicans' better angels. The face he put on reasonable Republicanism is John Boehner. That made sense as far as Boehner himself goes -- I have been impressed by him this year -- but we recently seem to have learned that Boehner does not speak for his party, particularly the frosh (for the measure of their extremism, read Stan Collender's account of the first Tea Party caucus meeting of the new House).   

One part of Obama's most recent argument, expressed in his last two press conferences, indicates to me that he may be invested to the point of personal mania in transforming GOP intransigence.  It's this:

Friday, July 15, 2011

Five questions for Obama

After three presidential press conferences in two weeks, I have a few questions of my own for President Obama:

1)You said today that we are dealing with two problems: the debt ceiling, which is "a problem manufactured in Washington" for political grandstanding, and the structural deficit, which is difficult but solvable. Why then have you yourself embraced negotiations under the debt ceiling deadline as "a unique opportunity to do something big"?

2) You said today that cutting $2.4 trillion in spending without adding new revenue, as Republicans have proposed, would, to paraphrase, "effectively gut a whole bunch of domestic spending." Why would making the same cuts while adding a few hundred billion in new tax revenue not "effectively gut" the programs in question?

Thursday, July 14, 2011

Obama's tax strait jacket

Last Sunday, when Chuck Schumer defended Obama by denying that middle class tax hikes were on the table, it occurred to me that Obama has not so much shifted to the right on tax hikes vs. spending cuts as remained where he was in 2008:

That unwillingness to tax "the middle class" is a core precept of Obama's. I recall my disappointment during the 2008 campaign when Obama made it clear that he would seek to roll back the Bush tax cuts only for the wealthiest 2%, which accounts for  I believe a quarter of the revenue forgone by those cuts. You simply cannot get to $2 trillion in additional revenue over ten years without taking it out of "the middle class" so broadly defined -- that is, everyone from the 97th percentile on down.  Even with thoroughgoing tax reform, which lowers rates in exchange for reducing tax expenditures, strictly limiting the most popular tax breaks would probably raise net taxes on more than the top 2% of taxpayers.

The moderate Bipartisan Policy Center's plan, for example, radically restructures the tax code, vastly reducing tax expenditures, taxing all capital gains as ordinary income, flattening income tax rates to 15% and 27% and the corporate rate to 27%, and adding a 6.5% national sales tax; it would raise some $2.2 trillion in new revenue by 2020 but also raise net taxes on every income group but the lowest quintile. Obama has never been willing to do that.

I had assumed, as I think others had, that Obama would use tax restructuring -- lowering rates and closing loopholes -- as cover to raise taxes on at least some people making less than $200k (or families under $250k). No dice, apparently.  The strict line that Obama drew in 2008 limiting the tax hikes he is willing to entertain still stands.

The shift of the goalposts to the right thus predates Obama's presidency. Republicans have shifted them by making the Bush rates the status quo and relentlessly demonizing all tax increases, and Obama's half-acquiescence goes back at least to his candidacy.  Those like David Brooks who charged that Obama was putting his agenda in a tax straitjacket back in 2008 were right -- and he is not using tax reform as a cloak to broaden the tax hike pain.
 This basic fact has dawned on a lot of people this week. Ezra Klein noted yesterday:
But we’ve also learned a lot about President Barack Obama. Take taxes. The prevailing theory has been that the Obama administration would seek the largest tax increases it could plausibly pass. Liberals are now dismayed to learn that that notion is false. Instead, the Obama administration wants to take the tax issue off the table as soon as possible; the president is willing to take much less in revenue in exchange for spending less time arguing about taxes.

The Baltimoring of America

As Congress and the President go down to the wire negotiating a package of enormous spending cuts and tiny-to-nonexistent tax hikes, this state-of-the-nation diagnosis by David Simon, creator of the epic of Baltimore street and political life The Wire, seems tragically as appropos as it was when spoken in 2006:

But what really ails America, in my opinion, is this:  Raw, unencumbered capitalism is an economic force and a potent one.  But it is not social policy and amid a political culture of greed and selfishness, it is being made to substitute for social policy.  The rich get richer, the poor get fucked, and the middle class of this country - the union-wage consumer class that constituted the economic strength of postwar America - is fast disappearing as the need for union-wage work disappears.

Raw capitalism - absent the moderating aspect of a political system that cares for the great mass of voters (or non-voters) who uphold that system - is not good for most of us.  It is great for a few of us.  We are building only the America that we are paying for, and ultimately, it is going to be an ugly and brutal place, much like the city-state depicted in The Wire.  So when Congress fails to raise the minimum wage for the first time in fifteen years because they will do so only if at the same they can eliminate an estate tax for the wealthiest 8,000 families in the country, as they did this month, I at least manage a smile to know that the content of my little television drama is not the stuff of hyperbole; if anything we've been gentle about what the American future is.

Tuesday, July 12, 2011

Hysteron proteron, or leading from behind (temporally)

The hysteron proteron (from the Greek: ὕστερον πρότερον, hýsteron próteron, "latter before") is a rhetorical device in which the first key word of the idea refers to something that happens temporally later than the second key word. The goal is to call attention to the more important idea by placing it first.

The standard example comes from the Aeneid of Virgil: "Moriamur, et in media arma ruamus" ("Let us die, and charge into the thick of the fight"; ii. 353).
In yesterday's presser,  Obama's hysteron proteron approach to leadership reached a kind of apotheosis.  Check out the temporal transposition in the president's peroration. Here he's explaining why he's agreed to address the long-term debt problem before the jobs problem:
This is how do we operate in a smart way, understanding that we’ve got some short-term challenges and some long-term challenges.  If we can solve some of those long-term challenges, that frees up some of our energies to be able to deal with some of these short-term ones, as well.
That is standing Krugman on his head (logically or not), with a vengeance.

Monday, July 11, 2011

Okay, he's 'leading'....

Leaving aside for the moment Obama's policy positions, does anyone still think that he's too passive/failing to lead/afraid to confront Republicans? In a sense, he is out-crazying them: embracing negotiation under the debt ceiling sword of Damocles as a "unique opportunity"; insisting on a $4 trillion grand bargain; promising to veto any short-term debt ceiling fix; and, via Geithner, ruling out a "14th Amendment solution" in which the Treasury simply ignores the debt ceiling. Insisting under all these conditions that he will not agree to any deal that does not raise new revenue is brinkmanship in the extreme. In fact, we seem to be headed straight over the brink.

Hillary Rodham Pawlenty

Jonathan Chait has been arguing that Michele Bachmann is positioned something like Obama in 2007: she does best among those voters "most attuned to the campaign."

If Bachmann is Obama, Tim Pawlenty seems to be lining up for the role of Hillary Clinton:

Sunday, July 10, 2011

Why the president's grand bargain offer is so conservative

Ever since Obama made it clear that he was engaging with Republicans to strike a multitrillion deficit reduction deal, Democrats have lamented how far the goalposts have been moved to the right.  Why were Democrats not insisting on, say, a 50/50 split between spending cuts and tax hikes? Why was the floated half-loaf deal weighted an apparently 83/17 in favor of cuts, and the more recently proffered grand bargain something like 3-to-1? (Though I wonder whether, as in the president's initial proposal, that is not in fact 2-to-1, with another trillion in savings credited to reduced interest paid on the debt.)

I believe that Chuck Schumer's statement yesterday in response to Boehner's rejection of the grand bargain may contain an explanation that's been hiding in plain sight, per the passage I've bolded below:

Saturday, July 09, 2011

What's next for Sheila Bair?

Joe Nocera has a wonderful debriefing of just-retired FDIC head Sheila Bair, who fought the good fight on behalf of depositors, mortgagees and taxpayers in the runup to the financial meltdown and throughout it -- fighting unsuccessfully to rein in subprime lending and for effective mortgage modification, and successfully for strong resolution authority in Dodd-Frank to wind down failing megabanks.  Throughout, she was an advocate for market accountability -- that is, for bank bondholders and mortgage holders to absorb a portion of the losses caused by mortgages gone bad and banks gone bust. Nocera also credits her with staving off U.S. adoption of Basel II, the loophole-ridden standard for bank capital requirements that enabled European banks to put themselves in even worse shape than American ones.

Perhaps the article is spun this way, but as Bair delivers her own postmortem it's hard not to speculate about her future:

Friday, July 08, 2011

Obama Sr. and DSK's accuser

I can't be the only reader whose mind jumped to Dominique Strauss-Kahn's accuser when I read this:
Mr. Obama’s father, Barack Hussein Obama Sr., told immigration officials that Ann Dunham, whom he had recently married, would make “arrangements with the Salvation Army to give the baby away,” one document said...

An immigration official had become leery of his “playboy ways” and thought Mr. Obama might have more than one wife, which can be grounds for deportation. Mr. Obama said at the time — falsely — that he had divorced his Kenyan wife, with whom he had two children.

The excerpt of the book says it is unclear whether Mr. Obama intended to have his son adopted or if he was fabricating the story to appease immigration officials. Mr. Obama often gave contradictory answers on the forms, sometimes leaving questions about his marital status blank. 
Jesse Ellison recently reported on the pressures that induce refugees seeking asylum to lie. While the stakes are lower for those on student visas, like Obama Sr., the mind set is still instructive:

Indulging my worst impulses toward despair

Good God, is this the day the Obama presidency died?  Horrendous monthly jobs numbers make it seem so. As the economy dives toward double-dip recession, the president is a self-bound hostage to the GOP, mired in calamitous-looking deficit reduction talks, the results of which are likely to further crimp growth while shredding the safety net.  Having let the GOP set the agenda, Obama is unlikely to find a way to further stimulus.

This feels like nemesis nipping at the U.S.'s heels, the next tumble down a staircase that began with the Lewinsky scandal, carried through the busted and stolen 2000 election, then on to Bush busting the budget and defunding the federal government while shredding civil liberties and various norms and taboos of governance. Now, I'm haunted by Cassandra Krugman's constant forecasts of calamity triggered by too-weak progressive response to the financial meltdown, half measures that discredit a sane stimulative response.  Now the lunatics are poised to once again take over the asylum after four years of powerful incentives to sink ever deeper into lunacy -- discrediting stimulus, discrediting the once-conservative approach to universal healthcare codified in the ACA, discrediting effective regulation, discrediting an even minimal safety net.

We are in the dangerous circumstance of having a two party system in which one party is not fit to govern and the other -- its leader, anyway -- may lack the will to effectively counter that extremism.  The country cannot afford another period of Republican misrule before that party changes its character, chastened by a period of Democratic success. The abyss yawns.

A stupid post, I know, but I'm going to ride with the feeling of the moment.

Update: thanks to commenters for the buck-up messages. I do hope that this post looks really stupid a year from now, and it was probably silly to put it up: I have been determined to reserve judgment on the debt ceiling talks until we see what results, but jumped my own gun.  

Thursday, July 07, 2011

Debt deal does not compute

I was glad in a way to read in the Times last night that Obama has allegedly widened the scope of the deficit reduction talks to include about $1 trillion in new revenues over ten years, approximately the benchmark (conservative but not outlandish) set by Bowles-Simpson and by Obama's own plan floated in April. But the notion that such an enormous deal -- including tax reform and social security reform as well as large Medicare/Medicaid and defense cuts -- can be hammered out and agreed on before August 2 simply does not compute. Not only Cantor and McConnell but Boehner too continue to swear that no deal can include net tax increases -- that any closure of tax expenditures must be offset by reduced marginal rates. Also, the sheer scope and complexity of the deal smells like a two-or-three year project, not a product of a few weeks of intense negotiations.

I'll pay you to sell me less...

The FT's John Kay inveighs against the deceptive business practice of offsetting a low headline price with price-gouging at the margins, as in hidden bank fees and $10 minibar beers.  The subject put me in mind of a recent dodge in US packaged foods: don't change the price, but downsize the package. Deceptive? Maybe. But after 30 years of supersizing it's probably a good thing from a health point of view.

Whole Foods lines up various blends of coffee, all the same price, but in 10, 11 and 12 ounce cans. From one perspective, that's the opposite of deceptive. There before your eyes, if you have eyes to see,  is the ascribed premium value of french roast.

Tuesday, July 05, 2011

Obama is two years early on deficit reduction negotiations

To listen to Obama's statement about budget negotiations this afternoon, you would think that he has willingly embraced the debt ceiling deathline as a means to force a deficit reduction deal quickly: the current negotiations under threat of default are, he said, "a unique opportunity to do something big."  Refusing to entertain the possibility that a comprehensive 10- or 12-year deal won't be struck before the August 2 debt ceiling deadline, Obama said that lawmakers should not "kick the can down the road" with a short-term fix.

I hope Obama proves me wrong, but it seems to be that there is something fundamentally wrong with this "opportunity." He should not be trying to negotiate a multi-year $4 trillion deal in this short time frame, under threat of default, with a GOP that continues to swear, as Boehner did today in response to Obama's speech, that it will not raise taxes at all. It's either madness or some kind of feint.

Bill Clinton negotiated a comprehensive multi-year deficit reduction act that reflected his priorities in August 1997, two and a half years after the Gingrich Congress was sworn in swearing to radically cut both spending and taxes.  For the first 11 months of 1995 the GOP essentially refused to compromise, maintaining throughout the bill-drafting process and in the omnibus budget bill they finally sent to Clinton all the provisions he had pledged to veto -- $245 billion in tax cuts, nearly $300 billion in Medicare cuts, nearly $200 billion in Medicaid cuts. And veto he did -- the omnibus bill, as well as  emergency debt ceiling and short-term spending bills with onerous provisions. It was only after the Republicans had broken their heads against multiple vetoes, two government shutdowns, a slow drip of partial appropriations and a short-term deal in April 1996 for the fiscal year ending that October that thy were ripe for a comprehensive deal -- mainly on Clinton's terms.

The more perfect union we love to hate

Just read two 4th of July essays that I can't help juxtaposing, because each has a valid point to make, and yet they're all but contradictory.

First, E. J. Dionne, arguing that the Tea Party fundamentally misunderstands the American experiment:

Monday, July 04, 2011

Back to the future: Norquist's extortion

October 1, 1995.  Bob Dole, Senate majority leader and presidential candidate, is working to shepherd an omnibus spending bill incorporating the GOP's seven-year deficit reduction plan to passage, around the promised veto of Bill Clinton.  A marquee feature is $245 billion tax cuts, scaled down from the Contract with America's call for $354 billion but representing a consensus GOP figure since legislation took shape in the House and Senate in the spring of the year.  After months of Democratic attacks, however,a Washington Post poll finds  that 69 percent of respondents deemed "leaving Medicare services basically as they are now" to be more important that cutting taxes. Dole wavers:
"Will {the tax cut} be $245 billion? I'm not certain at this point," he said on CBS's "Face the Nation." "We have to get into the Finance Committee and see what we can achieve"(Washington Post, 10/3/95).

Heresy!  Up rears an enforcer all too familiar to those following the current budget battles in Washington:

Sunday, July 03, 2011

Why Obama can't entirely channel Bill Clinton circa 1995

Worried by the Obama administration's apparent large concessions to date in the debt ceiling negotiations (demanding paltry revenue hikes in exchange for massive spending cuts), I've been reading newspaper chronicles of Bill Clinton's epic budget battles with the Republican House and Senate in 1995 and 1996, seeking a kind of benchmark and maybe a bit of reassurance.

Clinton pretty much won these battles, which were not really resolved until the Balanced Budget Act was agreed upon in August 1997. The $284 billion in Medicare cuts over seven years that the Republicans had written into their 1996 bills was winnowed down to $112 billion; the GOP's $182 billion in Medicaid cuts was reduced to a fraction of that and offset by $24 billion for the S-CHIP program to provide Medicaid to uninsured children; the $245 billion in tax cuts became $95 billion in cuts reflecting Clinton's priorities.

Friday, July 01, 2011

"He made it worse"...compared to what?

ca·su·ist·ry... n. pl. ca·su·ist·ries
1. Specious or excessively subtle reasoning intended to rationalize or mislead.

Mitt Romney is having a hard time convincing people that he hasn't been relentlessly lying about Obama's economic record since he officially kicked off his campaign. Let me offer my assistance.

In the fundamentally misleading speech with which Romney launched his campaign, he said this about Obama:
When he took office, the economy was in recession. He made it worse. And he made it last longer.
video by DemRapidResponse catches Romney saying substantially the same thing repeatedly since then, e.g., in the GOP debate:
What this president has done, is slowed the economy. He didn't create this recession, but he made it worse. And longer.
Challenged yesterday by an NBC reporter who pointed out that the economy is, in fact, growing, Romney said:
 "I didn't say that things are worse. What I said was, that the economy hasn't turned around."
That is really as clever as Clinton's "There is no sexual relationship." It's true, Romney did not say things are worse. He said that Obama made it (the recession) worse, presumably starting on Jan. 19, 2009, and made it "last longer."