Monday, August 01, 2011

Budget Deal is OK - for now

The pending debt deal is small ball. That's what makes the angst over its passage so astonishing. Cutting two trillion dollars in spending over ten years - if we really are cutting that much for in the fun house world of Washington accounting it's tough to know - is not trivial but it leaves the largest challenges untouched. That it took this much to get that little may be seen as an indictment of our political system, but I regard it as an indictment of the Democratic Party.

It's a popular Democrat trope about now to wonder "what happened" to the Republicans. In yesterday's New York Times, Tom Friedman gets misty for George H.W. Bush for being the kind of Republican who supports what liberal Democrats want to do. He believed in math and science, says Friedman. Friedman's math apparently requires that government spending not be permitted to fall below a certain percentage of GDP and that budgets may not be brought into balance without tax increases. His science admits only of the more extreme views on climate change and requires that we ignore insights from economics and political science which suggests that a cap and trade scheme on something as pervasive as carbon emissions is likely to be a disaster.

The problem with Republicans, we are told, is that they just won't raise taxes even on rich people who, being rich, don't need whatever additional money "we" may decide to take from them. The problem, of course, is that we already have a highly progressive tax system in which a large percentage of the population pays no income tax. Upper income persons already bear a substantially disproportionate share of the tax burden. While I suspect that some tax preferences will have to be looked at and that it may be inevitable that the Bush tax cuts will be permitted to expire for some upper income taxpayers (although, hopefully, not for those "millionaires and billionaires" who earn $ 250000), this is largely a spending problem and Republicans were right to take tax cuts off the table given the relatively modest spending reductions under consideration.

But, in the end, I agree with Charles Krauthammer and others who argue that this is the best that can be done for now. You cannot govern from the House of Representatives. It is amazing that Republicans were able to accomplish what they did. They have as Nicole Gelinas points out, demonstrated that "[w]e can’t spend what we plan to spend in the future without harming the character of the country." As Victor Davis Hansen observes, they have returned reality based views to the budget debate and largely rendered President Obama irrelevant.He and the Democrats became the "party of no" without a coherent vision of their own. We now that they don't like Paul Ryan's Roadmap or, presumably, any variant of that approach. We still don't know what they do like other than to continue the unsustainable.


Anonymous said...

Our gov needs to prevent deficits by making sure our debt to income ratio is in line...bailing out corporations and unions and not the people is doing things ass backwards.

Anonymous said...

Dude, you're a lawyer. You embarrass yourself every time you talk about economics. You should stop.

Anonymous said...

The biggest victory has been the change in the focus of the debate. It has been years since we have had serious discussions about debt and entitlements.

In Congress, remarkable work by
speaker Boehner. To criticize him is totally unrealistic. He made the best of the what he had to work with, and achieved more than anyone expected.

Anonymous said...

Yeah, the GOP used the threat of a credit default (talk about "likely to be a disaster") to force the country in a direction that seems
likely to weaken
an already weak economy. Quite the visionaries on the right.

And spending reductions balanced with revenue increases to address our nation's deficit is a coherent vision.

Anonymous said...

largely rendered President Obama irrelevant

Hardly. The deal agreed to in the past couple of days is all cuts, but key is where those cuts are triggered to originate. Specifically, they're heavily weighted toward defense. In all likelihood, this is going to result in increases in revenue via the bipartisan committee since GOP deficit hawks are not going to tolerate those cuts, at least not without fracturing the base.

To be sure, if the president really was irrelevant, your post wouldn't include the words "ok" or "for now."

Tom said...

I would agree that Obama was largely irrelevant in this. He was the only major public figure calling for tax increases, and the Democratic and Republican leadership alike ignored him.

I disagree that this is the best they could do, though. If they really were willing to let that debt ceiling be hit (since it could not be raised without their acquiescence), they could have gotten almost anything they asked for. It might have been hard for them politically, but it would have been a much better step in the right direction than this plan, which merely slows the increase in spending rather than actually cutting.

Lastly, for anybody who criticizes the Republicans for playing this game of chicken, I ask them, "What is a debt ceiling for, if not this?" The debt ceiling serves absolutely no purpose if it just gets raised automatically without comment. It is only useful when politicians put it to use as a bargaining chip.

Rick Esenberg said...

Dude, you're a lawyer

Agreed. I minored in Economics but that was a long time ago and that's all it was. And if you are a strong proponent of Keynesian demand management and believe that the only problem with the failed stimuli was that they weren' large enough (a matter of faith than of evidence), then this is a bad deal.

Anon 6:56

I think that the second round cuts are designed to be distaseful to both sides but I wouldn't hold my breath waiting for tax rate increases (as opposed to elimination of some preferences). That seems to be the third rail for the GOP.

Anonymous said...

That seems to be the third rail for the GOP.

Then I guess that's when we'll find out who's really relevant. Calling it now is a bit premature.