One of the developments of the past few years that's so peculiar that few people have really gotten their heads around it is the way in which conservative members of the House of Representatives have emerged as the key institutional roadblock to large cuts in American social insurance programs.I know, that sounds crazy- the Tea Party nuts in the House are the constituency that most wants to cut social insurance programs, so how can they be the key roadblock?
But it makes sense- the fact is that the centrists whom Paul Krugman calls the Very Serious People are all in favor of cuts to Social Security and Medicare. Among the punditocracy, calling for modest cuts to benefits is the way to sell your bona fides as someone who's not a left wing nut.
So Barack Obama, who has been very much in thrall to these VSPs, who pivoted to deficit reduction way too early in his effort to be a centrist, offered a Grand Bargain with lots of benefit cuts to social programs in exchange for very modest tax hikes. And the Republicans couldn't accept it (remember the GOP primary presidential debate in which every candidate said that he/she would not trade any tax hikes for spending cuts, even in a 10:1 ratio?). The GOP House members are holding out for a deal that is 100% spending cuts, and they won't accept anything else- No Compromise!
So in this case, when you don't compromise, you don't get anything you want. Republicans will of course continue to blame the president, but think about what they're offering:
US debt headed toward 200 percent of GDP even after 'fiscal cliff' deal
ReplyDeleteThe nation's long-term fiscal outlook hasn't significantly improved following the recent agreement between Congress and the White House over tax and spending issues, according to a new analysis.
The "fiscal cliff" deal, combined with the debt-limit agreement of August 2011, only slightly delays the United States reaching debt-to-gross domestic product levels that would damage the economy and risk another fiscal crisis, according to a report from the Peter G. Peterson Foundation released on Tuesday. The agreement "may have prevented the immediate threats that the fiscal cliff posed to our fragile economic recovery, but we haven’t remotely fixed the nation’s debt problem," said Michael A. Peterson, president and COO of the Peterson Foundation.
"The primary goal of any sustainable fiscal policy is to stabilize the debt as a share of the economy and put it on a downward path, and yet our nation is still heading toward debt levels of 200 percent of GDP and beyond," he said.
The report concludes that the recent round of deficit-reduction measures won't make major improvements because they fail to address most of the major contributors to the debt and deficit, including rapidly rising healthcare costs. At a House Ways and Means Committee hearing last week, lawmakers and budget experts agreed that rising healthcare costs, such as Medicare, must be addressed this year as part of efforts to overhaul the tax code and entitlement programs.
"Until spending in those areas is reduced, tax revenues are increased, or policymakers implement a combination of both, the United States will continue to have a severe long-term debt problem," the report said.
"Reforms should be implemented gradually, and fiscal improvements must be achieved before our debt level and interest payments are so high that sudden or more draconian reforms are required to avert a fiscal crisis."
The latest deal that stopped income tax increases for those making $400,000 a year or less may have only improved the burgeoning debt situation by a year.
Scheduled spending cuts from the 2011 budget deal, combined with the fiscal cliff agreement, put the debt on track to reach 200 percent of GDP by 2040, five years later than was projected prior to the passage of the two deals.
The recent deficit-reduction measure gave the nation an additional year before hitting that 200 percent threshold, the report showed.
Sequestration does not improve the outlook much, either.
Even if the budget sequester is fully implemented, federal debt would still reach 200 percent of GDP within about 28 years.
On top of that, the debt will continue to grow between now and 2022, and will accelerate significantly after that.
Debt is now projected to grow from 72 percent of GDP in 2012 to 87 percent in 2022, down only slightly from the 90 percent that was estimated before passage of the most recent deal.
Many economists suggest keeping debt at or below 60 percent of GDP, with research showing that economic growth slows for countries that have debt levels exceeding 90 percent of economic growth.
"Americans shouldn’t be under any false impression that our debt problems are behind us," Peterson said.
"And because it takes years to implement policies fairly and gradually, we need to make decisions now, before we are forced by markets to take severe action that hurts our economy and our citizens."
The bankruptcy of the Obama-Pelosi 'progressive' agenda
ReplyDeleteBy Peter Morici Peter Morici is an economist and professor at the Smith School of Business
No one can accuse the Democrats of being the party of personal responsibility. Confronted with an economy that contracted in the fourth quarter, Minority Leader Nancy Pelosi blamed Congressional Republicans for obstructing the president’s agenda and creating uncertainty.
In the wake of the financial collapse, the Democrats took full control of both the Congress and the presidency in 2009 and were presented with an historic opportunity to put their ideas into practice. Unfortunately, the newly elected President Obama and then-Speaker Pelosi treated the situation as a political opportunity to build a Democratic majority rather than an obligation to fix what’s broken in the economy.
Shrewdly, President Obama cobbled together a broader Democratic coalition by delivering to women free health care services, to Hispanics amnesty for young adults, to younger folks overly generous student loans, to teachers and civil servants subsidies to protect their jobs, to labor unions a rebuke of Simpson-Bowles recommendation that the retirement age be raised, and to his political friends generous subsidies for solar panels, windmills and other whimsical projects. Meanwhile, he cut defense, raised taxes on small businesses, and imposed unproductive regulations on manufacturing.
No surprise, the revolution of the takers has instigated a strike among the makers. Rather than be slaves -- yoked under burdensome taxes, regulations and endless hectoring from the Left -- small banks aren’t lending but instead are looking to sell out to the Wall Street barons who financed the President’s rise to power. Small businesses are not expanding, and multinational corporations are taking factories and jobs to China and other Asian venues where genuine enterprise and capitalism, paradoxically, is supported.
Now, Mr. Obama’s tepid recovery is failing.
When the President campaigned in 2008, he promised to address the huge trade deficits with China and oil, which together sap demand and slow growth and jobs creation, and address skyrocketing health care costs.
Early in his presidency, Mr. Obama blamed China’s undervalued currency for slow U.S. growth and warned Chinese leaders if they did not cooperate to redress the situation, he could act unilaterally. Liberal economists like Paul Krugman, conservative economists like this author and moderates like the Peterson Institute’s Fred Bergsten all recommended viable courses of action.
Sadly, the President talks tough in front of friendly audiences and to Republicans when he enjoys the high ground, but brings his kneeling pad when negotiating with Chinese leaders. He has simply done little to reverse the flow of money and jobs to the Middle Kingdom and other venues in Asia.
In the wake of the Deepwater Horizon disaster, the President punished the entire oil industry to gain political points and appease environmentalists. So much for substantially reducing the oil deficit!
His most significant accomplishment -- ObamaCare has turned into a massive subsidy for the health care industry and welfare program for working class voters he hopes to secure for the next generation. Health care costs 50 percent more than in Germany -- where outcomes are better -- and health insurance premiums and co-pays borne by business and the middle class keep rocketing.
Government spending is up over a trillion dollars, the federal deficit is spinning out of control and the country faces a credit downgrade by Moody’s. Former Speaker Pelosi vilifies Republicans for not embracing the President’s “balanced” approach, but he shows no interest in cutting spending and only passion for raising taxes on success.
America hardly lacks the technology, capital and enterprise necessary to succeed, but unfortunately, it is led by a man hell bent on building a political majority, and with little interest in fixing what’s broke in the economy.