Tag Archives: balanced budget amendment

Washington D.C.’s Oil Rush As Seen In Heller’s Big Tax Picture

Senate Republicans, who have turned obstructionism via filibustering into an art form, are allowing S. 2204, a bill to repeal the subsidies granted to major oil companies to come to the Senate Floor, not that they will follow Senator Harry Reid’s (D-NV) lead and enact the measure.  [LVSun]  However, debate on the bill does provide another opportunity to contemplate the almost total disconnect between the Senate Republicans and the reality of the global oil market.

Appointed Senator Dean Heller explains:

“Once again, Washington is doing its old familiar dance — pushing another measure that’s big on talking points but light on solutions,” Heller said in a statement shortly after supporting the procedural motion to take up the bill he doesn’t sound keen on voting for. “The truth is this measure will not help anyone struggling with rising gas prices.” [LVSun]

No, the bill has precious little to do with gas prices yesterday, today, or tomorrow.   Not that Senator Heller wouldn’t like to attack a bill “to reduce American dependency on global oil markets which doesn’t do that,” BUT the junior Senator is crafting a straw man at which to aim his lance.   The bill is about repealing  generous tax subsidies to highly profitable energy corporations who have benefited from American protection without paying their share of the tab.  And, taxes are what Senator Heller wants to discuss:

“Heller argues his position is not about protecting oil and gas companies; it’s about taxes. He’s open to talking about closing loopholes in the context of a larger tax discussion but not to raising taxes on anyone — including oil and gas companies — before then.” [LVSun]

For the want of a better term, let’s call this the Trap Door Argument.  The political expediency of the contention shows when it’s inferred that unless Senator Heller gets to close “loopholes in the context of a larger tax discussion” he’s not amenable to closing any loopholes.   The little devils are, of course, in the details.  What is that “larger context?”

One of the most notable features of Heller’s overall vision for taxation and federal spending is prominently displayed on his campaign website, a call for the adoption of a Balanced Budget Amendment.  For reasons already explained in more detail here, here, and more specifically here,  Senator Heller’s allegiance to Senator Jim DeMint’s (R-SC) Balanced Budget Amendment proposal from the Tea Party adherents in Congress isn’t so much a “larger context,” but an exuberant flight from fiscal reality.

What other proposals shape Senator Heller’s “larger context?”  Grover Norquist’s Americans for Tax Reform has proudly announced that Senator Heller was the first Nevada candidate to sign the No Tax Pledge. [Aft]  What did Mr. Heller sign?

“By signing the Pledge, Heller commits to the taxpayers of Nevada that he will “oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses … and oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.” [Aft]

And by aligning himself with Norquist’s organization, he’s signed into the Flat Tax Society:

“ATR believes that all consumed income should be taxed one time, at one low and flat rate. ATR is neutral as to where this taxation should occur. A flat tax is a consumption tax imposed when money is earned. Various sales taxes like the FAIR Tax are imposed when money is actually consumed. Each has the same consumption tax base. ATR maintains that tax reform should not be an excuse for a net tax increase. Rather, all deductions and credits repealed should be replaced by lower tax rates, new deductions and credits, and/or making existing deductions and credits bigger.” [AFT]

Therefore, the “larger context of tax reform” gives every appearance of being framed by (1) a balanced budget amendment, (2) no reduction in corporate tax loopholes unless matched by spending cuts, and (3) the enactment of a flat tax.   If Class Warfare is the desired outcome, the Flat Tax is the weapon of choice.

An economist from the Strom Thurmond Institute at Clemson University provides this explanation as to why this would be the case:

“…there’s no concealing that the flat tax would radically redistribute the tax burden. Adam Smith, to whom economists always turn to for economic wisdom, observed, “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” The current U.S. tax system consists mainly of taxes on income (personal and corporate), payroll (Social Security), sales, and property. In 2007, these taxes provided 92 percent of federal income and 51 percent of state and local government income. Sales taxes are regressive—they take a higher share of low incomes than higher incomes.”  [USNWR] (emphasis added)

There’s another little wrinkle in the so-called  Fair Tax (Flat) Proposition which may rankle many who still cringe at the income derived from playing the market — as it was played during the Housing Bubble, under the Flat Tax Plan there would be NO tax on interest earnings:

“Not taxing investment income would eliminate the current “double taxation” faced by investors who pay taxes on their income, and then again when that income generates profits. That, too, would benefit the rich more than the poor. (A retired billionaire living solely off interest income, for instance, would pay no taxes at all.) [TP,WP] (emphasis added)

Thus far, Senator Heller’s “larger context” is a Financialist’s  recipe for fiscal irresponsibility as prescribed in the Balanced Budget Amendment, for more (not less) deductions and credits, and for financing the operations of the federal government under a radical redistribution of the tax burden.

The Flat Tax hasn’t gotten much play in recent Republican debates since Governor Rick Perry and Herman Cain left the presidential candidate’s field, but the propositions most often offered for a Flat Tax range from 17% to 20%, with no taxation on income earned from investing (or speculating.)  The question at this juncture becomes: Does Senator Heller continue his advocacy of the Tea Party’s Balanced Budget Amendment, and does his adherence to the Americans For Tax Reform’s pledge indicate his adoption of Flat Tax proposals?

If the answer to those questions is “YES,” then the only context in which Senator Heller might be willing to address the reduction of tax subsidies for profitable corporations with an unfortunate history of non-payment of tax liabilities, is a system in which both Exxon-Mobil and a hypothetical middle income taxpayer named “Esther Mobley” are paying the same tax rate.
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For additional information see: Robert Reich, The Flat Tax Fraud; Catherine Rampell, “The Rich Get Biggest Break in Perry Tax Plan, NYT 10/31/2011; CNBC, John Harwood, “Perry, I Don’t Care If Tax Plan Helps The Rich,” 10/25/11;  John Cassidy, “Rational Irrationality: Rick Perry’s Ugly Tax Hybrid,” New Yorker, 10/25/11.  Rebecca Leber, “Exxon Mobil’s Tax Rate Drops to 13%,” TP, CTJ 3/26/12.  Robert Pozen, “Gingrich’s Flawed Social Security and Income Tax Proposals,” Brookings, 12/27/11.  Robert Pozen, “Perry’s Harebrained Tax Plan,” Brookings, 11/1/11.

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Filed under 2012 election, corporate taxes, Economy, energy, energy policy, Heller, Reid, Taxation

Senator Heller’s Strange Gifts: Middle Class Tax Cuts Paid For By Middle Class Taxpayers

Senator Dean Heller’s (R-NV) strange gift to the middle class should be unwrapped as quickly as possible, and held under a bright light.  Yes, Virginia City, there is a Santa Claus, but he only bestows gifts on the truly deserving and to discern who should be included in the “nice” side of the ledger one only has to take a peek at the provisions in Senator Heller’s wish list.

S. 1931 included a “Temporary Tax Holiday and Government Reduction Act – Amends the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 to extend through 2012 the 2% reduction in employment and self-employment tax rates. ”  There’s your Christmas Gift — a temporary tax holiday from payroll taxes!  But what makes this bill one of the most splendid examples of Republican Wall Street Warrior legislation is how Senator Heller proposes to pay for the reductions.

Answer: Freeze federal employment, Freeze federal employee paychecks, Across the board cuts in Federal discretionary spending, and Wow! — making millionaires and billionaires ineligible for unemployment benefits and increasing Medicare premiums for the ultra-wealthy.  If you are searching for an analogy — try thinking about that hand knitted aquamarine and heliotrope scarf from Aunt Minnie.   In short, Senator Heller will pay for the tax cuts for the middle class by cutting back the employment and finances of other members of the middle class; and, offering perfectly meaningless “cuts” to programs the ultra-wealthy aren’t going to use anyway.  [See also The Gleaner]

Senator Heller also offered Nevadans the Specter of Christmas Past, i.e. the recurring nightmare that is the so-called Balanced Budget Amendment, voting for both of the the mutually exclusive versions presented in the Senate this past week.  [USAT] The BBA is one of the sillier, least productive, and fiscally imprudent suggestions offered so far — from either side of the aisle.  Think: Finding a Japanese electric nose lifter in your Christmas stocking. [GeekyGadgets]

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Redux: This is NOT your family budget — False Analogies and Faulty Logic

Return with us now to that day not so long ago when the post heading was: This Is Not Your Family Budget.  Indeed, suggestions that a Balanced Budget Amendment is a good idea — as proposed by Senator Dean Heller — are based on a false analogy and very faulty logic.

Faulty Towers

The faulty thinking comes into play as the proponents ignore the fundamental ways in which government spending is different.  There are backstop functions, automatic stabilizer functions, monetary policy functions, and savings functions, which factor into the formula for institutional budgeting that aren’t part of family budgeting.  [DB]*

However, the false analogy extends a bit further. The blithe disregard for the factors listed above results in a proposition that is the complete opposite of the expression: “The government should be run like a business.”  Imagine a business that could not borrow funds for capital improvement projects?  No bond sales?  No ‘running a deficit’ for the purpose of investing in corporate infrastructure with an eye toward future profits? For example, are we to become upset and fearful for Chevron because its balance sheet indicates an increase in long term indebtedness since December 2008?  The bottom line is that a  corporate CEO couldn’t run a modern company under the guidelines suggested by the Republican Study Committee.

The False Analogy

Rather that reiterate all the specifics of the false analogy, here are some useful sources of information demonstrating the point that government budgets and family budgets are two entirely different things.

Economics writer David Nicklaus of the St. Louis Post Dispatch explains how the proposed balanced budget amendment would bust the U.S. economy rather than fix any of our current economics problems, noting the difference between government and family budgets. Robert Greenstein and Richard Kogan (CBPP) explain this argument further.   Robert Greenstein, writing for the CBPP, lists ways in which family budgets DO incorporate deficit spending and are not an appropriate model for government operations.  Greenstein and Kogan explain that the balanced budget amendment is extremely ill-advised, and would create problems for Social Security.

A Solution Worse Than The Problem

What House Republicans, and some Senators like Sen. Dean Heller, are advocating is a solution worse than the budgetary problems we are currently facing.  For those wishing to get into the weeds of this issue, the following articles and posts are recommended:

Richard Kogan, “Program Cuts Under a Balanced Budget Amendment: How Severe Might They Be?” CBPP, November 15, 2011.  Fieldhouse, Pollack, Thiess, “Why spending caps are poor policy…,” Economic Policy Institute, June 22, 2011.  Rebecca Thiess, “Unbalanced Budgeting: Federal Spending Cap May Endanger Social Security,” Economic Policy Institute, June 22, 2011.  Citizens for Tax Justice, “Balanced Budget Amendment Could Double Unemployment During Recessions,” November 17, 2011.

Several writers reference a post from MacroEconomic Advisers LLC  published on October 21, 2011 which concluded:

“The ultimate goal of a balanced budget amendment is to reduce the federal deficit. As we have written elsewhere, we believe strongly that deficit reduction is necessary both to avoid the slow crowding out of private investment and to avert the eventual sovereign debt crisis implied by current policies. A BBA would not necessarily achieve these goals before being abandoned or circumvented. Furthermore, an interesting and growing literature suggests that uncertainty surrounding fiscal policy retards economic growth.   The attempt to enforce a BBA could well end up heightening fiscal uncertainty while magnifying cyclical risks to the economy. It would be far better to achieve a sustainable fiscal policy through considered discretionary actions than under the yoke of a mechanical rule.”

Gimmicks and Games

Since it’s reasonably clear that the Balanced Budget Amendment, in its various forms, isn’t analogous to a family budget, isn’t a policy designed to make government run more like a business, and certainly isn’t a viable solution to our fiscal issues, it must be for political consumption.  It has more to do with the Republican campaign slogan “Cut, Cap, and Balance” than it has to do with economic realities.

And so, while Americans are calling for economic equity and JOBS, the Congressional Republicans continue to debate and “pass” symbolic and ideological bills playing to their own base.  Americans want jobs, the GOP offers attacks on Planned Parenthood and family planning. Americans want jobs, the GOP offers to repeal health care reform and the patients’ bill of rights legislation.  9% of American workers are unemployed, and the GOP offers to remove restrictions on firearms. Americans need jobs, and the GOP offers up a balanced budget amendment.

Nevada’s contribution to this political circus comes from our Wall Street Warriors,  Representative Mark Amodei (R-NV2) and Senator Dean Heller (R-NV), who have evidently decided to Campaign Like Its 1988 — in 2012.

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* See also: Desert Beacon, “Magical Mark’s Unbalanced Amendment,” July 29, 2011.  Desert Beacon, “This is NOT your family budget,” June 3, 2011. Desert Beacon, “How Not To Spend Your Family Vacation,” August 5, 2011.  Desert Beacon, “BBA or Bogus Blather for America,” July 18, 2011.  (Includes references) Desert Beacon, “Heller Still Supporting BBA,” July 11, 2011. Desert Beacon, “Slogans Beat Solutions..,” November 17, 2011.

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Filed under 2012 election, Amodei, Economy, Heller, income inequality

Slogans Beat Solutions Every Time: Heller Pushes Balanced Budget Amendment as a Campaign Item

Senator Dean Heller (R-NV) would very much like to have the so-called Balanced Budget Amendment emerge as a major topic in the 2012 elections.  [LVRJ] One reason to call reporters and ask, “How does my opponent stand on the Balanced Budget Amendment?” is to enroll the press in the campaign by getting members of the media to ask the question of said opponent, and then get the results into print or on the air.  It’s a game everyone plays.  Some more subtly than others.

Another reason to launch the topic is that it polls well.  Polling nationwide supposedly shows significant support for the idea, although few seem to appreciate the implications of this political gimmick.  The air might be taken out of this trial balloon if proponents like Senator Heller were asked, “Do you favor the following cuts to federal programs?”

Slash and Burn

If the House version of the BBA were to be enacted and if more revenue was not raised:

“… (the House-passed budget resolution assumes no increase above current-policy levels) and all programs are cut by the same percentage, Social Security would be cut $184 billion in 2018 alone and almost $1.2 trillion through 2021; Medicare would be cut $117 billion in 2018 and about $750 billion through 2021; and Medicaid and the Children’s Health Insurance Program (CHIP) would be cut $80 billion in 2018 and about $500 billion through 2021.” [CBPP]  (emphasis added)

Now, the question becomes — if all program cuts are distributed equally under the terms of the Balanced Budget Amendment — would Senator Heller support slashing Social Security by $1.2 TRILLION through 2021?  Would he cut Medicare by $750 Billion through 2021?  Would Senator Heller realize his objective of demolishing the SCHIP program under the terms of this amendment? (1)

Those wondering what might happen if Social Security and Medicare were exempted from the automatic program cuts should consult the chart constructed by the CBPP which outlines what would happen under the terms of the balanced budget amendment.  (2)

Starve The Beast

The Republican Study Committee goes even further than the Slash and Burn House version.  The CBPP reports that the RSC version would:

 (a) cut total funding for non-defense discretionary programs by approximately 70 percent in 2021, and by more than $3 trillion over the next ten years, relative to the funding levels that Congress approved in April for fiscal year 2011, adjusted for inflation.  (Relative to the discretionary caps set by the BCA, the RSC’s cuts in discretionary programs would be smaller, but still enormous.)

(b) contain deeper Medicare cuts than the Ryan budget — it includes the Ryan proposals to convert Medicare to vouchers and raise the Medicare eligibility age from 65 to 67, but raises the eligibility age sooner than the Ryan budget would.

(c) raise the Social Security retirement age to 70.

(d) contain cuts of almost unimaginable depth in the core programs for the poorest and most disadvantaged Americans.  In 2021, Medicaid, SNAP, and Supplemental Security Income would all be cut in half.

Analysis by the Economic Policy Institute yielded the following succinct conclusion about the “consensus” version of the balanced budget amendment as proposed by the Republican Study Committee:

“This plan moves the goal post for the coming debt ceiling debate so far to the right that Republicans have left the stadium. Short of eliminating every cabinet agency (the entire discretionary budget), drastically defaulting on our obligations to our citizens (Social Security, Medicare, and Medicaid), or defaulting on our obligations to our creditors, this plan simply is not feasible. Even if it were feasible, cutting $1.4 trillion in federal spending by 2016—when the economy is projected to just be returning to potential output and full employment—would be economically devastating. Budget process proposals are much easier to generate than budgets, but this one is totally detached from reality. “

In short, what we have in the Senate version is a Grover Norquist Dream Budget — a starved beast — including drastically cut funding for social safety net programs like Medicare and Social Security. (3)

Symbolic Messaging

Another argument set forth by proponents of this beyond-Draconian so-called solution, like Senator Heller, asserts that the passage of a balanced budget amendment will be a SYMBOL for the business community that Congress takes deficit and debt reduction seriously. This is inane.

If Republicans were truly concerned about reducing the debt and deficits, they’d not have ignored pay-as-you-go funding practices in 2002, and they would not have espoused the Credit-Card-Conservativism practiced during the Bush Administration.

If the Republicans were honestly engaged in deficit and debt reduction activities they would have adopted a more Reaganesque posture on the matter and admit that St. Ronald increased taxation during his Administration.   And, if the Study Committee were truly concerned with debt and deficit reduction they would call for a return to the Clinton Administration taxation levels when the deficit was under control.

If Republicans were serious about reducing the national debt and budget deficits, then they should give equally serious consideration to increasing the marginal taxation rate of billionaires, rather than placing more economic stress on an already overburdened Middle Class.  Offering to close a few loopholes and shut a couple of tax havens is window dressing at best, and an ineffective way to approach federal financing.

Popularity Contest

While the Balanced Budget Amendment may be “popular” at the moment with voters, and while Norquist’s legions (Senator Heller among them) may advocate Slash/Burn/Starve The Beast appropriations policies, voters may be far less inclined to support a measure that would — as devised by the RSC — have a disastrous impact on Social Security and Medicare.   What would happen, for example, if the pollsters ask:  Do you support a measure that would balance the federal budget by cutting Medicare and Social Security?  This political gamesmanship should be in a time out.

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(1)  Senator Heller has not been supportive of the SCHIP program for assisting families with seriously ill or injured children.  [DB] He voted against H.R. 2, on January 14, 2009 [roll call 16] When H.R. 2 was returned to the House after successfully passing in the Senate, Heller voted against the compromise version of the bill. [roll call 50].

(2) See also: New York Times, “Balanced Budget Delusion,” November 15, 2011. Congressional Research Service, “A Balanced Budget Amendment: Background and Congressional Options,” July 8,  2011 (pdf).   Alliance for Retired Americans, “Fact Sheet – Balanced Budget Amendment: Bad For Seniors,” July, 2011. (pdf)

(3) Republican Study Committee: Balanced Budget Amendment summary, (pdf).  Capital Gains and Games, Bruce Bartlett, “Dopiest Constitutional Amendment of All Time, ” March 31, 2011.  Economic Policy Institute, “House 18% cap is as bad and infeasible a policy as the Senate’s,” June 3, 2011.

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Filed under 2012 election, Berkley, Heller

Coffee and the Papers: BBA Babble and Privatization Plans

– – How much more can one say about the symbolic (and rather stupid) idea of a federal Balanced Budget Amendment? (1)  However, that hasn’t stopped Rep. Mark Amodei (R-NV2) from jumping on the BBA Bandwagon.  [SPJ] Rep. Amodei is presently serving as a amplifier for the “42¢ claim” espoused by Rep. Paul Ryan which argues that $0.42 of every federal dollar spent is borrowed.  The number is in the ballpark [FactCheck] but the argument is still misleading.

The confusion comes from the definition of “debt,” are we talking about the total debt or that portion known as the public debt?  In the 42¢ Argument the basic reference is to the public debt.  [FactCheck] So, this excludes treasuries held by the Social Security trust funds and other government accounts.  The 42¢ claim gets a “half-true” from the Fact Checkers because:

It has long been widely reported that both the nation’s debt and its debt limit are $14.3 trillion. And that’s what the radio discussion was about. So when Ryan said that half of the nation’s borrowing comes from foreign countries — singling out China for emphasis — his listeners would assume he meant half of the $14.3 trillion in total debt, not the much smaller debt measure he now says he was referring to, even if that second measure has strong merit in the debt limit discussion. (emphasis added)

Those who would like to do their own calculations should refer to the Department of the Treasury’s Financial Management Service which issues the MTS, or “Monthly Treasury Statement.”

At the risk of redundancy, we’ve covered this Balanced Budget argument before, with predictable conclusions:

Thus, what we have in Congressional District 2 is a Republican candidate delighted to proclaim his support for a policy which:  (1) Protects the tax havens, loopholes, and special provisions for the ultra-wealthy, while (2) Further impacting the already precarious finances of and support for the American middle class, and which is (3) unenforceable without significant judicial activism.

Worse still, it is close to being (4)  false advertising.  No, it won’t make the national budgets like the state ones, because the state ones still allow debts incurred for capital project investment.  And, no, it’s not like the family budget either — unless we’re speaking of a family that doesn’t take out vehicle, student, or car loans, and pays cash for all medical and educational expenses, and doesn’t put anything on a credit card. [DB]

Someone in Amodei’s audience needed to have ask if it would be fiscally responsible to forbid the federal government from issuing bonds (like any local school district) for the construction of capital projects (like facilities for DoD installations)?  Or, if his 42¢ figure was (a) current or (b) based on total or  public indebtedness. (2)

– – If you thought “Moving Your Money” would put the brakes on increasing bank fees, please think again.  The New York Times reports on the new and newly increasing fees for retail banking. [TP] WealthInfoMatic$ has some good advice for those thinking of joining the Money Moving contingent.  The report from the Pew Charitable Trusts (April 2011) indicates the average bank applies approximately 49 fees for its retail services.  The full report (945K pdf) can be found here.

– – The “clean” coal folks and the American Petroleum Institute would have us believe that those “onerous” regulations from the federal government are holding back economy recovery and job creation.  Not so. (3)

“…several major media outlets deserve credit for fact-checking the claim and making clear just how wrong the argument is. Recent analyses from CNN, the New York Times, the AP, the Economic Policy Institute, the Wall Street Journal, and McClatchy newspapers — relying on, among other things, BLS data, surveys from the National Federation of Independent Business, and Brookings Institution scholarship — all said the same thing: government regulations are not responsible for holding back the economy.” [WashMonthly]

– – Not everything said by the pundits on the television broadcast sets is really worth listening to, and the Booman Tribune provides a particularly effective skewering of David Brooks’ inane commentary on the Penn State child abuse scandal.

– – In case you missed it, reviewing former Michigan Governor Granholm’s commentary on jobs might be in order:

Among the lessons that hit home the hardest occurred back in 2003, when she tried to keep an Electrolux plant in Greenville, Mich. (the “Refrigerator Capital of the World”). Then-Gov. Granholm offered the company all sorts of incentives, including tax breaks and worker concessions, only to be told by Electrolux that “there is nothing you can do to compensate for the fact we can pay $1.17 an hour for labor in Mexico.” [SFgate] (emphasis in original)

Crooks and Liars updates this information with video from Granholm’s recent appearance on CNN.  More “free” trade agreements anyone?

– – Digby’s blog has some excellent advice for #OWS organizers in regard to dealing with the “A-hole problem.”  The advice is also pertinent to anyone doing community organizing for just about any issue on the political spectrum.

– – If you’ve not already bookmarked Perrspectives, the article on GOP candidate Mitt Romney’s proposal to privatize Medicare and Veterans Health Services should be reason enough.  See also: Romney Proposes to Privatize Medicare [WSJ] and Paul Krugman on Vouchers for Veterans. [NYT]

– – Finally, if you don’t have the time to click over to any other item referenced in this post PLEASE see “Penn State, my final loss of faith…” by Thomas Day, published by the Washington Post.

Notes and References: (1) A previous post, “Balanced Budget Amendment, or Bogus Blather for America?” appeared in DB on July 18, 2011, complete with a list of references and suggested resources.  See also: Talking Points Memo on current efforts by the GOP controlled House to bring up one of three versions of the Balanced Budget Amendment.

(2) A much more inclusive report of Rep. Amodei’s presentation in Winnemucca, NV can be found in the Silver Pinion Journal.

(3) There’s more from Politicsusa on EPA as “aliens.”

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Filed under Amodei, Medicare, Politics, Romney, Veterans

How Not To Spend Your Summer Vacation: GOP’s Next Gimmick, The Balanced Budget Amendment

In spite of all rationality and economic literacy to the contrary, the Republicans insist on bringing up every topic except JOBS.  They were too busy attacking health care reform to discuss JOBS bills, too taken with anti-choice measures to speak to JOB creation, too involved with schemes to privatize Medicare to address unemployment, and too enamored of creating a mountain from the mole-hill debt ceiling issue to call for JOB legislation.  And, now the GOP has a another campaign to avoid talking about JOBS.  They will be focusing on their Balanced Budget Amendment, ardently supported by appointed Senator Dean Heller (R-NV) [DB]  and District 2 candidate Mark Amodei.

From the New York Times: “In a meeting with his conference on Monday, Speaker John A. Boehner told members that the best thing they could do during the August recess was to sell their constituents on the idea that the amendment — which essentially stipulates that government cannot spend more than it takes in — is necessary and good. “

There they go again.  It isn’t necessary and it certainly isn’t good.

What would a balanced budget mean for states?  Nothing good. The answer was discussed here.

Would a balanced budget amendment secure an equitable tax structure and economy policy that is feasible, enforceable, and productive? NO, and that was discussed here.

Would a balanced budget amendment make the federal government run more like state governments?  NO.  Would it make the federal government work more like a business budget?  NO. Would it make the federal government work like a family budget. NO, and that was explained here.  The previous post also contains additional sources which explain why a balanced budget amendment is a really bad idea.

In short, rather than discuss job creation, unemployment reduction plans, or legislation that might actually help individuals and small businesses get beyond the Recession, the GOP would have the American public engage in their latest Snark Hunt — chasing illogical, uneconomical, irrational, and ephemeral gimmicks and manufactured “crises” — ANYTHING to avoid a serious discussion of economic growth and job creation.

This is not a productive use of time, effort, or energy.  It’s merely another focus-group fostered campaign theme that does more to obfuscate the very real economic issues faced by the American public, than it serves to correct them.

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Filed under Republicans

Heller’s Wonderful Word Salad Explains…Something?

Appointed/Anointed  Senator Dean Heller (R-NV) was one of 26 members of the United States Senate to vote against the debt ceiling bill.  [vote 123]  Why? Heller stated: “I voted No on the largest debt increase in history. We need long-term, structural changes to rebuild our economy.”   Really?

First, no one was voting on the largest debt increase in history — they were voting to pay off debts already accumulated. Moving on.

Heller continued:

“I respect the effort by all involved to reach a compromise, but this agreement simply does not make the long-term, structural changes necessary to rebuild our economy. Congress has again shied away from making the tough decisions necessary to seriously address our nation’s need for fiscal health and economic growth. Twice I have voted in favor of forward-looking plans that would prevent tax increases, protect Social Security and Medicare and require Congress to send a Balance Budget Amendment to the States.

“Without a fundamental transformation in Congress’ approach to budgeting, we cannot stabilize our economy and foster substantial growth and investment. An effective plan would provide significant savings, institute tax reform, create jobs and outline a sustainable approach for reducing our nation’s debt.  This deal falls short of providing a clear path to reaching these goals,” Senator Heller said.”

Would anyone like a little cracked pepper on this word salad?  Or, to extend the food analogy, once masticated and swallowed this word salad is remarkably insubstantial.  We’re left with more questions than answers.

(1) What, pray tell, are “long-term, structural changes?”  Would this be a “balanced budget amendment” which the Tea Party radicals are seriously considering — all rationality notwithstanding?  Or, if the political winds begin to blow against the BBA does this artful phrasing become something else altogether?

(2) What are the decisions “necessary” to rebuild our economy?  We can discount “tax cuts” because a tax cut never built a road, bought equipment for a VA hospital, put food on a tray in the lunchroom cafeteria, hired a home health aide for a senior citizen, bought a text book for a school, built a dam, or repaired a levee.  A “tax cut” never bought a communications system for a fire department, trained a police officer, or commissioned a Coast Guard cutter.  “Tax cuts” never constructed an Interstate Highway overpass, bought prescription drugs for a wounded warrior, equipped a Border Patrol Agent, or even put a modern gun in the hands of a soldier.

Does Senator Heller believe that the top 0.05% of American income earners are really “job creators?”  Here’s a simple question:  If a person works hard and makes over $1 million per year as a surgeon, an athlete, or as the owner of a construction company, that person pays about a 25+% marginal tax; BUT if the same person does nothing but speculate on the stock market and “earns” the same amount, he or she pays only 15%.   Which is a “job creator?”

(3) What does this mean: “… forward-looking plans that would prevent tax increases, protect Social Security and Medicare and require Congress to send a Balance Budget Amendment to the States?”    Forward looking?  There’s nothing particularly “forward” about privatizing Social Security; Republicans have wanted to dismantle that program since its inception in during the Depression.

What’s “forward” about eliminating Medicare as we now know it, and replacing it with a voucher program which makes payments directly to the health insurance corporations?    “Premium support” is nothing more than a euphemism for a direct payment to one of the health insurance giants in order to “bribe” (“incentivize”) them to offer some kind of health care insurance to the elderly.  The result is socialism for the corporations and the “free market” for senior citizens.

(4) What would a balanced budget amendment mean for the states?  The first thing it means is that the federal government wouldn’t be there when the states needed it.   Have a Hurricane?  YOYO!  The federal government may not be able to access funding to meet the costs of cleaning up after an unusual weather event.  Have a major natural disaster like an earthquake?  Forget it Memphis, St. Louis, or the Bay Area.  YOYO!  The San Andreas and New Madrid faults should sit quietly while the Congress balances its finances.  We might want to remember that former Representative Heller was not initially in favor of sending federal money to assist in the aftermath of Hurricane Katrina, saying, “I’d prefer to give relief to the Gulf Coast region with a couple of ropes attached — and they aren’t lifelines.”  After voting in favor of extreme right wing amendments, then-Representative Heller ended up voting in favor of H.R. 1227 in 2007.

Would this BBA mean that the government would function like a family or a family business?  Absolutely not.  No family functions without incurring some indebtedness — there are car payments, house payments, medical bills, and college loan expenses.  No business can run for very long when it is under-capitalized, hasn’t a reliable line of credit, and can’t borrow to meet unexpected news — good or bad.  A so-called “balanced budget amendment” is fiscally irresponsible, economically irrational, and financially infeasible.   However, it sounds like a very good idea to those who are marginally economically literate, a category which appears to encompass most members of the Tea Party.

(5) What is a “fundamental transformation in Congressional approaches to budgeting?”   Good question, because Senator Heller doesn’t provide any real clues.

(6)  What is involved in a plan to “stabilize our economy and foster substantial growth and investment?”   If we want stability in our economy then the most obvious move would be to reward long term investment in manufacturing and finance.   Continuing the Bush Tax Cuts, and the loopholes for hedge funds, simply means putting ever more money into short term quick profit trading strategies.  Allowing banks to participate in proprietary trading with assets secured by private accounts just means that more money gets poured into the Wall Street Casino.  These elements do not reduce market volatility — they reinforce it.

(7)  What Plan?  “An effective plan would provide significant savings, institute tax reform, create jobs and outline a sustainable approach for reducing our nation’s debt.”

No one is seriously opposed to “significant savings,” but savings on what?  Do we privatize Social Security — which hasn’t contributed a penny to the national debt, but in fact actually owns some of it in the form of Special Issue Securities?  How does that save anything?  Do we privatize Medicare?  How are we saving anything when instead of paying beneficiaries and providers we are pouring the money into the coffers of the insurance companies?  If we wanted to save some money in the Medicare program why don’t we allow the Department of Health and Human Services to negotiate prescription drug prices?

Can we really experience “significant savings” if the beleaguered American Middle Class is made to shoulder even more of the expenses for our national safety net and economic automatic stabilizer programs, for our basic social services, and for our national defense?

Yes, this would make it appear as if some “tax reform” were in order, but is Senator Heller speaking of shifting the burden from middle and working class Americans  toward those who have been benefiting from volatile markets? Is he speaking of closing tax havens, tax loopholes, and tax breaks for the top 0.05% in order to ease the burden on the other 99.5%?

(8) What jobs?  This analysis from the Economic Policy Institute doesn’t sound like the current debt deal is a “job creator,” in fact it appears to have the opposite effect.  In words:

“The agreement would reduce spending by at least $1 trillion over 10 years through budget caps on non-mandatory programs, with additional reductions under discussion in a second phase. While the bulk of the cuts are back-loaded – coming more in the future – the near-term cuts would still have an immediate impact. Applying conventional multipliers, the reduction of $30.5 billion in calendar year 2012 would reduce GDP by 0.3%, and result in roughly 323,000 fewer jobs (as depicted in the table below).”

In pictures:

Senator Heller’s statement manages to say everything and nothing.  There are all the right focus group buzz words:  “rebuild our economy;”  “tough decisions;” “economic growth; ” “forward looking; ” “stabilize our economy; ” “foster substantial growth…”  However, without giving substance to his own statements all that Senator Heller has provided his constituents is less  a definitive pronouncement of policy and more like the product of a random phrase generator.

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Magical Mark’s Old Economy: Amodei Releases Bushian Economics Ad

Nevada Congressional candidate Mark Amodei has released another relatively fact free ad in his bid to succeed appointed Senator Dean Heller in District 2, predictably he’s running “against Washington.”   The candidate offers us three easy solutions to our economic problems: lower taxes  on small businesses; cut regulations; and put “federal lands to work.”  This is as clear a restatement of Bushian Economics as we’re likely to find.

Once more: “Persistent belief in the magical thinking of Bushian Economics, in which de-regulation (in 2008 we saw where that got us), tax cuts (which exacerbated the federal deficit and the hyperconcentration of wealth in the Wall Street Casino without creating jobs), and privatizing (which didn’t do much of anything except make public services more expensive) — is tantamount to doing the same things over and over again, each time expecting different results.”

The Instant Tax Cut Solution

Tax cutting has been an article of faith for Republican candidates since the litany of the 1984 GOP platform.  It’s interesting that in the commercial message Mr. Amodei — now in a flannel shirt driving pickup truck — stresses cutting taxes for small businesses, but his web page list has little, if indeed anything to do with cutting tax liabilities for truly small firms.  [See Previous Post]

He would support making the Bush Tax Cuts permanentHow nice for the top 1% of American income earners, the prime beneficiaries of these cuts.  Small, independent, business owners making less than $250,000 annually do not get nearly the break that’s awarded the top 1%, much less approach the benefits which accrue to the top 1/2 of the top 1%.  Remember this graph?

What candidate Amodei is essentially saying is that we should make the Bush Tax Cuts permanent, so that the share of federal taxes paid by the middle class continues to increase.

He would support eliminating the federal estate tax.  We’ve covered this territory before as well.

“If we look at the Tax Policy Center’s evaluation of the situation as of 2011, they estimate that about 50 farms and businesses nationwide would be affected if the threshold remains at $5 million. (pdf) Who would seriously advocate losing tax revenue to the benefit of  no more than 50 small companies and farms nationwide?”

In short, what we have here is candidate Amodei’s firm pledge to advocate for the Paris Hilton Legacy Protection Act.

He would support continuing the deductions for multiple homes.   No one’s seriously proposing to eliminate the mortgage deduction for the family home, however only about 6% of Americans own a second home. [HomeIns]  Thus, if the mortgage deduction is allowed for vacation homes, then obviously the 94% of Americans trying to stay right side up in one home are still hefting more of the tax liability burden for the benefit of the top 6%.

He would reduce marginal tax rates for individuals and small businesses.  Why? If candidate Amodei truly believes that the federal deficit is a serious problem, and if we have the lowest overall tax burden since the 1950s, then why would we reduce marginal rates even further?  If candidate Amodei remains one of those devoted followers of Bushian economics and believes — all evidence to the contrary — that tax cuts generate revenue, then what he’s proposing is that we continue to do “more of the same” and to expect different results.

He would support a balanced budget amendment — no matter how deleterious this might be for national finances.   We’ve covered this territory before too, here and here.   If one were to draw a graph illustrating the relationship between economic literacy and support for balanced budget amendments we’d see an inverse proportionality — the higher the level of support for a BBA the lower the level of economic literacy.

The Bottom Line

Tax cuts, in se, do not generate revenue, they do not create jobs, they do not cause immediate increases in aggregate demand.  Only in the Land of Voodoo Economics, in the realm of the Supply Side Hoax, in the dreams of the Masters of the Universe and the Wall Street Wizards, are tax cuts the elixir which cures all ills.   We know better than to believe “snake oil” cures everything from male pattern baldness to malaria, it’s a credit to modern Republican advertising that some have come to believe that tax cuts have the same economic curative powers.

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Magical Mark’s Unbalanced Amendment

Nevada Congressional District 2 candidate Mark Amodei has another plank on his “tax platform” that deserves some more attention — he’s come out in favor of a balanced budget amendment.  If ever there were a litmus test for political and economic illiteracy this would be it.  It doesn’t take too much effort to understand why.

There are several versions of a BBA floating inside the Beltway, but the one closest to House Republican hearts comes from the Republican Study Committee.

There are inequitable provisions for applying budget cuts and closing tax loopholes and off-shore tax haven provisions.

“The RSC budget secures all of its deficit reduction through spending cuts and none through revenues; it cuts federal expenditures by more than $9 trillion over the coming decade, relative to a continuation of current policies.  To ensure that policymakers follow this cuts-only approach, the version of the constitutional amendment coming to the House floor requires supermajority votes of two-thirds of both the House and Senate to raise any taxes, which would make it virtually impossible to raise revenue.” [CBPP]

In other words, it would require a virtually impossible super-majority to cut taxpayer subsidies for major oil companies, or for deductions for vacation homes and private jets — but cutting benefits for veterans, the elderly, and children would be relatively simple.

Cuts required in the federal budget under the proposed balanced budget amendment would predominantly impact the American middle class.

“This is the part of the budget that includes veterans’ medical care, most homeland security activities, border protection, and the FBI.  It also includes education, environmental protection, protecting the nation’s food and water supply, and medical research, as well as services for disadvantaged or abused children, frail elderly people, and people with severe disabilities.”  [CBPP]

And, what do middle income Americans depend upon for law enforcement, veterans benefits, clean air and water, food inspection, student loans, medical research, and assistance for elderly or disabled family members?  “Non-defense discretionary programs.”

The proposed balanced budget amendment is simply not feasible.

“This plan moves the goal post for the coming debt ceiling debate so far to the right that Republicans have left the stadium. Short of eliminating every cabinet agency (the entire discretionary budget), drastically defaulting on our obligations to our citizens (Social Security, Medicare, and Medicaid), or defaulting on our obligations to our creditors, this plan simply is not feasible. Even if it were feasible, cutting $1.4 trillion in federal spending by 2016—when the economy is projected to just be returning to potential output and full employment—would be economically devastating. Budget process proposals are much easier to generate than budgets, but this one is totally detached from reality. ”  [EPI]

Under this proposal not even drastic cuts to Medicare, Medicaid, Social Security, and every cabinet level department of the United States would be enough to meet the balanced budget amendment’s requirements within the next 50 years.

The balanced budget amendment is unenforceable.

As previously suggested these kinds of political statements are easy to draft, but not so easy to implement.  Who determines if income equals outlays? During what time periods? Using what numbers?  Numbers based on what methodology? There are enough questions to render the implementation of the amendment subject to protracted litigation.   Those who are disturbed by the propensity of the courts to become involved in policy development should be positively hysterical at the prospect of a judicially driven budget process.

As if these reasons were insufficient, there’s more information about the ridiculousness of this “balanced budget amendment” ploy in a previous post.  That post contained an extensive list of “extra credit” reading.

Thus, what we have in Congressional District 2 is a Republican candidate delighted to proclaim his support for a policy which:  (1) Protects the tax havens, loopholes, and special provisions for the ultra-wealthy, while (2) Further impacting the already precarious finances of and support for the American middle class, and which is (3) unenforceable without significant judicial activism.

Worse still, it is close to being (4)  false advertising.  No, it won’t make the national budgets like the state ones, because the state ones still allow debts incurred for capital project investment.  And, no, it’s not like the family budget either — unless we’re speaking of a family that doesn’t take out vehicle, student, or car loans, and pays cash for all medical and educational expenses, and doesn’t put anything on a credit card.

It doesn’t deliver what it promises.  If any of its proponents have been lulled into believing that this balanced budget amendment would quickly and efficiently redirect and restrict government spending — they have the next 50 years to wonder what went wrong.

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