Tag Archives: federal deficit

Yes, We Could Be Having A Serious Deficit Reduction Discussion?

Tea Party FlagAt some point in the ongoing discussion about federal debts and budget deficits everyone needs to get serious.  Serious, that is, about doing that which will reduce our federal deficit spending.  Really serious, not as in “let’s wave a Debt Crisis Flag every three months to advance an agenda including the privatization of Social Security and the voucherization of the Medicare program.”

Let’s start with the obviousSocial Security doesn’t add a dime to the national debt.  If the words of a progressive blogger won’t suffice, how about listening to former President Ronald Reagan?  (video here)  So, discussing “reforms” to the self funded Social Security program as a means to reduce the national debt is extraneous to any serious deficit reduction discussion.

One way to approach the privatization of Social Security is to change the frame of reference, such as altering the connotation of “entitlement” from some earned benefit to which we are entitled because we paid for it, to one which has a tinge of “welfare” about it.  Social Security is not a welfare program — it is an earned benefit.  People who have paid into it all their working lives have every right to expect to be getting something back.  Social Security is not a retirement program.  It is a program which seeks to prevent abject poverty for elders.   Nothing in the Social Security program prevents anyone from maintaining a self-contributory retirement account of any shape or form.   Indeed, the benefits from Social Security are low enough that retirement to the Gated Golf Paradise Of Your Choice can only happen if you have a self-contributory retirement savings program. Anyone suggesting that “entitlements” such as Social Security “have to be reformed” to ease the burden on the federal debt (1) doesn’t have a clue what they are talking about, and (2) is regurgitating anti-safety net talking points from radicals who want to privatize all retirement income programs to the benefit of Wall Street investment firms.

Medicare does have some issues.  The first, and most readily apparent, is that the Medicare Part D (prescription drug) segment is, and always has been, underfunded.  However, the really big monster under the Medicare bed is the increasing cost of health care in America.  When private health care corporations started buying up religious organization/private, state, and locally supported hospitals the profit motive surged in the sector.  Health care must now generate a profit.  Savings, which were once achieved for the purpose of reducing costs for local tax payers or donors to religiously based institutions, now accrue to the corporate bottom line — not to taxpayers, donors, or patients.

The second factor is technology.  We do have the best medical treatment providers in the world.  However, best often translates into “most expensive.” We have all manner of devices and gadgets and equipment and gear to save or sustain lives.  Our hospitals take it as their mission to save or sustain life, which is all well and good until the emotional meets the economical.  There are “death panels” in this country, but they aren’t governmental — they are familial, with families making ‘end of life’ decisions which horrifically in some instances are based on what the family can afford.   Frankly speaking, we don’t do a very good job of educating our citizens about advance directives.  Some conservatives set up a howl when they noticed the Affordable Care Act provided for paying physicians or other medical professionals who provided ‘end of life’ counseling for their patients — however, a little counseling might go a long way toward reducing the anxiety of hospital personnel and the trepidations of family members.  It could also provide some savings in the long run.

Returning to the Big Problem — the Medicare Part D component; we knew in 2003 that the Part D segment would  cost approximately $534 billion.  [Foster pdf] Simply put, “the drug benefit had no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit,..” [Forbes]  The part about “dedicated financing” is important.  While the Social Security trust funds have dedicated financing (payroll taxes) there were no provisions to increase the revenues available to finance the Part D enhancement.   There is something unappealingly ironic about the current GOP insistence on “entitlement reform” because “Medicare is broken,” when it was the GOP majority in 2003 that Broke the Program.

Ways to ‘reform’ the Medicare program have been suggested which do not require “voucherizing” the entire thing and sending seniors back to pounding pavement in order to find affordable health insurance plans.  We could consider means testing for the prescription drug benefit.  We might take under advisement lifting the earnings cap for payroll taxes from the current $110,000 level and dedicating a portion of the revenues toward the Part D program.  We could allow the Department of Health and Human Services to negotiate for prescription drug prices the way the Veterans Administration bargains for prescription drugs for VA hospitals and clinics.

If we are REALLY REALLY SERIOUS about ‘reforming’ Medicare then it would be helpful to get past the silly voucherization proposals, referred to as “structural reform” in Speaker Boehner’s response to the President, [Boehner pdf]  and get to the core of what makes health care expensive — we could talk about health care cost containment, dedicated financing for Medicare, and lifting the earnings cap.   We might also want to take a deep breath and see if the Affordable Care Act’s provisions, such as eliminating tax payer subsidies for profitable private Medicare Advantage insurance policies, could achieve some savings over the next decade.

However, it’s getting relatively obvious that the Republicans aren’t terribly serious about deficit (debt) reduction when their offers are strictly ideological (privatize and voucherize) and the proposals don’t address the monster of their own creation — the lack of financing for Medicare Part D.

Buzz Words and Generalities.   Speaker Boehner is offering (pdf) “pro-growth tax reform that closes loopholes and deductions while lowering rates.”   This phrasing is coming perilously close to the older verbiage: Waste, Fraud, and Abuse.  As if we could make up any gaps in program funding by simply cutting out the WFA.  Most anti-tax advocates cite the WFA as some massive potential figure which if reduced could cure all our fiscal woes.  When pressed to provide total figures associated with the largely mythical WFA these advocates provide outlier examples of welfare fraud, some particularly egregious Pentagon payments to contractors, and perhaps a bit of information from Internet e-mail chain letters.  The WFA numbers have yet to yield up the level of financing needed to close budget gaps in the Pentagon or any other government activity.

The arithmetic from “loopholes and deductions” doesn’t add up either.  The same sort of fantastical thinking is required to equate the WFA savings and the L&D revenues.  These mythological creatures are based on the same gossamer upon which anti-tax advocates conjure up the notion that an inordinate amount of the U.S. budget is allocated to foreign aid.  The average American has come to believe that foreign aid takes up 10% of the federal budget, when if fact it consumes only 1%. [NYM]

The Republicans also appear to be consuming their own rhetoric on savings associated with reductions in federal employee compensation.

“Cutting pensions and benefits for government workers is popular, but once again most Americans overestimate how much that costs the government. On average, Americans think the federal government spent 10 percent of its 2010 budget on pensions and retiree benefits; the OMB figures indicate the real number is about 3.5 percent.” [CNN]

The moral of this story is that if the amounts of spending on pensions and benefits, or the amounts that can be retrieved by closing loopholes and eliminating deductions, are grossly inflated, then the resulting policy and budget decisions will be widely off the mark.

Unfortunately, the same type of ideologically based proposals which are the core of Speaker Boehner’s “structural reforms” i.e. voucherization and privatization of Medicare appear to inform his suggestions about federal employee compensation, and another favorite GOP target, SNAP (food stamps.)

The program is already under assault from all sides, considering the appropriations being entertained in the agriculture bill.

The Senate’s version of the farm bill would reduce overall funding by $23 billion, with a reduction in food stamps of $4.5 billion over five years. The House Agriculture Committee is proposing to cut funding by $35 billion — with nearly half the overall cut coming from reductions in food stamps by $16 billion over five years. [Atlantic]

But there’s a problem here.  Food stamps have a beneficial effect on the national economy.

“Those who believe in cutting SNAP funding as a cost-saving measure should know that food stamps boost the economy — not put a strain on it. Supporters of federal food benefits programs including President George W. Bush understood this, and proved the economic value of SNAP by sanctioning a USDA study that found that $1 in SNAP benefits generates $1.84 in gross domestic product (GDP). Mark Zandi, of Moody’s Economy.com, confirmed the economic boost in an independent study that found that every SNAP dollar spent generates $1.73 in real GDP increase. “Expanding food stamps,” the study read, “is the most effective way to prime the economy’s pump.” [Atlantic]

If the object of the game is to increase federal revenues by generating a higher GDP along the formula proposing that a growing economy produces jobs, and more jobs yield more taxable income, and more taxable income means more revenue — then the GOP has the SNAP portion of the argument exactly backwards.  They are proposing to cut a program which actually generates more economic growth.   If one seriously believes that economic growth means more revenue and hence less indebtedness, then one can’t seriously advocate cutting programs which elevate levels of economic growth.

All Pain and No Gain.  The two sides don’t seem to be speaking to the same fiscal slope, cliff, gully, whatever.  From the Republican perspective the damage to the economy might be done by The Specter of Rising Taxes.  Those legendary Job Creators — who are now seeing record corporate profits while wages continue to stagnate — might not invest, and hence there will be no economic growth.  This is fundamental Supply Side Hoax thinking.  That it has been, and still is, a hoax is demonstrated neatly by this graph from the Federal Reserve Bank of St. Louis:

Corporate Profits Low Wages

The blue line represents wages, the red line corporate profits.  If corporate well being were the driver of overall economic growth and  well being then why has the blue line been trending downward since 1970?  The answer is simplicity itself: Supply Side Economics is a Hoax of the First Water.

A deficit reduction plan predicated on ideology, urban legends, misunderstandings, and economic illiteracy isn’t SERIOUS.   That conclusion further advances the argument that the Republicans aren’t really serious about debt or deficit reduction, but merely see the issue as a flag to be waved in the van of their attack on the social safety net, a banner of privatization signaling their allegiance to Tea Party politics.

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Filed under Economy, Health Care, health insurance, income tax, Medicaid, Medicare, national debt, Social Security

Fiscal Cliff or Stairway to Heaven?

As the Nevada Progressive points out, the looming “fiscal cliff” is a meaningful moment for the Republicans in the U.S. Congress.   The somewhat sordid history of this “cliff” which in actuality could be more like a slight slope is summarized as:

“The United States fiscal cliff refers to the effect of a series of recent laws which, if unchanged, will result in tax increases, spending cuts, and a corresponding reduction in the budget deficit beginning in 2013.  These laws include tax increases due to the expiration of the so-called Bush tax cuts and across-the-board spending cuts under the Budget Control Act of 2011.” [link]

At this point, even the well informed may need a reminder that the term ‘fiscal cliff’ was coined by Federal Reserve Chairman Ben Bernanke, who was concerned that the impact of the failure of the Super Committee to reach an agreement would depress the economy:

“For the record, although the explanation wasn’t reported or repeated as much as the catchphrase itself, Bernanke actually said the fiscal cliff was about the large spending cuts and tax increases already scheduled to occur being far too big for the current U.S. economy to handle at one time. “I hope that Congress will look at [the spending cuts and revenue increases] and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date,” he told the committee.

In other words, “fiscal cliff” means the big deficit reductions that have been both inadvertently and intentionally scheduled to go into effect at the turn of the year are the absolutely wrong fiscal policy at that time and that the economy will be damaged if they are not changed.” [OF.org]  (emphasis added)

For those likely to hit the panic button — some programs are exempted from the budget cuts: Social Security, federal pensions, and veteran’s benefits.  Social Security is properly called an entitlement program, because the beneficiaries have paid into it, and it is supported by payroll taxes and its own trust funds.  No one, repeat NO ONE, has “spent” money earmarked for the Social Security Trust Funds.  [SSA]

For those likely to run screaming into the sage brush about THE DEFICIT, we should note that reductions in military operations in Afghanistan will reduce that beast, and we should remember that the Affordable Care Act also has some deficit reduction benefits.  Cherry-picking selective think tank and editorial board musings notwithstanding, the  “CBO and JCT estimate that enacting both pieces of legislation—H.R. 3590 and the reconciliation proposal—would produce a net reduction in federal deficits of $143 billion over the 2010–2019 period as result of changes in direct spending and revenues.” [WH.gov]

The central question about the ‘fiscal cliff’ is whether or not  it becomes a stairway to heaven for the American middle class.  It’s a cliff if the Republican controlled Congress obstructs the negotiation process such that ALL tax breaks enacted during the Bush Administration expire — including those for those earning less than $250,000 annually.  It’s a stairway to heaven, if the Congress can agree to allow the tax breaks for millionaires and billionaires to expire, and retain the tax breaks for middle class families.

It’s a cliff if the Congress demands that automatic economic stabilizers like unemployment insurance support, nutrition programs, and other means by which we prevent highly volatile economic swings are cut in order to prevent the upper 1% of American income earners from having to pay any increased taxation.  It’s a stairway if the economic stabilizers can be themselves stabilized, perhaps even if in slightly reduced forms.

It’s a cliff if the tax breaks for 97% of American small businesses are lost in the interest of sparing the top 0.01% of American income earners any tax increases.  It’s a stairway if tax breaks for 97% of American small business owners are maintained, and the deficit is reduced by encouraging economic growth, and by taxing the top 1% more fairly.

The newly re-elected President had some words about this choice:

“President Obama said he refuses to accept any approach that isn’t balanced. “I’m not going to ask students and seniors and the middle class to pay down the entire deficit,” while higher earners get tax cuts, he said.

The President said he will ask Congress to pass a bill that will continue the tax cuts for the middle class, which he says will eliminate much of the uncertainty in the nation. After that point, he said, he and Congressional leaders can work on a compromise for the remaining tax cuts.” [CSPAN]

The President’s own words, on video (not yet embeddable) from CSPAN.

 

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Filed under Bush Administration, Congress, Economy, Federal budget, House of Representatives, national debt, Obama, Politics

The Crisis That Isn’t: The Romney/Ryan Campaign in Whopperville

Whopperville, U.S.A.At rally in Lima, Ohio, GOP VP Candidate Paul Ryan says Pres Obama not doing anything about the debt crisis & is making it worse.” via Mark Knoller.

Not doing anything? First, it’s hard to understand why a sitting member of Congress could miss the information that federal government spending has flat-lined during the Obama Administration.  Marketwatch explains:

“Although there was a big stimulus bill under Obama, federal spending is rising at the slowest pace since Dwight Eisenhower brought the Korean War to an end in the 1950s.  Even hapless Herbert Hoover managed to increase spending more than Obama has.”

For the arithmetically challenged, Marketwatch provides a chart:

How does Marketwatch substantiate the contention that spending increases during the Obama Administration are slower than even the Hoover Administration?

If spending increases are at the slowest rate in decades, AND federal spending has flat-lined during the Obama Administration — then how does one conclude the Obama Administration isn’t doing anything about the budget deficit and is actually “making it worse?”

One doesn’t … unless you are a resident of Whopperville in a Brave New World:

“One hundred repetitions three nights a week for four years, thought Bernard Marx, who was a specialist on hypnopaedia. Sixty-two thousand four hundred repetitions make one truth.”  – Brave New World (Aldous Huxley)

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Filed under 2012 election, Economy, Federal budget, Politics

Catching Up: A Roundup of Good Reading

** Click on “expand” to see the Worker’s Voice advertisement which reminds Nevadans that Senator By Appointment Only™ Dean Heller (R-NV) voted not once, but twice, to end Medicare as we know it and to replace it with a coupon (voucher) plan primarily benefiting health insurance corporations.   Representative Shelley Berkley (D-NV1), Heller’s opponent in the 2012 Senate race has a cogent op-ed concerning what Heller’s position would cost senior citizens in Nevada.

** About that GOP claim that President Obama “cut” some $716 Billion from Medicare — BOGUS — what the Affordable Care Act really did was save $716 Billion by reducing taxpayer subsidies to health care corporations for profitable Medicare Advantage plans, and cut waste, fraud, and abuse from the system.  NOTHING IN THE ACA CUTS MEDICARE PROGRAMS FOR THE ELDERLY.  By the way, the Ryan Budget plan cuts about the same amount from Medicare, but uses the money to protect tax cuts for the top 1%.

**  Oops?  David Stockman, former Reagan budget guru has a few words for the Romney/Ryan Budget, compliments of Charlie Pierce at Esquire Magazine:

“The Ryan Plan boils down to a fetish for cutting the top marginal income-tax rate for “job creators” — i.e. the superwealthy — to 25 percent and paying for it with an as-yet-undisclosed plan to broaden the tax base. Of the $1 trillion in so-called tax expenditures that the plan would attack, the vast majority would come from slashing popular tax breaks for employer-provided health insurance, mortgage interest, 401(k) accounts, state and local taxes, charitable giving and the like, not to mention low rates on capital gains and dividends. The crony capitalists of K Street already own more than enough Republican votes to stop that train before it leaves the station.” [NYT]

But wait, Mr. Stockman hasn’t gotten to his closing:

“In short, Mr. Ryan’s plan is devoid of credible math or hard policy choices. And it couldn’t pass even if Republicans were to take the presidency and both houses of Congress. Mr. Romney and Mr. Ryan have no plan to take on Wall Street, the Fed, the military-industrial complex, social insurance or the nation’s fiscal calamity and no plan to revive capitalist prosperity — just empty sermons.”  [NYT]

Many of Mr. Stockman’s proposals will be unpalatable to Democrats, however he’s right on target about the credibility void and “empty sermons” in what is supposed to pass for “big ideas” in the Romney/Ryan fiscal policy.

Rep. Ryan, staunch defender of the Mega-Mogul, and lieutenant of the Blazing Pants Brigade, will be in Las Vegas to meet with our resident Republican Money Pot, Sheldon Adelson, and to hold a “rally” of the all-white faithful chorus of The Church of the Empty Sermon.  More at The Examiner.

** Not convinced that the GOP’s offering for the 2012 election is all about protecting the Merger & Acquisition Kings of Wall Street?  Then read the Atlantic’s analysis which posits that under Ryan’s plan Mitt Romney would pay 0.82% in federal taxes.

**  Flashback to March 2012:  “A budget plan introduced by House Budget Committee Chairman Paul Ryan (R-Wis.) would add more to the deficit over 10 years than if Congress kept the status quo, undermining claims of its fiscal impact.  Ryan’s blueprint, “The Path to Prosperity,” would add $3.127 trillion to the deficit during the decade spanning 2013 to 2022, according to a table on page 88 of the plan.”  [The Hill]

There’s more from TDB:

“Everyone knows by now that Ryan’s budget would replace Medicare with a voucher whose value declines over time. His cuts to Medicare and other health care programs would total $2.4 trillion over the next ten years. But despite that, and despite all the domestic spending cuts in his plan, Ryan still doesn’t get anywhere close to balancing his own budget. That is because even by his own estimate, he reduces revenue by $2 trillion over the same period. His budget relies on optimistic economic assumptions about the stimulative effects of tax cuts, and many of his rate reductions are similarly supposedly offset by unspecified loophole closings, so the real revenue loss would be much greater.”  (emphasis added)

**  MUST READ: “Frank Luntz Messaging Ordered By NRCC” in Crooks & Liars.   A Taste: “Do not say: ‘entitlement reform,’ ‘privatization,’ ‘every option is on the table,’” the National Republican Congressional Committee said in an email memo. “Do say: ‘strengthen,’ ‘secure,’ ‘save,’ ‘preserve, ‘protect.’”   This makes it very clear, because if the GOP says “don’t say” we can reasonably assume that they mean “privatization.”

There’s more over at the Booman Tribune worth reading as well.   Perrspectives sums it up, “Now, Mitt Romney and his Republican allies are counting on Americans having short memories and bad math skills. For today’s Party of Lincoln, the message for 2012 is clear: You can fool some of the people all of the time, and that’s our target market.”

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Filed under 2012 election, Adelson, Berkley, Heller, Medicaid, Medicare

Wall Street Fine, Main Street Not So Much, States Caught in the Middle

The situation in Nevada is beginning to demonstrate the universal application of the great literary phrase: “It was the best of times, it was the worst of times.”  Consider the following information from a Las Vegas Sun article about therapeutic services for disabled children back in March:

“In 76 percent of the cases reviewed, the state did not provide all of the services called for in plans agreed to by state caseworkers and families. This was “due to a lack of available personnel resources” and reduced hours the state had to contract with therapists.”

In 52 percent of cases, the state did not initiate services within 30 days, as required by the federal government. This was “attributable to the lack of personnel resources as a result of the reduction in the amount of funds available for contract services.”

There are 2,477 children receiving these services, such as they are, and another 250 ranging in age from newborn to 3 years of age on a waiting list.   So youngsters with autism, physical disabilities, developmental issues, and other serious medical challenges are in the cross hairs of a support system in which “fewer children could have more services, or more children could have fewer services.”  This is what an austerity budget means.   For everyone. If there are no increases in revenues, then all public services will be caught in the same bind as the kids — fewer may have more, or more can receive fewer.

However, in a political climate still clutching the remnants of the failed Voodoo economics of the Trickle Down Artists, and the ephemeral mythology that lower taxes magically transforms spreadsheet pixel dust into increased revenues,  any attempt to raise revenue is the antithesis of good politics.  [“Sandoval, not in favor of business tax initiative“, LVSun]

The often and well debunked MYTH [EconoFact]  that lower rates of taxation will generate the revenues necessary to provide essential government services simply doesn’t work in the real world in which there are pot holes in asphalt, 30 kids in a kindergarten class, not enough health inspectors to cover the number of restaurants in a single year, not enough deputies to keep trucks from speeding through small towns, aging fire fighting equipment, and what might generously be called “antique” drinking water delivery systems.

For small businesses in Nevada this isn’t the best of times either.  Nevada’s experiencing job growth of about 1.1% YOY, a tick behind the national YOY job growth of 1.4%.  [DETR] Of special note is that the capital region — Carson City — has lost 4.2% of its job growth.  In fact, the capital city MSA is the only one in the state which is having declining job growth.

When the “business” of a MSA is primarily government then the private sector is affected when government declines.  We can craft a little home-made chart showing what happened to Carson City in terms of the percentage change YOY in its taxable sales as reported to the Department Of Taxation, as the state shed jobs and shaved the budget.  (pdf reports)

It’s no wonder small businesses and local retailers feel the bind when there’s been only one YOY increase since 2007 — and they started digging and backfilling out of the prior four year hole.  This is what an “austerity” budget looks like to local businesses trying to function in an area in which government payrolls help support the local economy.

So, why all the demand for “austerity,” if it doesn’t help provide public services and it doesn’t help local businesses? 

Federal and state deficits are a problem when interest rates are high.  Here’s one of the simplest explanations I’ve found so far:

“When long-term interest rates are high, a federal deficit competes against and “crowds out” private borrowing and investment. When long-term interest rates are low, the federal deficit is not taking away from borrowing by the private sector. On the contrary, the federal deficit is acting as a needed boost to aggregate demand in the economy, an action also known as “fiscal policy.” When the economy is slack, every dollar of reduction in federal spending takes three or four dollars off of our gross national product.”  [Grayson](emphasis added)

Got that?   The “crowding out private borrowing and investment” happens when interest rates are HIGH.”   So, what are the long term interest rates now?  The Treasury 20 year CMT is 2.13%. [Treasury] What does this look like in a historical context?  This:

The overall trend line doesn’t seem to indicate “high interest rates” does it?  Notice that the top of the line for the interest rates shown on the chart doesn’t go above 5.5%  Now, let’s compare that to the 30 yr. CMT for a previous era, say 1980 to 1990:

Since the old 30yr column has gone the way of the DoDo, and really long term Treasuries are spoken of as 25+’s, perhaps a better comparison would be the current 20 year rates:

The rate for 20 year notes hasn’t crept up over 3.08% during 2012 thus far.  We could sit and look at pretty charts all day, and the message would remain the same — this is NOT a period of HIGH interest rates, therefore the old “government borrowing drives out private capital” maxim doesn’t apply.  What the heck! Let’s look at one more — the U.S. Treasury’s Yield Curve showing the yields (rates) for all the notes available:

And, there it is — a graphic illustration of Low Interest Rates.  So, let’s get this straight.  We have to have an “austerity budget,” meaning that the federal government has to cut back on aid to the states, because when the government has to borrow money it crowds out private investment — EXCEPT when interest rates are low.   No, this doesn’t make sense, and Laura D’Andrea Tyson explains why:

“The “crowding out” argument explains why large and sustained government deficits take a toll on growth; they reduce capital formation. But this argument rests on how government deficits affect interest rates, and the relationship between government deficits and interest rates varies.

When there is considerable excess capacity, an increase in government borrowing to finance an increase in the deficit does not lead to higher interest rates and does not crowd out private investment. Instead, the higher demand resulting from the increase in the deficit bolsters employment and output directly, and the resulting increase in income and economic activity in turn encourages or “crowds in” additional private spending.”  [NYT] (emphasis added)

How do we know when we have excess capacity?  High unemployment is one really good tell.   What have we learned?

(1) Austerity budgets, the result of program funding cuts without any new revenue don’t serve to provide basic services for Nevada citizens, and others throughout the nation.

(2) We know that in regions in which government spending constitutes one of the major supports of the local economy local retailers and other small businesses see their sales decline.

(3)  Deficit reduction is necessary when government borrowing during periods in which we are operating at or close to our economic capacity when interest rates will be affected by the “crowding” to get capital.

(4) Our interest rates, for even very long term treasury notes, are exceedingly  low.

(5) Our economy is not functioning close to its capacity — witness the unemployment rates.

Therefore, the argument that we have to privatize Social Security, turn Medicare into a voucher coupon program, cut women and children off WIC nutrition support, take SNAP benefits from working families, cut spending for infrastructure maintenance and improvement, slash preventative medicine and wellness programs, and leave the national parks to rot…. because We Have To Reduce The Deficit — is ultimately ideology and currently bogus economics.

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Filed under conservatism, Economy, Federal budget, Health Care, Infrastructure, Medicaid, Medicare, Nevada economy, nevada health, Nevada politics, nevada taxation, public employees, recession, Romney, Social Security, Taxation

Romney’s Recruits?

The shiny smiles on the faces of presidential candidate Mitt Romney and his endorser, the Guy Who Likes To Say “You’re Fired!” on un-Reality TV in Las Vegas yesterday [Steve Marcus Photo, LVSun] is almost beside the point.  At some point a few of the GOP’s spokespersons need to be wearing a few tread marks.  Mr. Trump, with his racist birtherism and blatant biases, should be one of them.  In this context, Mr. Trump’s ridiculousness is nearly beside the point.  As suggested last evening –after the bland dismissal of Russ Limbaugh’s excoriation of Sandra Fluke and the pedant commentary on Trump’s adoption of birtherism — the point is When Does The Real Mitt Romney Stand Up?

The vaunted GOP capacity to create a narrative and have all the players take assigned roles is imperiled by the expressed need to get very disparate voices to speak to their segments of the voting public.  In order to “win” does Mr. Romney need to cater to the Birthers? To acquiesce to the rabidly anti-gay bigots?  To embrace Limbaugh’s misogyny?  To swear obeisance to the radical rantings of a Ted Nugent?   If he feels this need, then what does that say about his confidence in his own message?

Former Governor Romney wants to focus on “the economy.”  However, that’s a difficult sell at the moment.  Further, his contention that the economy “could have been better” without policies put in place by President Obama packs as little punch as the President’s comments that the economy “could have been a lot worse.”   The Land of Could Have is a minefield.

Mine One: Worse still for the presidential hopeful, the economy is slowly emerging from a deep recession, and his prescription for economic growth is a Financialist’s wet dream replete with De-regulation and Lower Taxes for the top 1% of American income earners.   It’s the Bush Administration’s policy on steroids and European Austerity on amphetamines.   It’s also not clear that Mr. Romney actually believes his own narrative.  Consider this example that’s been getting some play of late:

Halperin: …You have a plan, as you said, over a number of years, to reduce spending dramatically.  Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office?  Why not do it more quickly?

Romney: … Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%.  That is by definition throwing us into recession or depression.  So I’m not going to do that, of course.

Governor Romney’s comment makes it clear that he does comprehend the formula by which the GDP is derived.

\mathrm{GDP} =
C + I + G + \left ( \mathrm{X} - M \right )

Private consumption + gross investment + government spending + (exports minus imports) yields the GDP.    However, because Governor Romney understands the GDP formula doesn’t mean that the President doesn’t.   And, the President has the support of the leaders of the G-8:

“The leaders did concede somewhat to Ms. Merkel’s position on austerity, acknowledging that national budget deficits had to be addressed. But they added that spending cuts must “take into account countries’ evolving economic conditions and underpin confidence and economy recovery,” a recognition of how much the austerity packages have dampened consumer and political confidence in Europe.”  [NYT]

In short, if government cutbacks undermine consumer confidence then the “C” part of the equation takes a cut as well.   Thus, tossing out epithets like “community organizer” doesn’t necessarily offer any proof that the President doesn’t understand the essential elements of our economy and how we measure it.  This gets us a step closer to Mine Two.

Mine Two:  Is Governor Romney really serious about reducing deficits?  Unfortunately, Governor Romney’s narrative is long on generalities and very short on specifics.  He wants to cut taxes and reduce the deficit.  Not. So. Fast.  Here are the two proposals side by side:

Forbes magazine, not exactly a bastion of liberalism, reported the effect of the Romney plan: “TPC found that repealing the AMT and cutting rates by 20 percent would increase the deficit by more than $3 trillion over the next 10 years, even after the 2001/2003/2010 tax cuts are extended.” (emphasis added)  This analysis renders the continuation of Governor Romney’s remarks all the more incomprehensible.

“So I’m not saying I’m going to come up with ideas five or ten years from now that get us to a balanced budget.  Instead I’m going to take action immediately by eliminating programs like Obamacare, which become more and more expensive down the road – by eliminating them, we get to a balanced budget.  And I’d do it in a way that does not have a huge reduction in the first year, but instead has an increasing reduction as time goes on, and given the growth of the economy, you don’t have a reduction in the overall scale of the GDP.  I don’t want to have us go into a recession in order to balance the budget.  I’d like to have us have high rates of growth at the same time we bring down federal spending, on, if you will, a ramp that’s affordable, but that does not cause us to enter into a economic decline.”  [Time]

What are we talking about here?  The only specific is the elimination of the Affordable Care Act and the Patients Bill of Rights.  What other programs are “like” Obamacare?    If repealing “Obamacare” would add another trillion dollars to the deficit [HHS] or worse, “According to the CBO, repealing the Affordable Care Act would increase the federal deficit by $230 billion over the next 10 years, and by about $1 trillion more in the decade thereafter,” [AOL] then what deficit reduction is Governor Romney expecting?
What else is on the Romney Chopping Block?

“I know Medicaid, for instance – it can be better run by taking the Medicaid dollars, block granting it to the states, and then having the states know that in the future, those dollars will grow at inflation plus one percent.  Of course, there will be an adjustment for changes in poverty level, and population, and so forth, but basically knowing that they have to live within those parameters.  Those kinds of changes save about $100 billion a year.  Just taking federal programs, sending them to the states, and growing them at inflation, or inflation plus one percent, you add these together, you get about $500 billion in savings.”

Let’s look for a moment at the practical implications of Governor Romney’s Medicaid proposal on Governor Romney’s state:

“While McDonough said it is possible for block grants to be structured in a way that adjusts for increased enrollment, he said the kind of block grants advanced by many Republicans has been more along the lines of “Here’s your dough. Good luck. Do the best you can. See you later.’’

US Representative Paul Ryan, a Wisconsin Republican and chairman of the House Budget Committee whose budget Romney has enthusiastically endorsed, has proposed a block grant tied to massive cuts in federal Medicaid expenditures.

The federal government, which now pays a fixed share of states’ Medicaid costs that automatically rise in response to a recession, would instead dole out a set dollar amount that would increase each year with inflation and US population growth.”  [BostonGlobe]

Sending the funds to the states, and giving them “flexibility” sounds fine in the general sense, but it’s devastating in the real world.  For the umpteenth time, federal spending can be an automatic stabilizer during economic downturns, and if the pressures for enrollment go up in a state, then if the federal government can ease the burden on states (and individuals) that frees up money for other consumer expenditures until we get into the rebound.   The only constituency served by the Romney proposal to block grant Medicaid payments appears to be those who are ideologically disinclined to provide assistance to states to provide health care for those in poverty.

Worse still, the Romney proposal doesn’t even address some practical considerations which are widely acknowledged, for example:

“First, the block grants don’t grow at the rate of health care inflation (which far outpaces inflation in the broader economy). Second, the grants don’t adjust to account for an aging population that will become more and more expensive to treat. Currently, Medicaid costs are expected to grow at nearly 7 percent a year. The Ryan plan would cap the growth of the federal block grant at roughly 3 percent. Romney, in an astonishing assault on the poor, has said he’d put the cap as low as one percent.

Under the slightly-less-cruel Ryan plan, the federal contribution would be cut by one-third by 2021 – sticking states with $150 billion in unfunded healthcare obligations.

As CBO puts it, “federal payments for Medicaid under the proposal would be substantially smaller.” Even assuming that flexibility creates some cost savings, CBO writes, states would not have enough money to maintain Medicaid as it currently exists. They’re likely be forced to “decrease payments to Medicaid providers, reduce eligibility for Medicaid, provide less extensive coverage to beneficiaries, or pay more themselves.” [RS] (emphasis added)

Mine Three: Not to put too fine a point to it, but thus far the specifics offered by the Republican candidate (1) add — not subtract — to the federal deficit, and (2) do so at the expense of the elderly poor, the disabled, all while slapping a hefty  $150 billion unfunded obligation on the states.  Further efforts by interviewer Halperin to get Governor Romney to be more specific beyond cutting Amtrack, PBS, national parks, the endowment for the arts, and other small programs were ultimately unsuccessful.   The Governor’s attitude seems to be “we’ll know when we get there,” — wherever that might be.

It’s hard to have confidence in a message when it (1) counteracts your stated intent, (2) may have unintended economic consequences especially at the state and local levels, and (3) is predicated on a negative, i.e. we can’t have nice things because we’d have to borrow money to get them.  The last item is itself predicated on a bit of misinformation.  No, the Chinese don’t “own us.”  The U.S. has $15,692,368,000 in public debt [Treas] approximately 32 cents of each of these dollars is owned by federal trust funds like Social Security, and Americans own about 54% of our public indebtedness.   Of all our public debt?  China owns about 12%. [FC]

If this is beginning to sound like a muddle, it is.  Governor Romney’s stepping on his own economic messaging.  His deficit reduction proposals don’t reduce the deficit.  His spending cut proposals predominantly cut into our social safety net.  [RS] His tax proposals are almost as vague as his spending cut plans.

It is almost as if he believes that if his generalities are sufficiently sparkly they will blind voters into giving credence to his economic “expertise.”  Should that not be enough, then perhaps he does need a coalition of the Birthers, the Transcripters, the Misogynists, the Raving Ranters?

References and Recommended Reading:  “The complete Romney interview transcript,” Time, May 23, 2012. Forbes, “Romney Tax Plan Would Add $3T to the deficit over a decade,” Feb. 29, 2012. “How Romney Would Slask the Social Safety Net, ” Rolling Stone, Feb.1, 2012. “Romney Proposals would require massive cuts…” CBPP, May 21, 2012.    U.S. Department of the Treasury, Data Center.

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Filed under 2012 election, Economy, Federal budget, financial regulation, Health Care, health insurance, Medicaid, Obama, Romney