President Barack Obama has begun contacting Republican and Democratic senators in search of a budget compromise even as each party blamed the other for across-the-board cuts in government spending.
The Democratic president worked the phones yesterday, calling senators “who he thinks could be part of a caucus of common sense to help move our country forward,” National Economic Council Director Gene Sperling said today on NBC’s “Meet the Press.” He didn’t identify the senators.
Slightly more than $85 billion in cuts, affecting agencies and programs that range from the Pentagon to the Smithsonian Institution, began March 1 amid a more than two-year-old impasse over raising taxes and cutting entitlements.
Even as lawmakers are deadlocked over what to do about the so-called sequestration, both sides signaled today they don’t want a second confrontation over legislation that will be needed to keep federal agencies running beyond March 27.
In the context of the US Congress, sequester is defined as an act of lewd acrobats involving a senator, a underage prostitute, a tube of KY-Jelly, and a squid.
OK, you got me, I might have just made up that last bit.
So, to prevent sequestration from becoming a way for politicians to carry out personal vendettas against various political targets (both by the left and the right), the money is supposed to be withheld from every government agency equally. That is, every government agency, program, and project gets the same percentage of its projected budget withheld to produce an “across the board” total spending cut in order to make the federal budget for that year meet the limits set by congress in the Budget Resolution.
In other words, if you force the government into sequestration in order to stick it to the other guys, you automatically screw yourself too.
There is very little flexibility in sequestration because the process isn’t supposed to be used.
Sequestration is supposed to be the nuclear option, the option with such catastrophic consequences that anything else is preferable – including sitting down at the table with your political opposition and doing your goddamned job.
Using Sequestration to cut government spending is exactly like slamming into a wall and depending on your car’s airbag so that you don’t have to fix the brakes.
It’s stupid and dangerous and as I’ve said, exactly like cutting off your own nose.
Go read the whole thing; a genuinely clear, angry, and (yet) amusing look at this clusterfk.
Barack Obama approaches his second term with his highest job approval rating since his first year in office (save for a brief bin Laden bounce) and a clear upper hand over the deeply unpopular Congress - including majority support for his demand to decouple talks on the debt ceiling and budget cuts.
With another showdown on the nation’s borrowing limit looming, 58 percent of Americans in this ABC News/Washington Post poll say the debt ceiling should be handled separately from the debate on spending cuts. Thirty-six percent instead favor linking the two, as the Republicans in Congress seek - a position that drew a tart response from the president Monday.
If it comes to a standoff, moreover, just 22 percent in this poll, produced for ABC by Langer Research Associates, indicate they’re willing to have the federal government default on its debt obligations or partially shut down if budget cuts can’t be agreed. And the president leads the GOP leadership in trust to handle the issue by a 14-point margin.
The results are perhaps unhelpful to House Speaker John Boehner, who said Monday, “The American people do not support raising the debt ceiling without reducing government spending at the same time.” That followed Obama’s comment that failing to lift the debt limit would be “irresponsible” and “absurd”; he called the linkage to budget cuts “a ransom.”
The supposed endgame behind the whole “starve the beast” plan was to end up creating a crisis that would force the elimination of Social Security and Medicare.
Those two programs have long been a major thorn in the side of ideological conservatives because they refute basic conservative dogma by…
1. Being government programs designed to help the entire population.
2. Actually working.
3. Being tremendously popular.
These facts damage one of the primary tenets of conservatism, that government doesn’t work, period. Why do you think they have also tried so hard for a plan “B” by their repeated plans and attempts to privatize both programs? Luckily for us those plans have always failed, at least so far.
By purposefully being fiscally irresponsible by lowering taxes while increasing government spending over 30 years the GOP has sent both the debt and the deficit skyrocketing. Their problem is that now that they finally have the “crisis” they have been trying to engineer, they lack enough public support to follow through. The overwhelming majority of the population wants to keep SS and Medicare going, even exits polls in this election confirmed that.
Those same polls and others have also shown that most people understand that a combination of both spending cuts and increased revenues via higher taxes is necessary. Not only to try to shore up the viability of the social programs but to avoid more damage to our credit rating and ultimately a possible economic crash and default on our debt.
The funny part of all this is that by agreeing to sequestration the GOP has now painted itself into a corner where taxes will go up no matter what happens. I don’t see how they can spin this into a win politically even with their PR machine cranked up to 11. As I said elsewhere here, Obama simply outplayed them in the “long game.” The Dems planned for this at the last debt ceiling negotiations while the Republicans failed to think it all the way through.
Personally I am going to stock up on a lot of popcorn because we are about to see four weeks worth of crying, whining, and hand wringing by the GOP. Regardless of what happens during those weeks the deficit will eventually end up being reduced and the Republicans are not likely to get much of the credit for doing so. Who knows, maybe instead of simply using it as a slogan the Republicans will finally see the need to actually become a fiscally responsible party in the end?
/Not holding my breath
Chart of spending during Presidential administrations
WASHINGTON (MarketWatch) — Of all the falsehoods told about President Barack Obama, the biggest whopper is the one about his reckless spending spree.
As would-be president Mitt Romney tells it: ‘I will lead us out of this debt and spending inferno.’
Almost everyone believes that Obama has presided over a massive increase in federal spending, an ‘inferno’ of spending that threatens our jobs, our businesses and our children’s future. Even Democrats seem to think it’s true.
e 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.
Here are the facts, according to the official government statistics:
• In the 2009 fiscal year — the last of George W. Bush’s presidency — federal spending rose by 17.9% from $2.98 trillion to $3.52 trillion. Check the official numbers at the Office of Management and Budget.
• In fiscal 2010 — the first budget under Obama — spending fell 1.8% to $3.46 trillion.
• In fiscal 2011, spending rose 4.3% to $3.60 trillion.
• In fiscal 2012, spending is set to rise 0.7% to $3.63 trillion, according to the Congressional Budget Office’s estimate of the budget that was agreed to last August.
• Finally in fiscal 2013 — the final budget of Obama’s term — spending is scheduled to fall 1.3% to $3.58 trillion. Read the CBO’s latest budget outlook.
One of the most high impact outbursts in the history of television occurred on February 19, 2009 when CNBC editor Rick Santelli, standing on the floor of the world’s largest derivatives exchange, launched into a spontaneous attack on a White House plan to provide mortgage relief to homeowners. Santelli’s remarks were pointed. He accused the White House of “promoting bad behavior” and questioned whether government should “subsidize the losers’ mortgages.” He ended with a rhetorical flourish by asking, “President Obama, are you listening?” in response to which the crowd near him on the exchange floor erupted into applause and cheers. At the end of the clip, Santelli announced, “We’re thinking of having a Chicago Tea Party.” His remarks became the subject of a White House press briefing the next day in which Press Secretary Robert Gibbs rebuked Santelli and the derivatives industry generally.
Students of the national Tea Party still debate whether Santelli’s attack was the beginning of that movement. There were Tea Party-like protests against government spending going back as far as 2006. Yet, many observers consider Santelli’s comments to have had a catalytic effect. Websites, organized protests and media commentary about the “Tea Party” all emerged within 24 hours of Santelli’s attack. The outburst transformed the Tea Party from a loose array of local protests into a more cohesive and focused political movement.
Paul Ryan’s Cut funding everywhere (but for my district!) budget stance shows the operative GOP principal: government spending bad … except for me.
Republican presidential candidate Mitt Romney’s running mate, Paul Ryan, has staked out a reputation in Congress as a fiscal conservative. He has spoken out against President Obama’s efforts to jump-start the economy with the stimulus law, and after a conversion a few years ago now opposes earmarks. But when it comes to helping out his district in southern Wisconsin, Ryan’s principles have been flexible.
Ryan was never a fan of the American Recovery and Reinvestment Act, as the stimulus is officially known. He voted against it when it came to the House floor in 2009, as did every other House Republican, and he railed against it in frequent TV appearances.
“Temporary stimulus does not work,” he said on CNBC. “It does not give businesses confidence to invest in jobs and capital for the future. It’s just sort of sugar high economics.”
But despite his denunciations of the measure, Ryan made sure his constituents were not left out when the money was divvied up. When the Energy Center of Wisconsin, a nonprofit that promotes energy-efficient buildings sought Ryan’s help in obtaining stimulus money, he came through.
THERE HAS been plenty to criticise about President Barack Obama’s handling of the US economy. Yet the overriding story of the past few years is not Obama’s mistakes but the scorched-earth opposition of Republicans, who have done everything they can to get in his way - and who now, having blocked the president’s policies, hope to win the White House by claiming that his policies have failed.
And last week’s shocking refusal to implement debt relief by the acting director of the Federal Housing Finance Agency - a Bush-era holdover the president hasn’t been able to replace - illustrates perfectly what’s going on.
Some background. Many economists believe that the overhang of excess US household debt, a legacy of the bubble years, is the biggest factor holding back economic recovery. Loosely speaking, excess debt has created a situation in which everyone is trying to spend less than their income. Since this is collectively impossible - my spending is your income, and your spending is my income - the result is a persistently depressed economy.
How should policy respond? One answer is government spending to support the economy while the private sector repairs its balance sheets; now is not the time for austerity, and cuts in government purchases have been a major economic drag. Another answer is aggressive monetary policy, which is why the US Federal Reserve’s refusal to act in the face of high unemployment and below-target inflation is a scandal.
But fiscal and monetary policy could, and should, be coupled with debt relief. Reducing the burden on Americans in financial trouble would mean more jobs and improved opportunities for everyone.
Unfortunately the administration’s initial debt relief efforts were ineffectual: officials imposed so many restrictions to avoid giving relief to “undeserving” debtors that the programme went nowhere. More recently, however, the administration has got a lot more serious about the issue.
And the obvious place to provide debt relief is on mortgages owned by Fannie Mae and Freddie Mac, the government-sponsored lenders that were effectively nationalised in the waning days of the George W Bush administration.
In case it wasn’t clear the first time he said it, Mitt Romney is certain that “culture” is the reason Israelis are relatively rich today, while Palestinians are quite poor. Much of the world — including the authors Romney cited — responded to his analysis with a collective “oy.”
But Romney’s stand does raise a few good questions. Among them: How on earth has Israel become so successful? Sure, its economy has no shortage of problems — in particular, a startling degree of income inequality. But in the span of just a few decades, the Jewish state has “transformed itself from a semisocialist backwater into a high-tech superpower,” as The Economist put it in 2010. Per capita, it gives birth to more technology startups and is the destination for more venture capital than any other country is the world. Its economy barely flinched during the financial crisis.
Here are four big reasons (though by no means the only ones) Israel is in the strong shape it is today.
IT LEARNED FROM DISASTER
It may now be known as the Silicon Valley of the Middle East, but back in 1984, Israel’s story had much more in common with modern-day Zimbabwe. That year, the inflation rate averaged 450 percent, and for a few months reached vertigo-inducing highs of around 950 percent. The economy, in short, was eating itself alive. But the crisis had an upside, in that it sparked reforms that would lay the groundwork for Israel’s present-day prosperity.
Like any nasty bout of hyperinflation, this one had a few culprits. But here’s the streamlined version of what happened: Starting with the massive military buildup that followed the 1973 Yom Kippur war, Israel began ratcheting up its public sector spending. By the end of the decade, the government was consuming three quarters of the economy and leaving behind huge budget deficits, which it tried to finance by having the Bank of Israel print money. The fact that Israeli workers’ wages rose with the cost of living only made the situation worse.
Fighting severe inflation usually means suffering through some unemployment, and so Israeli policy makers, who were obsessively focused on providing the country with jobs, did little to fix their metastasizing problem. But as the economy’s health deteriorated — on top of the inflation problem, there was a banking crisis — investors began evacuating their money from the country, and it became unclear if Israel would be able to pay its foreign debts. In 1985, government leaders met for a marathon, one-day summit where they crafted a grand bargain that slashed government spending, massively devalued the currency, and severed the tie between wages and prices. It also set new rules for a more independent central bank.
This was, in many ways, the beginning of the modern Israeli economy, a step away from the early workers’ state, and towards something more akin to mainline modern capitalism. Although public spending in Israel is still high, the government has gradually eased up its role in the economy, while focusing on keeping inflation low and its deficits manageable.
Ever since the financial collapse of 2008 — and perhaps since the dawn of time — Democrats have argued that a struggling economy needs more government spending and more taxes, while Republicans have fought tooth and nail for less government spending and lower taxes. This has gone on so long that I got drawn to the ancient mystery of it. Which side is right?
According to Joseph J. Thorndike, director of the Tax History Project at Tax Analysts, tax rates aren’t nearly as important to economic growth as people think.
In the 1950s, taxes were high, but the economy still hummed at an impressive rate. In the early 1980s, Reagan cut taxes and took credit for ending a recession. But by the mid-1980s, he raised rates again to combat a growing deficit. The economy continued growing. Then George H. W. Bush and Bill Clinton raised taxes even more. Business kept booming.
“The economy will do what the economy will do, thanks largely to non-tax factors,” Thorndike said.
But one thing that does seem to matter, perhaps more than the tax rate itself, is the frequency with which the tax rates change. In the 1930s — during the Great Depression — tax rules shifted constantly, as the government reacted to the crisis. Since investors could never predict what taxes would be, they delayed new investments rather than make big decisions with too many unknowns. That prolonged the Depression.
Today’s investors are in the same boat. The crash of 2008 prompted a host of new policies, literally overnight. An unpredictable presidential election raises more questions about what tax policy will be.