When he unveils the budget on Wednesday, Obama will break with the tradition of providing a sweeping vision of his ideal spending priorities, untethered from political realities. Instead, the document will incorporate the compromise offer Obama made to House Speaker John Boehner (R-Ohio) last December in the discussions over the so-called “fiscal cliff” - which included $1.8 in deficit reduction through spending cuts and tax increases.
“The president has made clear that he is willing to compromise and do tough things to reduce the deficit,” a senior administration official said, “but only in the context of a package like this one that has balance and includes revenues from the wealthiest Americans and that is designed to promote economic growth.”
While Republicans are certain to be skeptical of Obama’s call for more taxes, the president also is likely to face immediate heat over his budget proposal from some Democrats and liberal supporters. Obama proposes, for instance, to change the cost-of-living calculation for Social Security in a way that will reduce benefits for most beneficiaries, a key Republican request that he had earlier embraced only as part of a compromise. Many Democrats say they are opposed to any Social Security cuts and are likely to be furious that such cuts are now being proposed as official administration policy.
After an all-night debate that ended just before 5 a.m., the Senate on Saturday adopted its first budget in four years, a $3.7 trillion blueprint for 2014 that would provide a fast track for passage of tax increases, trim spending modestly and leave the government still deeply in the red a decade from now.
The roll call voting records for the amendments to the budget resolution were placed on a table at the Senate Press Gallery.
The 50-to-49 vote in the Senate, which is controlled by Democrats, sets up contentious — and potentially fruitless — negotiations with the Republican-controlled House in April to reconcile two vastly different plans for dealing with the nation’s economic and budgetary problems. No Republicans voted for the Senate plan, and four Democrats opposed it: Mark Pryor of Arkansas, Kay Hagan of North Carolina, Mark Begich of Alaska and Max Baucus of Montana. All four are from red states and are up for re-election in 2014.
“The Senate has passed a budget,” Senator Patty Murray of Washington, the Senate Budget Committee chairwoman, declared at 4:56 a.m.
The House plan ostensibly brings the government’s taxes and spending into balance by 2023 with cuts to domestic spending even below the levels of automatic across-the-board cuts roiling federal programs now, and it orders up dramatic and controversial changes to Medicare and the tax code.
Sen. Barbara Boxer of California, the Democrats’ chief deputy whip, said Wednesday that she believes party leaders would try to pair tough Republican amendments with Democratic alternatives. “We’ll have side-by-sides. They would be related to the topic,” she said.
Minority Whip John Cornyn of Texas said the GOP had a “collective list of priority amendments.” The options include a mandate for the budget to be balanced in a 10-year window and a proposal to strike a Democratic provision for $975 billion in tax increases on wealthy taxpayers and corporations to help reduce the deficit.
Senate Majority Leader Harry Reid, D-Nev., and the White House have worked in tandem to shield vulnerable Senate Democrats from tough votes that could provide opponents with campaign fodder. But regardless of those concerns, the Senate this week will finish its first budget debate in four years.
Senate Budget Chairwoman Patty Murray, D-Wash., kicked off formal floor proceedings 5 p.m. Wednesday. Thursday is likely to be a long day of speechmaking, with rank-and-file lawmakers of both parties eager to talk.
While each party is guaranteed 25 hours of debate on the budget resolution under the rules, the main event — a continuous sequence on nonbinding votes known as a vote-a-rama — is expected to begin Friday.
Washington has Grand Bargain fever, again. Thanks to the sequestration, Republican government-shrinking mania and Barack Obama’s apparently sincere desire to get some sort of huge long-term debt deal done, the Grand Bargain is looking more possible than at any point since the heady days of the National Commission on Fiscal Responsibility.
For some reason, the options for dealing with sequestration — a self-inflicted made-up austerity crisis — are being purposefully and pointlessly limited to a) spending cuts, either those in sequestration or different ones, or b) spending cuts and tax increases. “Let’s just not do this, everyone” is rarely presented as a viable option. Instead, the single best end result, according to lots of pundits, Democrats and even Republicans, is tthe Mythical Grand Bargain.
This is awful news, for most people. A “grand bargain” is not going to be good. But after Barack Obama had fancy dinners with some Republicans last week, everyone is again hopeful. The president is hopeful. John Boehner is hopeful. David Gergen is probably hopeful. They can all taste the Bargain. Ooh, it’ll be so great when we get that Bargain!
The Grand Bargain is revered, among the Sunday Show set, as a goal essentially for its own sake. Its Grandness is its point. The thought of the parties coming together, agreeing on a mutually unpleasant compromise involving great political “sacrifice” (symbolic sacrifice for the politicians, likely eventual actual sacrifice for the constituents), warms the cockles of the Beltway Establishmentarian’s heart. If liberals and conservatives can’t stand the deal, all the better, even if one or both sides have perfectly valid reasons for blanching. The Bargain must, by necessity, reduce the deficit by “reining in entitlements.” “Entitlements” means Social Security and Medicare, two very popular and successful programs designed to keep retired people alive. Social Security and Medicare “reforms” that make both programs less generous are among the least popular policy proposals in America today, but both parties — at least, the leaders of both parties — support them (rhetorically). Cutting these programs is probably the single highest priority of the tiny centrist elite, and it has been for years, excepting the usual run-ups to our various wars. Part of the elaborate theater of Performing Seriousness in Washington is claiming that “everyone agrees” that the cuts are urgent and necessary, while also bemoaning that no politicians are “brave” enough to support them.
Most business economists opposed the automatic spending cuts that took effect Friday night amid the gridlock between President Obama and Congress, but they overwhelmingly support efforts to reduce the deficit over the next 10 years, according to a survey released Monday.
The survey of 196 members of the National Association for Business Economics, taken from Jan. 21 to Feb. 13, gave some support to both sides in the U.S. government budget debate.
Republicans’ views won some support, as 56 percent of the economists said deficit reduction should be achieved “only” or “mostly” with spending cuts. More than half, or 58 percent, said the cuts should be focused on entitlement programs, such as Social Security and Medicare.
President Obama also got some backing, as most of the surveyed economists said that spending cuts should be balanced by raising revenue through tax increases. Around 95 percent said that Congress should reform the individual tax code, with 74 percent believing the reforms should “slightly” or “significantly” increase revenues.
The rate at which personal income grows plummeted 3.6 percent in January, the biggest one-month decrease in 20 years, as Americans spent a little more to keep warm and fill up at the pumps.
The Commerce Department report Friday was a bit of a jolt on first reading, but the biggest indicators of how consumers are dealing with the end of the 2 percent payroll tax cut will likely come next month in the report for February.
The sharp decline in personal income in January marked the largest drop since January 1993. Part of the decline was a pullback from a 2.6 percent surge in December, as businesses rushed to pay out dividends and bonuses before the new year’s hike in taxes.
A portion of the drop in January also reflected the tax increases. The income at the disposal of households after inflation and taxes plunged 4 percent in January, after advancing 2.7 percent in December.
Here’s an article that I wish I had written, & here’s hoping that the author, Robbie Ottley, will pursue a future in Journalism.
“I’m really going to miss the 112th Congress,” said no one ever.
The members of Congress sworn in after a 2010 Republican landslide proved to be the least productive since 1947, passing fewer laws than any Congress since records were first kept that year. And they went out with a bang of a whimper last week, passing legislation to avoid the so-called fiscal cliff on New Year’s Eve and New Year’s Day, when most Americans were drinking, watching college football or both.
As Jonathan Weisman said in the New York Times, the legislation eventually passed “would have been a Republican fiscal fantasy” back in the days of President George W. Bush [“Lines of Resistance on Fiscal Deal,” Jan. 1]. The legislation permanently extends the Bush tax cuts for 98 percent of Americans, only returning taxes to the Clinton-era rates of 39.5 percent on individuals making over $400,000 a year and couples making over $450,000 a year. If you had returned to 2003 in a time machine and told House Democrats who still retain those positions that a decade later their votes would be necessary to save these tax cuts, they would have laughed in your face or punched you, or both.
But House Democratic votes were necessary to save the Bush tax cuts for all but the wealthiest two percent because House Republicans are so fervent about cutting the size of government that the old Republican goal of cutting taxes to encourage growth is no longer good enough to justify any budget deal that doesn’t take a scythe to government spending.
Since the fiscal cliff deal cut a negligible amount of spending while avoiding the immediate catastrophe of higher taxes on the vast majority of Americans, it didn’t garner a majority of Republican votes, even though the deal promises to continue negotiations on significant spending cuts until another deadline two months from now.
Riding the wave of a Tea Party-driven electoral tsunami into office in 2010, House Republicans still feel they have a mandate to cut government down to the bones. As such, the fiscal cliff deal is derided as a “surrender” by conservative columnist Charles Krauthammer, and Democrats were “slaughtering” Republicans according to conservative web presence Matt Drudge, who also facetiously framed the bill as $41 in tax increases for every $1 in spending cuts.
Past its own New Year’s deadline, a weary Congress sent President Barack Obama legislation to avoid a national ”fiscal cliff” of middle class tax increases and spending cuts late Tuesday night in the culmination of a struggle that strained America’s divided government to the limit.
The bill’s passage on a 257-167 vote in the House sealed a hard-won political triumph for the president less than two months after he secured re-election while calling for higher taxes on the wealthy.
In addition to neutralizing middle class tax increases and spending cuts taking effect with the new year, the legislation will raise tax rates on incomes over $400,000 for individuals and $450,000 for couples. That was higher than the thresholds of $200,000 and $250,000 that Obama campaigned for. But remarkably, in a party that swore off tax increases two decades ago, dozens of Republicans supported the bill at both ends of the Capitol.
The Senate approved the measure on a vote of 89-8 less than 24 hours earlier, and in the interim, rebellious House conservatives demanded a vote to add significant spending cuts to the measure. But in the end they retreated.
What’s it mean? See this post that details the changes at Slate
This is a masterful artifice by Boehner - by setting the tax ceiling so high and proposing little else to reduce the deficit he can make it look like he’s acceding to the the President’s plan when he’s not. Any cap above 250k offers too little revenue and Boehner knows it. This is especially true when that’s offered up with zero cuts. This is a game where the GOP won’t do anything that doesn’t cut medicare and social security, but they want it to look like it’s the president’s idea.
It’s really a gross dereliction of duties, since it is specifically the House of Representative’s duty to create and pass the budgets year to year.
‘There’s been a lot of posturing up on Capitol Hill instead of going ahead and getting stuff done, and we’ve been wasting a lot of time,” Obama said. “If you just pull back from the immediate political battles, if you kind of peel off the partisan war paint, then we should be able to get something done.”
But it was beginning to look a lot like postponement for Obama’s annual Christmas break in Hawaii, so he could continue working to prevent a looming political and financial crisis.
The House was poised to vote today on a measure that Boehner devised on his own — what the speaker is calling “Plan B” — to give tax breaks to everyone except millionaires. Obama Wednesday threatened to veto the bill and Democrats have dismissed that plan as a “political ploy” intended to give Boehner and Republicans political cover if the fiscal cliff talks end in failure.
Boehner showed no signs of backing down and appeared determined to maximize political leverage and use the measure to strengthen his hand in negotiations. In a very brief appearance at the Capitol, Boehner said that the House would take up his bill on Thursday. He declared that his “Plan B” measure will give Obama two options: `He can call on Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history.”
Polls show that most Americans would blame Republicans if the fiscal-cliff is reached without a solution, a situation that would risk a recession with $500 in combined tax hikes and government spending reductions. How much Boehner’s “Plan B” bill with its $1 million threshold for tax increases would mitigate fallout for the GOP is difficult to predict.
Democrats attempted to paint it as an inadequate solution to the problems at hand, in terms of increasing revenues and reducing spending. The White House said Boehner’s Plan B would only cut $300 billion from the deficit, through increased revenues from millionaires.
“The deficit reduction is minimal, and perversely, given its authors, solely through tax increases with no spending cuts,” White House communications director Dan Pfeiffer said in a written statement. “This approach does not meet the test of balance, and the President would veto the legislation in the unlikely event of its passage.”
LARRY SUMMERS MAY BE OUT of the White House, but he is still a remarkable bellwether of establishment economic thinking. As the Treasury secretary under President Clinton, he was a stalwart of fiscal discipline and financial deregulation; as the director of President Obama’s National Economic Council through 2010, he was a brake on big stimulus proposals. Now, in these days of worldwide fiscal austerity, he has reinvented himself, in lectures, on television, and in the press, as a pro-growth moderate. In an essay published in the Financial Times last March, for example, he warned against the dangers of “premature” efforts to rein in the U.S. deficit with harsh spending cuts and tax increases:
Even if the economy creates 300,000 jobs a month and grows at 4 percent, it would take several years to restore normal conditions. So a lurch back this year towards the kind of policies that are appropriate in normal times would be quite premature.” [Emphasis added.]
Of course, it’s true—with unemployment still at nearly 8 percent, a “lurch” toward austerity now would be disastrous. And for opponents of austerity, obliged by a budget-obsessed political climate to fight their battles one day at a time, Summers’s call for patience makes him a valuable ally. But the more important point lies not in the argument he makes about our current moment, but in what he concedes, without any reflection, is the correct policy for returning to “normal” conditions.
Notice his repetition of the word normal. This signifies a belief that Summers shares with many economists: that the market system trends naturally toward an end state of full production and high employment. The economy can be displaced from this “normal” condition by a shock or a crisis, but when the shock passes, “recovery” begins—and once “recovery” is under way, progress toward “full recovery” is inexorable. This belief runs so deep among economists as to be practically primal; it is also built into official U.S. government forecasts, coloring the worldview of legislators and presidents.
From this belief it follows that, as soon as the country enters a recovery, the job of economic policy is to manage a “soft landing.” By this, economists mean that we must start to concern ourselves with the problems that come with too much employment: price inflation, higher interest rates, aggressive unions, big wage increases, and the “crowding out” of private investment by public borrowing. For Summers, these worries are second nature; they are what policy should address once a good recovery gets going. Austerity’s time will come—we’re just not there yet.