"You really should take Simpson-Bowles"

During the campaign, the GOP complained that Obama really should have supported Simpson-Bowles deficit reduction report. They made this earnest suggestion while not supporting S-B themselves, but it was just perfect for the Dems.

Of course it's chutzpah to tell your opponents what positions they should take, but not really surprising. Simpson-Bowles is the ugly girl with a great personality and much more good sense than all the boys and girls combined. Someone should be bringing her to the senior prom negotiating table, but not ME. She's just not right for me, because I need a girl with lower revenue requirements than 21% of GDP and a real overhaul of Medicare. Besides, if I bring Simpson-Bowles as an opening at negotiations, the end point is going to be much worse than S-B when negotiations are finished. [Odd that this problem wasn't on the radar when various GOPers remarked that Obama should have embraced S-B.]

A few conservatives, such as this editor at Town Hall, are bucking this logic and pushing for the GOP to make S-B as their first serious offer. Currently, that's the outsider's position because the leadership isn't close to doing that.They're still in the faux outrage phase, "flabbergasted" that Obama as victor is less conciliatory than he was in August '11 or during the debates.

Well, it looks like no one will take the sensible ugly girl to the prom. Instead, they'll be acting like adolescents, jumping off the fiscal cliffs, maybe shutting down government over debt ceiling increases, and trying the make hay with whatever opportunities they have.

When it comes to the end of the Bush tax cuts, the truth is that no one has to do anything. They fade into the sunset all on their own. Each side will blame the other--"We wanted to save them, but those other scoundrels just wouldn't cooperate"--but neither will sacrifice a high card to prevent the tax rises. They will, however, try like hell to pin the blame on the other guys.

The next real choke point will when we hit the debt ceiling in March, but there is also the funding bills for the government which will start in the spring, if I remember correctly from 2011. Maybe some smart young senator or Congressman will ask Simpson-Bowles to one of those lovely events. Maybe she'll be the date for the entire Gang of Six, and she'll finally achieve the popularity she deserves.

Call me already--you know you need me!

Image: dontwannahearit.com

Is the GOP for Simpson-Bowles?

One of the biggest surprises in the GOP campaign is the attack on Obama for not supporting the Simpson-Bowles deficit reduction plan (capsule history and summary here). This is so surprising that Ryan's accusation against Obama caused mild-mannered political scientist Jonathan Bernstein to throw F-bombs, in capital letters no less.

So, being who I am, I wondered when this became a talking point for conservatives. They sure weren't embracing Simpson-Bowles in early 2011. So when did it stop being a corpse and start being a stick with which to club Obama?

Here's what I found.

• First, May 26, 2012. Newsbusters. Art Laffer on Bill Maher talking about the economy. The commentary is that the left didn't like SB because of entitlement cuts, and Obama followed the left of his party. Maybe so, it was already dead, due to insufficient congressional support. Obama wasn't even the coup de grace.

• The real spin starts on 8/15 with a piece for Fox News website. This is a balanced article about the political positions. Ryan lead opposition to SB, and Obama punted. The article said that Obama should have pushed the topic 2010-2011. Agreed.

• Breitbart.com had a story on 8/19. A cabal of political advisers encouraged Obama to let Paul Ryan go first, and then Obama would look sensible in comparison. The post says that Obama should have been the leader. Ha, ha. I think the political advisers were probably right. At that point, it was too late to lead on the issue for that year--the new GOP majority in the House had their pitchforks out and torches lit, so SB wasn't going to be considered. As Bill Maher says, Simpson Bowles would have gotten cooties if Obama endorsed it then.

I find it very hypocritical of Ryan, Breitbart, etc. to criticize Obama over his handling of SB since the GOP were even worse. The report came out as the new Tea Party Republicans were chomping at the bit to use their new power in the House. They tried a lot of brinksmanship on major funding bills and over the debt ceiling. Delicate negotiations or reasoned discussion of this bipartisan plan weren't on the agenda for the House GOP.

Funny - is Simpson-Bowles on the agenda now? (Ssh, it's just a prop.)

 Ryan honoring Simpson-Bowles in the breach - his partisan plan

Image: breitbart.com

Extra. The House reaffirmed its negative opinion of Simpson-Bowles in a 382-38 vote in March 2012.

The man who should be king

 
... actually, he should be president. That is my gut response to this video of Chris Christie. (Disclosure: I have a weakness for unvarnished talk, preferably with occasional profanity.)

At 10 minutes in, he gives Obama the same advice I'd give Obama if I could get on Meet the Press. Take Simpson-Bowles off the shelf (saying the politician equivalent of "I made a mistake"), and back it hard around the country and in Congress.

Watch the whole video. Highlights are that Christie would join the ticket with Mitt Romney, how he's handled canceling a huge transportation project, and how he's lowering New Jersey's highest-in-the-country state taxes.

This straight-shooter's pick out of this sorry bunch of GOP candidates: Romney. Republicans should be listening. Ron Paul supporters should be listening too.

Update 1/22/12. I love this guy. Partial headline from Google news:

Gov. Christie nominates two for state Supreme Court including gay African...

If you like Ron Paul...

...I think you'll like this interview with Alan Simpson. The same truth-telling, some self-effacement (so pleasant on a high-Newt day like today). Enjoy!

Simpson-Bowles economic plan - WIN

I've written about my support of the Simpson-Bowles plan many times, but I'm finally doing a capsule review as I've done of Obama's, Romney's, and Cain's plans. A debt-reduction commission was created by Obama in early 2010 after Congress after the Republicans in the Senate refused to give a mandate for a commission and guarantee a vote on their recommendations.

The commission was bipartisan with members from the House, Senate, business, and economic experts. They worked from April 2010 until December 2010. In the end, 11 of 18 commission supported the report, with the dissenters split nearly equally between Dems and Repubs. (Thanks, Wikipedia, for this background.)

This plan is actually very readable with all major recommendations put into categories and bullet pointed, like this:

RECOMMENDATION 1.1: CAP DISCRETIONARY SPENDING THROUGH 2020. Hold spending in 2012 equal to or lower than spending in 2011, and return spending to pre-crisis 2008 levels in real terms in 2013. Limit future spending growth to half the projected inflation rate through 2020.

Budget Cuts

Roll back discretionary spending to $688 billion for security and $410 billion for non-security spending. Let agency heads recommend the budget reductions for their department; Congress will not be allowed to micromanage and protect a fiefdom.

Cut congressional and white staffing and budgets by 15%. Reduce federal workforce by attrition. Institute pay freezes and much tighter travel budgets.

Tax Reform

Raise gasoline taxes $.15 a gallon for adequate funding for transportation (currently partially funded through borrowing).

Eliminate most deductions. All dividend and capital gains will be taxed as the same rate as earned income. The commission offered three choices to determine which brackets to establish:

• If there are no deduction and no credits, the brackets would be 8, 14, and 23%.
• If there are credits for low-wage workers and their families, the brackets would be 9, 15, and 24%.
• If there are credits for low-wage workers and somewhat limited deductions for mortgage interest, health insurance, charitable giving, and retirement savings, the brackets would be 12, 22, and 28%.
• Exemptions would be maintained as is. The standard deduction would become an exemption. A family of four would exempt $26,000 from taxes.
• Business income tax would be 26 or 28%.

Health Care Spending

• Freeze doctor reimbursement for 2013 and have a 1% reduction in 2014. 
• Reform the payment formula. Repeal the longterm care part of ACA (already done). 
• Institute a simpler, higher deductible higher copay. 
• Require the same drug rebate for some on Medicare as already used in Medicaid. 
• Increase fraud division. 
• Decrease contributions to states for Medicaid administration costs. 
• Reform malpractice law and create specialized courts. 
• Start pilot programs for health insurance vouchers for federal workers (already in ACA and part of Ryan plan for Medicare). 
• Create a board like the IPAB payment board to set reimbursement rates. 
• Once reforms are in place, establish hard caps that allow spending increases that match the percentage growth in GDP plus 1% per year.

Mandatory Spending Reforms

Change federal pension rules to bring them in  line with lower rates in the private sector. Reduce spending on agricultural subsidies. There is also a bunch of smaller savings on student loans, general fees, mines, private pension insurance, energy, post office.

Social Security

Change benefit formulas to provide better support for low-income, very old, and long-term disabled. Provide less generous support at the high end. Raise the retirement age, tax more income, make state and local workers join SS.

Enforcement

Cut spending somewhat gradually. Start tax increases after first year of substantial spending cuts. The CBO will score spending bills and send them  back to committee when they exceed the allotment for their category of spending. OMB can require across the board cuts if Congress passes offending bills.

An appointed ongoing committee will recommend 2% cuts every year by identifying programs that are no longer needed or not working as planned. They will also recommend consolidation of redundant programs.

No off-budget spending for wars.

Congress will define what constitutes "emergency" and "disaster" spending. They will establish a special fund for disaster relief based on 10 year average.

My Critique

It's a  great plan. I think the exemptions are a bit low. It doesn't zero out the deficit in its ten-year projection, which I think should be a goal in any plan because we can't pay down our debt until we have a zero deficit. Those are my two specific criticisms. That doesn't decrease my awe at the achievement of the commission. They were actually able to reach agreement in many areas:

• Cutting the federal workforce
• Discretionary spending limits
• Healthcare spending (where agreement is especially hard to reach)
• Social Security
• Provisions to enforce the budget agreements

The one area where they couldn't reach a final agreement was tax reform, and even then, they agreed on a framework and three workable options within that framework. Whittling tax reform plans down to option A, B, or C, and getting agreement to present just those options is still a solid achievement.

You can compare the Simpson-Bowles plan to mine, but I wish you wouldn't. On the other hand, go ahead and compare it to Romney's plan and Obama's plan. For laughs, compare it to Cain's plan. Remember when he was the frontrunner?

The Payoff

Within the first 4 years of the plan, we reduce our deficit to 2.3% of GDP, then down to 0.8% by 2025. In the meantime, normal growth in GDP will make our debt smaller as a percent of the economy.

Green - current trajectory

Red - Bush tax cuts expire

Blue - Simpson-Bowles WIN!

Edit 12/27/11. Added my second criticism, that the plan didn't zero out the deficit.

No shock treatment, please

Is it already too late to save the US from becoming Greece? I think there's hope. We have some time left, but we don't know how much time it is.

If this was an action movie, and the US was under a known threat of attack, there would be multiple military missions, conventional and unconventional, trying to prevent a terrible outcome. You can probably picture it--the stalwart hero who does everything he can think of to stop the devastation.

Well, we are under that kind of threat. We don't know how long we have to defuse the bomb, this bomb being our high and growing level of debt. And unlike in an suspense movie, I don't want to take any high stakes gambles. I don't want to try to shock our economy into a burst of activity that saves us, because what if it doesn't work? Shock treatment always costs a lot, whether direct government stimulus spending or tax cuts. The costs and risks are too high, and there is a good alternative.

We can take a conservative course. We can match our spending to our income. We haven't done that on a federal level in 11 years, and it'll be hard to do in just one year without causing painful shocks to our economy. However, we can put ourselves on a multi-year reducing diet plan. We can plan that in year 1 we will do this, in year 2 even more, etc.

Sticking to a budget can be hard for a family unless the family has 1) discipline and 2) some emergency money. The US is a wealthy country, so having some emergency money isn't really the problem. Discipline definitely is.

Right now, most of the country agrees that we have economic problems and rapidly increasing debt. In fact, that was the consensus at the beginning of 2010 when Obama created the deficit commission.

Unfortunately, there wasn't a consensus on the treatment. Was it more important to stimulate the economy to grow, and if so, using what method? This lack of consensus didn't hamper the deficit commission. As they studied the problem, most of the members came to a consensus, which became the Simpson-Bowles plan. Ultimately, the Republican and Democratic chairs (Simpson and Bowles) and 9 other committee members representing both parties approved the plan. However, there were dissents on both the right and the left. Obama damned the plan with faint praise, and Congress didn't act on it. This was an incredible waste, because a plan that can get bipartisan agreement is a rare achievement. This plan, supported by moderates, was scuttled by the extremes and the cowardly.

Once the plan was rejected, then we saw the plans from the extremes. Obama's initial budget proposal for 2012 had a deficit of $1.1 trillion. The Ryan plan cut only $90 billion, had a deficit of $1 trillion, and had future cuts that overwhelmingly affected domestic spending. Ron Paul's plan called for cutting $1 trillion in his first year. He's clearly unafraid of the economic shock. Consequently, no budget was ever passed for 2012. Instead, the government has operated under continuing resolutions for the entire year. Budgets cuts were agreed during a crisis over the debt ceiling, but there is no plan in place for 2012.

If Simpson-Bowles had been accepted, voted on, and passed, we would be nearly to our second year of the plan. Instead, we have a deeply polarized Congress, a current confrontation over payroll tax cuts, and no deal in sight for the Bush tax cuts due to expire at the end of 2012. We will stumble to a more balanced budget, even without a deal, thanks only to sunset provisions. I guess we should count our blessings. The extremes are canceling each other out (at least until the next election). A lucky default outcome is better than an expensive, ill-conceived policy, but a reasonable, conservative approach like Simpson-Bowles would be far better. In the meantime, the bomb is still live, and time is getting shorter.

 Blue - new taxes, Red - spending cuts. Simpson-Bowles: Most balanced

Update 2/10/12. Greece today:  "Papademos said failure to secure the $171 billion rescue package that’s under negotiation threatened 11 million Greeks with a default that would halt the payment of wages and pensions and shut down schools, hospitals and businesses." -- Bloomberg.  Is that what we want in our future?

Romney's economic plan - FAIL

It's time for me to accept that Romney may well be Republican nominee, despite the appearance that half the Repub base can't stand him. Since I live in Massachusetts, I've experienced Romney as a governor but I can barely remember it. That indicates that he wasn't a great governor or an awful one. That's the sum of my firsthand experience. For any other questions, I have to research just like anyone else. This comment from an Atlantic blog seconded my impression of him and prompted my flurry of Romney research:

"He's seeped himself in the republican orthodoxy with a wink wink and nod and a smile at the camera.  I think he can largely free himself from that come the general election." --Atlantic post

My impression of Romney as a campaigner: polished delivery, strong on the details, personable, moderate. I don't remember many policy proposals, but the entire field has been rather lean on policy (except 9-9-9), so that's par for the course. I had to look at the goods, so I skimmed Romney's 87-page economic plan.

The good news is that the plan is not a typical Republican conservative supply-side fairy tale. Of course there's Obama-bashing on every other page, but there's some promising stuff too. What I liked:

• Lower tax rate on cap gains, dividends, interest, but importantly, only for tax payers under $200,000.
• Cut corporate rate to 25% and end rules that discourage repatriation of overseas profits.
• An explicit shout-out to Simpson-Bowles' recommendations on tax reform - broader tax base, simpler, fewer deductions.
• A cap on regulation that measures compliance costs, and doesn't allow an overall rise in compliance costs.
• A bit of respect for Dodd-Frank disguised as criticism.
• Cut, cap, and balance but at 20% of GDP, not the 18% level that most conservatives quote.

What I didn't like:

• Eliminate estate tax (but this is such a Republican plank, I'm not too surprised).
• Mention of the illusory tax compliance cost of $400 billion a year. I don't believe we spend 2.7% of our GDP in tax compliance. Where the spending is concentrated, in complex business arrangements,  will likely remain.
• A poke in the eye at the auto industry over the bail-out--UAW made out, but investors (carefully not called creditors) got screwed. I predict he'll change his tune on this one in the general campaign.
• Only small fixes to Social Security.
• A shout-out to Ryan's plan to voucherize Medicare, but with unspecified differences. This void shows how dangerous a definite policy commitment would be. I doubt that Romney will choose the deeply unpopular voucher approach.
• Turn Medicaid into a block grant. (I'm on the fence as to whether this will be beneficial or not.)
• Support for a balanced budget amendment that is more a strait-jacket than a workable plan.
• Tough talk about sanctioning China for currency manipulation.

Gaping holes in the plan:

• No plan for the uninsured or for lowering health care costs.
• No specific areas of spending cuts, but a reduction of the federal workforce by attrition.
• No proposed federal budget with numbers.

So, my overall impression is that the plan isn't extreme considering it came from a Republican: no major tax cuts, a reasonable goal on regulation. But it fails in two essential ways:

• It isn't a plan unless it contains actual numbers.
• It isn't honest about what will be painful. 

This plan is meant to get Romney elected, and only then will we find out if he'll grapple with tough issues. I'm sure no one is surprised that Romney is playing it safe.

 ...but don't expect a straight answer.

Should I review Michele Bachmann's plan now? ... No, I'll stick to real candidates.

Update 12/13/11. Romney announced his plans for Medicare reform, and they look a lot like Ryan's plan to voucherize the program.The big advantage of vouchers is that the federal government can decide how much to spend year-to-year. A big disadvantage is that it puts cost-containment onto insurance companies. To be fair, cost-containment is the boogey man in all Medicare plans. ...Oh, it's not a voucher, it's premium support. Don't ask me to explain the non-existent difference between the two.


Wall Street Journal review of Romney's plan

The Growing Importance of the Super Committee

The shutdown looming last week was just barely averted. The rebellious Tea Party continues to demand budget concessions whenever they can take a hostage. But the Dems are not folding anymore. Why? Maybe because of the super committee.

The super committee is charged with negotiating deficit reduction between two camps that are pretty far apart. Too many in Congress have pledged to non-negotiable positions, yet they voted themselves a loophole in the debt ceiling deal. The Congress will give the super committee recommendations an up-or-down vote, no amendments or filibusters allowed.

To many, an agreement between the members of the committee seems unlikely. Several party hardliners were appointed, including Jon Kyl, Patty Murray, Max Baucus, and Jeb Hensarling. (I don't personally know that appointees other than Jon Kyl are hardliners--I'm depending on news sources.)

I'm more optimistic. The appointees may be more partisan, but that means their compromises will have more weight with colleagues. This isn't just a warmed-over Simpson-Bowles committee or Gang of Six, that is, the same people hawking the same plan. This time, core members of the parties are doing the negotiating.

The reasons I think they will strike a deal:

• The form of the committee enhances its chance of success. Don't underestimate the ability of serious people sitting down together and talking to reach some compromises. Not all of them have to agree. Smaller groups of 2 or 3 or 4 can hammer out proposals to present to all twelve.
• Public opinion is for a deal. There is a lot of pressure on both Republican and Democratic officials to stop arguing and make some sort of deal. Republicans lost general support over the August brinkmanship. Democratic seats in the south, midwest, and west are always vulnerable when Democrats as a group drift too far left or if they are obstructionist.

So the super committee is giving tremendous cover to the rest of Congress, but only if they reach a compromise. Major pressure to do something!

I care less about the specifics of the deal than how the rest of Congress reacts to it. But I'll throw out some predictions because I always do. On spending cuts, I think they will probably come to roughly the same conclusions as Simpson-Bowles. Taxes will be harder to work through, so maybe they'll establish another super committee, maybe they won't touch it, or maybe there will be some token tax increases in this deal. The last part of this prediction covers so many possibilities that it hardly counts as a prediction.

Update 11/17/11. It now looks like the super committee will fail. Read my updated analysis.