Short: 'Fix the Debt' is fixed

A great article from Jonathan Chait about a pro-deficit reduction group that is strangely biased towards whatever the GOP offers. Chait takes apart the GOP proposal and Fix-the-Debt's incongruous support of it.

The GOP gets credit for being deficit hawks, but it doesn't deserve 95% of this credit. Sure, they propose cuts here and there, but their major actions have been 1) to stymie systemic reform of the budget and 2) enact deficit-growing tax cuts.

The article has some pointed recent history. It's a good reminder, as history usually is.

New slogan, same old.

Image: yourhoustonnews.com

Rant about healthcare spending

I'm fed up with conservatives who complain that Obamacare is going to bankrupt the country but never turn their gaze on Medicare. The message seems to be that other people can spend buckets of government cash on healthcare, but NOT YOU. You are scum because you don't have employer-provided insurance.

There is no acknowledgement of the real problems in the healthcare system. Here's a big example: how many people know that current Medicare taxes aren't covering current Medicare expenses? I heard this mentioned in passing this week, and it was news to me. If we can't even cover our current Medicare expenses, why isn't that information all over the news? It should be a common point when talking about spending, similar to how everyone mentions the yearly deficit and the national debt now being $17 trillion.

Yet it's not mentioned frequently. The fact is that general revenues are paying for more than 45% of our Medicare costs, meaning that other programs are squeezed. And the BABY BOOMERS HAVEN'T EVEN STARTED GETTING OLD YET.

When are we going to start reining in Medicare? I'd cynically say probably not while we have elections and seniors turn out in high numbers, but I don't think we can wait that long. We need some method to force people and doctors to stop this gorging. We've got to start saying "no," but that means saying "no" when life and health are on the line. I don't know if we can do that. We may believe that we have to spend on our healthcare, no matter how much.

Will it be possible to cut back? If so, how? The easiest way is to cut what's ineffective. That means gathering the statistics, and then convincing or forcing doctors not to order the ineffective treatments. We'll probably need to cut barely effective treatments too. I've read of cancer patients being referred for a fourth round of treatment that's known to extend life for only three months. What is the cost? Would you decrease your own bank account $100K per month to extend your life? If not, then you probably shouldn't decrease the country's resources either.

This also means giving comfort care and end-of-life treatment to frail elders instead of hospital care and expensive ICU treatment. Perhaps we shouldn't be trying to save extremely premature babies and people with very severe head trauma. Yes, we will have all these life-saving and life-extended technology that we will purposefully not use because it costs too much.

As I said above, I don't know if we can do that, just let it alone and not jump in with all that. Our track record isn't good.

Image: smh.com.au

What started this rant? The idea that Ben Carson, the neurosurgeon religious black conservative darling can save us. That and finding out that the Medicare payroll tax isn't covering even 55% of our Medicare spending.

Extra. Healthcare costs are growing faster again after a five-year slowdown.

Missing: Real fiscal negotiations

. . . chasing a fetish instead

For some unknown reason, the GOP decided to forego fiscal negotiations in the run-up to the appropriations for next year, and focus only on defunding Obamacare. They turned Obamacare into a fetish and focused all their energies on it.

Obamacare is certainly not the only political fetish. In fact, politics is full of fetishes. Each party tries to raise up their fetishes and burn those of their opponents. Here are a few fetishes off the top of my head: assault weapons ban, balanced budget amendment, green jobs, DADT, "real Americans," ...

Actually, I ran out of fetishes sooner than I would have thought. To me, a fetish is a practically useless but politically powerful piece of policy or jargon. In actuality, it doesn't matter, but politicians latch onto it for political grandstanding. Obamacare doesn't really fit this definition, since it will have real consequences, but it has been turned into a fetish because politicians have inflated its symbolism to a great degree.

Negotiate or bust

So, back to the point. Instead of doing some horse-trading on funding this and that, cutting hither and thither, the GOP has wasted months on Obamacare. They did manage to pass a bill in the House cutting 5% from the food stamp budget, but that's it. Maybe someone in the GOP (not you, Rand Paul) remembered to make up a prioritized list of other cuts, and will whip it out after the Obamacare offensive is defeated. If not, the GOP will yet again be caught out with no negotiation strategy. This happened in December '11, Feb '12, Dec '12, and March '13. When will the GOP learn?

The Dems, of course, like spending as much as they can get away with, so they aren't taking up the slack and suggesting their own cuts. Nancy Pelosi says there's nothing more to cut, but also that the Dems will work with the GOP to make government more efficient and end duplication of services. Her negotiation strategy is "you go first." This cynical strategy isn't good for the country at all, but those hopeless Republicans don't have anything better.

I hope we can get back to the situation in 2011 when the Tea Party was pushing for some real cuts, and they weren't going to back down. That was a realistic goal and it worked.

Right now they're engaged in a folly, and they seem to be throwing more energy at it than they had in 2011. Why are they flushing away their power on an unattainable goal? The only answer I have is that they don't know and don't care what is achievable and what isn't.

Perhaps we were damned lucky that they focused on budget cuts in 2011 and not Obamacare. Maybe it was just dumb luck, and not any wisdom at all. If the Tea Party chooses its goal irrationally, they are going to be a bull in a china shop until they're shot down. On the basis of 2013 vs. 2011, I'm not ready yet to declare the Tea Party totally irrational, but that's definitely on the list of possible explanations.

So, to the Tea Party, please go back to demanding some fiscal restraint. Show that your 2011 rational choice wasn't an aberration.

Image: washingtonpost.com

Extras. The food stamp cut mentioned above was 5% of a $80 billion budget that's doubled since 2008. The stimulus increased the grants, but that is also due to end, which may mean the total cuts are larger, perhaps on the order of 10%. The Dems are screaming about "food insecurity," which means one person in a household skipped as few as one meal a month due to food availability. Fetish, anyone?

Bernstein: GOP is "post-policy"--they have no proposals. Josh Barro complains about the lack of rational healthcare reform ideas among the GOP. Yeah, I noticed that.

Budget FAIL x 2

Ryan budget - FAIL
Senate Democratic budget - FAIL

NO SURPRISE.

I could leave it at that, but the topic deserves serious consideration, so I'll tell why both budgets are rotten, and thereby do more honor to budgeting than either party did. The GOP budget is a return of the usual Ryan chicken scratch. If this budget was a TV character, it would be wandering around dazed and with amnesia, unaware that it was rejected in the 2012 election. It contains all the usual Ryan touches: repeal of Obamacare, block-grants in place of Medicaid, and voucherizing Medicare ten years from now. Yawn. No, wait, I think they dropped the additional tax cuts for "job creators." So maybe there's only pervasive amnesia.

The Democratic budget is fairly similar to Obama's budget of 1.5 years ago, but with less stimulus spending--only $100 billion instead of $400B. The Dems are feeling their oats after the election win so the ideal balance is no longer 1/3 tax increases to 2/3 spending cuts. Instead it's 50/50. But in fact, there are no spending cuts, just slower spending growth. The deficit eventually slims down below 3% of GDP, but only if growth is significantly robust. In fact, the spending grows on average 4.7% per year, so we better have strong growth, or we'll have some mighty large deficits.

Of course, we don't really have to worry about the Dems spending as much as they say in their budget. It's as likely to pass as the GOP version. They are both losers, dead-on-arrival partisan toilet paper. We are on track to follow the prediction I made early this month--a status quo Continuing Resolution. Bigger yawn.

I think I'll take a nap for a few years, then wake up and see if the same predictable fake budgets are walking around like unfulfilled specters haunting the Capitol. Then I'll vomit.

Image: theblaze.com

Extra. The WSJ sugar-coats the Ryan budget and invents a new euphemism for a Medicare voucher system:

 "The idea is to revamp Medicare's benefits and premium structure so these relics from 1965 work like normal insurance and give seniors the incentive to take a larger role in their own care."

Yes, I'm sure that medical insurance for seniors can be just like auto insurance. That will totally work.

And good news of just desserts. Obama's approval rating is considerably lower, especially with independents. I interpret this as unhappy moderates (like me).

Why do Democrats love tax increases?

So the Democrats got a substantial tax increase on the wealthy at the beginning of the year. That should be enough for the fiscal health of the country, right?

Not according to most of the Dems out on speaking tours these past few weeks. From Obama on down, they are saying that the federal government needs even more revenue. If that's true, we have to wonder why the Dems didn't get that extra revenue in the fiscal cliff negotiations. Here some speculative ideas about why the Dems want that revenue:

1. The Dems want to set the precedent that all deficit reduction will be a mixture of spending cuts (cuts below the current baseline, which is in an upward trajectory) and revenue increases.
2. Dems want to kill off the GOP preferred method of deficit reduction, which is by spending cuts only, with no revenue increases except from economical growth.
3. Dems want to force the GOP to capitulate to the Dem's preferred deficit cutting approach, and thereby humiliate the GOP.
4. Dems don't want to be humiliated by the GOP if it ends up that government can be cut significantly without huge gaps opening up in the social safety net.
5. Dems are concerned about the growth of income inequality and the reduction in broad, well-paying employment, and they want to even out the inequity using taxation to supporting public provision of standard benefits.
6. Dems are protecting their loyal constituencies of government workers and those who received federal benefits.
7. Dems honestly believe that the cuts will be devastating to government services that we depend on, so the sequester is too deep.
8. Dems always want to raise taxes and spend more on government programs, and they don't even remember why.

Obviously I don't know the talking point reasons the Dems give for needing higher revenue, and I'm getting more and more exasperated as I try to figure out the reason. If you're wondering why I can be so nasty to the Dems just 4 months after supporting Obama's reelection, I'll remind you that the GOP proposals were even more dangerous and ridiculous.

I may be getting the government I voted for, but I never had a chance to vote for the government I really want. (That's true for lots of people--just ask a libertarian.)

Image: democrats.org

Short: Why I'm writing more about the GOP

I struggle to write about the Democratic side of the political equation lately. Their positions and proposals are so stale that I just roll my eyes and shut down: sure, more spending on education! Too bad we haven't figured out how to reduce our $800 billion deficit a little bit more before we add on a few wishlist items.

The latest disappointment: Senator Tom Harkin, an unreformed tax-and-spend liberal, is repeating that the government doesn't have "a spending problem." Almost all Dems wisely stopped saying that in August 2011, but some are trotting it back out. With nearly $3T in spending each year, $17T in debt, and a bumper crop of retirees on the way, we absolutely have a spending problem that we better do something about. (By the way, this news item came to my attention via the conservative blogosphere. MSM FAIL, again.) I don't know when I'll hear something realistic from a Democrat again. Maybe when they finally propose a budget that can get 51 votes in the Senate, then they'll return to fiscal reality. Obviously I'm not holding my breath.

The GOP, at least some of them, are grappling with budgets and electoral fallout. They're the ones who acknowledge that the sequester will happen.

It's glaringly obvious that either of the political parties can lose sight of reality and start believing that their spin is truth. The Dems went from triple crown winner in 2008 to half-lame handicapped donkey in 2010. The GOP got punished in 2012. Won't someone learn from these last three years? If you go too far from  sensible, centrist policies, the American electorate is ready to slap you down. Please, dammit, learn this!

Image: epicureanddealmaker.blogspot.com

No-budget Obama

I hope you noticed this: Obama doesn't want the sequester to go ahead as is, but he isn't offering a replacement plan. That's the job for Congress. I guess Obama's job is to give lofty speeches and run our foreign policy. But his job evidently doesn't include providing meaningful leadership on difficult domestic issues.

His budget is AWOL too. So far, he seems to favor more revenue--from closing tax loopholes this time-- and unspecified cuts. It's disappointing that Obama can't state any cuts, even for the good of the country. He doesn't name cuts because they would automatically become incorporated in any future deal, and Obama doesn't want to give up any ground that isn't part of a package. There's a certain sense to this in an adversarial negotiation, but it's sad that other factors aren't a larger consideration, such as good budgeting and leadership on issues.

I don't think the sequester is horrible, largely because I'm for restraining government spending, but in gentle ways that are less likely to send us into another recession. However, Dems apparently have a different opinion. It is so damn hard to get Dems to agree to cuts that we ought to take the sequester as a once-in-a-lifetime opportunity, and also as an experiment to find out how painful cutting actually is. This is something we have never tried at the federal level, while it's common at state, town, family, and personal level. I'm unconvinced that it's too dangerous to run this $85 billion experiment (the savings in the first year, or appoximately 0.5% of GDP).

Obama claims that the sequester should be replaced by a balanced approach of spending cuts and revenue increases, but this ignores something very important. The sequester was the cut-only piece of deficit reduction passed in August 2011. The end of the some of the Bush tax cuts, passed Jan. 2013, was a tax-increase piece of deficit reduction. Between the two, that is balanced deficit reduction. If the sequester is to be replaced, it should be replaced with cuts. It's also pretty obvious that the GOP agrees with that, so only a new menu of cuts has any chance of passing. 

With no viable alternative on offer, I think that finally the cuts will happen, starting shortly after March 1. That's a long time coming.

Cuts are coming

Image: sxmdailyphoto.com

Extra: Spinning the sequester for future electoral gain

Lessons learned from the fiscal cliff

Prepare for a surprise. I'm not going say again how blind the GOP was to the situation, and they should wake up. I'm not going to check in on reactions. Instead, I'm going to reflect.

Obama was not gracious in victory, though he wasn't triumphant either, as some in the GOP claimed. The GOP has no right to criticize Obama's manners, which are 100 times better than the average GOP politician when he talks about Obama or other Democrats. Nonetheless, more thanks and more humility would have been appropriate.

A pretty good deal

There are many things I like about deal. Obama gave the GOP a good-sized fig leaf, and didn't go for as much "soaking the rich" as his left flank wanted. Obama held to his $400K number even though he could have tried to pull back to $250K. That is good.

Obama reportedly wanted a year delay in the sequester, but let it go for the realistic 2 months. That is good.
 
The government won't take a 55% bite out of estates, or any bite out of smaller estates. That is good. It is also balanced. Obama is living by his oath of a balanced approach, even if it costs him the votes of the most  liberal senators and he loses some from his loudest cheering section.

The next battle

I like the tone that Obama set in these negotiations. He didn't let the GOP's veto power intimidate him. If they had remained unreasonable, he wouldn't have caved. He would have let the tax increases happen. That is reinforcing the idea that actions will have their consequences, and the grown-ups aren't going to shield the children from learning their lessons.

Obama is taking a tough love approach. He has clearly put his marker down: the rest of the fiscal negotiations this year aren't going to be over-the-top partisan fights. I suspect he'll know what his best/final offer will be, and he won't go any further. Sometime (no link, alas) I heard him quote 2/3 spending cuts to 1/3 revenue increases. I think that's what he'll stick to.

In some ways, knowing someone's final number is good. But in running the US government, the idea that there is a non-negotiable final number--that may not work. The toll on the country may be huge while we're waiting for one side to cave to the other side's final offer.

Into uncharted territory

Obama  is also insisting on balance. This is trickier. If Obama is saying that there won't be anymore cut-only deals, he is taking a surprisingly tough line. This would still be new territory for Republicans if they have to vote for increases to a current tax rate.

On the flip side, pushing tax increases is very dangerous for the Dems. It plays into the stereotype that Dems don't know how to restrain spending or cut back--that they have only one response, which is to raise taxes. The Democrats have yet to show that they can trim spending in anymore than a marginal way. Since the bulk of the cuts associated with the 2011 debt ceiling fight haven't yet taken effect, real belt-tightening still hasn't happened. This country wants to try a decent dose of cuts, so let's do it.

A man with a plan

For the first time since the loss of the supermajority in the Senate in 2009, Obama seems to have a solid plan. If you look at the plans of the Dems and the GOP since the 2008 election, it's a mostly pitiful collection:

• Dems 2009 - Pass as much of our wishlist as possible.
• GOP 2009 - Non-cooperation with Dem program.
• Dem 2010 - Lost the 60 votes in the Senate, what now?
• GOP 2010 - Block everything and complain incessantly that the economy still sucks.
• Dem 2011 - Oh shit, no House anymore. Negotiate so that the GOP gets only half of what they want.
• GOP 2011 - Pass the GOP program in the House and cram it down the Dems' throats.
• Dems 2012 - Campaign on a milder (balanced) Dem platform. Don't look crazy.
• GOP 2012 - Campaign on a full GOP platform.

Obama's current plan is an extension of the campaign platform--Don't be crazy. Moderation. Balance. However, he has added resolve to stick to moderation. I don't know what the current GOP plan is. I don't think the GOP knows either.

I like Obama's position. There are lots of pointless arguments I could've avoided if only I'd stood my ground on a reasonable plan and said no to whining and demands.

However, it's important to remember resolve doesn't work if you're resolved to do something nuts. It can work for Obama because he has a solid program--a balanced approach to the fiscal problems of this country. If he moves too far to the left, leaving the center where he is right now, then his plan won't work.

The downside of Obama's plan

I'm not at all certain Obama will be able to enforce his doctrine that deficit reduction will be balanced from this point forward. Within the next two months, Obama and the GOP have to figure out two big issues:

• Implement the sequester as is, or change the terms, which will probably mean moving the cuts around.
• Raise the debt ceiling again.

The GOP is sure to demand more cuts. I don't know how Obama will handle that. If he pushes for additional tax increases, I think he will fail. It's too soon for more taxes.

However, if he can show that the 2011 deal, this recent tax deal, and an early-2013 deal taken together are balanced, then he may prevail. So far, this is what I think he's trying to do. He talks about the big numbers in the deals: $1.2 trillion in cuts, $600 billion in revenue.

These numbers are good landmarks, but there is another big number. The current projected deficit for 2013 is $970 billion [CBO projection, but with fewer revenue increases]. That's too large. We need to reduce the deficit faster, but it's not clear how we can do so. We can try to trim some more spending, but that has proved very difficult. More revenue increases are also unlikely. I think we're going to hope that the economy picks up and reduces the deficit that way. Maybe it will. We are due for an upturn.

My plan would be to implement the planned spending cuts or an equivalent starting no later than March, and then reassess in June as to whether we need to enact additional cuts/revenue increases to lower the deficit. Kick the can, hope for the best, and have a firm date for the next move. That's not the worst plan ever. Sigh. Good thing I'm not president.
 

Best of luck, Mr. President

Image: foxnews.com

Interesting context:

• Obama's speeches on the tax deal: before the deal, after passage.
• Who lost their cool in the negotiations: Boehner and Reid. Cool cats: Obama, Biden, McConnell.
• Wall Street Journal's spit-and-bile reaction.
• Rational conservative reaction.
• My go-to conservatives (HotAir).
• Liberals complaining - I'm too jaded to google for that.

Update 1/6/13. The fig leaf is still generous, but the revenue is probably higher because people between $250-450K are having their deductions limited. That can hurt more than a rate increase, but it's also one way to limit tax avoidance.

Short: Tax increases for everyone!

Here's a good article outlining why the GOP should let the country go over the fiscal cliff. This is the reason in one sentence:

"Republicans will never be able to build a political case for less spending if most Americans are insulated from the cost of that spending."

That's a very "tough love" approach, and maybe it's the right one. I've been thinking about political gamesmanship and leverage, but this is first principles. If people want it, they should pay for it.

Of course the article makes it sound like Obama invented deficit spending. It doesn't mention Bush cooking the books, keeping wars off-budget, or anything like that. However, the article points out that extending the Bush tax cuts was a terrible thing to do in 2010, and maybe it handed the election to Obama.

Perhaps I should check whether the author, Avik Roy, told Romney that extending the Bush tax cuts is a terrible idea. Hold on a minute...

Well, no, he didn't suggest this until  Dec. 22. In fact, during the GOP convention, Roy wrote that the GOP wasn't wrong to resist tax increases, but deserves "a meaningful proportion of the blame for the fiscal situation that Obama inherited and then made worse."

This is another lesson that everyone wants tax cuts on their watch, and no one wants to be the grinch or deliver the bill. However, it also makes me want to go over the fiscal cliff in order to find out if people are really willing to pay the full cost of government. I want to know that!

How much government do I really want?

Image: mollygalbraith.com

Postscript. Of course, there may be some important reasons not to go over the cliff, like we really don't need to push our economy into another recession quite yet. Let's think about the greater good, not just partisan advantage, OK? Do I know the best course. Uh... no. So maybe it's best to be cautious. A bit of a cliff now, and more later this year if we don't have a tummy ache recession.

Negotiation box score update - more FAIL

Well, this isn't as much fun as I hoped it would be. The GOP is hopelessly mired in the idea that they can get a lot by giving a tiny bit.

_______________________________________________________
Boehner's offer circa 12/16/12

• Tax increases on those with incomes $1 million and over. 
• Increased revenues of $1 trillion if there are spending cuts of $1 trillion. 
• GOP keeps the leverage of further negotiations on the debt ceiling. (source)

______________________________________________________
Obama's offer circa 12/17/12

• Tax increases on those with incomes over $400,000. 
• Increased revenues of $1.2 trillion. 
• Certain savings in the big entitlement programs, but not a particular numerical promise. 
• Automatic debt ceiling increases based on this deal for 2 years. (source)

______________________________________________________

Both are bad deals, asking for too much while offering much less. So Boehner is turning to Plan B, writing a bill that will extend  most of the Bush tax cuts for non-millionaires. This bill may pass the House, but then go nowhere, except perhaps as butt-covering for House members. Sigh.

Image:  epic-fail.blogspot.com

Previous offers:

_______________________________________________________
Boehner/Ryan 11/14/12

• New revenue only through GDP growth.
• All the spending cuts in the Ryan 2012 budget. (source)

_______________________________________________________
Boehner 11/15/12

• Ok, maybe some new revenue.
• All the spending cuts in the Ryan 2012 budget. (source)

______________________________________________________
Obama 11/29/12

• $400 billion in entitlement cuts.
• $1.6 trillion in tax revenue.
• $50 billion stimulus program. (source)

______________________________________________________
Boehner 12/3/12

• $800 billion in tax revenue.
• $600 billion in Medicare and Medicaid cuts.
• $300 billion in savings from programs like farm subsidies.
• $200 billion to slow growth of government, including Social Security.
• $300 billion cut to federal agency budgets. (source)

______________________________________________________

Negotiation box scores

The Atlantic Wire had a neat summary of the negotiation offers, and I think I'll steal the idea. It'll be fascinating to see the evolution of the offers through these summaries. Here goes:

_______________________________________________________
Boehner/Ryan 11/14/12

• New revenue only through GDP growth.
• All the spending cuts in the Ryan 2012 budget. (source)

_______________________________________________________
Boehner 11/15/12

• Ok, maybe some new revenue.
• All the spending cuts in the Ryan 2012 budget. (source)

______________________________________________________
Obama 11/29/12

• $400 billion in entitlement cuts.
• $1.6 trillion in tax revenue.
• $50 billion stimulus program. (source)

______________________________________________________
Boehner 12/3/12

• $800 billion in tax revenue.
• $600 billion in Medicare and Medicaid cuts.
• $300 billion in savings from programs like farm subsidies.
• $200 billion to slow growth of government, including Social Security.
• $300 billion cut to federal agency budgets. (source)

______________________________________________________

The first partially serious offer is Boehner's on 12/3. By the way, Boehner's new revenue would come only from high earners, according to the Washington Post. Look for more box score updates!

Image: businessinsider.com

Screw the "greater good"

That appears to be the position of the leadership of both parties. Neither party wants to risk the blame for the pain of budget cuts, so they're both saying "You first." 

• The GOP is essentially making the same proposal that they did throughout 2011, but with a little more tax collected from high earners. For this paltry sacrifice, they want all their proposed spending cuts from the Ryan budget enacted.

• The Dems want the top rate to rise, partially to humiliate the GOP with their tax pledges. When it comes to additional spending cuts, the Dems are making the paltry offerings.

It looks like without a presidential election to force them into good behavior, our politicians revert to spoiled partisan children. They want what they want, and the other guys will just have to give in.

Look at last year. A 2% tax increase was at stake, and the GOP caved after trying to get concessions for 2 months. Now a 4% tax increase is looming, but neither side is willing to bargain. Perhaps the threat needs to be bigger, like a full government shutdown, before these bitter opponents stop grandstanding.

By the way, I'm not talking about just the GOP. The Dem offer is at the same level of blind stubbornness as the GOP position is. Did we just reelect this brats? I'm afraid so.

 Man the trenches!

Image: wattwork. blogspot.com

Extras. The Ryan budget cuts: broadly outlined without specifics (p.64). A thumb guide to the stages of negotiations.

The GOP's big risk that backfired

Conservatives had bet big on being able to defeat the Democrats and take control of the federal government. They were largely successful in 2010, retaking the House and almost capturing the Senate. But in this election, they fell far short.

The GOP now has to settle for much less as they deal with taxes and spending reductions. They were strongest in 2011, with the debt ceiling looming. However, they lost that advantage by stubbornly resisting increased taxes on the wealthy. This was an explicit promise most Republicans had made (the Norquist-imposed pledge not to raise taxes). The implicit penalty for any Republican breaking the pledge was to face a stiff primary challenge. So, between stubbornness and fear, no-new-revenue was their unalienable position.

 The Cost of Maintaining Sacred Cows

They gave up a lot to maintain that position. They probably could have gotten deeper budget cuts in a broad range of programs, and maybe would have been seen as serious "adult" budget realists. But serious spending reform doesn't happen quickly, so you have to be willing to spend several months in negotiations. The Dems were willing to do that, but the GOP grandstanded for too long and spiked negotiations at least once. In the end, the GOP were backed into the corner by a hard deadline, and had to take the only no-new-revenue deal the Dems offered. (And the Dems stacked the deck so it was an extremely disadvantageous deal.) Essentially, the GOP lost the budget negotiations over no-new-revenue in 2011.

"The Situation"

They are poised to lose in the current negotiations too. The situation is eerily similar:

• There is a huge fiscal issue with a detonation date.
• Negotiations that should take months have to be squeezed into a few weeks. 
• The Republicans risk being nationally hated spoilers unless they seriously negotiate.

So, they are back in this position because they went for broke on their philosophy and agenda, hoping that they could win it all and simply impose their solutions.

 The Perks of Flexibility

I can't accuse the Dems of doing the same thing. They said they were putting everything on the table. The Dems never walked away and even offered a higher target for spending cuts in 2011. They didn't have sacred cows that they had to protect at all costs. The GOP could have asked for all the cuts they dreamed of, and they might have gotten a substantial number of them. But only if they were willing to make some big concessions too. However, the GOP weren't willing to do that.

This has been a lesson to me in negotiations, but it seems that the wise men of the GOP didn't learn what I learned, because they are back in the same situation this year. The best they can do is retrieve their crib notes from 2011 of what the Dems offered in their "grand bargain" and try to embarrass the Dems into accepting the deal now. But the headlines for "grand bargain" are decidedly unoptimistic.

Prepare for the Downside

This is also a reminder to me that you always have to consider the downside risks. What should you do in case the market falls, sales stall, or you miss your electoral goals? You better have a plan. The GOP didn't. That makes them even bigger losers, and it didn't come from the voters.

...but don't choke on it.

Image: nytimes.com

PS. I don't consider this deeply insightful. I think lots of people share this perception. However, the GOP hasn't acknowledged this situation since the election, so I decided to write explicitly about it and commit it to pixels. Perhaps many more Repubs are saying "oops" now.

Extra. An explanation of the Dem bargaining position regarding higher tax rates vs. a cap on deductions. 

Bad news for spending cuts

The results of this election, with Obama reelected and more Dems in the Senate, point to a harder line by the Dems against spending cuts. This is regrettable, because our government has grown too large, spending too high a percentage of our GDP and crowding out other parts of the economy.

Sometimes the electorate shows its displeasure by voting in a government that will cut expenditures. That happened in Massachusetts when we passed a 2.5% cap on property tax increases (Prop 2 1/2). However, on a national level, it's never worked--the spending cuts have never materialized.

We need spending cuts more than ever, but the GOP, the side that pushed hardest (if only recently) is weakened by this election. Spending cuts will be more anemic because of this. I'm noting this likelihood, not bemoaning it. Government almost always misses the perfect balance, and the outcomes if the Republicans won a sweep would probably have been worse.

So this new government won't be great on spending cuts. I hope they do enough. If not, I hope the public forces them to do more. I'm expecting to be disappointed, but preferably not so disappointed that I think we should have gone with the Republicans this time.

We'll see. I've known that adjusting the budget wasn't going to happen in one iteration, but will evolve over many cycles. I hope to see a strong start to entitlement reform and trimming the scope of government. But more than that, I'm glad that we won't be seeing the Bush tax cuts made permanent.

It's too bad that we have to settle for such mediocre results from our government, but that seems to be the price of democracy.

Image: catosdomain.com

Debate 1 reaction

So I made myself watch the entire debate. It wasn't as painful as I was expecting because 1) I was forewarned, 2) I'm well aware of the weaknesses of both candidates, so I'm not surprised to see them.

Romney did the better job covering over his weaknesses during the debate, but he's positioned himself for a lot of uncomfortable followup questions. Obama just needs to sharpen his message and shorten his answers. He also needs to practice with someone other than John Kerry (Mr. Long-Winded Answers). I'm not sure who would be a good stand-in for the short, snappy, but polite answers that Romney gave. No Democrat comes to mind, and that's a sad commentary on the Dems.

Summary

Here is my overall impression of the debate:

• Romney was strong on the attack, but purposefully vague about his own plans.
• Obama was moderately good in his defense. Unfortunately, he let his points get lost in too much detail.

Neither is talking specifically about what they would do if elected because this has pitfalls for both. Neither can definitely deliver what the electorate would like to hear--a low-pain transition to fiscal health. So they each hide the respective pain they'd inflict. Since they're both vulnerable, neither is attacking future plans as forcefully as they should be.

Their Weaknesses

Romney is declaring that he won't increase the deficit. He's not even claiming he'll lower the deficit, as a good fiscal conservative should, but only that he won't be worse than Obama on this score.

Yet he has to be vague because he did promise to cut tax rates by 20%, and he'll need to offset that by removing deductions. It looks to me as though his tax rate cut is no longer a promise, and he can probably be nailed on that. However, once he admits it, then the funny math stops being a disadvantage to him, unless of course it costs him the GOP base.

Romney has similar problems with healthcare for people who aren't covered by employers and the future of Medicare. The solutions he proposed in the primaries don't really hold water in the general. He has no answer for the uninsured, and his Medicare proposal is a voucher program that throws seniors into a tough marketplace.

Obama is mealy-mouthed about spending restraint generally. He states that he wants government to help give people opportunities, and most of us know that translates into lots of programs that suck up revenue. He doesn't sound like he's really committed to fiscal restraint.

He overreached in accusing Romney of supporting a $5 trillion dollar tax cut. He could have scored on some very pointed criticism, but now Romney has him sounding like a liar. Obama might have thrown away a big advantage there, but I hope not, because it's a strong, valid point.

Neither candidate had a strong closing statement. Obama was scattered. Romney basically said that another four years of Obama will be awful, but he (Romney) won't be awful. That didn't resonate with the audience (or CNN's focus group), and it's hardly a positive argument for electing him.

Their Strengths

Romney was detailed about what he wanted to do with Medicaid--block grant with 1% increase per year, and give the states the freedom to develop their own programs and priorities. This sounds a lot like what happened with welfare reform, which was successful in turning a huge ongoing headache into a more respectable social program. Notably, it was the only issue where Romney was specific about what he would do.

Romney is making sure he doesn't sound like a heartless robber baron who'll slash education, Medicare, Medicaid, and most government departments. He's back to saying, as he did last fall before the primary heated up, that he'll shrink the government by attrition of government workers, not by sheaths of pink slips.

Overall, Romney sounds like someone who sensibly sees that government has grown too large, and he doesn't want to grow it anymore. Instead, he wants to slim it down gently. This is a good contrast to Obama, who is still building it up.

In Obama's $90 billion for green jobs, Romney has found a great, multi-purposed stick to bash Obama with. Obama wants to spend more on teachers- bam, that $90 billion would pay for a lot of teachers. Want to close a $2 billion loophole for oil companies, bam, you spent 50 years of that money on green jobs.

Obama's strengths are in his explanation of Obamacare and restraint on Medicare spending. His critique about throwing seniors into a nasty healthcare insurance market with only vouchers rang true over and over. Romney had to keep saying that it wouldn't affect today's seniors (but damnation for the rest).

What They Won't Talk About

Neither candidate talked about the sequester, or the "fiscal cliff"--the combination of the sequester and the expiration of tax cuts. This is the hard stuff, the actual cuts, and neither candidate will touch it. Neither is offering even smaller deficits, even though deficits are still running over $1 trillion per year. There are no medals for courage awarded here.

Neither talked much about what they'd do about the Bush tax cuts, even to attack the other. Only one mention of these tax cuts -- amazing. This must be where both are extremely vulnerable, so neither will make it an issue. The moderator should have put them on the spot.

Romney continues to use Simpson-Bowles as another club with which to beat Obama. However, he doesn't embrace S-B. He pretends that he likes it, only he's got a better version. Considering how well I know Simpson-Bowles, I can declare that this is hogwash, otherwise known as craven, corrupt lying on Romney's part. However, I'm happy that Simpson-Bowles continues to be a touchstone. It doesn't die because it's a great plan.

Take-away

I notice that there isn't a lot of video circulating from this debate. There was no knock-out moment. Romney looks like a stronger opponent, but the same weaknesses are still there. Obama will be able to reverse this setback, and Romney has very little he can capitalize on. Romney may have won the debate on style, but it's not a lasting or substantial victory.

That's either Jim Lehrer or the truth.

Image: politicalhumor.about.com

Transcript here.

Short: The sequester quantified

I'm not a complete nerd, but I long ago decided not to be scared of numbers, so I looked at the 394-page sequester report. The report is actually pretty simple-- it lists federal agencies and how much their budgets are going to be cut, like this:

The cut levels are 2% for some special favored programs (like Medicare), 7.6%, 8.2%, and 9.4% (mostly for defense programs). Some lucky programs have no cuts, like Social Security and Medicaid. The overall savings from these cuts are just $1.2 trillion over 10 years, that is only $120 billion a year or one-tenth of our current deficit.

The cuts and the which functions would be affected were determined by the debt ceiling deal that passed over a year ago. The Congress people who passed this legislation probably know what they voted for, and could probably put together this report, but they hoped to embarrass Obama and pin the cuts on him. That's a pretty weak ploy. Personally, I'm glad the debt ceiling deal had teeth. Finally a bit of fiscal sanity.

Anyone complaining about this had better make a damned good argument against these cuts and offer a better alternative.

One additional reflection: It takes 220 pages to list all the federal agencies and bureaus, though I fear that maybe even this listing isn't all the federal bureaus. This makes me wonder if the federal government is trying to do too much. However, I didn't see obviously ludicrous agencies. Maybe ending non-ludicrous agencies is part of budget sanity too.

Hail to the sequester

I'm a fan of the sequester for a simple reason: it cuts spending. Spending has to be cut. We are running a huge deficit that isn't going to shrink any time soon with our projected economic growth being so low. So if we are to avoid mounting up even huger piles of debt, we need to cut spending, raise taxes, and probably both.

I prefer that most of the deficit reduction come from spending cuts. We spend so much on government functions mostly because we aren't taxed for the full expense. If we had to pay the full amount, we would quickly decide to do without some of those government functions.

That is what the sequester does--it trims government. We should applaud the sequester, not bash it. Specifically, Republicans should support it. They're the ones who most favor cutting spending. Well, this is what spending cuts LOOK LIKE. Did the GOP, or the rest of us, think it was something else?

Of course, the GOP might have had the delusion that we would only cut programs they don't like, but even then, the GOP wasn't being too specific. How deep would they make cuts to food stamps, children's health, EPA, veterans' health, college aid? I haven't seen a specific proposals from a mainstream Republican--Paul Ryan's proposal was mostly smoke and mirrors. Romney's proposal: a vague leave-it-to-the-next-Congress.

So this sequester panic, I don't understand it except as a political fearmongering. The sequester is a cut. Embrace it because it's what we need to do. This one is just the beginning.

Did they think this is what it would be?

Image: dbaldinger.com

Fighting the Sequester/Defending it

The GOP has regretted the defense cuts they agreed to last August almost as soon as the ink was dry. Now  few Democrats are getting into it. Tom Harkin is cherry-picking cuts to vaccine programs to show how bad the sequester is. This commenter expressed some of my sentiment:

"The louder the politicians squeal about sequestration the better I like it." - WSJ comment

The comments were generally quite pro-sequester. That means the portion of the public that's paying attention is more realistic and pragmatic than the elected officials.

I've come to think that the sequester was the best Congressional action of 2011. They finally began to face the huge task of cutting the deficit. They also accepted, if only for a microsecond, that the pain was going to be spread broadly instead of being shoved onto the "other side."

I'm going to make a prediction. After Obama details the cuts, as the House and Senate are requiring him to do, there will be:

1. A brief period of trumped-up outrage.
2. Then a period of mellowing.
3. Then general acceptance of the cuts as positive change in government, with a few remnants of dissent by the habitually outraged.

Not a workable solution

Image: jlnavarro.blogspot.com

"The worst danger facing the US:" A retrospective

Back in the early 1980's, when Reagan was president and the USSR was a communist state instead of a lot of kleptocracies, I read an article about the biggest issue facing the US. At the time, the most devastating concern I had was nuclear war. Do you remember that fear? Intercontinental missiles launched out of silos and nuclear submarines targeting military and population centers in the US and USSR. The explosions would kill millions instantly, and kill most of the rest slowly as society fell apart and we succumbed to disease and starvation. That was a standard fear in my generation, and the film Testament was our closest image of it.
But nuclear war wasn't the subject of this article because the writer didn't have the same fears I did. Instead, she wrote about her fear of the mounting federal debt. I remember scoffing at this. How could anyone worry about the deficit when our society (and more personally my entire family) could be annihilated in a nuclear war?

Now I don't worry about nuclear war anymore. A stray nuke, yes, but we'd get over that isolated disaster the way we got over 9/11.

However, I remembered that prediction in the article. At the time, I noted that the author was a born-again Christian and an avid supporter of Reagan, so I probably dismissed the rest of her ideas. I certainly don't remember anything else--whether she made particular suggestions on how to cut the deficit or spending, or the future effect the deficit would have.

Actually, I didn't dismiss everything because I took the time to note the different way of looking at the world. I decided to remember and check back in a few years. Was she right that deficits were the biggest danger, or was I right that it was nuclear war?

I can't answer that question even today. Back in 1981, nuclear war might really have been the biggest concern. If we hadn't treated it seriously, we might have made serious mistakes in our policies that would have resulted in nuclear disaster. Maybe our fear and concern led to negotiations that were tremendously successful at limiting the danger.

However,we didn't focus on that other danger: the deficits. So they just grew larger and larger as we half-watched. Now, they are a tremendous danger.

Well, maybe so, maybe not. Deficits will never be the same kind of existential danger that nuclear war was. Ironic if the worse danger is easier to solve than the lesser danger. But it will probably be that way. Sigh.

 My solution: Nuke the debt

Image: vi.sualize.us

Puzzled by this campaign

The title says it. I don't understand how the issues in this campaign are unfolding. Not surprisingly, the GOP are on the attack, and Dems are playing defense. Not surprisingly, the main target is Obama.

As I've said before, I don't think Obama deserves as much blame as is heaped on him. The House Democrats were worse, particularly Nancy Pelosi. However, they don't make such good targets because they were already shredded by their 2010 losses. Still, Nancy Pelosi holds onto her leadership position, in a demonstration of her lack of accountability to the electorate. Or maybe it's the duty of the House Dems to throw her out, so it's the House Dems who aren't being accountable to the country.

The GOP is better doing attacks than simply presenting their case because their positions are questionable and tenuous. They don't have a strong story on the budget and the deficit. They have more tax cut pixie dust on the economy, because it WORKED SO WELL LAST TIME.

So their strategy has to be to attack, and hope that their attacks hit the target with Americans, and that something sticks to Obama.

I guess I understood this campaign after all. The reason it doesn't feel cogent is because it's not cogent.

 Photo: reuters.com