The Budget Debate We Could Be Having

March 13, 2011

Arianna Huffington rightly calls it “the incredible shrinking budget debate.” She’s referring, of course, to the controversey about how much and where we’ll cut federal non-security discretionary spending.

The debate is shrinking — or more precisely, shrunk — for two reasons.

First, as I and many others have said before, it’s focused on a small fraction of the federal budget — and not the parts that are driving the deficit upward, e.g., health care costs, military spending. We could blow away the entire non-security discretionary part and barely make a dent.

Second, the current debate is focused almost entirely on the spending side of the ledger.

Republicans in Congress are dead set against tax increases of any sort. Indeed, on the House side, new rules pave the way for more tax cuts — and without offsets to keep the deficit from rising.

But what about the Democrats?

President Obama says he’ll push against a further extension of the Bush-era tax cuts for families earning more than $250,000 a year and the estate tax changes that benefit only the very wealthy.

But he’s still celebrating the extension of all the other tax cut extensions — an indication, I think, that he won’t back off his campaign promise not to increase taxes on the (generously defined) middle class.

Tax cuts for them represented a far larger portion of the costs of the December compromise than the tax benefits for the wealthy — $485 billion versus $139 billion, according to a Center on Budget and Policy Priorities analysis.

Presumably they’d again cost much more if extended past 2012, when all the cuts are due to expire. And, of course, there’s no way the President will get them extended without agreeing to keep the rest alive — unless the next elections produce a huge party shift in Congress.

So either the deficit soars or spending gets even more savagely cut.

On the positive side, the President would like the corporate tax code simplified. The Tax Foundation reports that the current plethora of deductions, incentives and the like will cost $102 billion this year.

But the President says he’d use the savings to lower the corporate tax rate, not to reduce the deficit. Perhaps because he wants a corporate buy-in and some Republicans at the table. As New York Times columnist Paul Krugman has observed, he has a history of “negotiating with himself” before the bargaining begins.

But that’s not the total story.

The President has gotten unfairly bashed for not incorporating the recommendations of his fiscal commission into his proposed Fiscal Year 2012 budget. But he’s apparently adopted a key part of the framework proposed by commission co-chairmen Erskine Bowles and Alan Simpson.

As CBPP’s top experts explain, the Bowles-Simpson plan skews toward deep program cuts. They’d represent more than two-thirds of savings through 2020, with about 21% coming from non-security discretionary spending.

And the two-to-one ratio is reportedly what we see in the President’s proposed Fiscal Year 2012 budget –or pretty close. Tax Policy Center Director Donald Marron says the revenue side seems somewhat more than one-third.

Why limit tax increases to one-third or so of a deficit reduction plan — especially when the baseline reflects a decade of tax cuts? So far as I know, it’s just an unexplained policy preference.

What if the tax breaks — corporate and individual — were viewed as less important than the needs of low-income people?

The Center for American Progress has an interesting table that pairs the total current costs of some of the safety net programs the House Republicans have targeted with the revenues lost due to some tax breaks that benefit “the wealthy,” including corporations.

It’s an eye-opener, though some of the pairings are, to my mind, a little dicey. We learn, for example, that:

  • Per-year lost revenues due to the recent tax cuts for very wealthy estates would more than pay for early childhood education programs.
  • Eliminating the loophole that allows hedge fund managers to pay taxes on what’s essentially salary income at capital gains rates would yield more than enough revenues to cover homelessness assistance grants.
  • The cost of extending “alcohol fuel,” e.g, ethanol, tax breaks is nearly double the current spending level for community health centers.
  • All the programs CAP identifies could be paid for by the first year of savings from not extending the Bush-era tax cuts for high-income filers.

Huffington concludes that the current budget debate is going to end with “lots of unnecessary suffering” because that’s what “those who control our political debate” have chosen.

I’d like to think she’s wrong, but it’s hard to envision a shift big enough and quick enough to yield a different outcome.


Simpson Gaffe Shows Where He’s Coming From

September 9, 2010

Former Senator Alan Simpson, co-chair of the President’s fiscal commission, has taken a lot of heat for comparing Social Security (or maybe all government programs) to “a milk cow with 310 million tits.”

But Washington Post columnist Dana Milbank says he’s right on target. The outrage merely confirms that the simile is “spot on.” It’s proof positive that “special interest groups …, the real sucklings at the public teat,” don’t want the commission to “do its job right,” i.e., recommend spending cuts across the board.

The Post editorial board wants to give Simpson a pass. He should have watched his language. Indeed, he’s apologized. But his fundamental point about Social Security is correct.

Up to a point, the Post editors are right, though I don’t think Milbank is. The e-mail that provoked the controversy says that we’ve got to make Social Security “sustainable and assure long-term solvency.”

I don’t think anyone would quarrel with that. As I earlier wrote, the latest report from the system’s trustees projects a long-term shortfall in the Trust Fund, which holds bonds in which surplus payroll taxes are invested. If nothing changes, there won’t be enough funds to pay full benefits in 2037 or thereafter. Better to do something soon than wait till that happens.

But words matter. And Simpson’s are very telling. They’re not just some momentary lapse in tact. They’re a clue to what someone who may have a lot of influence on the future of Social Security and other social programs is coming from.

Consider first the simile. A cow with 310 million “tits” (one for every American) is a monster — obviously something we must do away with. All those people sucking at them are draining the system of resources. They’re getting something for nothing — sustenance they don’t deserve.

This is certain a novel way to look at an income insurance program — one that beneficiaries have, in essence, paid premiums for to protect themselves and their dependents from destitution if they become disabled and/or when retire, voluntarily or otherwise, at a fairly advanced age.

As Simpson himself acknowledges, this isn’t the first time he’s made “cracks about people on Social Security who milk it to the last degree.” (Note that figure of speech again.)

Back in April, he ridiculed the concerns he was hearing as coming from “old cats 70 and 80 years old who are not affected one whiff [sic]. People who live in gated communities and drive their Lexus to the Perkins restaurant to get the AARP discount.” (Former President Reagan’s Cadillac queens of welfare recycled.)

Which brings us to the other telling part of the e-mail — its blatantly insulting and dismissive treatment of individuals and organizations that have raised concerns about cutting Social Security benefits.

The recipient, who’s Executive Director of OWL (the Older Women’s League), is told she’s one of those people who “babbles into vapors.” Simpson refers her to a chart, if she’s “any good at reading … anything that might challenge [her] biases and prejudices.” She should call him when she gets “honest work.”

Asked about the commission’s prospective work on Social Security, he told a CNBC interviewer, “You’ve got to scrub out of the equation the AARP, the Committee for the Preservation of Social Security and Medicare, the Gray Panthers, the Pink Panthers, the whatever. Those people are lying …. They don’t care a whit about their grandchildren.”

So far as he’s concerned then, everything isn’t on the table, notwithstanding what President Obama said at the commission’s first meeting. He’d staked out his position long before then. “To think you’re entitled to something regardless of your net worth or income is just BS.”

So obviously are, from his perspective, any recommendations that would preserve Social Security for the long term without breaking the contract it’s based on.

And we know what will happen if that contract gets broken. Those “greedy geezers” whose benefits will be drastically cut — or eliminated — because they’re not in dire straits will get on board with a scheme to privatize the system.

I’m betting that would be just fine with the eccentric but nonetheless staunchly conservative former Senator from Wisconsin.