Archive for August, 2013

Sequester the Sequel

Thursday, August 22nd, 2013

While many are suggesting that the first year sequester cuts weren’t that bad, they are generally unaware that the sequester bill included five years of scheduled across the board spending reductions.

So let’s take a look at what has happened already and then what is coming.

According to the U.S. Bureau of Economic Analysis, over the first half of 2013, the federal government has subtracted 0.8 percentage point from GDP growth—this as the economy grew a paltry 1.1 percent in the first quarter and 1.7 percent in the second.

The CBO has projected that if the next round of sequester cuts were canceled, we would see another .7% in GDP growth and add another 900,000 jobs by Q3 2014.

As Business Week says, this isn’t rocket science.  “We’re living through the biggest contraction in federal spending in 60 years, and this is one of the weakest recoveries on record. Coincidence?”

Conservatives counter that every dollar that isn’t spent by the government goes back into the pockets of taxpayers.  The implications are that individuals will spend that money in the same ways that the government will, we will see the same growth, and we will be better for it because the government is inefficient and political.  The problem with this simplistic view is that in uncertain times like this individuals DO NOT spend their money.  Instead they reduce their debt and increase their savings.  Businesses respond to reduced demand by doing the same thing.  So we end up with a lot of cash sitting on the sidelines and economic growth slows, which is where we are today.

The CBO says we are operating 6% below our capacity right now.  That is $1T in economic capacity that is sitting idle because of lack of demand.  The problem, for anyone willing to take a look, is clearly NOT too much government spending.  It is too little consumer demand.

Here are a few more quotes if you remain unconvinced.

“The idea that spending cuts generate growth in a demand-constrained economy is nonsense,” says Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities.

“To say the sequester is good for the economy is wrong on a scale that’s impressive,” says Neil Dutta, chief U.S. economist at Renaissance Macro Research.

“I don’t know how you can make that claim,” says Stuart Hoffman, chief economist at PNC Financial Services Group, who estimates that the sequester has stolen about 30,000 jobs from each month’s payrolls total since it was enacted in March.

If there is good news in this story, the economy appears to have survived the assault with a blunt instrument that the first sequester administered.  We are now in a position where the GDP can grow faster than the debt.  That means simple focus on short term economic growth will likely complete the recovery and put us back in a situation where debt as percentage of GDP is going down even though the debt in absolute terms may be going up.

So what is the Republican agenda?

First, threaten to shut down the government if Obama doesn’t repeal Obamacare.

Second, threaten to throw the government into default, if the Obama administration doesn’t agree to ANOTHER round of spending cuts in addition to what is already on the books.

So it doesn’t sound as though there is much political appetite at the moment to replace the sequester with something more constructive and there is certainly the possibility that it will get worse before it will get better.

That said, here’s a short list of the impacts we’re dealing with beyond those already mentioned.

States

This next round is going to impact states even more than the previous cut.  States will see $4.2B less in federal funding.  Targeted programs include public housing assistance, money for schools with low-income students, food inspection, scientific research grants, and environmental protection programs.  While states absorbed a $4.6B cut last year through reductions is staff in reductions in programs, this year they will be forced to start eliminating programs completely.

The other state complication is that most states are required by law to balance their budgets and the 2014 budgets have already been passed.  If the next round of sequestration is implemented, most states will start their fall legislative terms with significant budget shortfalls.

From a USA today article

“They are already in a difficult spot because they already have imposed major cuts to their schools and other public services,” Leachman said. “If they enter those legislative sessions having to deal with additional cuts in federal funding for schools or law enforcement or clean water or programs that help low-income families, that makes their job even more difficult.”

Pennsylvania budget secretary Charles Zogby said his state managed to get through the first round of sequestration budget cuts without massive cuts in personnel—but that may change. “Thus far, that hasn’t been part of the challenge. It may be in round two,” he said.

Headstart

Headstart, one of the most successful programs we have to alter the future of poor kids, is going to have to cut fall enrollment by 57K because of sequestration cuts.

Public Defenders

The federal public defender system has been decimated by the sequester cuts.  According to the WSJ, this ends up costing tax payers more than what has been saved through the cuts because our constitution guarantees that those who cannot afford an attorney will have one appointed for them.  When public defenders are not available, court dates are delayed and courts ultimately hire private attorneys.  We pay for all that.

Overburdened defenders also make mistakes and miss evidence that could have cleared their clients.  These mistakes create more appeals.  As Supreme Court Justice Stephen Breyer noted in March in congressional testimony about the effects in general of the sequester, it is “cheaper to have a decent lawyer in the first place.”

Medical Research

Even George Will decries the effects of reductions in basic medical research caused by the sequester.

For Francis Collins, being the NIH’s director is a daily experience of exhilaration and dismay. In the past 40 years, he says, heart attacks and strokes have declined 60 percent and 70 percent, respectively. Cancer deaths are down 15 percent in 15 years. An AIDS diagnosis is no longer a death sentence. Researchers are on the trail of a universal flu vaccine, based on new understandings of the influenza virus and the human immune system. Chemotherapy was invented here — and it is being replaced by treatments developed here. Yet the pace of public health advances, Collins says, is being slowed by the sequester.

This will be, Collins believes, “the century of biology.” Other countries have “read our playbook,” seeing how biomedical research can reduce health costs, produce jobs and enhance competitiveness. Meanwhile, America’s great research universities award advanced degrees to young scientists from abroad, and then irrational immigration policy compels them to leave and add value to other countries. And now the sequester discourages and disperses scientific talent.

Forest Management

The sequester has also reduced our ability to manage our forests which has contributed to the unprecedented scale of wildfires that we’ve had to fight.

The Hazardous Fuels Reduction Program was $500 million last year, went down to $419 million this year under the automatic budget cuts, and has been proposed to go to $292 million next year.

“The fires that are ripping through Oregon and Idaho and California and the West are just proof that the fire prevention policy is broke,” Sen. Ron Wyden, D-Ore., chairman of the Senate Natural Resources Committee, said from Lincoln City.

“There are years of neglect. The fuel load builds up and it gets hotter and hotter on the forest floor. Then you get something like a lightning strike and a big inferno. Then the bureaucracy takes money from the prevention fund to put the fires out and the problem gets worse. The cycle just repeats itself again and again.”

This brings us to the basic question of why.

The only answer I can come up with is that Republicans have lost touch with reality.  They have won the war against debt.  Rather than take a victory lap and set themselves up for a potential change in control in the senate, they are determined to pump another bullet into the wounded economic recovery.

Their fantasy that cutting government spending would stimulate economic activity has failed.  We can now document the damage it did to the economy.  With the second round of sequester cuts looming, we have an opportunity to reduce the damage.  Just stopping the austerity program will have a positive economic effect.  But we can’t seem to even have a rational discussion on how to do that simple thing because of ideology and politics.

Since it is unlikely that Republicans will unilaterally abandon the ideology that is driving their actions, the only other possible solution is a political one.  If Republicans suffer another defeat in 2014 similar to what they experienced in 2012, maybe then the survivors will finally realize that there are real political consequences to imposing a minority agenda on an unwilling majority.

Clown Politics

Monday, August 12th, 2013

This past weekend, a rodeo clown at the Missouri State Fair wore a mask to mock President Obama.  Apparently the performance went well over the line between the sort of slapstick humor typical of rodeo clowns and mean spirited racism.

 

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Here’s a description from one of the members of the audience.

“It was the usual until the very end at bull riding,” he said. “As they were bringing the bulls into the chute and prepping them … they bring out what looks like a dummy. The announcer says ‘Here’s our Obama dummy, or our dummy of Obama.

“They mentioned the president’s name, I don’t know, 100 times. It was sickening,” Beam said. “It was feeling like some kind of Klan rally you’d see on TV.”

Unfortunately, this Missouri rodeo clown is part of a vocal minority who feel that the man who has won two national elections fair and square somehow doesn’t deserve the office that he occupies.

This is driven by an unprecedented assault on both the man and the office by the Republican Party.

Paul Ryan recently responded to Obama’s latest proposal for a corporate tax cut.  Obama was offering to work with Congress to overhaul business taxes in exchange for a guarantee that the revenue gains be used create new jobs through spending on roads and infrastructure.

“The president claims his economic agenda is for the middle class. But it’s actually for the well-connected…There’s no doubt that it works well for them. But for the rest of us, it’s not working at all.”

Ryan further protested that Obama is “interested in tax reform for corporations — but not for families or small business.” He also accused Obama of implementing health care and regulatory policies that favor big businesses and big banks.

Paul Ryan struck a different tone during the 2012 Presidential campaign.  He accused Obama of “sowing social unrest and class resentment,” of supporting “a government-run economy” and of “denigrating people who are successful.” He has charged the president with leading the nation toward “a cradle-to-grave, European-style social welfare state.”

So which is it?  Is Obama a class-baiting socialist or a corporate sellout?

Boehner, asked at a news conference about Obama’s series of speeches on the economy, replied: “If I had poll numbers as low as his, I’d probably be out doing the same thing if I were him.” Obama’s job-approval rating is 46 percent. Boehner’s is half that.

Mitt Romney called Obama a “weak president,” and Newt Gingrich, during the 2012 campaign, called Obama “so weak that he makes Jimmy Carter look strong.”

Yet in January Boehner said that Obama planned to annihilate the Republican party, ““[G]iven what we heard yesterday about the president’s vision for his second term, it’s pretty clear to me and should be clear to all of you that he knows he can’t do any of that as long as the House is controlled by Republicans,” Boehner said. “So we’re expecting over the next 22 months to be the focus of this administration as they attempt to annihilate the Republican Party. And let me tell you, I do believe that is their goal. To just shove us in the dustbin of history.”

Rep. Issa said Obama is guilty of “imperial behavior” and “abuse of power.” Sen. Rand Paul, of Kentucky, asserts Obama is “someone who wants to act like a king or a monarch.” And Rep. Louie Gohmert, of Texas, says Obama is “a tyrannical despot.”

So which is it?  Is Obama a weakling or a tyrant?

During the intervention in Libya, Gingrich demanded in early March 2011 that the United States should “exercise a no-fly zone this evening.” Two weeks later, after Obama took the action that would bring down Moammar Gaddafi, Gingrich said, “I would not have intervened.”

After the Benghazi attacks, Republicans lined up to criticize the President for not having enough security at the embassy in Benghazi and ignoring the mounting tensions Ambassador Stevens was documenting.

Fast forward to this month when the administration closed embassies across the Middle East in response to an intercepted al Qaeda communication.  “Terrorism works — because we’re closing all of our embassies and consulates on one day,” said Rep. Ted Poe, the chairman of the House’s terrorism and nonproliferation panel.  “Our embassies cannot operate with a bunker mentality in foreign countries,” he said. “Our embassies are there to interact with the people of that country. I hope we don’t get into this bunker mentality mode.”

So which is it? Is Obama a tone deaf risk taker or a terrified bunker dweller?

I could continue for quite a while, but the picture is clear.

The only consistent message coming from Republicans is that Obama is always wrong.  He is wrong if he acts.  He is wrong if he doesn’t act.  His ideas are always wrong even when he borrows them from Republicans (Obamacare, corporate tax cuts, and no fly zones).

Republicans may feel that tearing down the President is an effective strategy to get them back into the White House.  The problem is that if they demonstrate that this is an effective strategy, it will be used on them too.  And if they do ever return to the White House, they may not recognize the smoldering ruin they had to create to get there.

A More Perfect Union

Sunday, August 4th, 2013

A More Perfect Union

But I say unto you, Love your enemies, bless them that curse you, do good to them that hate you, and pray for them which despitefully use you, and persecute you; That ye may be the children of your Father which is in heaven: for he maketh his sun to rise on the evil and on the good, and sendeth rain on the just and on the unjust.

For if ye love them which love you, what reward have ye? do not even the publicans the same?

And if ye salute your brethren only, what do ye more than others? do not even the publicans so?

Be ye therefore perfect, even as your Father which is in heaven is perfect.  Matthew 5:43-48 

Jesus was pretty clear here.

God loves everyone.  His Son Jesus advises us, for our own good, to do the same.  He was also pretty clear about who that “everyone” included.  Not just those that agree with us, but all those who treat us badly, make us mad, and may even persecute us.

The political situation in this country is pretty good evidence that people aren’t taking that advise.

CBS released a poll which shows that there are very few people left in the middle of our political spectrum.  The rancor of the past 13 years or so has forced most people to take a side.  The result is that everyone thinks that the other guy is crazy.

Is-the-other-party-too-extreme

 

Compared to partisans, independents actually don’t appear stuck in the middle: just 29 percent of them see both parties as too extreme. Independents instead tend to pick only one of the parties as too extreme, so this isn’t really a case of an alienated center watching both parties move further away. (And it also squares with the fact that many people who call themselves independent do in fact lean to one side.)

Here’s how that affects our politics.

Americans want deals and compromises in principle, and from both sides -eight in ten say they’d like to see more of it. But when those Republican voters back home see congressional Democrats as too extreme, and vice versa for Democratic voters, then members to who cut deals across the aisle are bound to face suspicion: has that extreme other side really changed its stripes? Did our side really get more than we gave? And it’s easy to see why activists on both sides are turned off by the very thought of cooperation with another party that’s so (seemingly) out of touch.

The result is that voters have given their representatives an impossible task.  They dislike deadlock, but they are so skeptical of the motives of the other side, that they question any concessions that necessarily have to be made in order to reach a compromise.  In other words, voters say that they want compromise, but they punish the politicians who in fact attempt to make a deal and reward those who, in principle, refuse to support anything but the party line.

Because the extremes appear to outnumber the middle, our government has lost the ability to compromise.  Instead it is all about maneuvering for power and counting the “scalps” that can be accumulated along the way.  We have replaced practical reality with political gamesmanship and obsessive ideology.

Here are a few recent examples.

Obamacare Obsession

The House recently voted for the 40th time to repeal Obamacare.  It passed on a strict party line vote, but will have no practical effect on the law.  The only value of this vote is to provide Republican members of the House a “scalp” to take home with them and show to their supporters.  The vote may help Republicans build the case for electing more Republican Senators in 2014, but Senator Tom Coburn summarized reality when he said, “The only way you get rid of Obamacare is winning the 2016 election.”

Republican Senators Lee and Rand Paul have been circulating a letter threatening to shut down the government in the fall if President Obama doesn’t stop the Obamacare rollout.  This is another activity, like the previous one, that is perilous for Republicans.  The last time Republicans shut down the government, they paid a dear price at the polls and single-handedly rescued Bill Clinton’s Presidency from the Lewinsky scandal.

Sen. Richard Burr, R-N.C., called it the “dumbest idea” he had ever heard, while Sen. John McCain, R-Ariz., warned against more shutdown “shenanigans.” Some senators who initially backed the idea, like Sen. John Cornyn, R-Texas, have rescinded their support for it.

Even if House Republicans WERE successful in shutting down the government, that action, like the votes in the House, would only be symbolic.   The Congressional Research Service has reported that a government shutdown would not slow the Obamacare rollout.  That’s because Obamacare has other sources funding that are beyond the reach of the sorts of annual appropriations controlled by the House.

So why try?  According to Senator Ted Cruz, who is backing the government shutdown gambit, “No major entitlement, once it has been implemented, has ever been unwound,” he said. “If we don’t do it now, in all likelihood we never will.”

The reality about Obamacare is that the game is over.  By 2016, the law will be fully implemented.  State exchanges will be up and running.  Somewhere around 20M people who previously couldn’t afford to purchase insurance themselves, will be insured.  Those people are not going to vote for anyone who promises to take away their health insurance.  The margin of victory in 2012 was 5M.  It will be political suicide for any candidate for national office to start the race with a 20M deficit.  The 2012 election was the best opportunity for Republicans to repeal Obamacare, and they failed.   Their base, however, won’t allow them to admit defeat.  Instead they may inflict some very real economic damage to the country.

Scandal Obsession

Republicans are convinced that there must be a scandal somewhere.  The harder they look, however, the less they find.  Yet they continue to dig, because the digging itself supports the conservative partisan view that Democrats are corrupt.  So we have the spectacle of Rep Issa issuing subpoenas for more documents from the IRS, the state Department, and the Justice Department while the information that they are supplying only continues to support the administrations original claims.  Issa claims that the agencies involved are holding back valuable information, but that is also more political grandstanding.  The IRA has 170 people including 70 lawyers working on delivering the documents that Issa has requested.   His demands deliberately exceed their ability to respond.

Here’s what the documents that have been delivered so far have shown.

There was no executive branch involvement in the methods the IRS created to screen applications for non-profit status.  In fact, both liberal and conservative groups were subjected to the same types of screens.

While mistakes were made in Benghazi, there was no conspiracy to misrepresent the information shared with the public.

The failed attempt to trace guns being traded across the Mexican border was just that.  There was no attempt by the White House to cover up what was a poorly designed operation from the start.

The failures in each case were bureaucratic, not political.

Republicans aren’t particularly interested in what has the potential to be a real scandal – domestic spying.

Debt

We’re going to see this spin up again this fall when there is another discussion about spending.

The reality is that the sequester has cost both jobs and economic growth, but it has slowed the growth in debt to the point where it is possible with additional economic stimulus that we could grow our economy faster than our debt.

This should be good news.  Instead we are going to see more attempts to cut spending rather than stimulate growth because it was never about the debt.  It was always about reducing the size of government and weakening the traditional Democratic base.

Immigration Reform

Republicans of almost all stripes have admitted that if they are to have any hope of competing in future national elections, they have to repair their dismal image with immigrants.  The Senate in a brief moment of clarity managed to pass an immigration reform bill, but only after committing to spend $30B to build more fences and hire more border control agents.  Some have estimated that this cost works out to $40K per immigrant and may only serve to redirect the flow of immigrants from the border to other coastal locations.

The CBO estimated that the Senate bill would reduce the debt over the next decade by $135B and cut the flow of illegal immigrants by 50%.  Because of the path to citizenship, it would also reduce the number of undocumented workers living in this country over the next decade to 5M.

Yet it was not enough for House Republicans who rejected the whole thing.  They want to focus on questionable enforcement measures first.  Some reject the whole notion of a path to citizenship.

Why?

Because they have a base that has been supporting candidates with xenophobic positions against all immigration.  This even though President Bush proposed a similar plan in his administration and Reagan signed the Immigration Reform Act in 1986 which legalized 3M undocumented workers.

Summary

For those interested in history, what we are seeing in politics today is fascinating.  Ideas that Republicans created and promoted for decades are no longer recognizable to that party.  Obamacare was a Republican alternative to single-payor healthcare reform and was actually successfully implemented by Mitt Romney in MA.  Cap and Trade, monetary stimulus, tax reform, and entitlement reform were ALL originally Republican ideas.  The have ALL been proposed at one point or another by this administration as “common sense” approaches to solve problems.  They have ALL been rejected by today’s Republican Party.  This used to be the party promoting the intelligence of the free market.  It has become the party of opposed-to-whatever-the-Democrats- support.

There is a solution coming because demographics are running in the direction of Democrats.

The problem is that even this doesn’t resolve the underlying erosion in democracy as an effective method to resolve differences between political extremes.  Instead we appear to be drifting towards more of a parliamentary democracy where the only times things get done is when one party controls the government.

While I would prefer that Democratic ideas prevail, I would not want that to happen as a result of the death of the Republican party.  If that’s what occurs, it will be a dark legacy for our troubled time.