China and its Discontents

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Where are the David Stockmans in the White House?

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This op/ed in the New York Times written by Reagan’s OMB director and former Republican congressman David Stockman is the best piece of writing I have read about the deficit in the past year. And Stockman even manages to be bipartisan in his criticism of the various deficit plans! It’s common knowledge at this point that Rep. Ryan’s budget makes the deficit worse immediately by extending the Bush tax cuts and not doing anything with Medicare until the 2020’s; furthermore he focuses on cost-shifting and raising the burden on seniors and the poor and not on actually making the delivery of healthcare cheaper. But what Stockman reintroduces to the debate is that the Obama budget has its own problems – it is too timid and doesn’t call for any shared sacrifice from the middle class in the form of raised taxes.

This is the liberal argument we have been missing. But it’s also a realistic argument that states the obvious. The deficit debate has measurably shifted to the right – first, the Simpson-Bowles Deficit Commission was supposed to be the centrist plan, the compromise. Then the Republican Study Group’s budget was labeled conservative, the Ryan plan was labeled ‘serious’ and moderately conservative, and the Obama plan came out to the right of the Deficit Commission. Viola – a new middle, seriously shifted to the right.

There seems to be two methods of leading and bargaining in a political context – first, “The American President”-Michael Douglas style, where a leader articulates his preferred outcome, negotiates and compromises. Or, the second, where a leader releases a bargaining position that is designed to appeal to the other side, already compromised from the ideal. The President embraced the second tactic from the get-go, and he’s received a lot of flak from the Left and the media for doing so. Personally, I’m torn – I’m sure the success of tactic #1 is idealized, where the perfect outcome only exists in movies, like “The American President.” At the same time, I think the country needs presidential leadership with an aspirational vision. I don’t see that vision articulated in the Obama White House. I see: “We’re cutting less spending than the other guy.”

So does the White House need more David Stockmans in the White House – and a more liberal-sounding president? Do we need more people like┬áJared Bernstein, Biden’s economic advisor who just resigned to join the┬áCenter on Budget and Policy Priorities? I’d like to think so, if only because I still believe policy is ultimately an extension of the values we hold as a country. And would that mindset cause negotiations to grind to a halt, and lose on every priority the president has? Ideological conviction doesn’t seem to have stopped the Republicans from winning the debate.

Can Frank Luntz Be Serious?

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This is a joke:

“The last time Republicans gained control of the House, in 1994, they achieved more in the first 100 days than some Congresses have in two years. From welfare reform to tax cuts to a balanced budget amendment, they passed every one of their 10 ‘Contract With America’ items. … Once again, Republicans cannot be timid. American voters overwhelmingly support spending cuts to balance the budget; six in 10 of them support a 21 percent across-the-board cut in nonmilitary discretionary spending.”

Reality check: the 111th Congress, as in this Congress (yes, the one where Democrats have been in power), has been one of the most productive in history, on par with congress during the early years of both LBJ and FDR. Luntz cites: “welfare reform to tax cuts to a balanced budget amendment” as examples of Republican productivity 15 years ago. The problem is: everyone loves a tax cut. Everyone loves to cut welfare for Cadillac mommies. And the balanced budget amendment never passed the Senate. And then they shut down government over the deficit. So much for that: we got rid of the deficit by the end of the decade anyway, mostly because of a booming economy.

There are no natural constituencies against for what the Republicans are for. The poor on welfare don’t have a voice in government, but business does. While there might exist policy analysts who think certain tax cuts are bad for our budgets, there’s no constituency who is going to refuse one. Many Democratic priorities, however, require a gentler finesse in order to get passed. In other words, there are vested interests who will lose money if Congress acts for the greater good. It requires some politicking to persuade these vested interests, and that’s hard.

Here are some things the 111th Congress has accomplished: stimulus, which in itself represents a dramatic investment in infrastructure, schools, and a tax cut all rolled into one; healthcare reform, which could be split up into numerous major bills, such as closing the Medicare doughnut hole, providing coverage to 40 million Americans, requiring pre-existing conditions to be covered, allowing kids to stay on their parents’ plans until age 26, making sure all children have health insurance, and reducing the rise in the growth of healthcare spending; financial regulatory reform, which both forms a consumer protection agency to ward against faulty financial products that will explode in consumers’ faces, and derivatives that will likewise explode in bankers’ faces; Ted Kennedy’s final legacy, the SERVE America Act, which dramatically expands the number of young people serving in AmeriCorps and creates a ‘Social Innovation Fund’, which funds evidence-based programs with private and foundational support in pursuit of solving major social challenges; tobacco-regulation legislation; credit-card legislation, which establishes a credit-card bill of rights and bans arbitrary interest rate increases; fully funding and expanding the Veterans Administration; the Lilly Ledbetter Fair Pay Act (for all the ladies out there); fully funding the Violence Against Women Act (again, for the ladies); student loan reform and increased access to Pell Grants; Promise Neighborhood legislation (one of my favorite, and under-exposed in the entire bunch); cracking down on mortgage fraud; and more jobs legislation than I can count, including the Advanced Manufacturing Fund for innovative manufacturing strategies, expanded loan programs in the Small Business Administration, Energy Partnership for the Americas, creating markets overseas for our clean-energy industries, fully funding the Community Development Block Grant, job-training programs for clean energy technologies, and of course, everything already in the Stimulus Act.

Whew. That was a lot. And it makes Frank Luntz argument look ridiculous. Luntz says the Democrats loss is not about “deficient personalities or insufficient communication,” but about wrong priorities. I’m sorry, but Democrats promised this exact agenda when they were elected, and they delivered.

Luntz’s policy suggestions are likewise inane:

(1) Balance the budget as quickly as possible through meaningful spending reductions, a hard spending cap and a constitutional amendment so that it never gets unbalanced again.

(2) Eliminate all earmarks until the budget is balanced, then require a two-thirds vote by Congress for future earmark legislation.

(3) Keep taxes down by requiring supermajorities for increases, and eventually enact tax reform with a simple, low, fair rate that drastically reduces the length of the IRS code.

(4) Create a blue-ribbon task force that engages in a complete, line-by-line forensic audit of federal agencies and programs to end waste and reduce red tape and bureaucracy.

(5) And require Congress to provide specific constitutional authorization for every bill it passes so that the government stays within the boundaries imagined by the founders.

1) Spending reductions won’t get the job done without reductions in the rate of spending growth, especially in the medical sector, while a spending cap is unwieldy and not specific enough; 2) earmarks comprise a pitifully small portion of the annual deficit; 3) supermajority-requirements for tax increases have ruined California’s budget outlook and are a bad idea, while a “simple, low, fair rate” (i.e. the flat tax) is regressive and rewards the rich while punishing the poor; 4) a line-by-line audit of the budget is already being done – there’s already a non-military discretionary spending freeze; 5) who decides what’s acceptable in the eyes of the Constitution? Some wackos think the Constitution was written by Moses. I think this is the job of the Supreme Court, a job it has successfully carried out since Marbury v. Madison.

Ultimately, collective political behavior can seem irrational. Democrats ran on a specific platform, got elected in historic numbers, passed most of their platform, and then got dumped in historic numbers. But really, it’s just the floundering economy, and the Federal Government’s inability to fix a massive sink-hole in demand (now if this were the Reagan recession, which was actually created by the Fed and interest rates were raised to break stratospheric inflation in the late 70’s, it would be a lot easier to fix – just lower interest rates). What do I take from all of this? The Democrats’ loss has to do with anything but their policy accomplishments, and the political winds during a massive recession can switch on a dime.