Quote of the Day

“The wrong turn we’ve taken in economic policy — our obsession with debt and ‘entitlements,’ when we should have been focused on jobs and opportunity– was of course, driven in part by the power of wealthy vested interest.  but it wasn’t just raw power.  The fiscal scolds also benefited from a sort of ideological monopoly:  for several years you just weren’t considered serious in Washington unless you worshipped at the altar of Simpson and Bowles.

“Now, however, we have the president of the United States breaking ranks, finally sounding like the progressive many of his supporters thought they were backing in 2008.  This is going to change the discourse — and, eventually, I believe, actual policy.”

Paul Krugman, “Obama Gets Real,” NYT

It’s been so frustrating to me that during and since the Great Recession, we’ve sacrificed growth by focusing too much on each year’s deficit and the national debt.  Of course, deficits were going to spike when unemployment was so high and we were paying out so much more for unemployment benefits, food stamps, Medicaid, etc. and taking in so much less in revenues.  But we behaved as if that was not just a temporary circumstance, but our long-term destiny, and thus prolonged and deepened that temporary state, weakening us as a country and cruelly crushing a whole lot of families unnecessarily.  Keynes is (still) right, Paul Ryan is wrong, and Ayn Rand was a novelist, not an economist.  It’s time for the Prez and the Dems to lead us out of this economic wilderness.

OK, The Deficit Problem Is Solved

Well, that was easy.  From “Health Care Spending Growth May Have Slowed Permanently,” Brian Beutler, Talking Points Memo:

“Health care spending growth has famously slowed over the past five years, significantly enough that the Congressional Budget Office recently revised its projections of Medicare and Medicaid spending over the coming decade downward by hundreds of billions of dollars.

“Now, research papers suggests the recent slowdown doesn’t just reflect temporary economic weakness, but also structural shifts in how health care is delivered and financed — possibly attributable to the Affordable Care Act — and thus might be a harbinger of a longer-term trend.

If they’re right, and the trend continues, it means workers can expect higher wages and the country’s projected medium term deficits are significantly overstated, which in turn suggests lawmakers’ continuing obsession with the current budget deficit, and deficits over the coming decade, are misguided.

“The study by Harvard researchers, featured in the latest edition of Health Affairs, finds, like all studies of this nature, that the recession and weak economy contributed significantly to the spending growth slowdown. Less generous benefits, resulting in higher out-of-pocket costs, accounted for 20 percent of it. Faced with less generous coverage and less disposable income, people consumed fewer health services.

“But the good news is that spending growth also slowed among those whose health benefits haven’t changed, including Medicare patients. And that suggests a more enduring trend.

“’Our findings suggest cautious optimism that the slowdown in the growth of health spending may persist — a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country,’ the authors write.

“In a related article, health care economist David Cutler attributes the majority of the slowdown to fundamental changes — including perhaps slowing technological and pharmaceutical innovation, and increased efficiency among providers. If current trends continue, he concludes, then over the next 10 years ‘public-sector health care spending will be as much as $770 billion less than predicted. Such lower levels of spending would have an enormous impact on the US economy and on government and household finances.'”

Stick that in your pipe and smoke it, Paul Ryan!

Of course, that money will probably be spent on more war(s).

 

 

Policy of the One Percent, by the One Percent, for the One Percent

From “The 1 Percent’s Solution,” Paul Krugman, NYT:

“Thus, the average American is somewhat worried about budget  deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face.  And how should the budget deficit be brought down?  The wealthy favor cutting federal spending on health care and Social Security — that is “entitlements” — while the public at large actually wants to see spending on those programs rise.

“You get the idea:  The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor.  What the top 1 percent wants becomes what economic science says we must do.

“[T]he years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers.

“And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make.  To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?”

 

Prez “Chaining” Himself for Nothing?

Josh Marshall at Talking Points Memo on the President’s coming out for chained CPI to calculate Social Security benefits:

“[O]n the politics, President Obama and his advisors have made clear this isn’t what President Obama is actually for. He doesn’t think it’s a good idea. It’s rather what he’s willing to do if Republicans are willing to make a big move on revenues. So he’s anticipating claims that he’s not serious about long term cuts and making clear that he’s willing to put real cuts, painful cuts that most of his supporters will hate, on the table. There’s an internal logic there. But the problem is that there doesn’t seem to be much of any evidence that Republicans are going to make that any kind of move like that. So really this is just the President negotiating with himself, validating the wisdom of big Social Security cuts while Republicans are still saying — and show no signs of not saying — that no more taxes should ever go up ever.

“Now, the counter to this is that the optics of going the extra length helps the President with swing voters who want to see he’s trying to compromise. I’m uncertain about that. But that’s certainly part of the calculus.

“But there’s the third point that I think is most important to understanding what’s going on here. This isn’t only about President Obama’s negotiating acumen. In conversations with the president’s key advisors and the President himself over the last three years one point that has always come out to me very clearly is that the President really believes in the importance of the Grand Bargain. He thinks it’s an important goal purely on its own terms. That’s something I don’t think a lot of his diehard supporters fully grasp. He thinks it’s important in long-range fiscal terms (and there’s some reality to that). But he always believes it’s important for the country and even for the Democratic party to have a big global agreement that settles the big fiscal policy for a generation and let’s the country get on to other issues — social and cultural issues, the environment, building the economy etc.

“This has always struck me as a very questionable analysis of the where the country is politically and what it needs. But I put it forward because I don’t think these moves can really be understood outside of this context.”  Emphasis added.

My personal feeling is that the President can’t do a Grand Bargain with the group that’s in Congress now, especially the House, and that we don’t need one anyway.  As the economy comes back, deficits are declining to reasonable levels in the short and medium-term.  A Grand Bargain can wait, but jobs and growth can’t.  The more growth we can fuel now, the less painful that Grand Bargain will ultimately have to be.  Now is the time to pave the way for a future Grand Bargain rather than for doing that Bargain itself.

Progressives are freaking out today about chained CPI, but it ain’t gonna happen without revenues, which means it ain’t gonna happen.  So the President is making an offer that the GOP can — and will — refuse.

The Fog of Fiscal Flimflam

From “After the Flimflam,” Paul Krugman, NYT:

“So we could definitely do worse than the Senate Democratic [budget] plan, and we probably will. It is, however, an extremely cautious proposal, one that doesn’t follow through on its own analysis. After all, if sharp spending cuts are a bad thing in a depressed economy — which they are — then the plan really should be calling for substantial though temporary spending increases. It doesn’t.

“But there’s a plan that does: the proposal from the Congressional Progressive Caucus titled ‘Back to Work,’ which calls for substantial new spending now, temporarily widening the deficit, offset by major deficit reduction later in the next decade, largely though not entirely through higher taxes on the wealthy, corporations and pollution.

“I’ve seen some people describe the caucus proposal as a ‘Ryan plan of the left,’ but that’s unfair. There are no Ryan-style magic asterisks, trillion-dollar savings that are assumed to come from unspecified sources; this is an honest proposal. And ‘Back to Work’ rests on solid macroeconomic analysis, not the fantasy ‘expansionary austerity’ economics — the claim that slashing spending in a depressed economy somehow promotes job growth rather than deepening the depression — that Mr. Ryan continues to espouse despite the doctrine’s total failure in Europe.

“So where is this all going? Realistically, we aren’t likely to get a Grand Bargain any time soon. Nonetheless, my sense is that there is some real movement here, and it’s in a direction conservatives won’t like.

“Mr. Ryan’s efforts are finally starting to get the derision they deserve, while progressives seem, at long last, to be finding their voice. Little by little, Washington’s fog of fiscal flimflam seems to be lifting.”

I’m not as optimistic as Krugman about the fog lifting — I think we’re going to be socked in for some time to come — but I hope he’s right.  Maybe the Progressive Caucus will steal in on little cat feet.

Save the GOP by Destroying It

Talk about telling the emperor he has no clothes.  Dick Morris told CPAC the GOP must change on immigration, abortion, and balancing the budget!

Only about 50 people bothered to show up for Morris’ speech, but those who did got an earful.

First he said that the GOP must pass immigration reform that includes a path to citizenship.  So he told the House GOP to go to hell.

Then he said they must stop trying to over-turn Roe v. Wade.  He said the party should remain pro-life as a matter of principle and focus on trying to decrease the incidence of abortion, through promoting adoption, birth control, etc.  So he told the base to go to hell.

He went on to attack the plan to balance the budget in ten years.  He said that the GOP should focus on lowering the deficit and emphasize the ratio between the deficit and GDP and give up on the “hypnotic phrase” balanced budget.  So he told Paul Ryan to go to hell.

Morris loves attention.  I think he got himself some today.  Basically he was saying we have to destroy the GOP in order to save it.

CPAC is known as a venue for red meat.  Morris offered a heaping platter of kale.

The GOP — Garbage In, Garbage Out

From “Paul Ryan’s budget:  Social engineering with a side of deficit reduction,” Ezra Klein, Washington Post:

“Here is Paul Ryan’s path to a balanced budget in three sentences: He cuts deep into spending on health care for the poor and some combination of education, infrastructure, research, public-safety, and low-income programs. The Affordable Care Act’s Medicare cuts remain, but the military is spared, as is Social Security. There’s a vague individual tax reform plan that leaves only two tax brackets — 10 percent and 25 percent — and will require either huge, deficit-busting tax cuts or increasing taxes on poor and middle-class households, as well as a vague corporate tax reform plan that lowers the rate from 35 percent to 25 percent.

“But the real point of Ryan’s budget is its ambitious reforms, not its savings. It turns Medicare into a voucher program, turns Medicaid, food stamps, and a host of other programs for the poor into block grants managed by the states, shrinks the federal role on priorities like infrastructure and education to a tiny fraction of its current level, and envisions an entirely new tax code that will do much less to encourage home buying and health insurance.

“Ryan’s budget is intended to do nothing less than fundamentally transform the relationship between Americans and their government. That, and not deficit reduction, is its real point, as it has been Ryan’s real point throughout his career.”

“The problem is that these ideas are not, on their own, popular.  In fact, they’re deeply unpopular, and considered quite radical.  That’s why Newt Gingrich rejected Ryan’s initial budget as ‘right-wing social engineering’….  But presented on their own, Ryan’s plans scare people.

What Ryan has found is that the way they’ll get a hearing is if they’re presented as necessary, prudent measures to forestall an even more dramatic debt crisis.

“But whether these are good or bad ideas, they are not, under any reasonable definition of the term, necessary ideas.”

We’ve got Paul Ryan using phony scare tactics on the budget, and Rand Paul doing the same on the drones.  When I think of the GOP today, I think, “Garbage in, garbage out.”  We have neither a debt nor a drone crisis.  How can we solve  our real problems when one party is so focused on imaginary ones?

Health Care? Fuhgeddaboudit.

So Paul Ryan would balance the budget in ten years.

You probably won’t be surprised to learn that 70% of the cuts he makes to accomplish that goal are from health care.  Because, you know, we’ve got to keep producing all those weapon systems that the military says it doesn’t need.  We have to be prepared to fight World War II, the Cold War, and the War on Terror.

Besides repealing Obamacare, Ryan would slash Medicaid, shifting much more of the burden to the states, and hand out Medicare vouchers to seniors to go find health insurance, while raising the eligibility age two years.

Isn’t this what we all voted against in November?  Isn’t he what we all voted against in November?

Take two aspirin and don’t call him in the morning, America.

I Wish the Whole Country Would Read This

If I could get everyone in America to read one thing today, it would be Paul Krugman’s NYT column, “Dwindling Deficit Disorder.”  Some excerpts:

“What’s really remarkable at this point, however, is the persistence of the deficit fixation in the face of rapidly changing facts. People still talk as if the deficit were exploding, as if the United States budget were on an unsustainable path; in fact, the deficit is falling more rapidly than it has for generations, it is already down to sustainable levels, and it is too small given the state of the economy.

“Start with the raw numbers. America’s budget deficit soared after the 2008 financial crisis and the recession that went with it, as revenue plunged and spending on unemployment benefits and other safety-net programs rose. And this rise in the deficit was a good thing! Federal spending helped sustain the economy at a time when the private sector was in panicked retreat….

“But after peaking in 2009 at $1.4 trillion, the deficit began coming down. The Congressional Budget Office expects the deficit for fiscal 2013…to be $845 billion.

“Bear in mind that the budget doesn’t have to be balanced to put us on a fiscally sustainable path; all we need is a deficit small enough that debt grows more slowly than the economy. To take the classic example, America never did pay off the debt from World War II — in fact, our debt doubled in the 30 years that followed the war. But debt as a percentage of G.D.P. fell by three-quarters over the same period.

“Right now, a sustainable deficit would be around $460 billion.   The actual deficit is bigger than that. But according to new estimates by the budget office, half of our current deficit reflects the effects of a still-depressed economy. The “cyclically adjusted” deficit — what the deficit would be if we were near full employment — is only about $423 billion, which puts it in the sustainable range; next year the budget office expects that number to fall to just $172 billion. And that’s why budget office projections show the nation’s debt position more or less stable over the next decade.

“So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.

“There are, of course, longer-term fiscal issues: rising health costs and an aging population will put the budget under growing pressure over the course of the 2020s. But I have yet to see any coherent explanation of why these longer-run concerns should determine budget policy right now.

“Yes, we’ll want to reduce deficits once the economy recovers, and there are gratifying signs that a solid recovery is finally under way. But unemployment, especially long-term unemployment, is still unacceptably high. … [A]ll you have to do is look at Europe to see the disastrous effects of austerity on weak economies.

“Now, I’m aware that the facts about our dwindling deficit are unwelcome in many quarters. Fiscal fearmongering is a major industry inside the Beltway, especially among those looking for excuses to do what they really want, namely dismantle Medicare, Medicaid and Social Security. “

We can’t make smart political decisions based on phony economic analysis.  Let’s have honest debates about the size and scope of government, but let’s not rely on scare tactics that depend on disinformation about our deficits and national debt.  To me, the GOP is engaging in economic terrorism.

How Ryan Does It

If you’re wondering how Paul Ryan’s new budget reaches balance in just ten years, it’s because he assumes the repeal of Obamacare.  Yup, that’s going to happen.