Month: February 2013

Debt vs Deficit


by digby

Steve Benen flags an interesting result in the most recent Bloomberg poll:

I put together this chart to help highlight the Bloomberg results. A 62% majority believe the deficit is getting bigger, 28% believe the deficit is staying roughly the same, and only 6% believe the deficit is shrinking.

In other words, in the midst of a major national debate over America’s finances, 90% of Americans are wrong about the one basic detail that probably matters most in the conversation, while only 6% — 6%! — are correct.

For the record, last year, over President Obama’s first four years, the deficit shrunk by about $300 billion. This year, the deficit is projected to be about $600 billion smaller than when the president took office. We are, in reality, currently seeing the fastest deficit reduction in several generations.

And yet, 90% of Americans don’t believe the demonstrable, incontrovertible, entirely objective truth. It’s worth pondering why.

Benen blames the Republican fearmongering and the media’s obsession and he’s right. But it’s not as if deficit fever isn’t a bipartisan illness. I’m going to guess that a majority of the Democrats believe this because they assume the President wouldn’t be focusing on the deficit like a laser (and taking credit for the cuts made so far but proposing even more) if it was a problem that was coming under control.

What most people see is stuff like this, which they show all the time on TV and which makes them believe that the debt and the deficit are the same things:

U.S. NATIONAL DEBT CLOCK

The Outstanding Public Debt as of 22 Feb 2013 at 05:02:46 PM GMT is:

I haven’t heard anyone trying to explain the difference between the two.  Indeed, it seems clear to me that both parties see some utility in keeping this debt boogeyman out there.

The sad thing about all this is that we went through this education exercise back in the 90s.  They managed to at least persuade people that the deficit and the debt weren’t the same things for a while so that both parties could take credit for eliminating the deficit —  as if it were a very spectacular achievement. We all know what happened next.

So, this whole argument is a scam. The debt might be a problem some day, although there are many people who would argue that the this too is something of an illusion. But right now it is the least of our problems. The deficit is simply what the government needs to borrow to pay its bills on a yearly basis.  And right now, with interest rates at historic lows, borrowing money is very cheap and the amount we need to borrow is coming down, not going up. Not that anyone would know that by the conversation in Washington.

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More good news in California for America to learn from

by David Atkins

Things continue to look up in California, just a few months after passing a millionaire’s tax and electing 2/3 supermajorities for Democrats in both chambers of the state legislature. Budgets are balancing, good legislation is getting passed, shellshocked and powerless Republicans are barely heard from. And Californians are pretty happy about it:

Californians are more optimistic than they’ve been in six years, with nearly half of registered voters saying that the Golden State is moving in the right direction, according to a Field Poll released Thursday. And their feelings about the future parallel a surge in their enthusiasm for Gov. Jerry Brown.

The 48 percent of voters who think the state is on the right track is four times as many who did on the eve of Brown’s election in September 2010. Forty-two percent say the state is on the wrong track, but that’s a far cry from the 81 percent who felt that way just before Brown’s election…

Most voters — 55 percent to 39 percent — appear satisfied that Democrats now hold two-thirds majorities in the Senate and Assembly, giving them the power to raise taxes and place initiatives on the ballot without any Republican support. Most Democrats (76 percent) say that’s a good thing, while 86 percent of Republicans say it’s a bad thing.

Sixty-nine percent of voters with no party affiliation viewed the Democrats’ supermajority favorably. And amazingly, 12 percent of Republicans did.

“The no-party voters might be thinking it may be better than gridlock, that it enables the state to move forward,” said Mark DiCamillo, director of the Field Poll. “We’ll see what the perception is after Democrats do a few things.”

So far, it looks like making a dent in income inequality while utterly disempowering conservatives is pretty good for public morale in America’s largest state and biggest economic engine. The rest of America should take note.

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Rand vs Ted: The quickening

by digby

Oh, this should be fun:

Even as the Tea Party movement, per se, may be waning, the activists remain and they will need a voice in Washington. The rapid ascent of the well-spoken Cruz has pleased many conservative activists hungry for more. “We salute you, Senator Cruz, and we’re calling for backup,” a much-shared RedState post read.

But it may not put any smiles on the face of Sen. Rand Paul, who is himself trying to become the de-facto leader of the very same movement and who helped get Cruz where he is today.

Endorsements from the Kentucky senator and his congressman father, Ron Paul, were critical in a primary race where the GOP establishment lined up against Cruz and behind Texas Lt. Gov. David Dewhurst, an arch-conservative whom the Tea Party nonetheless made out to be a moderate. But Cruz didn’t return the favor by endorsing the elder Paul’s presidential bid.

Rand Paul has been called Cruz’s “role model,” but the Texan is in many ways more accomplished and worldly than the Kentuckian. While Paul, an ophthalmologist with atypical credentials, had never held public office before his successful 2010 bid, Cruz was on track for this job since adolescence. At Princeton, he was a champion debater. After Harvard Law, he clerked for William Rehnquist, the chief justice of the Supreme Court, where he would return years later to argue cases as Texas’ solicitor general.

And while other Paul-endorsed candidates like Utah Sen. Mike Lee have kept a fairly low profile after getting to Washington, Cruz has been eager to upset the apple cart, threatening to upstage or even supplant the man who helped bring him there. He’s been called the Ivy League Marco Rubio and the Republican Barack Obama, but perhaps a better epitaph would be the Purer Rand Paul.

Cruz is the real Tea Partier and I have no doubt they will run with him if it comes down to it. Paul is an iconoclast who glommed on to the tea party the same way everyone in the GOP did in 2009 and 2010. The Tea Party is just the far right in a tri-corner hat. Young Rand is something else entirely. I don’t think they know that. But I’m going to guess that Ted Cruz will have no trouble pointing it out. He doesn’t seem to be the shy type.

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Academic freedom for dummies

by digby

I give up:

In biology class, public school students can’t generally argue that dinosaurs and people ran around Earth at the same time, at least not without risking a big fat F. But that could soon change for kids in Oklahoma: On Tuesday, the Oklahoma Common Education committee is expected to consider a House bill that would forbid teachers from penalizing students who turn in papers attempting to debunk almost universally accepted scientific theories such as biological evolution and anthropogenic (human-driven) climate change.

Gus Blackwell, the Republican state representative who introduced the bill, insists that his legislation has nothing to do with religion; it simply encourages scientific exploration. “I proposed this bill because there are teachers and students who may be afraid of going against what they see in their textbooks,” says Blackwell, who previously spent 20 years working for the Baptist General Convention of Oklahoma. “A student has the freedom to write a paper that points out that highly complex life may not be explained by chance mutations.”

These bills are “a kind of code for people who are opposed to teaching climate change and evolution.”
Stated another way, students could make untestable, faith-based claims in science classes without fear of receiving a poor mark.

HB 1674 is the latest in an ongoing series of “academic freedom” bills aimed at watering down the teaching of science on highly charged topics. Instead of requiring that teachers and textbooks include creationism—see the bill proposed by Missouri state Rep. Rick Brattin—HB 1674’s crafters say it merely encourages teachers and students to question, as the bill puts it, the “scientific strengths and scientific weaknesses” of topics that “cause controversy,” including “biological evolution, the chemical origins of life, global warming, and human cloning.”

They should just stop teaching science rather than allow these throwbacks to bastardize education with this nonsense. Personally, I consider this child abuse, but if these parents think it’s ok that their children grow up to be cretinous know-nothings who are unemployable even by the lowest standards of a third world country, I guess that’s their right. But you have to pity those poor little kids.

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QOTD: Charles Pierce

by digby

Of all the various Washington mystery cults, the one at that end of Pennsylvania Avenue is the most impenetrable. This is why the argument many liberals are making — that the drone program is acceptable both morally and as a matter of practical politics because of the faith you have in the guy who happens to be presiding over it at the moment — is criminally naive, intellectually empty, and as false as blue money to the future. The powers we have allowed to leach away from their constitutional points of origin into that office have created in the presidency a foul strain of outlawry that (worse) is now seen as the proper order of things. If that is the case, and I believe it is, then the very nature of the presidency of the United States at its core has become the vehicle for permanently unlawful behavior. Every four years, we elect a new criminal because that’s become the precise job description.

h/t to gg

Oh those darned Republicans and their deficit obsession

by digby

Gee, I wonder where people get the idea that the deficit is the world’s most important issue? This is from the White House web site:

The President is serious about cutting spending, reforming entitlements and the tax code to reduce the deficit in a balanced way. The question is, will Congressional Republicans come to the table to get something done?

Let’s take a moment to look what we’ve done so far: The President has already reduced the deficit by over $2.5 trillion, cutting spending by over $1.4 trillion, bringing domestic discretionary spending to its lowest level as a share of the economy since the Eisenhower era [see below]. As a result of these savings, together with a strengthening economy, the deficit is coming down at the fastest pace of anytime in American history other than the demobilization from World War II.

And he’s laid out a specific plan to do more. His proposal resolves the sequester and reduces our deficit by over $4 trillion dollars in a balanced way- by cutting spending, finding savings in entitlement programs and asking the wealthiest to pay their fair share. As a result the deficit would be cut below its historic average and the debt would fall as a share of the economy over the next decade.

Just two months ago Speaker Boehner said there was $800 billion in deficit reduction that could be achieved by only closing loopholes and reducing tax expenditures. So we know we can get this done. Let’s be clear: the President’s proposal to Speaker Boehner is still on the table. Here it is again

We can’t just cut our way to prosperity. Even as we look for ways to reduce deficits over the long term, we must grow the economy in a way that strengthens the middle class and everyone willing to work hard to get into it.

So the choice in front of Congressional Republicans today is simple: will they let these devastating cuts happen that will cost hundreds of thousands of jobs simply because they refuse to close one tax loophole for the wealthy? Or will they compromise and work with us on a balanced solution to get this done? We hope they come to the table for the sake of middle class families, our national security and our future today.

For a Big Government liberal socialist he sure is proud of his record as a spending cutter, don’t you think? Click this link to see just how much more he’s chomping at the bit to cut.

*Oh, and by the way, they’ve gone completely wobbly on “revenue.” Ezra says this is in conjunction with fewer spending cuts as well, but it’s hard to see how that’s correct considering that the president is openly saying 4 trillion which is the number they arbitrarily chose back in 2011.

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No, we don’t need more regressive taxes

by David Atkins

Ezra Klein has a habit of beginning with some genuinely honest, non-conventional-wisdom arguments in his posts, then concluding with some nonsensical both-sides-do-itisms that almost invalidate the excellent points with which he began. That was the case with his critique of Alan Simpson, in which his takedown of Simpson ended with a bizarre paean to the necessity of immediate deficit reduction. And it’s the case with his latest post on how the tax debate has shifted right with President Obama’s help.

Klein cogently begins by noting that the President’s centrism combines with the Republicans’ hard right turn to shift the entire debate toward conservatism. But then he ends with this:

“One of the problems the president has is his promise that there won’t be a tax increase on anyone below those income levels,” says Alan Viard, a tax specialist at the conservative American Enterprise Institute. “It’s a straitjacket. You have to have some increase in tax burdens or benefit cuts on people making less than 250,000 to close the fiscal gap.”

That pledge made the kind of revenue numbers envisioned by Simpson and Bowles or Domenici and Rivlin in their respective plans — both of which do increase taxes on some Americans making less than $250,000 — effectively impossible. And it set up a new, and much more cramped, zone of the possible on taxes, where the Republican position is that taxes shouldn’t be raised on anybody, and the Democratic position is that taxes shouldn’t be raised on almost anybody.

This is a dramatic change in negotiating postures, says Bob Greenstein, President of the liberal Center for Budget and Policy Priorities. “Many people forget that when the Reagan tax cuts turned out to lose far too much revenue, the leader in scaling back the revenue loss in 1982 was Bob Dole, a Republican! It’s as though with each iteration of the debate the contours sort of shift a bit further to the right in terms of revenue.”

Yet even as the tax debate has moved to the right, the spending debate has moved to the left. Republicans today promise to leave Medicare and Social Security benefits untouched for at least the next decade. They also want to increase defense spending above its current levels and are beginning to make their peace with the permanence of the Affordable Care Act, which Boehner now calls, pointedly, “the law of the land.”

The consensus on spending, in other words, requires a very different consensus on taxes — or vice versa. “If we keep Social Security, Medicare and Medicaid largely unchanged, we’re going to need a significant amount of additional revenue,” says Viard. “In fact, we’ll need additional revenue even if we curtail them somewhat. It’s just not realistic to think we’ll cut their growth enough to not need more revenue. And some of that revenue is going to have to come from the bottom 98 percent.”

Not mentioned once in Klein’s piece is capital gains income, which is at the heart of the hollowing out of the American economy in favor of assets over wages, and at the heart of economy-destroying income inequality.

Greg Sargent analyzes a new study on inequality and makes the following observation:

Here’s what Hungerford found: The single greatest driver of income inequality over a recent 15 year period was runaway income from capital gains and dividends.

This finding is directly relevant to the current debate, because Obama and Democrats want to offset the sequester in part by closing loopholes enjoyed by the wealthy, such as the one that keeps tax rates on capital gains and dividends low. Dems want to do this in order to prevent a scenario where the sequester is averted only by deep spending cuts to social programs that could hurt a whole lot of poor and middle class Americans. Republicans oppose closing any such loopholes and want to avert the sequester with only deep spending cuts…

In other words, wealthy beneficiaries of low tax rates on capital gains and dividends are doing extremely well — and their runaway wealth is a major driver of income inequality. There’s a lot of that money out there that could be taxed as ordinary income — as Obama and Dems want — as a way to avert the sequester, which could badly damage the economy. Republicans oppose this.

Kevin Drum also notes:

Bottom line: If you care about rising income inequality, you should care about capital gains because that’s mostly where the skyrocketing income increases of the past couple of decades have come from. And while the fiscal cliff deal raised rates on capital gains and dividends slightly, there’s still plenty of room for them to go up more. Done within reason, this is very unlikely to have a negative impact on economic growth, and it would be about the fairest possible way to increase revenues.

So no, “failing” to increase regressive taxes doesn’t drive the economic debate to the right. America should try clawing back some of the inordinate wealth that has been stolen by the top 1% from everyone else, and wait for natural deficit reduction due to increased confidence and economic growth, before considering regressive tax increases. Doing even more damage to those who are already hurting accomplishes nothing given our record income inequality.

That, too, is another form of harmful austerity.

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We think it might be possible we won’t have enough money in the future.
Let’s make it official!

by digby

I’ve been getting some feedback from this post in which I (and others) made fun of the current logic that says we must cut social security benefits now because the projections show that there might not be enough money to provide full benefits later. People seem to be a little bit confused by it which I understand: sure, in an everyday sense, cutting back in order to save a little bit for tomorrow makes some sense. The problem with this logic in terms of social security is that they are selling it as a solution when in fact it’s simply throwing up our hands and accepting our fate. As Paul Krugman pithily explained:

“It’s probable (although not certain) that, within two or three decades, the Social Security trust fund will be exhausted, leaving the system unable to pay the full benefits specified by current law. So the plan is to avoid cuts in future benefits by committing right now to … cuts in future benefits. Huh?”

I think the confusion partly stems from the fact that people are under the misapprehension that the system is going to go bankrupt in a couple of decades and so it might make sense to them to take some bad medicine now in the hopes that there will at least be something there in 2035 or so. But that’s simply not the case. The social security system is solvent, it’s just that in a couple of decades they project that we will have exhausted the extra money the baby boomers have been contributing since 1983 for the trust fund (they’ll all be retired) and there will be a little bit less coming into the system through the payroll tax than will be going out in benefits. This means that if we simply never look at the numbers until the day that happens we could potentially have to cut benefits by some number yet to be decided.   But the fact is that the government does have to do some planning and so it’s useful to know if the dedicated funding stream for Social Security might be short for a period of time as the pesky baby boomers make their way through the system. The question is, how do we handle that?

First let’s be clear about these projections.They are exactly what they sound like: estimates. And it’s fairly obvious that estimates made decades ahead of time are probably little better than guesses. Indeed, the projections have been all over the place for the past couple of decades due to the ups and downs of the economy during that period.

Moreover, there are actually three projections, a low, a medium and a high.  Here is what the Social Security Board of trustees say about them:

“The intermediate demographic and economic assumptions shown in table II.C1 reflect the Trustees’ best estimates of future experience, and therefore most of the figures in this overview depict only the outcomes under the intermediate assumptions. Any projection of the future is, of course, uncertain. For this reason, alternatives I (low-cost) and III (high-cost) are included to provide a range of possible future experience.” 

“Significant uncertainty surrounds the intermediate assumptions.”

Indeed. It’s possible that these projections will turn out to underestimate the scope of the problem, but they are just as likely to overestimate the scope of the problem.  It’s not as if they have a crystal ball. But you’d never know that by the caterwauling of politicians on both sides of the aisle who seem to believe that Armageddon is nigh and we must immediately cut benefits lest something even worse happen down the road. (What do they know that we don’t know?  Soylent green?)

The sad fact is that Social Security has been so successfully demagogued over a period of decades that a misinformed bipartisan consensus has formed demanding they be seen to be “doing something” about this problem (which may not be a problem and which is far down the list of current issues needing attention.)  It’s also likely to be the case that the austerity caucus has succeeded in pushing even the skeptics to accept that cutting something is inevitable, so some otherwise level headed types are leaning toward cutting Social Security in the long term in order to avoid cutting something else in the short term and pushing the economy back into recession. It’s a devil’s bargain either way.

The the Protecting and Preserving Social Security Act, S. 308. makes several essential changes to Social Security. First, it revises the cost of living adjustment (COLA) formula so that future COLAs will more accurately reflect the spending patterns of older Americans. (Retirees spend more resources on health care, housing, and energy costs than the general population.) Adjusting the COLA formula to the CPI-E, immediately helps Social Security recipients meet their daily needs. In addition, it gradually phases out the earnings cap on wages. The current cap has fallen well below historical levels. It has become a tax loophole that could impact the long term financial stability of the Social Security Trust Fund.

They have made the obvious observation that not only shouldn’t benefits be cut, they should be raised.  The elderly aren’t exactly living high on the hog. The median income for Social Security recipients is about $35,000 a year.  And as the excerpt above points out, these are people who are not squandering those vast riches on caviar and champagne — they’re spending a huge amount of their income on health care.  (I don’t know if people are aware — old people get sick more than others.  And Medicare does not pay for everything.) The CPI-E (as opposed to the Chained-CPI) is likely to more accurately measure the cost of living for the elderly and, therefore, should at least be studied and modeled more thoroughly before we start cutting benefits for an already low income population. (Seriously, what in the world are these people thinking! 35k a year is not a lot of money!)

Then there’s the fact that all the other pension streams are proving inadequate. Atrios wrote a good piece on this issue for USA Today a few weeks ago which concluded with this solution:

It is almost universally accepted in policy circles and in the pundit class that strengthening Social Security involves cutting future benefits relative to what current law promises because according to current projections, Social Security only has the ability to pay promised benefits in full until 2033, and then 75% of them thereafter. The basic thinking is that we must promise to cut benefits now so that we won’t necessarily have to cut them 22 years from now. What?

Imagine if that is how we treated defense spending. Since it appears budgets will be tight in the 2030s, best to mothball all those aircraft carriers today. Who would buy that argument?

The reality is that we will make our defense decisions about the 2030s in the 2030s. That’s just how we should treat federally financed retirement programs. We never actually have to cut benefits if we make the policy choice to keep funding them.

Social security is only bankrupt to the extent that our political leaders lose the will to invest in a decent retirement for American workers.

As the system exists, large numbers of Americans nearing retirement will have little more than fairly meager Social Security benefits (the average benefit for retired workers is currently $1230) to survive on in their old age. We can doom them to a life of insecurity and relative poverty or we can take the obvious step to improve their lives: Increase Social Security benefits.

The goal of a retirement system should be to ensure that retired people have sufficient income to live out the remainder of their lives without a radical reduction in quality of life after they stop working. Our current system, a modest mandatory government retirement program combined with individual savings, is failing to do that.

Strengthen Social Security now, not by cutting benefits, but by increasing them.

What he said.

By the way, if you don’t know how the “Social Security trust fund” was constructed, this definition by Mark Thoma is the best one I’ve seen:

Starting in 1983, the payroll tax was deliberately set higher than it needed to be to cover payments to retirees. For the next 30 years, this extra money was sent to the Treasury, and this windfall allowed income tax rates to be lower than they otherwise would have been. During this period, people who paid payroll taxes suffered from this arrangement, while people who paid income taxes benefited.

Now things have turned around. As the baby boomers have started to retire, payroll taxes are less than they need to be to cover payments to retirees. To make up this shortfall, the Treasury is paying back the money it got over the past 30 years, and this means that income taxes need to be higher than they otherwise would be. For the next few decades, people who pay payroll taxes will benefit from this arrangement, while people who pay income taxes will suffer.

If payroll taxpayers and income taxpayers were the same people, none of this would matter. The trust fund really would be a fiction. But they aren’t. Payroll taxpayers tend to be the poor and the middle class. Income taxpayers tend to be the upper middle class and the rich. … When wealthy pundits like Krauthammer claim that the trust fund is a fiction, they’re trying to renege on a deal halfway through because they don’t want to pay back the loans they got.

Considering this reality, the best way to deal with a projected shortfall in dedicated Social Security funding is to raise the cap on payroll taxes so that those who make higher wages have to pay the same percentage as those who don’t.  That’s the least politically toxic approach I’d guess, although even that is a heavy lift.  But they must try.  That percentage has eroded significantly over the years and bringing it back up to where it was would go a long way to ending this sham crisis.

Update: 2/24/13

Think Progress has a very good treatment of the problem with “projections.”

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Bowling for freedom and liberty

by digby

The National Abortion Access Bowl-a-Thon! 

Oh, it’s on! And it’s spectacular. This April, abortion fund activists are taking it to the alleys–the bowling alleys–in 30 cities nationwide, for the 4th year in a row, to raise money for their local abortion funds and have a blast doing it! 

How it works: get a few friends together to start a team or join a team (like Downton Alley, Midwife Crisis or Jekyll and Repeal Hyde) and go balls out for abortion access!
Interested in limbering up your strike arm but you have a question or two? We’ve got answers!

• Where is it, again? In 30 cities nationwide! From Philly to Fargo to Portland and points in between…click to see if your city is on the Bowl-a-Thon map.

• When is it? On a single day in April–the exact date depends on the city.

• Dannnnng. There’s no Bowl-a-Thon at all where I live. Join the Virtual Bowl-a-Thon! Just sign up and–presto!–we’ll get you started. You can register solo or get some friends together and register a team. Set a goal and start raising funds for abortion access right at your desktop!

• I can’t bowl! Oh, bowling skills are not required. All you need is a sense of humor!

• I already signed up to bowl. Aren’t you hot stuff?! You’re already making a difference!Click here for tips and tricks to help you on your way to 300, and be sure to nominate your page or your team for the Bowl-a-Thon Page of the Week! So many cat gifs…

• But I’m still at work / on the train / at lunch right now. Well, sure. Just sign up when you get a chance. And in the meantime, think about who you can recruit to your team and start dreaming of the bowling puns and LOLcats that will pepper your page.

• I don’t like cats. Can I still bowl? Yes! The cat-averse are highly prized bowlers as well.

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