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…or not… I’ll hear about it either way today (Wednesday) at an event here in DC called “Progressives and the National Debt” hosted by the Center for American Progress and the Center on Budget and Policy Priorities.  On that conference website you can see the impressive lineup of experts who will be speaking, and you can watch the event live (8:30 am to 1:45 pm).

I’m not sure what the consensus “progressive view” of the dangers (or not) of deficits and debt will be, but I’ve always believed two main factors make the “progressive case” for deficit reduction:

1. Deficit financing of government spending or tax cuts typically involves a more “regressive” burden than the distribution of the alternative means of financing via tax increases or even (well-considered) benefit cuts. The burden of the federal debt via compounded net interest grows faster than the overall economy (the definitionof “unsustainable”) and especially faster than the growth in incomes for lower-to-middle-class households, and “backed-into-a-corner fiscal discipline” is more likely to resemble a sledgehammer that hits all Americans very broadly (and indiscriminately) rather than a fine-tuned set of policies that better targets the burden to those who can most afford it.
2. The overall tax-and-transfer system is progressive by income level–that is, the rich tend to receive net negative transfers (on net, pay taxes) over their lifetime, while the poor tend to receive net positive transfers.  (For lower-income households, incomes after federal taxes and transfers exceed incomes before taxes and transfers.)  If the (progressive) federal tax-and-transfer system is on a fiscally unsustainable path, then the (progressive) federal tax-and-transfer system might not be sustained.

But we’ll see what the experts say.  I may have to try some “tweeting” from my seat in the audience!  (Oh, boy…)

I love, love, love the story on DC public schools chancellor Michelle Rhee in this weekend’s Washington Post Magazine.  The “On Leadership” video interview of her by the Post’s Steve Pearlstein (another favorite person of mine) is great, too.  What I love about Michelle is her “extreme candor,” motivated by her belief that it’s straight and tough talk that’s required in order to bring about change for the better.  And despite those hints of “witchiness” (or even the b- version of the word) from the infamous Time magazine cover photo (below), I think Michelle’s Asian-American female exterior, and the dedication, determination, and (yet) humanness you can hear in her voice, helps to soften the edges of her candid tough talk just enough to make people listen.

And this passage in the Washington Post Magazine was the clincher for my writing this post (emphasis added):

The Rhees raised their daughter to work hard, trust herself and speak the truth. “I often told Michelle that no matter what she does, you’re not going to be liked by everybody,” says her father, a physician who specialized in managing pain before he and his wife retired to Colorado.

Rhee attributes her directness to her roots. “Korean people are not the most tactful,” she says. “I grew up with Korean ladies who’d say, ‘Gee, you’ve put on some weight.’ It has for as long as I can remember driven me crazy when people beat around the bush instead of saying, ‘Look, I need you to do this.’ “

I’m only half Korean (my other half is Chinese), but I think I definitely got a lot of that “Korean candor” gene in me.  (And get a glass or two of wine in me, and you really have to watch out!…)  For those relatively-new readers who might be misled by my very last (seemingly-biased) post on the irrationality of Republicans on tax policy, well, you probably haven’t been reading me from the start or have forgotten that I have been much more direct (and maybe even “witchy”) in my candor to my fellow Democrats.  And I think you should expect that a new very candid post on the Democrats and tax policy will be coming soon from this (half) Korean woman. 

UPDATE Tuesday morning (9/29):  Michelle will be live on washingtonpost.com today at 1 pm EST for an online discussion with readers, click here.  And here’s another part of her video interview with Steve Pearlstein where sometimes you may think you are listening to someone facing the challenge of advocating for fiscal responsibility.

If you read Bruce Bartlett’s column in Forbes this week, you might think I’ve been passing notes to him under the desks at school.  Bruce explains how the Republicans are just downright stupid (ok, my paraphrasing) when it comes to their “no higher taxes” mantra (emphasis added):

Eventually, Republicans decided that fighting deficits just wasn’t working for them. People might support a balanced budget in public opinion polls, but they opposed every single thing that would actually reduce deficits, especially higher taxes.

It is now Republican dogma that taxes must never be increased no matter how big the deficit. The last Republican to do that, Bush 41, got thrown out of the White House on his ear for doing so, Republicans believe.

Such a fate is not going to befall any congressional Republican today. Their mantra is that all tax increases must be opposed with every fiber of their being, and there is no problem that can’t be cured by tax cuts…

[B]ack in February when Congress was debating the stimulus package and the Treasury was facing a deficit of $1.2 trillion this year, the Republican position was that tax cuts–and only tax cuts–would stave off a deep recession. How that would have helped when incomes were falling to such an extent that tax revenues were virtually collapsing on their own was never explained. Tax cuts were a mantra to be repeated endlessly whether they had any rational connection to the economy’s problems or not.

Everyone knows that fiscal discipline must be restored eventually, or we will face truly horrifying consequences–defaulting on the debt, nonpayment of Social Security benefits, a collapsing dollar, and double-digit inflation and interest rates. Everyone also knows that this will involve a combination of higher revenues and lower spending. The idea that we can restore fiscal health only with spending cuts is childish…

What we face is a game of chicken. Republicans think if they wait until the last possible second to support the smallest possible tax increase necessary to make a budget deal work, they can get the largest possible spending cuts. The problem is that there is not one iota of historical evidence that this strategy will work…

At some point, taxes have to be back on the table as the price that must be paid for profligate spending. Only then will the American people realize that they can’t have their cake and eat it too…

I think the only point I’d add to Bruce’s is that you’ve got to fight fire with fire–or tax increases with tax increases.  I think the most persuasive case we can make to Republicans about the need to raise taxes now is that by rejecting tax increases now, they’re effectively supporting manyfold future tax increases on our children and grandchildren–and yes, even Republican children and grandchildren.  Because there’s no way we are going to be so wildly successful at bending the health cost curve down such that federal spending will come all the way down to the “equilibrium” level of taxes under current policy or even under current law (with all the Bush tax cuts expiring).  Even if we had the political will to make those tough choices, we would not be willing to be so cold-hearted as to make such cruel choices–and they would indeed be “cruel” choices if we had to get spending down to the 40-year historical average of revenues/GDP (the “magical” 18.3 percent figure) despite the elderly share of the population still rising and per capita health costs still growing faster than the economy.

Republicans want to believe that by rejecting tax increases now, they’ll encourage spending cuts over tax increases as a way to balance the budget.  But then somehow along the way even they who profess to favor spending cuts over tax increases admit (through their actions) that they actually favor deficits over spending cuts.  (Exhibit A: the Republicans’ sudden love for Medicare as we know it, now that President Obama appears to be willing to change it.)  Hence, resisting (any kind of) tax increases now is just plain stupid if you’re a Republican who really doesn’t want to see your kids eventually paying “European level taxes.”

And when Bruce says that:

Clinton’s big mistake was in not locking up the surpluses in some way. One idea would have been to use the surpluses to create private Social Security accounts that Republicans wouldn’t have dared to touch any more than they would dare to cut Social Security benefits…

it makes me wax nostalgic about the fiscal discipline of the Clinton Administration and how different our nation’s fiscal outlook would have been in that parallel universe where Al (”LockBox”) Gore would have been our president over the past eight years (or at least the first four of the past eight years)…

Today the House of Representatives overwhelmingly passed a bill to prevent Medicare premiums from rising.  A Congress Daily story explains:

House Democrats pushed through the bill to ensure that the roughly 27 percent of enrollees in Medicare Part B, which covers physician services, will see monthly premiums hold steady at $96.40 instead of rising to as much as $120.

The situation arises because, by law, Part B premiums must account for 25 percent of the program’s cost. Seventy-three percent of seniors are “held harmless” under current law so their benefit checks are not cut if their premiums rise more than their Social Security benefits. The other 27 percent then have to shoulder the entire burden of the program’s cost. That group includes 4.2 million seniors, including those with higher incomes of more than $85,000 for individuals and $170,000 for couples, as well as new enrollees. Another 7.3 million are lower-income beneficiaries whose premiums are funded by Medicaid. Their premium increases would otherwise be funded by the states without the congressional fix.

Yet although this was a Democratic-sponsored bill, House Majority Leader Steny Hoyer did not vote for it.  The Congress Daily story explains (emphasis added):

A longtime deficit hawk, Hoyer said the country would never get a grip on rising entitlement costs if Congress passes a bill like this. He also said the measure was overly generous to upper-income seniors.

“I felt it my responsibility to come to this floor as someone who speaks about entitlements, as someone who believes we’ve got to exercise fiscal discipline, as someone who believes we ought to take care of the less well off in our country, which is taken care of by the present law,” Hoyer said on the floor. “We have to buck up our courage and our judgment and say, if we take care of everybody, we won’t be able to take care of those who need us most. That’s my concern.”

In fact, four other House Democrats voted “No” on the bill–Brian Baird (WA), Melissa Bean (IL), Baron Hill (IN), and Adam Smith (WA).  I think these Democrats can be considered the least deserving of the “cowardly Democrats” label–at least regarding this particular decision on this particular issue.  Similarly, I think the 13 Republicans who voted “No”–including the ranking Republican member of the House Budget Committee, Paul Ryan (WI)–are probably the Republicans least deserving of the “hypocrites” label.

I’m in Charlottesville, VA tonight having combined a business trip with a campus visit for my oldest daughter, who’s a senior in high school. I’m happy to report (being the Virginia residents that we are) that she really liked what she saw today on her informal tour with a friend who’s a first-year student here.

But I didn’t have time to follow the Senate debate on the health bill today, nor to think of anything else to post.  But Donald Marron posted something today that I honestly meant to blog on earlier this week–President Obama arguing with George Stephanopoulos about what is or is not a “tax.”  Of course, this is not “news” to me given how the Administration has referred to their proposed “revenue enhancements” as “factors” and “things” before–anything but the dreaded “T word.”

So I don’t feel like slicing and dicing the various definitions of “tax” tonight, because having just given a talk on fiscal responsibility and the federal budget today (here in Charlottesville), all I feel like saying about it is I don’t care what you call it, we need to stop wimping out behind labels and find the courage to “just do it.”

The Baucus proposal for health care reform is about to get “modified” in the Senate.  Some politicians would claim “improved”–because they’ll get more of what they want (and what they think their constituents want).  We should expect to see more generous subsidies (i.e., a more costly bill) and yet more vagueness about the necessarily-higher offsets (if they stick to their target of deficit neutrality)–because that’s how things get negotiated in the Senate.  Evidence?  This afternoon the Washington Post reports (emphasis added):

Sen. Max Baucus (D-Mont.) said he revised the package he introduced last week to make it more affordable for low- and middle-income Americans while keeping it from adding to the federal deficit. “This modification incorporates important ideas from my colleagues on both sides of the aisle,” he said in a statement explaining the new provisions.

Baucus said the new package “is estimated to cost less than $900 billion” over 10 years, an increase of about $50 billion from his earlier price tag. Among other provisions, he said, the revised plan increases the “health care affordability tax credits” that enable low- and middle-class people to buy health insurance, reduces limits on out-of-pocket costs and cuts penalties for those who fail to obtain health insurance…

“There are a lot of things I can support in this package,” [Republican Senator Charles] Grassley said, praising the bill’s “fiscally responsible” approach of fully offsetting its costs. But he asserted that it imposes a variety of new taxes, fails to prevent taxpayer funding of abortions and leaves medical malpractice reform unresolved. He also charged that it does not do enough to prevent federal subsidies from going to illegal immigrants, failing, for example, to block the use of fake Social Security numbers.

In addition, Grassley blasted an individual mandate to purchase insurance coverage, calling it “an intrusion into private life” that would require extensive new enforcement tools…

Sen. Olympia J. Snowe (R-Maine), like Grassley a member of the Gang of Six, praised elements of the bill, which eschews a government-run “public option” for health insurance in favor of nonprofit cooperatives in a new system of “exchanges.” She said, however, that she is still worried about the affordability of health insurance for middle-class families that would have to purchase it, and she called for a further expansion of proposed subsidies…

And this is even before we’ve heard the details of the more than 500 amendments (the Post reports 564!) that will be considered.  This ain’t gonna be pretty.  Or maybe it will look pretty on the outside (generous, meaningful, substantial, and helpful) and yet be pretty ugly on the inside (in terms of courage and fiscal responsibility).  More here as it’s revealed. (Wait ’til you see what they do to really muck up the excise tax offset and the various larger leaps of faith we’ll have to take regarding future Medicare savings.)

According to an AP story by Hope Yen, a new Census Department survey (the “American Community Survey”) suggests that a common symptom of this recession is that people are feeling stuck–in several different ways.

Stuck wherever they live (because it’s expensive to move):

Preliminary data earlier this year found that many Americans were not moving, staying put in big cities rather than migrating to the Sunbelt because of frozen lines of credit. Mobility is at a 60-year low, upending population trends ahead of the 2010 census that will be used to apportion House seats…

Stuck in long commutes (because living close in and/or driving alone is expensive):

The percentage of people who drove alone to work dropped last year to 75.5 percent, the lowest in a decade, as commuters grew weary of paying close to $4 a gallon for gasoline and opted to carpool or take public transportation.

Twenty-two states had declines in solo drivers compared with the year before, with the rest statistically unchanged. The decreases were particularly evident in states with higher traffic congestion, such as Maryland, Texas and Washington.

Average commute times edged up to 25.5 minutes, erasing years of decreases to stand at the level of 2000, as people had to leave home earlier in the morning to pick up friends for their ride to work or to catch a bus or subway train…

And stuck in single-hood (because getting married is expensive, as it often starts the journey into home-ownership and parenthood):

Nearly 1 in 3 Americans 15 and over, or 31.2 percent, reported they had never been married, the highest level in a decade. The share had previously hovered for years around 27 percent, before beginning to climb during the housing downturn in 2006.

The never-married included three-quarters of men in their 20s and two-thirds of women in that age range. Sociologists say younger people are taking longer to reach economic independence and consider marriage, because they are struggling to find work or focusing on an advanced education…

But in recessionary times people are often stuck in marriages, too–because getting divorced (and splitting up a household and hiring attorneys) is even more expensive than getting married.  (See this story for example.)  Funny how both marriage and divorce appear to be “luxury” goods (or bads?)…

(And then of course there were the “staycations” many of us took this summer–stuck around home.  Not that that was a bad thing, depending on where “home” is for you.  I’m kind of spoiled with “home” being DC…)

Bottom line:  a slow economy tends to keep a lot of people “stuck” wherever they are, because real change is not just hard to do–it’s typically expensive, too.  It seems it takes money to “go with the flow.”

Last Thursday, the Congressional Budget Office released a report on “The Economic Effects of Legislation to Reduce Greenhouse-Gas Emissions.” The report attempts to quantify the economic cost of the proposed policy changes–answering the (relatively narrow) question:  what would be the negative effect on GDP caused by higher prices of carbon-based energy?  The trouble is the report doesn’t attempt to quantify the benefits of the proposed legislation–so it’s not clear how useful this report will be to policymakers who should ideally at least implicitly be weighing social costs against social benefits in deciding whether policies are in fact worth pursuing.

In his blog, CBO director Doug Elmendorf summarizes their conclusions (emphasis added):

CBO concludes that the cap-and-trade provisions of H.R. 2454, the American Clean Energy and Security Act of 2009, would reduce GDP below what it would otherwise have been—by roughly ¼ to ¾ percent in 2020 and by between 1 and 3½ percent in 2050. By way of comparison, CBO projects that real (that is, inflation-adjusted) GDP will be roughly two and a half times as large in 2050 as it is today, so those changes would be comparatively modest. In the models that CBO reviewed, the long-run cost to households would be smaller than the changes in GDP because consumption falls by less than GDP and because households benefit from more time spent in nonmarket activities. Moreover, these measures of potential costs do not include any benefits of averting climate change.

In fact, the CBO report acknowledges (on pages 3-4) that they avoid the thorny issue of valuing the cost of climate change itself (and the benefit of avoiding climate change).  They explain (emphasis added):

Despite the wide variety of projected impacts of climate change over the course of the 21st century, published estimates of the economic costs of direct impacts in the United States tend to be small. Most of the economy involves activities that are not likely to be directly affected by changes in climate…

[A] relatively pessimistic estimate for the loss in projected real gross domestic product is about 3 percent for warming of about 7° Fahrenheit (F) by 2100. However, even for the levels of warming that have been examined, most of the estimates cover only a portion of the potential costs. Other costs in the United States could come from nonmarket impacts (which are not measured in GDP) and from the potential for abrupt changes…

They go on to explain that the “nonmarket impacts” of climate change:

are very difficult to evaluate in monetary terms because they do not directly involve products that are traded in markets. Although such difficulties apply to effects on human health and quality of life, they are particularly significant for biological impacts, such as loss of species’ habitat, biodiversity, and the various resources and processes that are supplied by natural ecosystems. Experts in such issues generally believe that those nonmarket impacts are much more likely to be negative than positive and could be large.

(Note the mention of this problem measuring “nonmarket” benefits as applicable to “effects on human health”–and hence the debate over health care reform–as well.  I’ve said before that the reasons to expand health care coverage shouldn’t be limited to “because it will save money”–even over the longer run.  Presumably we choose to “buy” things, and on net pay out money, for a reason.)

The CBO report also discusses the small possibility of a potential abrupt and catastrophic effect of climate change which could have large economic costs (as well as broader social costs) but (again) which economists don’t really know how to quantify given the tremendous scientific uncertainty:

Experts believe that there is a small possibility that even relatively modest warming could trigger abrupt and unforeseen effects during the 21st century that could result in large economic costs in the United States. Two examples of such possible effects are shifts in ocean currents that could change weather patterns and affect agriculture over large areas, and rapid disintegration of ice sheets, which could dramatically raise sea levels around the world. The sources and nature of such abrupt changes, their likelihood, and their potential impacts remain very poorly understood.

What I see as the trouble with CBO–known as the official “scorekeeper” for legislation being considered by Congress–doing a quantitative analysis of the “economic effects” of climate change policy, is that all their qualifying statements about their inability to quantify (in dollar terms) the main point of climate change policy (avoiding environmental damage and what that means for the broader well-being of our society) will be lost on the policymakers, and hence on the public as well.  People look for the numbers in a CBO report and will surely use the numbers about what’s bad about climate change policy as a reason not to enact that policy, as long as there are no concrete numbers to support the merits of the policy.  In other words, it’s hard for CBO to be the unbiased arbiter on policy evaluation if they’re only “tooled up” on one side of the debate.

That’s why the report released this week on alternative measures of well-being (getting beyond aggregate, market-based GDP in particular), commissioned by French President Sarkozy and written by Nobel laureates Joseph Stiglitz and Amartya Sen is particularly relevant and timely.  There’s a nice summary of the report’s findings on the International Political Economy Zone blog.  And here’s a link to a Bloomberg article on Stiglitz’s position, which contains this “money quote” (ironic pun intended):

“So many things that are important to individuals are not included in GDP,” said Stiglitz, a Columbia University professor.

How about that? Even very wise economists understand that well-being and true happiness go beyond things that have dollar signs in front of them. 

I’m too sleep-deprived to do a careful analysis of the Baucus plan tonight, but as I was reading over the CBO analysis of the proposal, a familiar feeling came over me.  I realized the Senate Finance chairman’s health reform plan feels a lot like the Bush tax cuts did when they were first proposed, in these ways (that I can think of tonight–maybe you can think of more):

• The Baucus proposal contains a lot of “bipartisan” elements that (theoretically) should attract Republicans and not just Democrats to the bill.  It expands health insurance coverage (a crucial feature for the Ds) but offsets some of the gross cost of expansion with a revenue increase (excise tax on high-end policies) that removes some of the distortion caused by the current tax exclusion of employer-provided health care (hence, this gets prices a little more right–an idea that Rs, including Senator McCain, probably like more than the Ds).   The $500 billion net cost of the expansion of health coverage is offset with a mix of spending cuts ($409 billion, which Rs should prefer) and revenue increases ($139 billion, which Ds should prefer).  That “bipartisan” feel to the proposal reminds me of the Bush tax cuts, which had a mix of marginal tax rate reductions which appealed to the Rs, with refundable tax credits which the Ds wanted.

• The Baucus proposal assumes cost savings that would occur under current law even though Congress routinely backs away from that commitment. This reminds me of the assumption of a growing alternative minimum tax (AMT) under the Bush tax cuts:  that assumption–that current tax law would be honored and AMT revenues would rise dramatically–held down the officially-scored cost of the Bush tax cuts below what their true cost turned out to be with the repeated (deficit-financed) extensions of temporary AMT relief.  The Baucus bill achieves deficit-neutrality–even likely over the second ten years according to CBO–largely due to what the proposal assumes would happen to Medicare payments to providers over time.  As CBO explains (on page 9 of their letter, emphasis added):

These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments. The projected savings for the Chairman’s proposal reflect the cumulative impact of a number of specifications that would constrain payment rates for providers of Medicare services. In particular, the proposal would increase payment rates for physicians’ services for 2010, but those rates would be reduced by about 25 percent for 2011 and then remain at current-law levels (that is, as specified under the SGR) for subsequent years. Under the proposal, increases in payment rates for many other providers would be held below the rate of inflation (in expectation of ongoing productivity improvements in the delivery of health care). The projected savings for the proposal also assume that the Medicare Commission is relatively effective in reducing costs—beyond the reductions that would be achieved by other aspects of the proposal—to meet the targets specified in the legislation.

Of course, even though I say the Baucus proposal contains a lot of “bipartisan” elements, the fact is that it doesn’t have bipartisan support–not presently at least.  In fact, even the Democrats aren’t all that crazy about it; it’s not just that the Republicans won’t buy it.  And that’s all the more reason that I worry that the same thing that happened with the Bush tax cuts will happen to this health reform bill:  to win the support of more members of Congress you have to keep adding more costly elements to the proposal (–the mentality is: “if you get what you want, then I get what I want” rather than “I’ll give up this part if you give up that part”).  And if a bill eventually passes that hands out a lot of gain and very little pain, then even those who originally opposed the bill for its unaffordability might have a hard time voting against its extensions later on.  Don’t you think so?

UPDATE Friday morning:  Just check out this story in today’s Washington Post (by Shailagh Murray and Lori Montgomery) to get a strong hint at what I mean.  The only “bipartisanship” seems to be in complaints that the Baucus bill has too much “pain” and not enough “gain”:

Democrats and Republicans alike worry that a bill intended to address one source of financial hardship — the skyrocketing cost of health care — could lead to another, in the form of hefty premiums…

Some Senate Democrats, along with a key moderate Republican, Sen. Olympia J. Snowe (Maine), are now discussing ways to increase assistance for individuals and families who could face premium costs of up to $15,000 per year by 2016. Sen. Charles E. Grassley (Iowa), the ranking Republican on Baucus’s committee, is suggesting government assistance to insurance companies to help them control premium costs. And lawmakers in both parties are questioning whether Baucus’s main revenue source, an excise tax on insurance companies for their most generous insurance policies, would simply be passed on to consumers…

Kind of reminds me of how climate change policy’s going, too.  Folks are always in favor of the desired outcome of the policy (making things better) as long as you can get there without actually having to ingest the active ingredient (bitter medicine?) in the policy.  If we can reduce global warming without raising energy costs, better control health care spending without reducing the subsidies to health insurance, improve our fiscal outlook without raising any taxes or cutting any non-wasteful spending…it’s all pretty much the same story (a fantasy).

(***UPDATE Friday: My spam blocker is showing a little more life now, so I’m cautiously going to open up unmoderated comments today and just keep checking often. Keeping fingers crossed.)

I’ve been bombarded with spam comments (I mean real spam not just comments that are critical of me!) over the past couple days–so much so that until I figure out the problem, I want to hold all comments in a queue for me to review before they are published on the site.  That will mean (if the moderation queue works properly) that your legitimate comments will not appear right away but only once I can sit down with my laptop and internet connection and “approve” them.

My being out of town for the next day means there will be a longer wait in the comments queue than I would ideally like to make you sit through.  Perhaps when I’m back at the office I can open it up again and just swat away the spam as soon as I catch it.  But ideally I will figure out how to more permanently fix it (or it will magically fix itself)–to get my automatic spam blocker to “reconnect” with my site again.  I appreciate your patience.