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Why They Are Leaving

February 28th, 2010 . by economistmom

Well, in this interview with CNN’s Don Lemon, the Congressmen say it’s mostly for personal reasons–wanting to spend time with their children and grandchildren–but it also seems obvious that the frustration over the partisanship and the inability to work together to get things done is what makes the difference at the margin, especially for these centrist-leaning members.  And here’s another part of the interview that asks them, “Is the government broken?”

Let the “Elephant” Save the “Parrot”

February 26th, 2010 . by economistmom


YouTube video of a GE commercial (there’s both a dancing elephant and a parrot in it–as well as other supporting characters in this unusual “Singin’ in the Rain” cast).

The “elephant” is not a reference to the GOP, but the “parrot” is a reference to health care reform… (Stay with me here…)

The Washington Post’s Kevin Huffman writes about both animals today, in the context of yesterday’s health reform summit (my emphasis added):

Thursday’s health-care summit was the latest episode in an epic battle between the elephant and its rider.

The elephant, in a metaphor originally devised by psychologist Jonathan Haidt, stands for our emotional side. It enables our capacity for love and loyalty and is behind our drive to protect our families. The rider stands for our rational side. It’s what makes long-term plans, sets the alarm clock and tells us to walk away from that pint of Ben & Jerry’s.

For the better part of the past year, Democrats have appealed to logic with health-care proposal after complicated health-care proposal, while Republicans have appealed to tea party emotion. It’s been comprehensive reform vs. the audacity of nope, and, if you believe the polls, nope is winning.

How is this possible? Well, in the fascinating new book “Switch: How to Change Things When Change Is Hard,” authors Chip and Dan Heath draw from social science research to argue that we embrace change only by bringing these oft-conflicted systems into alignment. They argue, “When change efforts fail, it’s usually the elephant’s fault since the kind of change we want typically involves short-term sacrifices for long-term payoffs.” At the same time, the rider without the elephant is prone to paralysis by over-analysis. Ultimately, the authors write, “a reluctant elephant and a wheel-spinning rider can both ensure that nothing changes.”

To me, this elephant-and-rider story is not just reminiscent of the health care debate; it’s the storyline of anything the government tries to do for the sake of “fiscal responsibility.”  It’s a hard problem to solve and the “elephant” in all of us isn’t just unconvinced, but completely disengaged…disenchanted…uninspired… BORED.

At yesterday’s health care summit, the President was indeed in control and acting like “commander in chief”–but more than that he was acting like “professor in chief” (as the Post’s Dana Milbank emphasizes in his front-page story and as I “tweeted” saying “Professor Obama is on a roll…”).  But who was listening, and who changed their minds?  Out of everything the President explained, got right, and straightened out (like the wise and commanding professor), the line that probably made (or should have made) the most impact with not just the politicians but more importantly the American public (if they were watching at that point) was this one highlighted by E.J. Dionne:

[G]ood for Obama for asking Sen. John Barrasso (R-Wyo.) if he would really rather have catastrophic care than comprehensive health coverage…But Obama then made the central point of the whole day. Speaking of the uninsured, he said: “We can debate whether we can afford to help them. We can’t say they don’t need help.”

Back to Kevin Huffman’s column, he also thinks appealing to the compassion in the politicians and Americans more generally would have been better than lecturing to them:

My unsolicited advice: a little less rider, a little more elephant. When Kathleen Sebelius talks up “pooled purchasing options,” people’s eyes glaze over. The logical arguments are good, but my elephant could not care less. Instead, try tapping into a deeper sentiment: This is America. We are the kind of country that doesn’t let a man go bankrupt because his wife or kids get sick. We believe everyone deserves a doctor. That’s who we are.

So what’s the “parrot” got to do with anything?  Again from Kevin Huffman:

In “Switch,” the authors tell a story about the St. Lucia parrot — a magnificent, colorful creature that lives only on that Caribbean island. Biologists were writing the species’ eulogy when conservation activist Paul Butler found himself charged with figuring out how to save the parrot. Butler had ideas: create a bird sanctuary, license eco-tourism and muscle up the punishments for harming the parrot. But he also had a problem. Most people on St. Lucia didn’t know about the parrot, let alone care, and some people even ate the poor bird. What to do?

Instead of making an analytical case, Butler went for the emotional. He appealed to St. Lucians’ national character. The message: We are the kind of people who take care of our own. This bird is ours alone, and we must protect it. He built popular support for new laws, and today, there are seven times as many parrots happily squawking on the island.

If the appeal to “emotional side” in all of us had been emphasized at yesterday’s summit, not only would the politicians have been more likely to see the “common ground” between them in terms of the goal or the “prize,” but they also would have been more inclined to work together to find agreement about the really tough choices about how to afford to claim the prize–how to achieve what everyone actually wants to do about health care, and deficit reduction, and all the other difficult policy issues that get stuck because people care only enough to want the goodies but not enough to be willing to pay for them.

It’s like I said in reaction to the President’s fiscal commission:

[T]he first thing the President’s fiscal commission needs to do is to start getting out there and talking with real Americans, educating them about why we even need to worry about the budget deficit, and asking them about the (hard) choices they’re willing to make (or not).

…because I have a feeling that what Paul Tsongas said was right (that we are better than what our leaders ask us to be), and we as Americans may be more willing to save the “parrot” of health care reform (or fiscal sustainability more generally) than our politicians realize.  They just have to talk with us more about the parrot and all there is to love about it, rather than all there is to think about it.  They have to let our elephant in us save the parrot.

Ezra’s Pre-Game Show

February 25th, 2010 . by economistmom

Oh, boy!  Are you ready for a full day of health-reform summit viewing?  (Complete and live coverage will be on C-SPAN today, with extensive live coverage on CNN.)

Ezra Klein, the Washington Post’s uber-blogger and resident health policy expert (and all-around wunderkid), does a nice job summarizing what to expect from today’s bipartisan meeting of minds (…ok, probably just a meeting of bodies).

And here are some other pre-game features from this morning’s Post:

Friday morning update:  Ezra’s “post-game wrap-up” is great.  Visit his blog site and then scroll down for the whole day’s worth of posts–including a Skype chat with Diane Sawyer!  (More from me on the summit later.)

The Wyden-Gregg Bipartisan Tax Reform Plan: A Familiar Pattern

February 23rd, 2010 . by economistmom

gregg and wyden hearing

I do like that Senators Wyden (D-OR) and Gregg (R-NH) have worked together in a bipartisan manner to come up with a tax reform plan that lives up to the term “reform” (as in “improvement”) by actually broadening the tax base and eliminating some tax expenditures that seem to have little economic justification.  But a read through their own op-ed in today’s Wall Street Journal suggests how they chose which particular tax expenditures to eliminate and which to keep (emphasis added):

By streamlining and modernizing the outdated tax code, our proposal would eliminate many of the specialized tax breaks that currently benefit one group of Americans over another. The changes we propose will create policies that benefit everyone. They include: fiscally responsible middle-class tax cuts, business tax breaks to help American companies compete globally and create jobs, and a fairer and simpler tax system for all Americans…

We make fiscally responsible tax reform possible by eliminating many of the specialized tax breaks strewn throughout the tax code. Our legislation maintains the most popular tax breaks like the mortgage interest deduction and the health-care tax exclusion, while eliminating specialized exemptions such as a company’s ability to deduct as a business expense punitive damages resulting from lawsuits.

Our legislation also eliminates tax incentives that encourage American businesses to keep more of their foreign earnings overseas and export jobs by repealing the rule that allows U.S. companies to defer taxes on foreign income. And we take a hard line on corporate welfare by directing the Congressional Budget Office to examine the roughly $90 billion that the federal government spends to subsidize businesses directly and indirectly each year. These steps not only make the tax code simpler and fairer for everyone, they reduce opportunities for individuals and businesses to cheat the system and avoid paying their fair share…

The pattern is familiar:  even in base-broadening tax reform, avoid raising taxes on “real people” and instead reduce tax preferences that currently benefit “evil corporations”–or otherwise attack things that seem to fall under the “waste, fraud, and abuse” category.  Note that the proposal only directs CBO to “examine” tax expenditures, and only the corporate ones at that.  Wyden and Gregg make a point of preserving the “most popular” tax expenditures and specifically point out their keeping the mortgage interest deduction and the health-care exclusion.  Just because these are “popular” doesn’t mean they’re (economically) “smart.”  The two examples touted are in fact the two single largest tax expenditures in the federal budget–the mortgage interest deduction costing more than $100 billion per year, and the health care exclusion more than $150 billion per year (each more than the value of all corporate tax expenditures combined).  Eliminating the health care exclusion alone would be enough to get the 2015 deficit down to the Administration’s goal of 3 percent of GDP and would promote greater efficiency in the health care market by bringing out of pocket prices more in line with the true cost of health care (thus helping to damp down excess demand and ultimately bring down health costs).  But any good politician would ask:  why would we want to do that if it means so obviously raising taxes on real people–even if it would work to reduce health costs over time?…

And that’s why it’s hard to be popular and smart at the same time.  And if politicians propose a “bipartisan” tax reform plan you can be sure it looks like it gives more away than it takes and probably doesn’t do as much to truly “reform” the tax system as is advertised.  The Wyden-Gregg proposal is a step in the right direction, but it’s not that bold a change and doesn’t really make any tough choices.  It’s a familiar pattern.

The Elusive Fiscally-Responsible Common Ground

February 22nd, 2010 . by economistmom

The White House presented their proposal for health care reform today with a good deal of virtual fanfare on their very impressive webpage devoted to the much-hyped “health care meeting.” (For the real live show and audience participation/crowd reaction, we’ll have to wait until Thursday.)

The proposal is supposed to be somewhat a compromise between the House and Senate versions of health reform.  But it’s a very familiar kind of compromise in that instead of encouraging both sides to give up something that they want (but is costly), it trims the fiscally responsible pay-fors that make the most economic sense but that politicians (on both sides of the aisle actually) would rather not swallow.  In the case of health reform, the number one smartest thing to include is the higher taxation of employer-provided health benefits.  The Senate proposal included this feature via an indirect excise tax levied on insurance providers, which was already somewhat of a “second best” solution from an economic perspective because it didn’t allow the tailoring to households’ ability to pay that a tax levied directly through the personal income tax would.  The Senate’s indirect tax, in an attempt to look like it didn’t burden anyone who wasn’t truly rich, had already been diluted by exempting all but the most expensive insurance policies, and it wouldn’t take effect until 2013.  But the President’s proposal reduces the tax further by delaying the tax another five years, to 2018.

If you look at the section on the White House’s health meeting webpage that highlights the “Republican Ideas” the Administration supports/includes and compare it with the subsection on the aspects of the President’s proposal for “Ensuring Fiscal Sustainability” (implying the proposals that actually lower the deficit), you’ll find no overlap.  That’s because the only thing both sides agree on is in cutting things that sound like they’re just “waste, fraud, and abuse”–which doesn’t get us far enough to count as “ensuring” “fiscal sustainability.”

Given what the White House reveals/admits on their health meeting webpage, we shouldn’t expect to be dazzled by all the “bipartisan fiscal responsibility” we’ll see on Thursday.

Jon Stewart on the “Trap” of the President’s Health Reform Summit

February 21st, 2010 . by economistmom
The Daily Show With Jon Stewart Mon - Thurs 11p / 10c
The Apparent Trap
www.thedailyshow.com
Daily Show
Full Episodes
Political Humor Health Care Crisis

It was the focus of the President’s weekly radio address (video and transcript here), but Jon Stewart’s (Daily Show) discussion of the upcoming health summit is hilarious and more enlightening at the same time.

And Speaking of Magic Ponies…

February 20th, 2010 . by economistmom

magicpony

For some reason there’s a recurring “equine” theme in the recent talk about how to achieve fiscal responsibility…

Apparently Larry Kudlow thinks the President’s fiscal commission is a clever trick of sorts to force (and sneak) tax increases onto unwitting Americans (uh, NO, Larry…I’ve said the commission’s first assignment should be to get all the issues and policy options “on the (open) table” with the American public)–for he’s suggesting we swap the “magic pony” of supply-side tax cuts for the “Trojan horse” of the commission:

Take, for example, Obama’s new deficit commission. It’s a bad idea. This commission is a fig leaf to cover up President Obama’s out-of-control budget. It’s a Trojan horse for tax hikes, especially a value-added tax that would engulf the middle class with up to a 15 percent tax rate on the sale of goods and services. Obama is getting ready to move his lips on the pledge not to raise middle-class taxes. Congressional Republicans must not let him do this…

Rather than tax hikes, I say stop the spending…

Why not stop the multiple taxes on all forms of saving and investing, including capital gains, dividends and inheritances? And why not eliminate the business tax on profits in favor of a sales tax on net revenues that would deduct all investment expenses? That would leave us with a single-rate consumption-based income tax that would grow this economy by 7 percent to 8 percent in the years ahead, just as the economy should grow after a deep recession.

Going back to the debt-to-GDP ratio, I want to grow the denominator (the economy) and reduce the demand for the numerator (spending and borrowing). That means a combination of supply-side tax cuts and firm spending limits.

(Never mind Larry’s odd self-contradiction of first criticizing the idea of a broad-based consumption tax (as an add on) and then coming back to recommend a broad-based consumption tax (as a replacement); yes, the key difference is whether it would actually raise enough revenue and reduce the deficit, or not…)

And by the way, exactly who will ride Larry’s magic pony in his fantastic vision of how to get things right?  Larry gleefully explains:

let’s especially use this Tea Party power to stop Democratic plans for another round of broad-based tax increases.

Thanks to Bruce Bartlett for directing me to Larry’s magic pony story, and for pointing to another stupid idea for an alternative to the fiscal commission–going ahead and defaulting on the debt.  I think I’ll label that the “Mister Ed” option, because only someone as eccentric and naive as a “Wilbur” would listen to (even “hear”) such crazy ideas as those of Ed.

mister-ed

A horse is a horse, of course, of course.  And no one can talk to a horse of course…  Unless…

A First Assignment to the Fiscal Commission: Find Out If We Americans Are Indeed Better Than Our Leaders Ask Us to Be

February 18th, 2010 . by economistmom

This morning President Obama signed an executive order establishing a new, bipartisan “National Commission on Fiscal Responsibility and Reform” and made it clear that the commission would be welcome to suggest tax increases as part of their recommended policy mix for deficit reduction.  And just a little later this morning, a desperate man crashed his small plane into an IRS building in Austin, Texas, because he was outraged about his high tax burden.  (Read his suicide note here.)

On the commission, here is budget director Peter Orszag’s blog post, and as CNN’s Jeanne Sahadi explains:

NEW YORK (CNNMoney.com) — President Obama issued an executive order on Thursday that formally creates a bipartisan fiscal commission, a first step to forcing painful decisions needed to get the U.S. debt load under control.

Raising taxes, cutting spending and reforming Medicare and Social Security are all fair game, and thought to be impossible without the backing of both Republicans and Democrats.”Everything’s on the table. That’s how this thing is going to work,” the president said immediately after signing the order.

The commission must deliver a report to the president by Dec. 1 that makes recommendations for bringing annual deficits to no more than 3% of the size of the economy [by 2015]…

The commission will also be expected to suggest ways to permanently lower the country’s total debt…

The president formally named the two co-chairmen he has chosen for the commission: Alan Simpson, a former Republican senator from Wyoming, and Erskine Bowles, a Democrat who served as White House chief of staff under President Clinton.

He said the two men “are taking on the impossible: they’re going to try to restore reason to the fiscal debate.”…

Deficit hawks say that the country cannot adequately address the looming fiscal shortfalls without addressing both taxes and spending.

The presidentially-appointed commission might not be as “toothy” as a Congressionally-legislated commission, but (again, from the CNN story):

…there is a chance that recommendations from the presidential commission will be given serious consideration. Senate Majority Leader Harry Reid, D-Nev., and House Speaker Nancy Pelosi, D-Calif., have given their assurances — in writing — that they will bring the group’s recommendations to the floor for procedural votes before the end of the year. The House will only take them up, however, if they pass the Senate first.

Voting for the commission’s recommendations will likely be a tough pill for both parties. But the idea behind a bipartisan panel is that it can give political cover to lawmakers since no recommendation can be made unless it has the support of 14 of the 18 commissioners.

Matt Miller has it right to emphasize that the toughest obstacle to establishing fiscal sustainability isn’t in figuring out the right economic policies, but rather in having the political will to see them through (emphasis added):

The good news from the Clinton experience is that the chronicle of debt foretold in Obama’s budget is perfectly consistent with a return to fiscal sanity much sooner. The bad news is that our bipartisan blend of fiscal dishonesty and political calculation has reached the point where it’s hard to know who will spark the debate we need about the real choices America faces.

Republicans act as if near-term deficits are a bad thing, when in fact the flood of spending both from the stimulus and the Federal Reserve’s creative liquidity injections brought the economy back from the brink. The new Republican “it” boy on fiscal policy, Rep. Paul Ryan of Wisconsin, indulges in the mathematical and political fantasy that we can keep taxes at their historic level of 19 percent of GDP while doubling the number of people on Social Security and Medicare.

Democrats, meanwhile, are boxed in by Obama’s unsustainable pledge not to raise taxes on Americans earning less than $250,000 — a policy that only “works” if we think we can borrow all the cash for the baby boomers’ retirement from China. Nor will Democrats explain to their liberal base that trimming Social Security benefits for better-off retirees will be a progressive way to fund better teachers for poor children in the era of permanent fiscal pressure ahead.

It’s such a surreal moment that admissions of cowardice somehow pass for evidence of fiscal rectitude. Whatever its merits — and let’s all wish it well — the very need for Obama’s new fiscal commission amounts to an extraordinary confession.

“We refuse to risk our hold on power,” our leaders are essentially telling us, “by coming clean on our own about the tax increases and spending cuts we know are needed to pass a sound nation to our children.” Thus “political leadership” becomes an oxymoron. Odds are we’ll fix the budget once enough of us show our leaders it’s safe to do what needs to be done

The late Paul Tsongas, one of the co-founders of the Concord Coalition, said at Concord’s birth in 1992 that:

“We are better than what we are being asked to be by our leaders.”

Now, we who work at today’s Concord Coalition must still hold some degree of optimism on the being “better” part (or else why would we keep doing what we do); see our participation on this joint statement (with two other organizations) on the fiscal commission. But I have to admit that (the motive for) today’s plane crash in Austin, and the result of two recent polls on the willingness of Americans to make the tough choices to reduce the deficit, do challenge that optimism.  First, a Rasmussen poll (discussed in further detail by Eric Kleefeld of Talking Points Memo) suggests that many Americans (particularly Republicans) would rather have budget deficits and tax cuts than a balanced budget with higher taxes.  (Never mind that there’s no such thing as a “free” tax cut and that deficit-financed tax cuts just turn into much larger required tax increases in the future.)  Additionally, a New York Times/CBS News poll that was cited in yesterday’s NYTimes article by Jackie Calmes told us that Americans believe Bush Administration policies are to blame for the large deficits but that they’re not willing to reduce the deficit by cutting health care or education or (even) military spending.  One question Jackie did not report on was the following (#39):  “The Obama administration has proposed letting the tax cuts passed in 2001 expire for households earning about $250,000 a year or more.  This would increase federal income taxes for those people.  Do you think this proposal is a good idea or a bad idea?” The responses:  62% said “good idea,” 31% said “bad idea,” and 7% said “don’t know.”  But that is not surprising, because far more than 62% of the people are being asked about a tax increase on someone else.

So the question about the tax increase on the rich is not a very helpful one, because the response only reflects the perception suggested by the first (tongue-in-cheek) comment in the story about the Rasmussen poll:

I favor balancing the budget by raising everyone’s taxes but mine. I also want a magic pony.

All this empirical evidence on how much Americans understand the deficit (not very well) and what they want to do about it (nothing themselves, if they can help it) tells me that the first thing the President’s fiscal commission needs to do is to start getting out there and talking with real Americans, educating them about why we even need to worry about the budget deficit, and asking them about the (hard) choices they’re willing to make (or not).  Once Americans better understand how deficits adversely affect the economy and hence impose broadly distributed costs on society, the question that needs to be asked is not just about the kind of broad-impact spending cuts and narrow-impact (only on the rich) tax increases people would be willing to see, but whether they’d be willing to see higher taxes as part of a deficit-reduction package, even if those taxes are their own. More specifically, if the President’s commission quickly comes to the realization that not raising taxes on households under $250,000 is NOT an option, would a majority of Americans still say “yes” to the survey question on the 2001 tax cuts if the income floor were struck from it?

Are we Americans indeed better than our leaders have (thus far) asked us to be?

What Matters Is “Marginal” Job Creation and “Marginal” Deficit Reduction

February 17th, 2010 . by economistmom

With today being the one-year anniversary of the American Recovery and Reinvestment Act of 2009 (more commonly referred to as “the stimulus”), and President Obama expected tomorrow to announce his Presidential commission for deficit reduction, I’m hearing a lot of claims and rhetoric about what has “worked” versus what has not, and what has to be done going forward versus what should remain “off limits.”

In all these arguments and politically-colored “evaluations”, I hear misplaced focus on (the stark and easy-to-talk-about) absolutes, averages, and aggregates, when what matters economically are relatives, marginals, and individuals.

Let me elaborate a bit with the two issues at hand…

On the Stimulus: Republican critics of the stimulus argue that the “proof” that the stimulus hasn’t worked lies in the still-bad numbers of the unemployed–that since ARRA’s passage last year, total jobs in the economy have decreased, not increased.  As the New York Times’ David Leonhardt explains:

The reasons for the stimulus’s middling popularity aren’t a mystery. The unemployment rate remains near 10 percent, and many families are struggling. Saying that things could have been even worse doesn’t exactly inspire…

[T]he debate is largely disconnected from the huge stimulus experiment we just ran. Why? As Senator Scott Brown of Massachusetts, the newest member of Congress, said, in a nice summary of the misperceptions, the stimulus might have saved some jobs, but it “didn’t create one new job.”

But of course ARRA made a difference and surely did “create jobs” at the margin–even if the economy continued to lose jobs in aggregate.  If the net job losses would have been greater without the stimulus, then the stimulus “created” jobs.  That ARRA prevented some jobs from being lost is surely the case in the state and local government sector, where it did not matter what kind of incentive (”substitution” or relative price) effects the stimulus set up for those governments; those governments have budgets that have been so thoroughly bumped up against their binding constraints that any kind of transfers to those governments (even pure cash ones) have to have prevented some of their workers from being let go.

That doesn’t mean that ARRA couldn’t have been better designed to get more (or faster) “bang per buck”; there were parts of the policy that were far more about steering the longer-term economy in a slightly different direction than about stimulating economic activity (any kind of economic activity) now.  And even the parts of ARRA that were done in the name of “stimulus” weren’t always so “stimulative”, because there was too much worry about getting the “right mix” of tax cuts versus spending–where the notion of “just right” depended on the politics, not the economics.

On the President’s Fiscal Commission: The big question is whether Republicans are going to participate.  Get ready for tomorrow’s rhetoric from the Republicans that there doesn’t need to be a (general) “fiscal” commission–there needs to be a “spending” (cuts only) commission, their argument being that the long-term fiscal challenge is mostly on the spending side of the budget, not the tax side.  As the Washington Post’s Lori Montgomery reports:

On Tuesday, however, House Minority Leader John A. Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.) again declined to say whether they would name members of the panel. “Blue-ribbon commissions are fine and dandy, but we’re still waiting for a response from the president on our proposal to start cutting spending right now,” said Boehner spokesman Michael Steel.

But this presidential commission/advisory panel is going to be different than the President’s earlier “tax reform” one.  The New York Times’ Jackie Calmes explains that this advisory body is going to leave everything on the table, including tax increases that contradict the President’s own campaign promises:

Elected Republicans, however, are under intense pressure from their party’s conservative base to oppose any tax increases — a line in the sand that dims any prospects for bipartisan cooperation. Yet economists, including veterans of past Republican administrations, are vocal in insisting that the debt problem is too great to be solved without increasing revenues somehow and perhaps moving to a new consumption tax system like Europe’s.

The same economists also say a significant deficit-reduction plan is not possible unless Mr. Obama breaks his campaign promise not to raise taxes for households making less than $250,000. Last week, Mr. Obama said he would not impose that condition or any other on a fiscal commission.

And of course I think that’s a good thing to leave on the table, because even though it’s true that growing entitlement spending, especially health spending, is our greater challenge over the longer term, it’s also true that “bending the health cost curve” isn’t going to get us to the President’s goal of 3 percent of GDP deficits by 2015.  And although one shouldn’t push for absolutely balanced budgets and complete elimination of the deficit now or even decades from now, we still need to work on relative deficit reduction–and relatively more fiscally responsible policies–as soon as possible.  How to do it sooner rather than later?  Given the present “margin” of policy choices, you have to consider tax increases, and you have to consider smart tax increases that raise revenues in more efficient ways than just raising statutory tax rates.  There are ways of achieving a more sufficient level of revenue that don’t have to involve trading off with the goal of promoting a strong economy, as long as we’re able to get rid of the constraint of President Obama’s campaign promise by allowing the new commission to work unencumbered by it.

The first place to start is letting go of the notion that “Obama tax policy” has to include Bush tax policy extended.  For as Jackie Calmes also writes:

When George W. Bush took office in 2001, the government projected surpluses of $5.6 trillion for the coming decade.

In an analysis of what happened next, the economists Alan J. Auerbach and William G. Gale found that much of the accumulated debt owes to Bush-era policies and to the recession, with its costs in lost income taxes and automatic benefits for the unemployed. The one-time costs of stimulus and bailout measures are “really small stuff” relative to the rest, Mr. Auerbach said.

More than Mr. Obama could have imagined, the situation now tests his promise to break Washington’s gridlock and to lead in making “the hard choices.”

Steve Pearlstein also has an excellent column today about this upcoming test of the President’s leadership:

Viewed in that context, the current political disarray need not be an insurmountable problem for President Obama, but rather could represent a golden opportunity to demonstrate the leadership the country needs and craves. He will not demonstrate that leadership by running around to carefully staged events in which he tells ordinary voters what he thinks they want to hear. Nor will he demonstrate it by redoubling efforts of his PR war room to respond to every attack or piece of Republican disinformation with overwhelming rhetorical force. Rather, the real challenge is whether the president can strengthen the bond of trust between himself and the American people by having the courage to tell the hard truths and make the hard decisions, irrespective of short-term political consequences and the tut-tutting of the commentariat.

The irony is that only by doing that which may be unpopular and unpolitic can the president revive his longer-run political fortunes…

I’m hoping the fiscal commission will serve as a good “tutor” to the President on this leadership test, which is all about helping the American people accept the “hard choices” that will pay off in the longer term.  It has to start with the President being willing to talk about them more.  More tomorrow.

Another Deficit Hawk Throws In the Towel?

February 15th, 2010 . by economistmom

Senator Evan Bayh announced today that he will not seek reelection; here’s the CNN story (from which the above video comes). Why not? His main explanation (as highlighted by the Washington Post’s Jonathan Capehart):

Two weeks ago, the Senate voted down a bipartisan commission to deal with one of the greatest threats facing our nation: our exploding deficits and debt. The measure would have passed, but seven members who had endorsed the idea instead voted ‘no’ for short-term political reasons. Just last week, a major piece of legislation to create jobs — the public’s top priority — fell apart amid complaints from both the left and right. All of this and much more has led me to believe that there are better ways to serve my fellow citizens, my beloved state and our nation than continued service in Congress.

Is “bipartisan fiscal responsibility” becoming just a “pipe dream”?  How naive was I when I wrote this over three years ago?

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