A Snowball’s Chance In Hell
February 8th, 2010 . by economistmom
(Photo from HuffingtonPost)
So, I’ve been pretty much paralyzed with this snowstorm (”Snowmageddon” as they’ve dubbed it) here in DC. We have a couple feet of snow on the ground! It’s made it difficult for me to keep up any of my normal routine either as economist or mom, in fact, so I haven’t blogged since before the first flakes fell. But with everything including my work place, my kids’ schools and the federal government closed today, no Economic Report of the President released yet (I think it was supposed to come out this week, maybe even today), and not much to do other than wait for the snow to thaw (but you know, we have another round of snow coming tomorrow?!), I thought I’d attempt this little post relating this weekend’s storm to the fiscal policy issues I manage to obsess about even in the middle of something as distracting as all this snow.
On Saturday I witnessed this amazing mass snowball fight in Dupont Circle (pictured above)–here are Washington Post and Huffington Post stories and videos on it. It sort of reminded me of how well bipartisanship is going these days on Capitol Hill, especially when it comes to coming together on fiscal responsibility…
We have the House Republican Leader, John Boehner, arguing that the President’s notion of a bipartisan fiscal commission would actually be a “partisan” commission, mainly because it would allow revenue increases to be put on the table (emphasis added):
The commission proposed by President Obama would reportedly be barred from proposing cuts to any discretionary spending, which accounts for more than one-third of all federal spending. With discretionary spending off the table, tax increases would represent a very large portion of the policy options for decreasing deficits. By seeking to take the ‘comprehensive’ route on every issue except spending, the Obama Administration only reveals its unwillingness to end Washington Democrats’ spending binge.
Of course, unlike mandatory spending, discretionary spending is subject to annual review through the appropriations process and can be constrained through the use of spending caps. If the Administration really were unwilling to tackle the growth in government spending, they would have taken the big mandatory spending programs (Medicare, Medicaid and Social Security) off the table, but they didn’t–even with some pressure from the more liberal parts of their party to do just that.
House Majority Leader Steny Hoyer responded to the Boehner statement with this (emphasis added):
I’m disappointed in Minority Leader Boehner’s response to a sincere attempt to establish a bipartisan mechanism to address the fiscal challenges facing our nation. The Obama Administration has made fiscal responsibility a focus over both the short- and long-term. Their budget proposal included several immediate steps, such as the freeze on non-defense discretionary spending and a Financial Crisis Responsibility Fee to ensure taxpayers are repaid. Additionally, the President will sign statutory ‘pay-as-you-go’ legislation into law soon, reinstating a proven tool for bringing discipline to the budget process.
Over the long-term, a bipartisan fiscal commission is key to setting a path toward sustained fiscal discipline. The Administration has repeatedly indicated its openness to constructive suggestions on how a commission should be structured, as evidenced by Secretary Geithner’s outreach to Minority Leader Boehner. I regret that Leader Boehner rejected the Administration’s overture asking for input…I agree that all options for restoring fiscal balance should be on the table for the commission to consider. However, budget experts from across the political spectrum agree that finding a solution to our long term fiscal challenges requires focusing on tough choices with regard to entitlement spending and revenues. Regardless of how discretionary spending is handled, the proposed freeze for the next fiscal year is a strong action.
Many Republicans say a tax cut would spur growth and revenue. Mr. Obama suggested it would cost revenue and drive up the deficit. “I’m going to want to take a look at your math, and see how that works,” he said.
TAPPER: Do you think the fact that you guys are pushing the bipartisan commission is indicative of the fact that our political system is not capable of taking on the serious challenges our nation faces? You and I know that the money, as Willie Sutton says, said, that — why do you rob banks? Because that’s where the money is. The money is in entitlement programs, Medicare, Medicaid, Social Security, things that you do not touch in this budget. The fact that you need a bipartisan commission to recommend cuts or tax increases, doesn’t that indicate that our political system is incapable of making these tough decisions?GEITHNER: Jake, I am very confident in our ability as a country to bring people together and make sure we are solving these challenges and these problems. We’ve done it in the past. It is completely within our capacity to do as a country. But of course it requires you bringing people together across the aisle to step back from politics, to try to bring practical solutions to things that are very important to our future as a country. And the president is committed to do that. And we’re going to give the Republican Party the chance to share in the responsibility and the burden and the privilege of trying to fix the things that were broken in this country.TAPPER: Republicans are afraid this is just a back door for tax increases. Are you willing to say that tax increases are off the table for this commission, let’s sit down and talk about the long-term structural problems with entitlement spending?GEITHNER: The president’s view — and this is a view shared by many Republicans, and it builds on what we’ve seen with effective commissions in the past, like the Greenspan commission that President Reagan established to help restore the financial footing of Social Security — is that, for this to work, you’ve got to bring people together to step back from politics, day-to-day politics, and to bring fresh ideas to solve these kind of problems. That’s the only way to do it, we think, and we’re committed to doing that. We’ve got to do it on a bipartisan basis, and we’re deeply serious about doing this.
That’s why right now I feel a lot like Jonathan Chait does in his New Republic column from a week ago entitled “The Impossibility of Fiscal Responsibility.” Jonathan argues that fiscal responsibility is impossible because the Republicans aren’t cooperating or even “engaging” (not even in a chaotic snowball fighting kind of way), and that:
[I]t’s very hard for one party to reduce the deficit by itself. I wouldn’t say that the entire Democratic Party is committed to serious deficit reduction. But major elements are, and nearly the whole party is committed to at least not making the problem worse. But a unilateral commitment to fiscal responsibility is a huge political handicap…
The more Democrats do to reduce the deficit, the easier they make it politically for Republicans to retake power, and the easier they make it fiscally for Republicans to wreck the budget when they do. So, why try?
So, because right now there’s no evidence that current Republicans in Congress will budge an inch on the issue of taxes, and at the same time little evidence that the Administration yet has the courage to take the lead with their own party on taxes (and saying very plainly that they must come up, eventually), today I look at all the snow around me feeling “stuck” and can’t help thinking that “bipartisan fiscal responsibility” has about a snowball’s chance in hell.
I consider it more likely that Boehner’s objection is an excuse rather than the only deal-breaker, but I must say he has a point, and it seems that Hoyer agrees at least in terms of what is ideal (everything on the table, period).
It will/would be quite lame if the Administration and/or Congressional Democrats put forth as a deal-breaker on a commission the a priori exclusion from consideration of reductions in (current or projected) discretionary spending. I’d say that would be more lame than Republicans having as a deal-breaker that everything must be on the table, so if either is to be singled out for criticism (or the harsher criticism) it is clearly the White House and/or Democrats who are insisting on taking off the table a priori a substantial chunk of what they would prefer not to change outside of the normal political process.
And while we’re on the subject of fairly applying a single standard (vs. not doing so), all this talk about Republicans being much more to blame than Democrats for obstructing fiscal responsibility is at best overblown and actually closer to simply unfair. How many Democratic senators voted against the Conrad-Gregg commission — even after Social Security was taking off the table! — simply because delusional extremists among their base screamed that a commission would lead to cuts in entitlements and social spending generally? Answer: 22 Democrats (plus Independent Bernie Sanders), along with 23 Republicans (granted, a lower percent of the party total, but not enough to justify the difference in characterizations I’m seeing from the left on the relative inclination toward serious fiscal responsibility of the parties). Were those 22 Democrats (plus Sanders) any better than the Republicans who acted similarly to pander to their delusional extremists?
And please, anyone who wants to object to some supposed false equivalence on my part, please present a substantive case for why Democrats are substantially more inclined toward major moves (i.e., sacrifices) to substantially mitigate our long-term fiscal imbalance.
I agree with Brooks on this one (I know there will be a great sigh of relief on that score).
What’s the core logic for excluding anything? From my perspective, taking discretionary spending (which has increased by 25% or more in the last 2 years) off the table is a pretty straightfoward effort to make the only tradeoffs tax increases versus entitlement changes with the hope that tax increases will be the easier solution.
It seems to me that Boehner’s position (all on the table or no) is a lot more principled than the administration’s position unless someone smarter than me can define a principle that explains the administration’s position.
Hoyer’s statement is hardly principled. He seems to say, in principle I agree that everything should be on the table but because the budget experts (that we listen to) have a point of view that the bulk of the solution lies elsewhere, we shouldn’t have everything on the table. That’s a pretty tortured line of logic.
Also agree on the commission vote. Reid was able to whip 60 democrats into supporting a health care bill that the public mostly hated but couldn’t get more than 38 for a proposal that the president supported that is popular with everyone but the radical fringe on both sides.
By the way, on the commission vote, I offer no excuse for the Republicans who voted no. I just don’t think there’s any real difference between the two sides.
You can increase my taxes just as soon as you stop TBTF, $400,000 bonuses and front running prop desks. Otherwise … I’d rather not give you any … of my money.
Being a fiscal conservative, social liberal, I say cut spending and make targeted tax cuts.
I’d vote for the Democrats if they decided to be fiscally responsible. As it is now … voting Republican will be my no vote.
Steve,
If you are agreeing with me then you must be confused
(kidding)
I have the same take on the weakness of Hoyer’s argument. I guess he was trying to say that taking discretionary spending off the table is not ideal, but not a big deal, since that part of the puzzle would supposedly be addressed to some serious degree by other means, so it shouldn’t be a deal breaker. But it’s weak both in the questionability of the premise and in terms of the very neutrality of a starting point that is at (or near) the heart of the idea of a bipartisan commission. Add to that the fact that it makes an excuse for Democrats to stick to their lame deal-breaker condition rather than putting pressure on them to drop it, and it’s not a helpful move by Hoyer. (And I should note that, relative to members of Congress generally and DEFINITELY relative to Pelosi, Hoyer has seemed to me more potentially serious about getting to fiscal responsibility, and I’ve been hoping that somehow he replaces Pelosi as speaker, so I have nothing against Hoyer.)
Brooks,
Here’s the thing though. Discretionary spending is about 1/3 of the total, so it is material. Arguably, it’s more material than SS, so would we say it’s not material if we took that off the table?
Additionally, if you are the commission, you now have to make an assumption about discretionary spending. What assumption should you make? The assumption itself is a perspective on policy outcomes without taking a perspective on policy outcomes.
In that regards, it substantially complicates the work of the commission since it will now need to build scenarios on discretionary spending. Presumably, it will also need macro scenarios and scenarios are, of course, multiplicative.
So why do it other than for gamesmanship?
BTW, I also have a pretty positive view of Hoyer (maybe it’s Pelosi’s low bar). He seems a genuinely fair minded chap. Indeed his formulation in the quoted passage makes him look like a fair minded chap put in the situation of defending a largely conceptually confused position. Not an enviable place to be
Steve,
All good points.
I think you’re reading too much into Hoyer’s statement. He isn’t saying that discretionary spending shouldn’t be, or won’t be, part of the mandate for the commission. Boehner put up that straw man to criticize the commisison, but there is no indication that the President would exclude discretionary spending from its mandate. What Hoyer said is simply repeating a factual statement made by budget experts on the left and right — the long term fiscal shortfall is driven by the fact that spending on entitlements are growing faster than revenues. those on the right emphasize the growth of entitlement side of that statement and those on the left emphasize the revenues not being sufficient, but both sides agree that discretionary spending is not a driver of the problem and would only contribute modestly to the solution. In fact, it is a staple of presentatins made by the Fiscal Wake Up tour members on the left and right to show that completely eliminating discretionary spending — defense and non-defense — we would still face massive long term problems.
So what Hoyer was really saying is yes, everythign, including discretionary spending, should be on the table for discussion, but neithe rside should use discretionary spending as an excuse to avoid the difficult choices on entitlements and taxes that are the real key to achieving fiscal sustainability. That is not as much of the partisan point as you suggest, because many liberals reject reforms of enitlement spending by arguing that our budget problems could be largely solved by cutting the (discretionary) defense budget.
Bluedog,
All of the statements are conditional as in, if it’s excluded then…
If it’s not excluded, we all agree it would be better. And for the record, discretionary spending is larger than SS or Medicare and will remain so for the predictable future.
The most recent CBO baseline for 2020 says
Discretionary spending $1518
Social security $1170
Medicare $1038
Can’t believe everything you read I guess. It’s true that today no single item is the $1.6 trillion that the current deficit is. But discretionary spending is larger than SS or Medicare and will remain so for the foreseeable future.
BlueDog,
Thanks for bringing up the possibility that “reported” barring (of the commission from proposing cuts to any discretionary spending) to which Boehner refers may not be the reality. If it turns out not to be a condition, we may never know if it never was planned or if it was planned and backed off from prior to the Admininstration or Democratic leadership saying publicly one way or another. But it is still important to note that Hoyer is essentially saying that even if such a condition is applied it would not be that big a deal and would not be a legitimate deal breaker from the Republican perspective. I strongly disagree.
There are two key reasons why discretionary spending is fundamentally different from, and of less concern in the long term budget context, than entitlements. First, discretionary spending is subjec to the annual appropriations process unlike entitlement programs that grow on automatic pilot. Changes made in entitlement programs today will affect the trajectory of spending on those programs indefinitely into the future. Changes in discretionary programs can only affect spending in the upcoming year; eliminating discretionary programs does indirectly reduce spenidng pressure in the future but just as often frees up room for spending on other programs in the appropriations process in future years. The most that a commission could do as a practical matter is propose discretionary caps for a few years. Second, even taking into account the large growth in the last couple of years, discretionary spending has been declining as a percentage of GDP — i.e. growing slower than our income — whereas entitlements have been growing as a percentage of GDP and are projected to do so to an even greater degree in the future. Spending growing faster than income is the definition of the problem, and that applies to entitlement spending and not discretionary spending.
That’s why most budgeteers have said that the President’s proposed freeze in non-security discretionary spending is a positive step that will require some sacrafices but will only have a very modest impact on our fiscal problems.
BlueDog,
The question isn’t whether it’s more important for a commission to be able to deal with entitlement or discretionary spending, but whether it’s important for the commission to be able to deal with the latter. Sure seem important to me, and not just because it’s an inappropriate precondition for a “bipartisan” commission and could turn off Congressional (and other) Republicans from supporting the creation of the commission and participating adequately (whether as a principled stand or just as an excuse) or from supporting its recommendation.
A couple of other notes:
Re: The most that a commission could do as a practical matter is propose discretionary caps for a few years.
The point is simply that it shouldn’t be taken off the table a priori. And if your point is one of process, the fact is that no future Congress is bound by anything, whether in entitlements or discretionary.
As for the growth rate of discretionary spending, again, that’s not the point, and also, just because the projected spending growth is coming from A, it doesn’t mean that some of the solution can come from reducing projected spending in B.
At the end I meant to say “…doesn’t mean that some of the solution can’t come from reducing projected spending in B.”
BlueDog,
Do you know that the rate of growth in discretionary spending that is projected over the coming budget cycles exceeds the rate of inflation but a substantial amount (about 200 bps according to the CBO)? That seems a reasonable topic for the commission to consider.
Your statement about discretionary spending relative to GDP requires a time frame to evaluate. Over 25 years it’s true but only due to the decline in military spending as a percentage of GDP. More recently, I don’t think you are correct but I will go back and check the CBO tomorrow.
And your assertion that a commission could do no more than propose caps is I think patently false and the reason any restriction is wrong. A commission could easily propose returning to a level of discretionary spending that would be the 2008 baseline extended by inflation in 2016 (post recession). That would be a lot lower than a 3-year freeze (which is a real rather than nominal freeze and won’t be passed by Congress in isolation anyway).
Just to say, there are lots of options and taking things off the table before it even starts is bad, if only because it gives those who want to obstruct another reason to do so.