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A “Pledge to America”…to Continue to Screw Things Up

September 23rd, 2010 . by economistmom

I was going to point out that the GOP’s new “Pledge to America” isn’t going to do the fiscal outlook any favors.  But Ezra beat me to it:

Take the deficit. Perhaps the two most consequential policies in the proposal are the full extension of the Bush tax cuts and the full repeal of the health-care law. The first would increase the deficit by more than $4 trillion over the next 10 years, and many trillions of dollars more after that. The second would increase the deficit by more than $100 billion over the next 10 years, and many trillions of dollars more after that. Nothing in the document comes close to paying for these two proposals, and the authors know it: The document never says that the policy proposals it offers will ultimately reduce the deficit.

This has been a winning political strategy:  promise the vague concept of “fiscal responsibility” and deficit reduction, get specific on cutting the parts of government spending that no one thinks of as a “benefit” to them, assure people that taxes will only continue to be cut and not paid for, know that most people (the most riled up ones in particular) don’t see the logical inconsistencies and don’t want to check the math.  It’s a winning political strategy but a losing economic one.

(UPDATE 9/24:  See the Washington Post’s online survey of readers, asking “Which GOP ‘pledge’ would most likely sway your vote?”)

18 Responses to “A “Pledge to America”…to Continue to Screw Things Up”

  1. comment number 1 by: Gipper

    Economistmom,

    Sometimes I wonder if you’ve ever engaged in a serious negotiation or haggled with a determined seller or buyer over something significant.

    The Republicans are winning elections the same way Democrats do.

    Republicans promise goodies (tax cuts) and expect someone else to pay for them (future taxpayers or spending cuts).

    Democrats promise goodies (entitlement spending, Obamacare, welfare, etc.) and expect someone else to pay for them (the ones not receiving the benefits or future taxpayers).

    Both strategies are good at winning elections and both lead to fiscal ruin. The Democrats created Social Security, Medicare, Medicaid, Depts. of Agriculture, Education, HUD, etc., etc. It’s up to them, not the Republicans, to lead the way on which programs should be cut.

    Why yell at Republicans and expect them to happily subsidize the Democrat welfare state?

    If a deal is to be made, it will be made by both sides giving up a lot. Economistmom thinks the Republicans should be giving up 90% and the Democrats 10%.

    Ain’t gonna happen.

    The logic of the Republican position is that interest on the debt will crowd out social spending in the future. That’s their fiscal strategy for cutting spending. It’s cynical, but it works at winning elections.

  2. comment number 2 by: AMTbuff

    I want a pledge to terminate Medicare and change Medicaid to a prominently labeled second-class level of coverage. You want medical care? Either pay for it yourself or, if you have no money, accept the meager coverage of Medicaid.

    Under this proposal, Medicaid should be rationed more tightly than Britain’s NHS. The goal is that nobody with the means to go elsewhere should choose to rely on Medicaid.

    This one change would put the government on a fiscally sustainable course. Furthermore, this result is inevitable once the Chinese stop lending us money. So why not just get on with it?

    My proposal may seem heartless, but it’s more compassionate than what will happen if we wait until the Chinese run for the exits. A smaller but durable safety net is better than a larger safety net that will break when it’s most needed.

  3. comment number 3 by: SteveinCH

    Wow. And now we link an statistically invalid web poll as if the results mean anything, and one from probably the most insular liberal readership in the country. That really adds a lot to the discussion.

  4. comment number 4 by: JohnB

    I wish I could vote for EconomistMom and the commenters on this site instead of the current Congressmen. You are more rational and responsible.

  5. comment number 5 by: AMTbuff

    >Perhaps the two most consequential policies in the proposal are the full extension of the Bush tax cuts and the full repeal of the health-care law. The first would increase the deficit by more than $4 trillion over the next 10 years, and many trillions of dollars more after that.

    Leaving aside the bizarre assertion that removing an expensive new entitlement would increase the deficit, economists agree that the problem is many times larger than this. Even if it didn’t harm the economy, letting tax rates increase would barely make a noticeable difference in the long-term fiscal picture.

    Therefore this Pledge does not meet even the Ryan level of seriousness in addressing the big problem. When not even the ostensible opponents of government spending are willing to propose serious retrenchment, the crisis is unavoidable.

    I wonder whether the media’s narrative post-crisis will heap blame on Obama for failing to alert the public in advance, like they promoted the “Bush lied” line. In this case the truth is much clearer than it was in the WMD situation in 2003.

    When they come, the actual cutbacks will make progressives wish they had signed on to the Ryan plan, as harsh as it is.

  6. comment number 6 by: Daniel Boon

    Wow, it’s like the parties WANT a libertarian party to get elected.

  7. comment number 7 by: Russ

    The Pubs and the Dems all play the same political game. However, in modern times, it’s the dems that seem to get the budge in-line whereas the pubs cut taxes on the rich and drive us into deficit spending. I’m still waiting for the trickle down Mr Reagan, Bush, etc!!! And I support the dems agenda, regardless of the political maneuvers in which they are forced to engage with the pubs. Because the dems agenda is about the ‘people’ not about the (global) private sector.

  8. comment number 8 by: Tyler S

    Ah, for a world where at least one political party would have the backbone to stand for higher taxes…

    Lets face it, we need higher taxes. We always had higher taxes, and then Bush came along and dropped em way down with all that balanced budget money Clinton got a hold of. Now we all realize that the Bush years were an abject failure, but no one seems willing to say that part of the problem might be that he dropped all our taxes and sent the country into a deficit tailspin.

    Hard lessons are still worth learning, people. We simply will not reduce spending to the point sustainable at this tax level, and neither party is seriously proposing doing so. You can bicker about health care and welfare and all those hot button issues, but guess what? All that stuff combined and slashed to zero doesn’t get us out of the hole we’re sitting in now. There is only one option short of essentially dismantling our present form of government. We need to raise taxes.

    Well, a country gets the leaders it deserves, and if we as a nation can’t see the hard path that is our only real chance of salvation, then perhaps we deserve to suffer in the dark a while longer. I have to have faith that one day we’ll learn that we’ll only get responsible governance when it is that we demand above all else.

  9. comment number 9 by: Gipper

    The argument that the Bush tax cuts caused our current recession makes about as much sense as claiming that the sun rises in the morning because the rooster crows.

    As for our nation’s debt, it’s time to apply some Generally Accepted Accounting Principles (GAAP). The present value of promises made under current law to fund Medicare, Medicaid, and Social Security expenditures over the next 50 years dwarfs the accumulated Bush deficits more than 20 times.

    Obsessing over Bush tax cuts as the root cause of our fiscal troubles is not a serious and honest position. Our fiscal troubles are rooted in making open-ended promises to spend money on retirement and medical care.

    It will require tax increases. However, there will have to be very serious spending cuts. Because the Democrats created these programs that are the root of our fiscal problems, it’s their responsibility to tell us how to cut them.

    Or, the Democrats should just come out and admit, they want America to be like the UK, France, and Germany.

  10. comment number 10 by: SteveinCH

    Tyler,

    Have a look at the CBO current law forecast of tax receipts as a percentage of GDP, then look at the history of same, then come back and talk.

  11. comment number 11 by: Tyler S

    Okay, Gipper, first, “part of the problem” and “root cause” do not mean the same thing. Don’t misquote me, its annoying. Second, we can have those programs if we pay for them. Third, to say that its the Democrats’ responsibility to make these spending cuts is stupid because they (we?) don’t agree that cuts are the right solution. Republicans are supposedly the pro cuts party, except that the don’t seem any more willing to propose cuts than democrats are to propose tax increases. Both parties want to have it both ways, and that is why we are doomed to suffer poor governance regardless of who wins. I don’t want to get into a which side is worse argument, there’s very little productive value in such arguments and neither party is worthwhile.

    For me, personally, by the way, Germany is a great example of how to run a country. Fiscally responsible, highly productive, high tax and high service, and a sterling quality of life. Germany is essentially the strong pillar holding up all of Europe. The UK and France are a mess, though, they got the high tax part but missed on the part about responsible spending. You of course, would disagree, nonetheless, I think we can all agree that whatever we as a nation decide we want our spending level to be, our tax level needs to match it, something neither party is proposing at present.

    SteveinCH, I’m quite familiar with the numbers you’re referring to. Care to clue me in on what aspect in particular you find meaningful to the present discussion?

  12. comment number 12 by: SteveinCH

    Well if you are familiar with the numbers, you’ll know that they forecast (based on current policy, meaning Bush tax cuts extended and AMT patched) Federal receipts of between 19 and 20 percent by the end of the decade and between 20 and 21 percent by 2035.

    Said receipts will be higher than at most times since the end of WWII as a percentage of GDP. In this context, your contention that we must have more taxes seems not so obvious on its face.

  13. comment number 13 by: SteveinCH

    People who are liberals like to posit that we need higher rates and use the silly baseline of receipts in 2009 and 2010. This is just as silly as using spending in 2009 and 2010 as representative to spending in perpetuity.

    Of course the spending numbers do come out pretty close. The CBO analysis of the President’s last budget submission has spending for the decade averaging 24.1 percent of GDP versus 24.7 percent in 2010. Of course those numbers don’t yet include the ACA. Once you put it in, it’s pretty much a wash.

    So again, I find your contention that we don’t have enough taxes specious unless you add the sentence “to do all the things the government wants to do, so many of which it has never done in the past.”

  14. comment number 14 by: Gipper

    Tyler S.,

    I’m back to talk….

    CBO publication “Federal Debt and the Risk of a Financial Crisis,” July 2010. Debt as Percentage of GDP rises to 80% in 2035 under current law. Because Obama and Dems want to extend tax cuts for under $250K, the percentage would increase to something around 150% (my guess since it would be 180% if all tax cuts extended). Are you comfortable with those figures? It only gets worse after 2035.

    You insinuated that the fiscal health of the US fell off a cliff after the good old Clinton years of inflated tax collections during Internet Bubble years, as if Bush was an order of magnitude worse. So I stand by my “root cause” statement, and your “part of the problem” parsing is a partisan fig leaf.

    It’s stupid for Democrats to recommend spending cuts only if they’re not serious about reaching a compromise with Republicans about cutting the defict. If they think that Republicans have to make all the moves to raise taxes and cutting spending (similar to Ryan Roadmap), while Democrats kick back and demagogue the hell out of them, then you’re smoking dope.

    Compromises require both sides to give something up. Democrats recommend spending cuts. Republicans recommend tax increases. Bases of both parties will be angry, but it’s necessary to put fiscal house in order.

    Glad to see an honest lefty admit he prefers German social programs, taxation, etc. to the US. We all know it’s true, but few are willing to admit it.

    As I said earlier, all of this is academic once we get beyond 2035. The spending projections of Medicare, Medicaid, and Social Security are far too scary to even contemplate. It’s a spending problem of a magnitude that resembles Greece, not Germany.

    So we can blame FDR, LBJ, and Obama for 70% of this mess and the Republicans can take 30% of the blame.

  15. comment number 15 by: Tyler S

    SteveinCH: First, what are you looking at? The CBO forecast I’m looking at (2010 to 2020) assumes the tax cuts and AMT patch expire, that being current policy. Second, that’s EXACTLY the argument I would make. I mean, I might phrase it a bit differently, something along the lines of “higher taxes are needed to provide new and better social and civil services to our citizens.” I get that on that front I’m in the minority, even among Democrats, but that is what I believe. I’m a deficit hawk first, however, and a liberal second, so while I’d like to see new programs and projects (a nation-wide high speed rail network would be my first priority), what is imperative is to balance the budget. You’d do it by cutting spending, while I’d do it by raising taxes. The biggest problem is that both political parties are unwilling to do either. Good politics, maybe, but atrocious governance.

    Gipper: Sorry, didn’t realize you were a Bush fan. I kinda thought people across the political spectrum had agreed that the Bush years were largely disastrous. Conservatives hated that he increased spending so much and blew the deficit open after the first balanced budget in decades while libs hated him for … well, a lot of reasons. Still, I certainly never said or implied that the Bush tax cuts caused the economic downturn, I said they were part of the reason why the bush years were an abject failure. Really, not the same thing.

    Second, please don’t take my disgust with the republican platform to be an endorsement of the democratic platform. If I prefer the democrats in power, its only in the same way I’d prefer to be shot in the leg rather than be shot in the chest. What I’d really love is not to be shot at all. We need a balanced budget, and neither party will give it to us because they’d rather play politics and avoid the hard decisions.

    As for your blame games, I find them pointless and I won’t participate in them.

    Where are you getting your spending numbers? The CBO figures I’m looking at show spending remaining fairly constant in relation to GDP.

  16. comment number 16 by: SteveinCH

    Tyler,

    FWIW, I’ve been very clear on this blog and others that I would allow all of the Bush and Obama tax changes to expire, means test all transfer payments, cut defense, and freeze (in aggregate) discretionary spending. Doing this would balance the budget in 5 to 7 years by my calculations.

    So your contention that I would balance the budget by cutting spending (alone) simply is not correct.

    The CBO does two baselines…current law (the one you reference) and current policy (one that assume popular things like the tax cuts for the “middle class”, the amt patch, and the doc fix will continue to be extended. I am looking at the current policy baseline.

    Under the current law baseline, taxes as a percent of GDP rise to over 21 percent by 2020 and almost 24 percent by 2035. Taxes have never been 21 percent of GDP in this country in its entire history. They topped out at about 20 percent in the year 2000.

    As to being a deficit hawk first and a liberal second, I simply don’t understand how that would work in practice. If you favor greater spending on a number of things (e.g., national high speed rail), you either must favor massive cuts somewhere else and/or massive tax increases. Just letting the Bush tax cuts on the wealthy lapse doesn’t even get close.

    The one place I do agree with you is in saying a pox on both their houses in terms of the Rs and the Ds. Neither side is serious. There are a few potentially serious people but nowhere near the number that would be required to matter.

  17. comment number 17 by: Gipper

    Tyler S.,

    Geez, Tyler. I give you a citation, and then you ask me from where I get my figures? Google it. Download the PDF and read it.

    You must be new to this blog to infer that I”m a Bush fan. I’m not. The last year of the Bush Admin was “disasterous.” Take that away and he would be remembered by many more favorably because the deficit as percentage of GDP was declining.

    The first 2 years of the Obama administration have been “disasterous”? Oh, I forgot, he gets an indefinite pass to blame Bush for whatever shortfalls occur. If we get a douple dip recession, it’s because the Republicans and conservative Democrats opposed more aggressive aggregate demand spending policies. It’s always going to be the Republicans’ fault.

    Of course, blaming the President for what occurs on his watch is the the stuff of political pundits and former economists-turned partisan hacks like Paul Krugman. So many other forces are at work in a $15 trillion economy that are beyond the control of economic policy that it’s silly for serious economists to think this recession could have been avoided if only Bush hadn’t lowered tax rates, or been tougher on Wall Street (whatever that means).

    But I’ve predicted that as long as Obama extends unemployment insurance for 99 weeks and refuses to lower the minimum wage, we’ll continue to have 9% plus Unemployment for a while. However, that kind of microeconomics thinking is disparaged by Democrats. Since it’s screwing up the election for the Democrats this November, I’m happy to continue to see them ignore my advice…..until November 2. To this extent, the President’s policies do have a direct impact on the economy and so far he’s failed miserably.

  18. comment number 18 by: Vivian Darkbloom

    I don’t think the required political compromise on reducing the deficit can happen unless we have divided government. Obviously, this will require a reduction in spending and a raise in taxes. If only one party is in control of government (both houses and the executive branch) there is absolutely no incentive for the party in power (whichever party that might be) to take the needed action unilaterally, nor is there any incentive for either party to compromise.

    In the current situation, if the Democrats were to significantly raise taxes, cut spending, or both, it would be political suicide. The out-of-power Republicans know this, and therefore there is no reason to help the Democrats out by compromising. If the power structure would be reversed, the outcome would be the same, I’m certain.

    If I recall correctly, all the really significant fiscal reforms have been accomplished with divided government, where real compromise was necessary. Both parties need compromise in order to share equally the public discontent over having their taxes raised or their benefits cut.

    I hope that the November elections will result in divided government. This is not because I am in favor of stalemate, it is because I think it is the only way in our system of two party government that real compromise can be acheived. It will also put to a real test President Obama’s pledge to work in a bi-partisan manner. His real test of leadership is going to occur after November 2.

    Another way to look at this is to compare the US situation with parliamentary government in Europe. The Netherlands just completed a two month or longer negotiation just to form a governing coaliton. The result is a governing agreement which ensures that legislative action will be taken based on true compromise. Divided US government is the only thing that really comes close to that model.