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A few weeks back one of my colleagues relayed an old joke to me which he was reminded of in the context of a fiscal policy issue we had been discussing.  Except as soon as he said it, I immediately thought it was an even better analogy to the (then-)Bush(-soon-to-be-Obama) tax cuts.  With that clue, let’s see if some of you readers can “see” this, too–solve the riddle:  how is the joke below reminiscent of what President Obama proposes to do about the Bush tax cuts?

“Could you loan me ten dollars but just give me five? That way you’ll owe me five, I’ll owe you five, and we’ll be even.”

I will follow up with my answer later (just for dramatic effect).  It will involve citing CBO reports, so don’t get your hopes up about it eliciting a lot of yuks from you. 

(Graphic above from Washington Post online:  Should Congress extend the Bush tax cuts?)

It’s a big “rag on the Bush tax cuts” week in the Washington Post–I think because this is one of the biggest looming issues Congress and the Administration will be coming back to after August “recess.”

It began with Ruth Marcus’ column on Wednesday, where she wrote:

…Which takes us back to the matter of whether it would be risky to let any of the Bush tax cuts expire. As a practical matter, Democrats and Republicans agree that the cuts should remain in place, at least temporarily, for families making less than $250,000 a year. That’s a debatable point. Former Federal Reserve Board chairman Alan Greenspan, whose blessing was responsible for propelling the tax cuts forward in the first place, said recently that Congress should let them lapse.

The real disagreement is over extending the high-end tax cuts, and on this even some supposedly fiscally responsible Democrats — I’m talking to you, Kent Conrad — have gone wobbly. The no-new-taxes-now crowd cautions against raising taxes in a recession — a fair point, except that there are more efficient ways to spur the economy than giving more money to those least likely to spend it. Alternatively, they cite — and inflate — the supposed impact on small business of raising the upper-end rates.

This would be more convincing if the Republican line were something other than “no new taxes, ever.” The economic and fiscal circumstances may change, but the prescription remains the same. And the patient is too ill to tolerate another dose of this quack medicine.

And in the Sunday paper (already available online as of Friday), the Bush tax cuts are the focus of the “5 Myths” series as well as “Topic A.”  Bill Gale of the Brookings Institution writes about “5 myths about the Bush tax cuts”.  My favorite myths of the five are #1 (on the tax cuts as “stimulus”) and #5 (on the effect of the tax cuts on the longer-term fiscal outlook)–because Bill argues there’s not much to “love” in either case:

1. Extending the tax cuts would be a good way to stimulate the economy.

As a stimulus measure, a one- or two-year extension has one thing going for it — it would be a big intervention and would provide at least some boost to the economy. But a good stimulus policy can’t just be big; it should also offer a lot of bang for the buck. That is, each dollar of government spending or tax cuts should have the largest possible effect on the economy. According to the Congressional Budget Office and other authorities, extending all of the Bush tax cuts would have a small bang for the buck, the equivalent of a 10- to 40-cent increase in GDP for every dollar spent.

Why? As the CBO notes, most Bush tax cut dollars go to higher-income households, and these top earners don’t spend as much of their income as lower earners. In fact, of 11 potential stimulus policies the CBO recently examined, an extension of all of the Bush tax cuts ties for lowest bang for the buck…The government could more effectively stimulate the economy by letting the high-income tax cuts expire and using the money for aid to the states, extensions of unemployment insurance benefits and tax credits favoring job creation…

…

5. Continuing the tax cuts won’t doom the long-term fiscal picture; entitlements are the real problem.

One theory holds that the country’s long-term budget shortfall is “just” an entitlements problem, the result of rising costs associated with growing Social Security rolls and increased health-care spending (via Medicare and Medicaid). Republicans like this idea because it plays down tax increases as a potential solution. Democrats like it because it makes the recent health-care package seem like even more of a triumph.

But it just isn’t true. The deficits we face over the next decade reflect a fundamental imbalance between spending and revenue, one that goes beyond entitlements. Based on projections by the CBO, Alan Auerbach of the University of California at Berkeley and myself, among others, even if the economy returns to full employment by 2014 and stays there for the rest of the decade, the continuation of current fiscal policies, including the Bush tax cuts, would lead to a national debt in the range of 90 percent of GDP by 2020. That’s already the highest rate since just after World War II — and Medicare, Medicaid and Social Security aren’t expected to hit their steepest spending increases until after 2020.

According to these same projections, the yearly deficit would rise to 6 to 7 percent of GDP by 2020. The Bush tax cuts would account for a significant chunk of this, considering that in each year they are in effect, the revenue lost because of them amounts to nearly 2 percent of GDP.

Compounding the problem: By increasing the government’s debt, the tax cuts have already led to higher interest payments on that debt. So even if all of the cuts expire on Dec. 31, we will still be paying for them for years to come.

And under this Sunday’s “Topic A,” it seems that no matter where fiscal policy economists fall on the ideological spectrum, it’s hard to find one who thinks permanent extension of all of the Bush tax cuts is a good idea.  My response (just because this is my blog):

DIANE LIM ROGERS

Chief economist at the Concord Coalition and blogger at EconomistMom.com

President Obama will find it very difficult, if not impossible, to simultaneously keep two major policy promises: maintain the generously defined “middle class” portions of the Bush tax cuts and begin to restore fiscal sustainability by reducing the deficit to 3 percent of gross domestic product by 2015.

At the same time, current economic conditions suggest a continued need for deficit spending to assist in the recovery. Even if the Bush tax cuts are far from the most effective form of additional fiscal stimulus we could come up with, it may be all we can get right now, politically.

So one way Obama can avoid simply rubber-stamping the Bush tax cuts — and turning the policy he has labeled “fiscally irresponsible” into his own — while saving face on his promises would be to temporarily extend only those portions of the cuts he has proposed to permanently extend in his past two budgets. A one- or two-year extension would buy time for the economy to further recover, while providing policymakers with a realistic deadline to permanently reform the tax system to raise adequate revenue in a more efficient and equitable manner — in other words, to come up with a tax plan Obama would be proud to put his name on.

And in the informal survey of readers conducted on the page with Ruth’s column, as of Saturday 6 pm, 57 percent of respondents (out of nearly 1000) said we should let all the Bush tax cuts expire as scheduled.  (Snapshot above.)

UPDATE (Saturday night):  Stephen Colbert’s take on the issue.  (Thanks to Len Burman for calling this to my attention via Facebook.)

CafePress will make anything in virtually any theme imaginable. So when I did a quick google search on “EconomistMom” to check for articles linking to my blog, the link to the CafePress “Economist Mom” merchandise came up at the top of page 2! Pretty cool. I guess I should at least get a bumper sticker for my car.  And note the 30% off sale until this Friday!  

On the San Francisco public radio show I did yesterday, the host kept informing me that she was getting many calls and emails (and maybe “tweets”) complaining about my use of the word “entitlements” when I referred to the Social Security, Medicare and Medicaid programs.  No one actually explained to me why they found the word offensive, but one hint I got was the one caller who suggested that my organization was part of a “libertarian” effort to end/dismantle/destroy Social Security.  (I was not given the opportunity nor had enough time to explain that our goals are precisely the opposite; if someone like Erskine Bowles, a co-chair of the President’s fiscal commission, compares the fiscal unsustainability of the federal budget to a “cancer,” it is because they want to get rid of the cancer, not let it kill the patient.)

So I started wondering why the term “entitlement” was viewed with such hostility as a value-laden, judgment-laden term.  I looked up “entitlement” on dictionary.com and found these definitions:

From the Random House dictionary:

The right to guaranteed benefits under a government program, as Social Security or unemployment compensation.

From the American Heritage dictionary:

A government program that guarantees and provides benefits to a particular group: “fights . . . to preserve victories won a generation ago, like the Medicaid entitlement for the poor” (Jason DeParle).

From the Merriam-Webster dictionary of law:

A government program that provides benefits to members of a group that has a statutory entitlement; also : the benefits distributed by such a program.

So I still don’t “get” what’s so bad about the term, but I guess in a time when even the word “taxes” is a “dirty” word (and “rationing” a nasty one as well), the ugliness of the word is in the ear of the listener, and listeners often listen through their ideological ear plugs (while bound in their ideological straitjackets).

What would readers suggest is a better label for these government programs?  How about something like my AmEx card uses for their bonus points program:  “Membership Rewards”?  (Does that sound more deserving?)  Regardless (and carrying this analogy a little further), it’s still the case that we are not charging enough in membership fees to cover the cost of our (federal) “rewards” program.  If I were to suggest charging higher fees (don’t say “taxes”) or reducing the generosity of the rewards (don’t say “entitlements”) or some combination of both, it’s not to suggest we get rid of the rewards program altogether, but because I like the rewards program and don’t want it to go away.

Your ideas?  (Use the above cartoon by Tom Tomorrow as inspiration.)

A very interesting column by Joe Keohane in the Boston Globe has my Concord Coalition colleagues depressed about what it suggests is the futility of our mission in reaching out and educating the public about fiscal responsibility:

Recently, a few political scientists have begun to discover a human tendency deeply discouraging to anyone with faith in the power of information. It’s this: Facts don’t necessarily have the power to change our minds. In fact, quite the opposite. In a series of studies in 2005 and 2006, researchers at the University of Michigan found that when misinformed people, particularly political partisans, were exposed to corrected facts in news stories, they rarely changed their minds. In fact, they often became even more strongly set in their beliefs. Facts, they found, were not curing misinformation. Like an underpowered antibiotic, facts could actually make misinformation even stronger.

This bodes ill for a democracy, because most voters — the people making decisions about how the country runs — aren’t blank slates. They already have beliefs, and a set of facts lodged in their minds. The problem is that sometimes the things they think they know are objectively, provably false. And in the presence of the correct information, such people react very, very differently than the merely uninformed. Instead of changing their minds to reflect the correct information, they can entrench themselves even deeper.

“The general idea is that it’s absolutely threatening to admit you’re wrong,” says political scientist Brendan Nyhan, the lead researcher on the Michigan study. The phenomenon — known as “backfire” — is “a natural defense mechanism to avoid that cognitive dissonance.”

And some of the professor’s examples of this psychological dysfunction? (my emphasis added for obvious reasons):

New research, published in the journal Political Behavior last month, suggests that once those facts — or “facts” — are internalized, they are very difficult to budge. In 2005, amid the strident calls for better media fact-checking in the wake of the Iraq war, Michigan’s Nyhan and a colleague devised an experiment in which participants were given mock news stories, each of which contained a provably false, though nonetheless widespread, claim made by a political figure: that there were WMDs found in Iraq (there weren’t), that the Bush tax cuts increased government revenues (revenues actually fell), and that the Bush administration imposed a total ban on stem cell research (only certain federal funding was restricted). Nyhan inserted a clear, direct correction after each piece of misinformation, and then measured the study participants to see if the correction took.

For the most part, it didn’t. The participants who self-identified as conservative believed the misinformation on WMD and taxes even more strongly after being given the correction. With those two issues, the more strongly the participant cared about the topic — a factor known as salience — the stronger the backfire…

But Joe Keohane goes on to describe some potential solutions to work around this “entrenchment” protective mechanism:

But researchers are working on it. One avenue may involve self-esteem. Nyhan worked on one study in which he showed that people who were given a self-affirmation exercise were more likely to consider new information than people who had not. In other words, if you feel good about yourself, you’ll listen — and if you feel insecure or threatened, you won’t. This would also explain why demagogues benefit from keeping people agitated. The more threatened people feel, the less likely they are to listen to dissenting opinions, and the more easily controlled they are.

There are also some cases where directness works. Kuklinski’s welfare study suggested that people will actually update their beliefs if you hit them “between the eyes” with bluntly presented, objective facts that contradict their preconceived ideas.

So let me give this a shot.  (I’m feeling a bit more optimistic than the rest of my colleagues.)  Repeat after me:

“I’m smart”…

“I’m thoughtful”…

and…

“The Bush tax cuts are very costly.”

Been taking a bit of a break this long weekend, and it’s been nice.  Hope all of you enjoyed your 4th of July celebrations.  The photo above is a Washington Post one, but the view is virtually identical to the one my minivan enjoys from the parking deck at the Concord Coalition every day (including last night)–I just don’t have the camera technology to capture shots like this.  I may have complained here about how Concord practices what they preach (fiscal responsibility), in that I take out my own trash at the office (among other things our staff does on our own where other offices have hired help)–and that it is my first job since Burger King (when I was 15) where I’ve had to take out the trash.  But my parking spot at Concord is a wonderful perk of working at Concord, with what I believe is the most spectacular view around DC for watching the fireworks.  My office doesn’t have the same view, but that’s ok.  When I worked for the Council of Economic Advisers at the end of the Clinton Administration (and first 100 days of the Bush Administration), I would tell my friends and relatives who visited my very grand office in the Old Executive Office Building that yes, this was surely the best office I’d ever have in my career.  But my parking spot at Concord (on a deck in the Rosslyn section of Arlington, VA next to the Iwo Jima memorial) is surely the best parking spot I’ll ever have in my career. 

Happy 4th (belatedly)!

In today’s Washington Post “Washington Business” section, there’s the story behind “LivingSocial,” an online source of half-off, 2-for-1 (or even better)-type deals toward fun activities (e.g., dance lessons, museum tours), personal grooming/pampering, and restaurant meals and other “libations.”  As the Post’s Thomas Heath explains:

It looks as if one Washington enterprise might have cracked the code.

LivingSocial is a start-up run by some online entrepreneurs, led by Georgetown University graduate Tim O’Shaughnessy, 28. [That's a Washington Post photo of O'Shaughnessy, above.]

The company has a simple online model: It has a deal of the day, in which participants use a credit card to buy, for instance, $50 of goods or services from a local company for $25. LivingSocial customers punch in their credit-card information and receive a code (or coupon) redeemable at the restaurant, spa or retailer participating in the offer. LivingSocial keeps 30 to 50 percent of each transaction and passes the rest to the deal-of-the-day business.

I’ve known about and taken advantage of LivingSocial for awhile now (I think I first found out about it via something that showed up on the sidebar of my Facebook page or maybe a WashingtonPost email?), and I love it.  It’s really the new, hip “Entertainment Book,” except so much easier to use and much more enticing, with its single “deal of the day,” which I always look forward to opening each morning.  How many Entertainment Books have you bought for fundraisers or otherwise that sat idle on your kitchen counter because you couldn’t be bothered to page through its hundreds of pages of coupons to see if what you already wanted to do was in there?  The beauty of LivingSocial is that it suggests in a very direct, “in your face” (morning in box) way that ____ (the deal of the day) is what you want to do!  And the limited time offer (one only has a day to take the deal or leave it) encourages one to contemplate and “go for it” right away–sort of the way the “Cash for Clunkers” limited time (and it turned out, limited pot of money) rebate had the effect of spurring into action anyone who might have otherwise not thought about whether they wanted to buy a new car at that moment.

If you are a DC-area resident, I highly recommend it.  It’s super easy to use, involves no commitment (no membership fees), and will get you to broaden your horizons about all the wonderful variety of things the DC-area has to offer.  So go have some fun! 

I have complained before of the Obama Administration’s use of a “policy extended” rather than current-law budget baseline against which to evaluate the costs of their budgetary proposals.  Measured against the CBO-official, current-law baseline, the President’s proposals add nearly $4 trillion to the ten-year deficit–increasing the deficit from $6.0 trillion to $9.8 trillion, or more than 60 percent.  Measured against the Obama Administration’s “policy extended” baseline where all the Bush tax cuts are extended permanently (and entirely deficit financed, of course), the Administration shows they reduce the ten-year deficit by over $2 trillion–decreasing the deficit from $10.6 trillion to $8.5 trillion, or nearly 20 percent.

Baselines matter.  And not just to budget geeks or other people who care about budget rules and the pay-as-you-go (PAYGO) standard (with many exemptions, of course).  But they matter to ordinary people, too, to provide perspective on what exactly is being changed and how large or small the change is (and how good or bad).

That’s why when I read this story in the Washington Post on Tuesday about the First Lady’s fight against childhood obesity and getting food manufacturers to commit to reducing the calorie content of their foods, I heard myself screaming:  “but what is the baseline?!… and is this big or small, and good or bad?!”  I mean, what the heck does a trillion or a trillion and a half calories mean?… Key points from the article, that yet do not help me understand how significant this is (emphasis added):

In a direct response to Michelle Obama’s declared war on childhood obesity, an alliance of major food manufacturers on Monday pledged to introduce new, more healthful options, cut portion sizes and trim calories in existing products.

The Healthy Weight Commitment Foundation, a coalition including Campbell Soup, Coca-Cola, General Mills, Kellogg, Kraft Foods and PepsiCo, will slash 1 trillion calories by the end of 2012 and 1.5 trillion calories by the end of 2015. The 16 members make 20-25 percent of food consumed in the United States…

Missing from the announcement were any specifics on the new products or cuts that will be made to existing items. But White House officials stressed that the companies will be held accountable. Each year, their progress will be assessed by the Partnership for a Healthier America, a nonpartisan organization for which the first lady serves as honorary chair. If any one of the companies doesn’t meet its target, all of the companies will be held responsible, White House sources said. The Robert Wood Johnson Foundation, a nonprofit dedicated to improve Americans’ health, also will track the effort’s impact on childhood obesity. A first report is tentatively slated for 2013.

“What the White House is doing is consistent and relentless,” said Marion Nestle, a professor of nutrition at New York University and a frequent critic of the food industry. “The food companies are having their feet held to the fire for making kids fat. That’s awkward. And it is not good for business.”

Eliminating 1.5 trillion calories sounds like a lot. But can it help turn the tide on obesity?

A spokesman for the Healthy Weight Commitment Foundation was unable to put the number in context. Instead, he said the number is designed to eliminate the “energy gap” — the number of calories consumed that are not expended through physical activity. Recent research estimates that gap is approximately 100 calories per day per person, and less for teenagers and children.

Hmmm…. sounds like the First Lady is trying to eliminate the “unsustainable” part of calories (the “energy gap”) just like her husband’s trying to eliminate–with the help of his fiscal commission, that is–the “unsustainable” part of the budget deficit (the part that exceeds growth in the economy). 

But I still find myself asking (like any well-conditioned budget policy analyst would) “a trillion-calorie reduction relative to what?–and spread over how many foods or people?–and over what kinds of people?”…  How do we evaluate the success of this calorie-reduction portion of the overall campaign to reduce childhood obesity?

I was in NYC today, taping the CNN special on the new sequel to IOUSA the movie, called “IOUSA Solutions”–produced again by husband-wife team Patrick Creadon and Christine O’Malley.  I was certainly the least famous person on the studio panel which was comprised of Bill Bradley, Pete Peterson, David Walker, Maya MacGuineas (president of Committee for a Responsible Federal Budget), Amy Holmes (conservative talk radio host), and CNN’s Joe Johns and Jeanne Sahadi.  Christine Romans was the host, and she did a wonderful job.  (She’s expecting son #3 by the way!)  Not sure why I was invited, but it was fun, and I didn’t even feel tempted to kick Amy Holmes under the table, by the way.

The two-hour special is supposed to air on CNN this Saturday at 1 pm EST and Sunday at 3 pm EST, “barring breaking news” as the producer puts it.  I will keep you posted.

The photo is of me with my post-CNN-taping hair and makeup, self-captured on my webcam on my ride back to DC on the Amtrak–that’s the “on track” reference.  I think CNN’s NYC studio does better hair and makeup than their DC studio.  Or maybe I’ve gotten more fond of the very heavy makeup because I realize it really does make one look younger.  My appearance in the CNN studio is quite the contrast to how I look in the actual documentary (where I have maybe one sentence, about the Bush tax cuts, of course), where I had gotten only a few hours sleep the night before and was being interviewed at Concord–where we don’t exactly keep a makeup artist.  Maybe you’ll see what I mean later this week.

As I think I pointed readers to last year, the Washington Post “Peeps Show” contest is becoming a great new Easter-in-DC tradition. This year’s winners are amazing as usual. My favorite is the “Peepocalypse 2010: Dupont Circle Snowball Fight” diorama (you can see it in this photo gallery), commemorating DC’s Snowpocalypse/Snowmageddon in early February and the amazing snowball riot that demonstrated the power of tweets–and now Peeps!

I don’t have an iPhone, but those of you lucky ones who do can download an iPhone Peeps Show app from the Washington Post’s site here.  Amazing.  I’ll go tweet this now…

Happy Easter!