A Few More Comments on the Pending Deal

July 31st, 2011 at 11:33 pm

Again, quickly running down the deficit-reduction framework as it stands:

–$1 trillion in cuts in discretionary spending over 10 years

What does that mean?  It refers to the non-entitlements in the budget: defense and non-defense programs where dollar amounts are appropriated every year.  On the non-defense side, it’s transportation, education and training, child care, housing assistance, health research, energy.

From a jobs perspective, a lot of infrastructure and investment in stuff like clean energy comes out of this part of the budget.

–A bipartisan committee (6 R’s, 6 D’s) must identify another $1.5 trillion in cuts; entitlements and tax increases can be on the table, though Speaker Boehner claims his R’s will not countenance any new revenues, and I’m prone to believe him.  Assuming the committee agrees on the cuts, it reports out by Thanksgiving and their proposal gets a fast-track procedure—up or down vote by the end of the year.

–But if the committee fails to report out or Congress won’t enact their cuts, a spending-cut-only trigger kicks in, with cuts split 50/50 between domestic and defense spending.  This sequester, as it’s called, would exempt “Social Security, Medicaid, unemployment insurance, programs for low-income families, and civilian and military retirement. Likewise, any cuts to Medicare would be capped and limited to the provider side” according the White House.

Those are welcome exemptions, but man, I don’t see how you get $1.2 trillion (that’s the savings required if this part triggers) after you’ve already taken $1 trillion out of discretionary and still maintain those exemptions.   I predict they’ll be a lot of pressure to violate this part of the deal.

Now, here’s a wrinkle a commenter asked about.  Again, from the White House fact sheet: “If the Committee does not succeed in meaningful balanced deficit reduction with revenue-raising tax reform on the most well-off by the end of 2012, the President can use his veto pen to raise nearly $1 trillion from the most well-off by vetoing any extension of the Bush high income tax cuts.”

Here, the White House is saying they have a fail-safe to get revenues in the deal.  If the committee gets to the trigger stage without revenues, they’ll go after the high-end Bush cuts.

OK, but those cuts were presumably going to sunset anyway, so on one hand, no new revenue there relative to what we expected.  And what if the committee does come up with cuts (unlikely, but just sayin’)…then does the administration punt on the high end sunset?

So it’s no replacement for a balanced sequester, one that required both cuts and new revenues.  On the other hand, given the tenor of the times, expected or not, it would be an accomplishment to finally see the sun set on those tax cuts.

The President spoke on the pending deal tonight, ending with this:

“[The deal allows us to] turn to important business of doing everything we can to create jobs, boost wages, and get this economy growing faster.  That’s what American people sent us to do and that’s what we should focus on in months ahead.”

I agree.  It’s about time.

But he also bragged that “these discretionary caps will put us on track to reduce non-defense discretionary spending to its lowest level [as a share of GDP] since Dwight Eisenhower was President.”

Why is that a good thing?  Why are 1950s levels (relative to GDP) of investment, infrastructure, and research in medicine and innovation so damn optimal?

And with all this incessant emphasis on deficit reduction, it’s going to be extremely tough to convince people that we actually might need to spend some money right now, in the short run, to help get this economy out of neutral.

There’s a lot of cognitive dissonance out there…stay tuned.

 

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11 comments in reply to "A Few More Comments on the Pending Deal"

  1. Binky the meretricious bear says:

    Why does this make me think of Dave Chappelle’s Black Bush sketch?

    It just looks like FAIL. It looks like there is zero difference between Obama and Bush II. Why did we bother to vote for Hopey Changey man if he was going to be useless on civil rights (torture, whistleblowers,gitmo, war on a whim) and the constitution (until the gays strongarmed him), useless on the economy, and useless at legislating and using the power of his office for the benefit of the country?

    Sarah Palin passed a tax increase on oil producers in the company town state of Alaska that has made the state wealthy. Prosecuted corrupt Republicans who were so brazen they had hats that said “Corrupt Bastard Club.” Maybe we should have voted for McCain to get the change we wanted. For a public trainwreck she managed to get some policy done.


  2. DARREN HUTCHINSON says:

    Thank you for your analysis. I found your blog after reading your comments about the lack of tax revenue (in the deal) in a Washington Post article. I will add it to my blog roll. I appreciate your insight.


  3. Patsy says:

    Senator McConnell’s smile when announcing the debt deal says it all.


  4. ScuzzaMan says:

    “non-defense discretionary spending” is the real kicker here.

    As if the vast bulk of what murderously gets called “defense” spending is not completely discretionary.

    That central lie of the modern warfare state cannot be allowed to stand unchallenged, or else all this commentary on the details is a complete non sequitur.


  5. Bill WI says:

    How is it that the Bush tax cuts for the ONLY the upper brackets expire and not the rest? I don’t recall them being separated anywhere. If they are not then it will be all expire or none expire, the House will never pass legislation for just a portion.


  6. jayackroyd says:

    Do we get the Eisenhower income tax bracket structure then? Because a lot of the insanity is tied to executive comp. One reason we don’t have pensions anymore, and health care benefits suck is because the top bracket doesn’t need the tax break anymore.


  7. Progressive Greene says:

    How about who’s going to be on the “bipartisan” committee? If we don’t know who’s going to be on it yet, who’s going to appoint the members? Seem like important details no one’s reporting on.


  8. ghm says:

    How is this “going forward”?

    Obama is a Trojan Horse Republican.


  9. nader paul kucinich gravel mckinney baldwin ventura sheehan says:

    http://www.youtube.com/watch?v=eiW_NI9stp8

    middle of the road
    What debt deal?
    911 deceptions
    the pretenders
    10 years after


  10. Jared Bernstein: Lousy Negotiating Skills Are Not the Problem | Canadian immigration and foreign recruitment news says:

    […] extremism, so they accepted a plan far less balanced than they would have liked — the final deal could well turn out to be $3 trillion in spending cuts over ten years, with no revenue increases to […]


  11. SteveLaudig says:

    “O” folds . . . again.
    But that is to be expected by someone who actively supported Joe Lieberman for re-nomination against a true progressive and seriously considered Birch Evans Bayh III, now a paid Fox commentator, for vice-president.

    To fold, a verb. v. fold·ed, fold·ing, folds. A transitive verb 8. a. Informal To discontinue operating; close: They had to fold the company a year after they started it. As an intransitive verb: b. Games To withdraw (one’s hand) in defeat. 4. Informal. a. To give in; buckle: He never folded under pressure.

    fold. n. 1. A fenced enclosure for domestic animals, especially sheep. 2. A flock of sheep.

    See also: the intransitive verb “to cave in”: 1. to collapse; subside; 2. to yield completely, especially under pressure. To cave in: To fall in and leave a hollow, as earth on the side of a well or pit. To submit; to yield.

    FOLDS

    The phonied up debt ceiling crisis, folds to Tea Party
    Single payer healthcare, folds to fraud err Insurance lobbying
    Elizabeth Warren nomination, folds to fraud err Wall Street financial sector
    Meaningful reform of Fraud Street err Wall Street, folds to fraud err Wall Street financial sector
    Guantanamo still open, folds to Republicans
    Drug reimportation, folds to Big Pharma

    I am certain I missed some. Can’t keep up with them all.


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