Random Musings On the Budget Debate

April 3rd, 2013 at 12:31 pm

I know, last month was all about budgets—we’re past that now, right?

Nuh-uh.  Just a few random synapse-firings for your consideration.

–The next entry in the budget sweepstakes is of course the belated White House budget, out next Wed, I believe.  I anxiously await answers to these questions:

–the universal pre K idea announced in the President’s State of the Union speech will be in there, but what will be the payfor?  The President stressed that the program, which could cost $10 billion/yr, won’t “add a dime” to the deficit.  There’s likely no conceivable payfor for this program with this Congress, but those of us who’ve been waiting for this idea to come along are in it for the long game, so it will be good to learn what we’re fighting for.

Kill the sequester!  It’s on the books now for the rest of this fiscal year—the recent continuing resolution made it so, in a bi-partisan agreement.  But there’s an evil temptation in this town to let current law—the official “budget baseline” which now embeds this $1.2 trillion in cuts—become the center of gravity.  That center must not hold.

Some very back-of-the-envelope math explains why: so far, we’ve got about $1.5 trillion of spending cuts on the books (Budget Control Act; all 10 year numbers); add another $1.2 trillion from the sequester; divide the sum by the $600 billion in tax increases from the cliff deal and you’ve got a highly imbalanced $4.50 of spending cuts for every dollar of revenue.

So here’s hoping the President’s budget will replace the sequester with a more balanced plan including revenues (which I’m certain will be the case).

No chained CPI!  No $100 billion more in NDD (non-discretionary spending) cuts!  These were both Obama offers to Rep Boehner in a grand bargainy sort of deal during the fiscal cliff squabble in December.  Neither should be on the table in the budget.  To put them there would be to meet the R’s way too far on their side of the field for no good reason.

I think I understand the strategy that says “don’t worry, progressives…we won’t enact either of these measures unless we get significant revenues.  And that’s unlikely.”

Tru dat.  But my game theory says keep your offers off the table until you’ve got their offers.  The problem doing it the other way is that you’re allowing the negotiations to start where you want them to end.  There’s the risk that the bargaining starts with with the stuff you’ve put on the table and goes down from there.  So the R’s say, “OK, we’re willing to nudge on revenues, but we’re going to need more cuts—beyond what you’ve already given us in the budget.”

And for the record, the NDD caps are already too tight and if we want a more accurate price gauge for Social Security, than get BLS to come up with a chain-weighted index for the elderly—in fact, put that request in your budget!

Jobs ideas.  It would be unrealistic to expect the CPC’s “back to work” budget ($2.5 trillion in job creation measures) from the White House.  But the President has offered strong rhetoric in recent weeks on the need for fiscal policy to support infrastructure and clean energy investments:

“Deficit reduction alone is not an economic plan.”

“My goal is not to chase a balanced budget just for the sake of balance. My goal is how do we grow the economy, put people back to work, and if we do that we are going to be bringing in more revenue.”

I expect these ideas will be in his budget, but again, the payfor issue will be the catch.

What happened to Ryan/Murray?  Once the White House budget is out, I guess they’ll all have some sort of budget conference where they try to reconcile the House (Ryan), Senate (Murray), and WH budgets, but hard to see how that could be anything but a huge mash-up that fails to deliver a compromise the President would sign.  In other words, we live with the continuing resolution until it expires and then kludge together the next temporary patch.  And for even more fun with numbers, remember there’s another debt ceiling debate coming this summer.

A key takeaway from all this is something I referenced in passing above but deserves more emphasis: do not let the current baseline with the BCA caps, the sequester, and too little revenue become the new normal.  To do so would be to needlessly enshrine austerity at the cost of economic growth, poverty reduction, and vital investments in our future.

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8 comments in reply to "Random Musings On the Budget Debate"

  1. The Raven says:

    Honestly, what do you think are the actual chances of avoiding this becoming the new baseline?

  2. Nick Batzdorf says:

    All the president and Democrats need to do to get public opinion on our side is have everyone read Krugman’s blog post today, explaining in hard numbers how all this deficit hysteria is ridiculous.


  3. Pablo says:

    Why is Obama budget more than 2 months late? Who at the White House is focused on this?

  4. Kevin Rica says:

    I think that the deficit is a real problem. I believe short-term fiscal stimulus is a necessary economic tool, but it is short term. You only have enough ammo to blast away for so long. If we want to use it during the next recession, we have to conserve ammo.

    But the focus on “entitlements” misses the real point. All the deficits of the “Consolidated Budget” until now have been incurred in the “On-Budget” accounts, excluding things like Social Security. If the “Off-Budget” programs (which are still in surplus) were simply abolished tomorrow — including the associated contributions), the deficit (on a cash-flow basis) would be larger.

    Although I am concerned about the fiscal demands of Social Security and Medicare IN THE FUTURE, this distracts us from the fact that general revenues do not cover general expenditures. The Republicans are trying to cut Social Security benefits while maintaining Social Security contributions and keep social Security in the black so that they can finance aircraft carriers with Social Security contributions.

    If you are serious about fixing the deficit, you must work first and foremost on the existing deficit — which is where all the existing debt came from. That is a bigger problem. (But it might require some more tax increases.)

    Maybe the Center on Budget and Policy Priorities should do a study of what would happen to the budget deficit if all the “entitlement” aka “social insurance” programs were abolished along with the associated contributions.

    • Jill SH says:

      Or, as I like to say, Social Security is not contributing to the debt — it’s financing it.

      • Kevin Rica says:

        OOOOOHH!! Very well put.

        Why did the political debate get so far with even the bumper stickers working against Social Security’s enemies?

  5. Maurice Wolf says:

    The Rich get Richer and the Poor (including the 53% of us)get poorer. We are already a Communist country just like in Russia or China or North Korea. Do thier leaders live in fancy homes, have expensive cars and clothes, worry about retirement or medical care or have to wonder where thier next luxurious meal with fine wine and liquor is coming from? The People are thier slaves just like in The good old communistic Democracy here in the U.S.A. We the People are the slaves of big money folk like The Koch Brothers.
    Don’t get me wrong, I am not against people who are wealthy. They are wealthy because they were born into wealth (no sin),were smarter,worked harder or were luckier than most of us. My complaint is that every cent that they have originated from the back of the working and middle class and that every one should be taxed on thier ability to pay!

  6. urban legend says:

    Social Security benefits, including the phony Chained-CPI method of cutting them surreptitiously, should be completely off the table, period. As a matter of law, since there is no such thing as a “unified budget” or “consolidated budget, Social Security cannot contribute to the deficit. The contract with Americans is that, consistent with the fact that, as a matter of law, there is a separate funding mechanism completely visible to the public, Social Security finances are, as a matter of law, entirely separate from those of the general fund. To pretend otherwise by reducing Social Security benefits is to break that promise to Americans and, at the same time, show gross disrespect for the law that embodies that promise.

    That’s why we are so angry — with an intensity that even progressive “policy wonks” whose careers are based in DC (like you-know-who) really do not seem to grasp. Those of us who worked the hardest out here in the entire rest of America to get the President into office are doubly angry because not only has he demonstrated immeasurable disrespect for those who did the most to put him into office, he has in pursuing a matter of personal simply pissed away the biggest political advantage Democrats have. The damage already done will be evident in 2014 if major reconstructive surgery (if even possible) is not performed.

    That we might get “more revenue” from closing tax loopholes should be understood as a ridiculous quid pro quo for caving on Social Security benefits and breaking the historic promise made to Americans — and breaking the law that separates the systems. Closing those loopholes is a worthy goal to eliminate regressive injustices in the tax system and to achieve a better revenue structure for the future. Social Security benefits, on the other hand, are a matter of life and death. They are non-negotiable. Yes, it is an absolute, utterly inflexible litmus test. Anyone who ignores that reality will pay a big political price. If we don’t succeed in driving you out of office in 2014, we will not forget and will do it eventually.