The longest federal government shutdown on record is over, but another shutdown appears possible, even likely, in less than a month.
The December-January shutdown ended with President Trump announcing he would sign a bill reopening the government after 35 days and two federal paydays that didn't pay off. He agreed to a deal that he could have had 35 days earlier, but he thought it advantageous to play brinkmanship with federal agencies and employees.
What is confounding about this shutdown is that it wasn't about debt limits or federal budget deficits or excessive spending, all of which were at the heart of earlier shutdowns. Conservatives have decried the economic stupidity of spending more money than you take in, year after year after year since before Ronald Reagan decried socialism. A government shutdown over excessive spending at least reduced spending for the period of the shutdown.
But this latest shutdown, which Trump said he would proudly take responsibility for, had nothing to do with federal spending or the deficit. It wasn't about money, although Trump was insisting on $5.7 billion for a border wall or else! It was about policy, the policy of building walls to keep people out of the United States. Trump had led cheers of "Build That Wall" at his campaign rallies and had insisted that Mexico would pay for the wall. No payments came from Mexico, and Democrats in the House also refused to insert payments for a physical wall into pending budget bills.
Both sides of this debate have some reasonable points. Trump says there is a crisis on the southern border with Mexico; flows of immigrants, most of them crossing in violation of federal laws, are overwhelming federal border security. He wants a solid wall to halt the "invasion."
Democrats point out that any wall can climbed over, tunneled over or blown up by determined migrants. They are willing to increase border security spending on enforcement and surveillance. More border patrolmen and immigration judges can expedite the refugee and asylum backlog and make immigration more manageable. They will give Trump the money he wants, but not for a solid wall that doesn't really address the problem.
A congressional committee will look for a compromise that will keep the government open after the mid-month deadline, but Trump might reject their proposal. A long-term solution to the immigration problem has to involve improvements in Central American economies and law enforcement in order to give desperate citizens opportunities and hope in their native countries rather than north of the border. Combined with better U.S. border security and crackdowns on corruption south of the border, the "crisis" at the border will be resolved without a solid wall.
Showing posts with label federal deficits. Show all posts
Showing posts with label federal deficits. Show all posts
Monday, January 28, 2019
Friday, April 6, 2012
Compromises necessary to cut deficit, debt
We're seven months from the election, and already both parties have drawn their lines in the sand that will doom the country if there is no compromise. Instead of seeking compromise and finding a middle ground that will save the country from financial ruin, both Democrats and Republicans are gambling the nation's solvency on a double-down bet on the next election.
Both parties are digging in their heels over taxes and spending, each playing to its own core constituency without any apparent willingness to do what is best for the nation as a whole. Since 2000, when the federal budget was balanced (at least in part, if you don't count Social Security obligations) in the final years of the Clinton administration, the federal deficit and federal debt have soared. We are now spending a trillion dollars more than we take in each year! There are many reasons for this: huge tax cuts pushed by President George Bush, two costly wars that were financed "off-budget," increased national security spending in the wake of 9/11, and a staggering recession that reduced tax revenues. And also this: an unwillingness on the part of Congress to address the difficult problem of balancing taxes and spending.
President Obama, who rejected the recommendations of the Simpson-Bowles deficit reduction committee that he appointed, has attacked Rep. Paul Ryan's GOP budget plan as destructive. The Ryan plan calls for elimination of unspecified tax breaks while further reducing the tax rate for the wealthiest taxpayers. Obama wants to increase taxes on those earning more than $250,000 a year, and he says Ryan's plan for turning Medicare into a grant program for health insurance premiums would mean the elimination of Medicare.
But here's the key fact about both Ryan's and Obama's plans: Neither would eliminate the federal deficit in the foreseeable future. Ryan's plan reduces the deficit primarily through cuts to Medicare and other social programs and the elimination of tax breaks to be named later. Obama has not proposed a plan that would significantly cut the deficit, and his commitment to not raise taxes on those making less than $250,000 effectively eliminates any hope of raising the large amounts of revenue needed to cut the deficit.
Both parties need to turn back the rhetoric and erase those lines in the sand. Democrats will have to stop portraying themselves as the saviors of Medicare and Social Security and recognize the fact that neither program is sustainable in its present form. Revisions will be necessary to keep the programs solvent. Small adjustments in eligibility age, co-payments, service delivery and payroll taxes could repair these programs with minimal pain. Moreover, every federal program or federal grant to the states, is not effective or efficient. Cutting ineffective programs is just good management. But every program has constituents, and constituents have lobbyists, and Congress does not like to say no to lobbyists.
For their part, Republicans will have to give up their doctrine that tax cuts are the cure for every ill that faces the country. If you're willing to vote for spending programs (and I'm not talking about the debt limit), you have to be willing to vote for the taxes to pay for them. The nation will not be able to cut its way out of this budget deficit simply because Congress will not cut defense spending or Social Security to any significant degree, and it cannot cut interest on debt, which is an increasingly large portion of the total budget.
Instead of lobbing pot shots at each other, the parties need to come together under the principle of shared sacrifice. For Republicans, that means the "job creators" (otherwise known as the wealthy) will have to pay higher taxes. For Democrats, that means the working class or middle class — people making less than $250,000 will see their taxes rise as part of the shared sacrifice. The only way we can cut the deficit is by doing it together. These are sacrifices for the good of the country. Unless compromises can be won, we will all share in the economic despair that is inevitable for a society that cannot stop living beyond its means and whose leaders refuse to compromise.
Both parties are digging in their heels over taxes and spending, each playing to its own core constituency without any apparent willingness to do what is best for the nation as a whole. Since 2000, when the federal budget was balanced (at least in part, if you don't count Social Security obligations) in the final years of the Clinton administration, the federal deficit and federal debt have soared. We are now spending a trillion dollars more than we take in each year! There are many reasons for this: huge tax cuts pushed by President George Bush, two costly wars that were financed "off-budget," increased national security spending in the wake of 9/11, and a staggering recession that reduced tax revenues. And also this: an unwillingness on the part of Congress to address the difficult problem of balancing taxes and spending.
President Obama, who rejected the recommendations of the Simpson-Bowles deficit reduction committee that he appointed, has attacked Rep. Paul Ryan's GOP budget plan as destructive. The Ryan plan calls for elimination of unspecified tax breaks while further reducing the tax rate for the wealthiest taxpayers. Obama wants to increase taxes on those earning more than $250,000 a year, and he says Ryan's plan for turning Medicare into a grant program for health insurance premiums would mean the elimination of Medicare.
But here's the key fact about both Ryan's and Obama's plans: Neither would eliminate the federal deficit in the foreseeable future. Ryan's plan reduces the deficit primarily through cuts to Medicare and other social programs and the elimination of tax breaks to be named later. Obama has not proposed a plan that would significantly cut the deficit, and his commitment to not raise taxes on those making less than $250,000 effectively eliminates any hope of raising the large amounts of revenue needed to cut the deficit.
Both parties need to turn back the rhetoric and erase those lines in the sand. Democrats will have to stop portraying themselves as the saviors of Medicare and Social Security and recognize the fact that neither program is sustainable in its present form. Revisions will be necessary to keep the programs solvent. Small adjustments in eligibility age, co-payments, service delivery and payroll taxes could repair these programs with minimal pain. Moreover, every federal program or federal grant to the states, is not effective or efficient. Cutting ineffective programs is just good management. But every program has constituents, and constituents have lobbyists, and Congress does not like to say no to lobbyists.
For their part, Republicans will have to give up their doctrine that tax cuts are the cure for every ill that faces the country. If you're willing to vote for spending programs (and I'm not talking about the debt limit), you have to be willing to vote for the taxes to pay for them. The nation will not be able to cut its way out of this budget deficit simply because Congress will not cut defense spending or Social Security to any significant degree, and it cannot cut interest on debt, which is an increasingly large portion of the total budget.
Instead of lobbing pot shots at each other, the parties need to come together under the principle of shared sacrifice. For Republicans, that means the "job creators" (otherwise known as the wealthy) will have to pay higher taxes. For Democrats, that means the working class or middle class — people making less than $250,000 will see their taxes rise as part of the shared sacrifice. The only way we can cut the deficit is by doing it together. These are sacrifices for the good of the country. Unless compromises can be won, we will all share in the economic despair that is inevitable for a society that cannot stop living beyond its means and whose leaders refuse to compromise.
Saturday, December 4, 2010
Democrats don't have to give in
The speculation is that President Obama will give in to Republican demands to extend tax cuts to the wealthiest Americans. Although extending the cuts for everyone making $200,000 or less ($250,000 for couples) can pass the House, Republicans in the Senate are adamant that it's their way or no way. Without legislative action, the cuts approved in 2001 and 2003 will expire at the end of the year. Obama and other Democrats are desperate to get the tax cuts for the middle class before the end of the year, and tax planners and employers, as well as taxpayers, want some certainty about 2011 taxes. So Obama is apparently willing to give in rather than see all of the tax cuts expire.
Maybe Democrats should rethink their strategy. They don't want to be blamed in attack ads and on Fox News of raising taxes on the middle class, but there's another way of spinning that outcome. Obama might say something like this: "Rather than allow millionaires and billionaires to enjoy lower taxes and see the greatest shift in American wealth to continue, we have chosen to begin closing the federal budget deficit. Allowing the tax cuts to expire will reduce the federal deficit by $4 trillion — that's TRILLION! — and will go a long way toward the goal of our deficit commission of reducing the long-term federal debt. Allowing the tax cuts to expire for working people will cause some personal pain, and it might temporarily stagnate our economic recovery, but in the long term it will benefit the economy by reducing federal borrowing and will benefit taxpayers by preventing debt from overwhelming our budget options and pushing up interest rates.
"We would have preferred to extend tax cuts for the working people of America, but Republicans refused to allow this without simultaneously extending tax cuts to those who need it and deserve it least. Prevented from passing our preferred option, our second best option is to allow all tax cuts to expire and let the added revenue help solve our deficit problem."
Maybe Democrats should rethink their strategy. They don't want to be blamed in attack ads and on Fox News of raising taxes on the middle class, but there's another way of spinning that outcome. Obama might say something like this: "Rather than allow millionaires and billionaires to enjoy lower taxes and see the greatest shift in American wealth to continue, we have chosen to begin closing the federal budget deficit. Allowing the tax cuts to expire will reduce the federal deficit by $4 trillion — that's TRILLION! — and will go a long way toward the goal of our deficit commission of reducing the long-term federal debt. Allowing the tax cuts to expire for working people will cause some personal pain, and it might temporarily stagnate our economic recovery, but in the long term it will benefit the economy by reducing federal borrowing and will benefit taxpayers by preventing debt from overwhelming our budget options and pushing up interest rates.
"We would have preferred to extend tax cuts for the working people of America, but Republicans refused to allow this without simultaneously extending tax cuts to those who need it and deserve it least. Prevented from passing our preferred option, our second best option is to allow all tax cuts to expire and let the added revenue help solve our deficit problem."
Friday, November 12, 2010
Deficit reduction plan takes heavy fire
That didn't take long.
President Obama's deficit reduction panel, chaired by Democrat Erskine Bowles and Republican Alan Simpson, released an outline of its recommendations Thursday, and it immediately took heavy fire from left and right. Nobel economics winner Paul Krugman condemned the proposal and the co-chairmen in a New York Times column. Speaker of the House Nancy Pelosi declared the proposed fix unworkable.
To be certain, the proposal from the committee involves some painful medicine. To be certain, to do nothing about the $1 trillion-plus federal deficit and rapidly growing national debt means chronic economic illness and eventual collapse of the American economy. Bowles and Simpson attempted to address the problem by wounding everyone's sacred cows. They propose raising the Social Security retirement age and reducing Social Security cost-of-living increases; eliminating the mortgage interest deduction; reducing the costs of Medicare and Medicaid by updating the health care systems for the elderly and poor; raising taxes to increase revenue; and other solutions.
None of these proposals are inviting, but here's the rub: The alternative — doing nothing — is unsustainable. America cannot continue to run huge deficits and pile on debt that will cripple the prospects of our grandchildren and their grandchildren. Sooner or later, we have to reduce our expectations of government (and the cost of government) and pay for the government services we receive while we receive them. It can be done. Barely a dozen years ago, the federal government was running a surplus and projected budget surpluses well into the future. Since that time, we have reduced taxes and sharply increased spending.
We can't continue on the present course. Congress has to take action. If the Bowles-Simpson plan can't be passed, come up with a better idea; but eliminate the deficit.
President Obama's deficit reduction panel, chaired by Democrat Erskine Bowles and Republican Alan Simpson, released an outline of its recommendations Thursday, and it immediately took heavy fire from left and right. Nobel economics winner Paul Krugman condemned the proposal and the co-chairmen in a New York Times column. Speaker of the House Nancy Pelosi declared the proposed fix unworkable.
To be certain, the proposal from the committee involves some painful medicine. To be certain, to do nothing about the $1 trillion-plus federal deficit and rapidly growing national debt means chronic economic illness and eventual collapse of the American economy. Bowles and Simpson attempted to address the problem by wounding everyone's sacred cows. They propose raising the Social Security retirement age and reducing Social Security cost-of-living increases; eliminating the mortgage interest deduction; reducing the costs of Medicare and Medicaid by updating the health care systems for the elderly and poor; raising taxes to increase revenue; and other solutions.
None of these proposals are inviting, but here's the rub: The alternative — doing nothing — is unsustainable. America cannot continue to run huge deficits and pile on debt that will cripple the prospects of our grandchildren and their grandchildren. Sooner or later, we have to reduce our expectations of government (and the cost of government) and pay for the government services we receive while we receive them. It can be done. Barely a dozen years ago, the federal government was running a surplus and projected budget surpluses well into the future. Since that time, we have reduced taxes and sharply increased spending.
We can't continue on the present course. Congress has to take action. If the Bowles-Simpson plan can't be passed, come up with a better idea; but eliminate the deficit.
Friday, September 17, 2010
A tax controversy that shouldn't be
It's hard to believe that the proposal before Congress to extend the Bush-era tax cuts to everyone with an income below $200,000 a year ($250,000 for couples) has become so controversial. President Obama, in keeping with his 2008 campaign promise, has proposed extending the tax cuts for 98 percent of Americans. He would eliminate the 2001-2003 tax cuts for the top 2 percent of wage earners. Restoring the old tax rates (misleadingly referred to by opponents as raising taxes) would help reduce the menacing federal budget deficit.
The Republican leadership in Congress has taken an all-or-nothing approach to extending the tax cuts — either the rich get theirs along with the poor and middle class or everyone will suffer. A recent poll found about half of Americans support the Republican position. I'm old enough to remember (and it wasn't so many years ago) that the Republicans touted themselves deficit hawks — they wanted to balance the federal budget, even if it was painful. Fully extending the Bush era tax cuts would cost the federal government four times what the economic stimulus package and health care reform — packages roundly criticized by Republicans for exploding the federal deficit — would cost combined!
Politicians (and voters) have short memories. One of President Bush's reasons for the 2001 tax cuts was that the federal deficit was running a surplus — it was taking in more money than it was spending. Budget surpluses were projected decades into the future. Bush argued that Washington should let the taxpayers keep the money the government didn't need.
To say the least, things have changed since then. A terrorist attack, two wars and an economic collapse later, the federal government is spending about a trillion dollars more than it takes in each year. A federal commission is looking into ways to reduce that deficit. Sen. Mitch McConnell, the Republican Senate leader, says the problem is government spending, not taxation. But the real problem, as with any business or family budget, is the combination of the two. If Congress cannot find a practical way to curtail spending — and it has been powerless to do that in the past decade — then increased revenues are the only available solution.
Allowing tax rates for the wealthiest Americans to return to normal levels and reinstating the estate tax at a reasonable, fixed level would have no impact whatsoever on more than 98 percent of Americans. It would also begin the process of addressing budget deficits and signal financial markets that Washington can do something about the deficit.
What is amazing is that this proposal is so controversial.
The Republican leadership in Congress has taken an all-or-nothing approach to extending the tax cuts — either the rich get theirs along with the poor and middle class or everyone will suffer. A recent poll found about half of Americans support the Republican position. I'm old enough to remember (and it wasn't so many years ago) that the Republicans touted themselves deficit hawks — they wanted to balance the federal budget, even if it was painful. Fully extending the Bush era tax cuts would cost the federal government four times what the economic stimulus package and health care reform — packages roundly criticized by Republicans for exploding the federal deficit — would cost combined!
Politicians (and voters) have short memories. One of President Bush's reasons for the 2001 tax cuts was that the federal deficit was running a surplus — it was taking in more money than it was spending. Budget surpluses were projected decades into the future. Bush argued that Washington should let the taxpayers keep the money the government didn't need.
To say the least, things have changed since then. A terrorist attack, two wars and an economic collapse later, the federal government is spending about a trillion dollars more than it takes in each year. A federal commission is looking into ways to reduce that deficit. Sen. Mitch McConnell, the Republican Senate leader, says the problem is government spending, not taxation. But the real problem, as with any business or family budget, is the combination of the two. If Congress cannot find a practical way to curtail spending — and it has been powerless to do that in the past decade — then increased revenues are the only available solution.
Allowing tax rates for the wealthiest Americans to return to normal levels and reinstating the estate tax at a reasonable, fixed level would have no impact whatsoever on more than 98 percent of Americans. It would also begin the process of addressing budget deficits and signal financial markets that Washington can do something about the deficit.
What is amazing is that this proposal is so controversial.
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