Overhaul

by digby


So, I saw this post by Marc Ambinder yesterday and wondered what it was about:

Blue Dogs Happy With Obama's Entitlement Comments

07 Jan 2009 01:06 pm

Here's President-elect Barack Obama, this morning:

We are working currently on our budget plans... starting to consult with members of congress on that... Discussion around entitlements will be a central part of those plans... by Feb [with my 10-page budget preview] we will have some very specific plans to release [on reforming entitlement spending].

Rep. Jim Cooper (D-TN) liked what he heard:

"I have talked with President-elect Obama several times about the severity of our entitlement crisis, and I have urged him to conduct a full audit of his predecessor's books. He understands the tremendous fiscal challenges we face. I appreciate his forthrightness on the subject this morning, and I pledge to work with him and his economic team to get this situation under control."



Convincing these Democrats that he's serious about entitlement reform is one of the ways he can smooth the stimulus package's digestion.


I can't imagine why Obama should be having any problems with any Democrat on a stimulus package, unless they honestly are too stupid to understand the scope of the problem or are so reflexively conservative that they blurt out Republican cant without even considering what they are saying. But they are Blue Dogs, so I suppose that both of these things are true.

But what's this about entitlement reform, which is characterized by the New York Times with a headline on page one that says, "Obama Promises To Overhaul Retiree Spending, Huge Deficits Looming, Potential For Risky Fight Over Social Security And Medicare?"
Changes in Social Security and Medicare will be central to efforts to bring federal spending in line, President-elect Barack Obama said on Wednesday, as the Congressional Budget Office projected a $1.2 trillion budget deficit for the fiscal year.

“We expect that discussion around entitlements will be a part, a central part” of efforts to curb federal spending, Mr. Obama said at a news conference. By February, he said, “we will have more to say about how we’re going to approach entitlement spending.”

Alluding to the projected deficit, which was accompanied by grim unemployment predictions, Mr. Obama said: “And we know that our recovery and reinvestment plan will necessarily add more. My own economic and budget team projects that, unless we take decisive action, even after our economy pulls out of its slide, trillion-dollar deficits will be a reality for years to come.”

Mr. Obama did not offer specifics on how he would address Social Security and Medicare, nor was there any hint that he expects to ask Congress to approve draconian cuts in benefits. The programs are vital to millions of Americans, and talk of cutting benefits has long been considered politically explosive. On the other hand, both programs face long-range problems, given the growing legions of baby boomers nearing retirement and, in the case of Medicare, the ever-rising cost of health care.


Clearly, they're not going to be able to try to "privatize" it as Bush did since the same baby boomers who are sucking the life blood out of the treasury in their old age (and who have been paying double for more than 20 years into the trust fund) just lost about a third of their retirement funds in the stock market. So that's good (sort of ...)

What else he's talking about, I still can't guess. Maybe it's just lifting the cap, as he talked about during the campaign. But that will most certainly be seen as a tax hike and there's no way in hell that's going to pass anytime soon. And anyway, I'm not sure it's such a great idea to put that back on the table right now either. The last thing people need is to start thinking their social security (or their parents' social security) is going to be cut if he wants people to start spending.

The message is getting muddled.

The deficit scolds are coming out of the woodwork, which even I in my cynicism didn't think they'd have the nerve to do at a time like this. Last night on The Newshour we had two deficit hawks on saying stuff like this:
DAVID WALKER: Gwen, we've got a structural problem. You know, since the 1980s, but for the period of time that we ended up having the statutory budget controls, we were addicted to deficit and debt. We were running deficits in good times and bad, whether we were at war or not. You know, we had a problem before we came into this recession, before these bailouts.


Is that true? I don't think so. I seem to recall that the last Democratic president left a rather large surplus, which was supposed to be dedicated to the "social security lockbox." I guess that's been airbrushed from history now that the Republicans blew through that surplus by giving it to the wealthy. That's what happens when Democrats exercise fiscal responsibility -- they get blamed for being profligate spendthrifts anyway. So it doesn't pay politically, and at this particular moment in time, the only possible reason to focus on it is for political purposes. This is the reality:

As the ranking Democrat and then chairman of the House Budget Committee, Representative John M. Spratt Jr. of South Carolina accused President Bush for eight years of recklessly running up huge fiscal deficits.

But by noon on Wednesday, after listening for two hours as economists explained why it was crucial to run a large deficit — one that would triple the previous record and vault far above $1 trillion — Mr. Spratt looked shell-shocked.

Lingering in his chair as the cavernous hearing room emptied, he stared into the distance and gave vent to his concerns.

“The thing I wanted to ask,” he said, “was if there was some limit which we should be wary of? Is there some limit in terms of how much borrowing and debt creation we should take on?”

For the moment, the answer is no. The Congressional Budget Office predicted on Wednesday that the federal deficit would balloon to $1.2 trillion this year — even before Democrats pass an economic stimulus bill that could cost an additional $1 trillion spread over this year and next.

To a degree that would have been unimaginable two years ago, economists and politicians from across the political spectrum have put aside calls for fiscal restraint and decided that Congress should spend whatever it takes to rescue the economy.

A startling range of name-brand economists — Martin Feldstein of Harvard and a top adviser to Republican presidents; Mark Zandi of Moody’s Economy.com and a former adviser to Senator John McCain’s presidential campaign; and Robert B. Reich, secretary of labor under President Clinton — urged Democratic lawmakers on Wednesday to think more boldly than ever before.

“It pains me to say that because I am a fiscal conservative who dislikes budget deficits and increases in government spending,” Mr. Feldstein told the lawmakers. But he said, “Reviving the economy requires major fiscal stimulus from tax cuts and increased government spending.”

So why are we hearing stale old Republican nonsense (and predictable Blue Dog enthusiasm) about fiscal discipline and "entitlement reform?"

And why the opening gambit on business tax cuts that are highly unlikely to help much? Bob Borosage, who is anything but reflexively critical toward Obama, wrote a piece yesterday that questions the dissonant Democratic strategy:

He'd be more likely to get a big and bold plan passed swiftly if he had put together his package, called on the Congress to pass it, invited Republicans to join or take the risk of standing in the way, while saving any concessions on business taxes until the end if he actually needed to round up the votes. I suspect that he'd have won just about as much Republican support that way.

Obama seems to be choosing a path that builds consensus at the potential cost of effectiveness. But if the plan fails, he'll take the blame no matter how many Republicans vote for it. And Republicans will attribute the failure to government spending, no matter how much of the plan consists of tax cuts.


And putting social security on the menu, even just for rhetorical purposes, can only scare the folks and make the plan even less effective. I'm not getting it. The point of all this is to get the economy moving again --- bipartisan support should be a secondary concern at best. There will be sufficient Republican support for any plan --- a small number of them aren't entirely brain dead and that's more than enough. This is one time where there is no doubt that the best policy is also the best politics.


Update: The Republican response to the speech this morning was instructive. They agreed to work with the president on a stimulus as long as it isn't as big as it needs to be, as long as it consists of more tax cuts than spending, and as long as those tax cuts don't just go to the middle class and poor but are also more tilted to business and wealthy investors.

So, the markers have been laid down and any compromise to get to 80 votes will have to be somewhere between the plan Obama floated and these Republican parameters.


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