Tuesday, December 04, 2012
We certainly have just seen that there is no shortage of passion on this issue, and it is a reminder that for all of the metrics we will discuss today, that go into this or that as a percentage of GDP, the ultimate metric, the ultimate end, the ultimate test for all we do in economic policy is whether it meets the fundamental values that make this country great — which are (1) are we nation in which the accident of your birth does not overly determine the outcome of your life, where everyone has an opportunity to rise; (2) are we a nation where the economic growth strengthens the middle class and creates more room for the poor and others who want to work their way up; and (3) are we creating an economy where those who work hard and take responsibility can raise their children with dignity, work with dignity, retire with dignity. That’s the ultimate test; that’s the ultimate metric for all we do.
That was from his speech today to "Fix the Debt." I like it.
Aside from the use of counter-productive framing a rhetoric, the rest was pretty good too:
I believe there is no reason we should not be able to find common ground for a balanced, fair and pro-jobs and pro-growth budget agreement. No one – on any side – should ever aspire to go over the cliff or in any other way to do harm to our economy as a budget tactic or political strategy. Those of us in positions of responsibility have an obligation to work together to find common ground – or at least painful but acceptable compromise – that moves our nation forward.
If we can pass the type of balanced agreement the President has advocated, we can beat the low expectations for those of us in Washington that exist for us and provide a spark of confidence to growth, investment and jobs. That type of agreement means balance between high-income revenues and mandatory spending; balance in terms of protecting the poor and the vulnerable, strengthening the middle class and asking the most from those who can contribute the most; and balance in terms of finding the fiscal sweet spot where we both create long-term confidence from showing we are bringing down and stabilizing our debt as a percentage of our economy, but also by including measures like infrastructure and emergency unemployment insurance to ensure we are giving our recovery and working families the strength and momentum they need in the immediate term. All of those are important components of balance, and I am happy that so many of the fiscal commissions, and I heard the reference from Senator Portman, understand that a strong agreement has to make sure that we strengthen the recovery, not contract the recovery in the short term. We don’t need to do that. We can design an intelligent long-term deficit reduction package that gives momentum and strength to jobs in the immediate term as we create more confidence that we will get our debt and deficits under control in the long term.
Make no mistake about it: no budget agreement – however robust – will provide the economic certainty and confidence we aspire to if job creators, investors and working families believe that, after we reach that agreement, just months down the road, we will start the next round of debt limit debacles. As both economist and business leaders have told us, only the greatest national tragedies have competed with the debt limit debacle of 2011 in terms of damaging consumer confidence. So let’s be clear: if we want to see the economic benefit of a bipartisan budget agreement we need to agree that the era of threatening the default of the United States as a budget tactic is over. The full faith and credit of the United States of America is something we should cherish and never use as a bargaining tool by any side. This should be beyond question at this moment.
Second, to the contrary to the claims of some, President Obama has put forward specific and detailed mandatory savings on the table and is deeply committed to leading on passing a balanced plan that includes tough, but smart, entitlement reform. Those of you, and there are many of you who are budget experts, will back be up on the following: it is only the President’s budget – not the House Republican budget – that has specific, detailed, and scorable savings in the first 10 years on Medicare. Those measures include not only provider savings designed to increase value for health services, but increases on high-income premiums in Medicare, and Medigap reform for new beneficiaries that is designed to discourage excess utilization. And I could go on and on. The President has specific proposals for indirect payment for farmers, federal workforce retirement savings, among many others. We understand that others, including people on these panels, will have other ideas – but so far we are still waiting to hear a clear and detailed definition of how those who disagree with us would propose do things differently.
Third, it is important that all those who care about our country reaching a balanced and robust deficit reduction agreement understand that it cannot come together without rates going up on income over $250K. As my colleague Jason Furman and I recently wrote, while the headline number that can technically be reached through simply limiting deduction on high income earners might seem in the ball park, such estimates quickly fall apart with the most minimal scrutiny. To take one proposal, the one to limit deductions to $25,000, it is often described as raising over $1 trillion. Yet, that estimate relies on tax increases on 17 million taxpayers making under $250K. If you remove the tax on those middle class families – and have a proper phase in, which we would all agree you should – the savings number comes down to $650 billion. But even at this point there is a fundamental flaw because the$25K deduction cap means that the charitable deduction for all high income people will essentially be eliminated. It is hard to design a better way to unite the most-well off Americans and those representing the poorest Americans, non-profits, churches, universities and hospitals against a single idea than proposing to completely eliminate the charitable deduction. If you then decide to make an exception for charitable deductions, your savings go down to anywhere from $350 billion to $450 billion.
That means if the President were to take the position that rates could not go up and he then found that so called high-income deduction savings max out at around $400 billion, then to get a robust and balanced deficit agreement, the President would have to be willing to agree to over $1 trillion in revenues through taxes that fall mostly on the middle class – something he definitively will not do. Even worse, such a plan would be asking these middle class Americans to face higher taxes simply to afford lower taxes on the most well-off.
That is why the President has made clear he cannot sign, and will not sign, any bill that does not raise rates or one that seeks to extend the Bush high income tax cuts at their current levels. Of course, tax reform on high income deductions should be part of the package. The President himself has, in his budget proposal for more than one year, has a 28 percent cap on tax expenditure for high income Americans. So the President has not only shown willingness to support that type of reform on tax expenditure reductions, he has led on the issue and put forward as specific and detailed of a proposal to raise over $500 billion as any as I’ve seen.
That is why the letter that came to the President from the House Republican leadership yesterday was so disappointing. It not only failed to recognize the necessity of raising rates; it actually called for lowering rates for the highest earners, which inevitably means a worse deal for the middle class. This is very unfortunate because recognition that we must raise rates on the highest income Americans stands today as the critical key to unlocking the door to a bipartisan budget agreement.
The letter also was disappointing because it failed to acknowledge what virtually every business leader today recognizes: that we must, for the sake of economic confidence and certainty, end the self-inflicted economic wound of sporadic debt fights that threaten default and tarnish the full faith and credit of the United States.
Again, there is no reason for us to approach — no less go over — the cliff. If our colleagues on the other side of the aisle will work in good faith with us, I am confident that we can reach a balanced, fair, pro-growth and pro-jobs agreement in the spirit of good faith and compromise. Thank you, and I’m sure everyone is looking forward to the discussion from the very impressive group of experts, Maya, that you have gathered today. So thank you.
I doubt that Grover Norquist, Pete Peterson or Paul Ryan much cared for that. I would imagine Cokie Roberts would be disappointed that it didn't prescribe the necessary pain for the old and sick. (And needless to say I think we need to be vigilant about all this "balance" talk.) But that was a principled statement that didn't give away the future security of average Americans. I'm mildly optimistic.
Update: Also too, this:
When the well-being of millions of Americans is at stake — as it is with major changes in Medicare and Medicaid — that shouldn’t be acceptable. If policymakers want to propose $600 billion in health care entitlement savings, as they have every right to do, they should show us the specific changes they would make to get there. Until they do, such proposals shouldn’t receive much credibility. I have an idea. Why don't we just tax the rich, stimulate the economy and then come back and reassess in a few years? Bueller? Anybody?
(Some news accounts report the House Republican leaders would raise the Medicare eligibility age to 67 and increase Medicare premiums for more affluent beneficiaries, although those items are not mentioned anywhere in the new offer. But if so, those measures would raise only about one quarter of the $600 billion and raise questions as to whether House Republicans have an answer for what would happen to many 65 and 66 year olds in states that turn down the health reform law’s Medicaid expansion or whether they are willing to turn back the clock nearly 50 years and let ours be the only Western democracy where significant numbers of poor elderly people can go uninsured.)
President Obama’s budget has over $300 billion in specific health entitlement savings. BowlesSimpson detailed its specific health entitlement savings as well. Only with specific proposals can we assess what level of cuts is reasonable and what is not.
For example, analysis shows that, although this wasn’t Erskine Bowles and Alan Simpson’s intention, several of their specific health care cut proposals would likely harm vulnerable low-income elderly and disabled people. In response to such analysis, Bowles has expressed openness to modifying some of his proposals.
Other parts of the Republican offer — its $300 billion in cuts in non-health mandatory programs and its $300 billion in additional cuts in discretionary programs — have the same problem: no specifics. The proposal is an exercise in “look Ma, no hands” budgeting.
Take non-health mandatory programs. In the negotiations that Vice President Biden chaired in the spring of 2011 and the subsequent negotiations between President Obama and House Speaker John Boehner that summer, the two parties tentatively agreed on $240 billion to $250 billion in nonhealth mandatory savings. But though a sizeable share of those savings has since been enacted, the new Republican offer calls for $300 billion in savings here. Where would the tens of billions of dollars in additional savings come from? The offer doesn’t say. Consequently, we can’t assess this part of the proposal, either.
We can assess the proposal for $300 billion in additional cuts in discretionary programs. It likely would pose significant risks to investments in areas from education to scientific research to food safety to border security to children’s programs such as child care, WIC, and Head Start. Consider the following.
The discretionary funding caps set by last year’s Budget Control Act (BCA) will cut
discretionary spending of $1.5 trillion over the next ten years [see this CBPP paper], compared to the Congressional Budget Office’s (CBO) baseline at the end of 2010 — when Bowles and Simpson issued their report.
And, the existing BCA caps are so austere that, by 2017, non-defense discretionary
spending will be at its lowest level on record as a share of the economy, with data going back to 1962.
Making the squeeze tighter, some essential non-defense discretionary programs will
require large increases in the years ahead. As an analysis that we will issue shortly shows, spending for veterans’ health care will need to rise by several hundred billion dollars over the coming decade, as more Vietnam veterans reach old age (when health care costs climb) and the number of Iraq and Afghanistan war veterans grows. To meet these costs for our veterans, which we will surely do, policymakers will have to cut other nondefense discretionary programs even more deeply to remain within the tough BCA caps.
Adding large further cuts on top of the steep cuts that the BCA requires would be most unwise, as former Senate Budget Committee Chairman Pete Domenici and former CBO
and Office of Management and Budget director Alice Rivlin have warned.
The Republican offer poses these problems for one main reason: its revenues are inadequate. At $800 billion, they don’t even offset the cost of extending President Bush’s tax cuts for the most affluent 2 percent of Americans and extending the current extravagant estate-tax break for the heirs of the richest 0.3 percent of Americans — as the Republican plan apparently does.
In short, people with low incomes or serious disabilities, and elderly people of modest means, would face substantial cuts — but people at the top would get to keep a significant share of their munificent tax cuts.
h/t to Dan Froomkin
digby 12/04/2012 09:17:00 AM