On debt and deficits


The costs of two presidencies, juxtaposedJames Fallows of The Atlantic calls it, “The Chart That Should Accompany All Discussions of the Debt Ceiling“:

It’s based on data from the Congressional Budget Office and the Center on Budget and Policy Priorities. Its significance is not partisan (who’s “to blame” for the deficit) but intellectual. It demonstrates the utter incoherence of being very concerned about a structural federal deficit but ruling out of consideration the policy that was largest single contributor to that deficit, namely the Bush-era tax cuts.

An additional significance of the chart: it identifies policy changes, the things over which Congress and Administration have some control, as opposed to largely external shocks — like the repercussions of the 9/11 attacks or the deep worldwide recession following the 2008 financial crisis. Those external events make a big difference in the deficit, and they are the major reason why deficits have increased faster in absolute terms during Obama’s first two years than during the last two under Bush. (In a recession, tax revenues plunge, and government spending goes up – partly because of automatic programs like unemployment insurance, and partly in a deliberate attempt to keep the recession from getting worse.) If you want, you could even put the spending for wars in Iraq and Afghanistan in this category: those were policy choices, but right or wrong they came in response to an external shock.

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Trickle-down


The news is discouraging, unless, of course, this was the whole point:

Median Net Worth of Households 2005-09The median wealth of white households is 20 times that of black households and 18 times that of Hispanic households, according to a Pew Research Center analysis of newly available government data from 2009.

These lopsided wealth ratios are the largest since the government began publishing such data a quarter century ago and roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession that ended in 2009.

That is, many have long complained that trickle-down economic theory actually increases wealth gaps in society. The newly-released study from the Pew Center does not shock anyone for suggesting that the wealth gap is growing. But I suspect few trickle-down critics actually expected an eighteen- to twenty-fold gap reflecting ethnicity.

More on compromise


E. J. Dionne is not so concise as his Washington Post colleague, but equally apt:

[Obama] summarized his approach this way: “[L]et’s live within our means by making serious, historic cuts in government spending. Let’s cut domestic spending to the lowest level it’s been since Dwight Eisenhower was president. Let’s cut defense spending at the Pentagon by hundreds of billions of dollars. Let’s cut out the waste and fraud in health care programs like Medicare — and at the same time, let’s make modest adjustments so that Medicare is still there for future generations. Finally, let’s ask the wealthiest Americans and biggest corporations to give up some of their tax breaks and special deductions.”

That’s four sentences on cuts and barely one sentence on taxes, and not even tax increases as such — just a request that the privileged “give up some of their tax breaks and special deductions.”

On the other side are “a significant number of Republicans in Congress [who] are insisting on a cuts-only approach — an approach that doesn’t ask the wealthiest Americans or biggest corporations to contribute anything at all.” He went on: “And because nothing is asked of those at the top of the income scales, such an approach would close the deficit only with more severe cuts to programs we all care about — cuts that place a greater burden on working families.”

That happens to be true. The most remarkable thing about this whole debate (other than the dangerous foolishness of one side holding the nation’s credit standing hostage to get what it wants) is that Republicans have defined their party as being committed to low taxes for the wealthy above everything else. If anything good can come out of this strange episode, it is that no one will ever be able to doubt that proposition in the future.

GOP priorities ought to be perfectly clear:

  1. Defeat Obama.
  2. Appease the rich.