Californification of Washington

[Whomp]

There's a scene in the "The West Wing" when one of the U.S. President's aides angers his boss by telling him he used a tax rebate to pay off debt instead of blowing the lot in shopping malls.

"So you don't want me to be responsible?" asks the puzzled aide.

"Oh we do," replies an exasperated President, "but we'd just rather you were responsible when the next guy was in power."

It's worth bearing this exchange in mind the next time you go to vote. Give politicians any choice and they will always prefer to leave fiscal rectitude to the next administration. It's just so terribly unpopular.

Mark1031 posted a OP "how stupid republicans are", What struck me more than how stupid people are was this comment.

It demonstrates the cost of the campaign of fear and hate that has been pumped up in the service of hyper-partisanship over the past 15 months. We are playing with dynamite by demonizing our president and dividing the United States in the process. What might be good for ratings is bad for the country.

I couldn't agree more.

There are enormous long-term fiscal problems our politicians need to address. However, the Republicans’ conservative base demands adherence to the no-tax pledge, while liberal Democrats demand that their representatives prevent cuts in spending for domestic programs. These hardened (and polar) positions greatly narrow the possible grounds for problem-solving.

Two articles I think all of you should read as they truly resonate deeply with me.
From the NY Times...

“I used to think it would take a global financial crisis to get both parties to the table, but we just had one,” said G. William Hoagland, who was a fiscal policy adviser to Senate Republican leaders and a witness to past bipartisan budget summits. “These days I wonder if this country is even governable.”

http://www.nytimes.com/2010/02/17/business/economy/17gridlock.html

and the article that helped spawn the OP title (along with the RHCP's)...

In this scenario, even deficit-fearing politicians avoid taking on the long-term deficit. Mr. Burman imagines a White House political adviser saying: "Mr. President, if you raise taxes or cut popular programs, you or your party will be defeated in the polls and the bad guys will take over. The bad guys do not share your priorities and they do not care about the deficit. Therefore, you cannot effectively deal with the deficit."

The challenge isn't coming up with options. The CBO has a book full of them, ranging from raising the retirement age to taxing carbon.

It's arithmetically possible to eliminate the deficit exclusively by cutting spending. Wisconsin Republican Rep. Paul Ryan's Roadmap does. But there's no political majority for those proposals.

It's arithmetically possible to erase the deficit by raising taxes, but the resulting tax rates would be politically and economically devastating. The challenge is fashioning a compromise that solves the problem and is politically viable.

http://online.wsj.com/article/SB20001424052748704541304575099371249822654.html

Recently, Byron Dorgan, Democratic senator from North Dakota, said the situation in Washington is untenable. Even more recently, Democratic Senator Evan Bayh of Indiana also said he wouldn’t seek another term in the Senate because it’s impossible to get anything done in dysfunctional Washington.

Here’s how he put it in a February 21 Op-Ed piece in The New York Times:

There are many causes for the dysfunction: strident partisanship, unyielding ideology, a corrosive system of campaign financing, gerrymandering of House districts, endless filibusters, holds on executive appointees in the Senate, dwindling social interaction between senators of opposing parties and a caucus system that promotes party unity at the expense of bipartisan consensus.

Love him or hate him this applies to today's environment. Do we have anyone with the leadership skills to be able to bridge this gap?

In August 1982, President Ronald Reagan went on TV to defend a package of spending cuts and tax increases that undid some of his earlier tax cuts: "Do we tell…Americans to give up hope, that their ship of state lies dead in the water because those entrusted with manning that ship can't agree on which sail to raise? We're within sight of the safe port of economic recovery. Do we make port or go aground on the shoals of selfishness, partisanship, and just plain bullheadedness?"

Good question, yes?

In the meantime, welcome to the precipice. Because I'm not sure we have the leadership, on either side, that's capable of problem solving.

Frankly, I wouldn’t be so unhappy if I were sure today’s battles were being fought over principles. What worries me most is the appearance that, instead, they’re being fought for personal and political advantage and to win elections.

I've made it my pledge to vote against any current politicians in Washington that votes purely along party lines. They need to be fired for their lack of leadership and "sheep-like" mentality. We need people who are willing to stand by their own convictions rather than a partisan platform. Are they out there?

For the non-Americans on these boards. Many of your countries (especially European) have serious long term financial issues that will occur even before the U.S. issues hit. Do your politicians have the leadership skills to handle your problems?

 

[Cutlass]

And pick up the book:
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility (Hardcover)
~ David M. Walker

Editorial Reviews
From Booklist
“It’s time for us to wake up—and wake up America—to the lethal threat of our own fiscal irresponsibility.” So states Walker, CPA and the government’s former top auditor, who now concentrates on raising public awareness of our nation’s growing deficits, increasing debt, and dependency on foreign lenders. He sets out to explain our fiscal situation in understandable terms, offers solutions, and helps us evaluate future programs that are heralded as “fair” or will “pay for themselves.” Walker explains our political culture in terms of what he sees as Washington’s malfunction. Questions that he suggests citizens ask of their government leaders: Has the government promised more than it can afford? Have politicians acknowledged that federal taxes must go up for more Americans than those designated “rich,” and are they just talking about fiscal responsibility without any action? Everyone will not agree with Walker, although he makes a compelling case for his views. Excellent book on critical issues as our economy slowly emerges from recession. --Mary Whaley
Review
"Please read this book by David Walker. No one has worked harder, been armed with more facts, written more clearly and been more dedicated to the mission of restoring confidence in our fiscal affairs and trust in government." —Paul Volcker, Chairman of the Economic Recovery Advisory Board and Former Chairman of the Federal Reserve

"Dave Walker has lifted the hood on the federal government, diagnosed the problems, and provided a number of sensible suggestions to help restore America's greatness. READ THIS BOOK IF YOU CARE ABOUT AMERICA’S FUTURE."—Ross Perot

"David Walker shows us how to regain fiscal sanity and why, if we don't, we're at risk of bequeathing a lower standard of living to our children and becoming a second rate power. Every American should read this book because Walker gives us specific solutions, and shows there is still hope."—Former U.S. Senator Bill Bradley

"DavidWalker has drawn a true frightening and fact-based picture of a looming crisis; a crisis that will make the recent financial meltdown seem like a walk in the park. If this analysis doesn't stir you to action nothing will."—Paul O'Neill, U.S. Secretary of the Treasury under President George W. Bush (43)

"Comeback America is a brilliant, factual, and highly readable account of our current fiscal predicament, how we got there, how we can escape, and what we should do in the future. It is a must read by every American, especially our elected leaders."—Carla Hills, U.S. Trade Representative under President George H.W. Bush (41)

"Every American should read David Walker's clear analysis of our dangerous future federal budget deficits and of our current political system. One might not agree with all of Walker's opinions and recommendations, but they should stimulate serious debate about issues that will determine the future of our society; and hopefully contribute to moving forward on those issues."—Robert Rubin, Co-Chairman, Council on Foreign Relations and Former Secretary of Treasury

“If you're a politician or citizen ready to get a grip—on budgets, spending, entitlement, and health-care reform—the ideas in Comeback America are a good starting point for a discussion.”—Philadelphia Inquirer

 

[downtown]

Yeah, its heartbreaking, and I get the impression that folks just shrug their shoulders and say "eh, X does it too/its always been this bad". I don't think thats the case. The enviroment now is especially bad.

Between this and my teaching experience, I'm personally pretty close to saying "ahh, hell with it". Forget political activism, I'm not even totally convinced I'm going to vote again in 2010...which I think is a pretty stark change to how I was even a year ago.

My confidence is shot Whomp. I WANT TO BELIEVE

 

[civ_king]

We are going to need some big taxes and some big spending cuts to get this paid off soon,

is it possible for the Fed to pay off bonds early?

 

[Karalysia]

Nationalization, central planing, and raise taxes.

 

[Cutlass]

It's not the Fed's (Federal Reserve) problem. It's the Treasury's problem. And they have to follow spending and taxing as enacted by Congress. But yes, if they have the money, the Treasury can buy back all the outstanding bonds. There was some concern when Bush first took office that at the rate debt was being paid down that we would run out of debt. Bush put a stop to that first thing

 

[Tani Coyote]

We are going to need some big taxes

It's arithmetically possible to eliminate the deficit exclusively by cutting spending. Wisconsin Republican Rep. Paul Ryan's Roadmap does. But there's no political majority for those proposals.

I prefer this idea, sorry, we pay enough already.

I'd nominate the military for a few cuts... we should use the aid budget as a bludgeon, simply because of lower cost and greater efficiency. We should also focus on training our citizenry in the basic arts of combat, so as to lessen the need for a large standing army(as we can simply raise large numbers of troops when necessary and retrain them/equip them/etc.), and it would also pay dividends in terms of reduced crime, I feel. As well, increased fitness in the population would mean less need for healthcare too, I feel, helping us get out of the healthcare crunch as well.

I do hope the healthcare plan does reduce deficits over time though... would make our job easier.

and some big spending cuts to get this paid off soon

Now THIS I can get behind.

 

[civ_king]

Nationalization, central planing, and raise taxes.

to get this to work, you would need
1) a less partisan public
2) Republicans screwing up horrifically
3) A President as awesome as Theodore Roosevelt, Franklin Delano Roosevelt and Abraham Lincoln combined (the three awesomest liberals in American History)

 

[Benefactor]

Every Government seems to be terrible at making a balanced budget.

 

[civ_king]

Every Government seems to be terrible at making a balanced budget.

Except Andrew Jackson

 

[Cutlass]

I prefer this idea, sorry, we pay enough already.

I'd nominate the military for a few cuts... we should use the aid budget as a bludgeon, simply because of lower cost and greater efficiency. We should also focus on training our citizenry in the basic arts of combat, so as to lessen the need for a large standing army(as we can simply raise large numbers of troops when necessary and retrain them/equip them/etc.), and it would also pay dividends in terms of reduced crime, I feel. As well, increased fitness in the population would mean less need for healthcare too, I feel, helping us get out of the healthcare crunch as well.

I do hope the healthcare plan does reduce deficits over time though... would make our job easier.



Now THIS I can get behind.

In Walker's book, he makes the point that we need to work on both ends. Entitlement spending cuts, discretionary spending cuts, and tax increases.

 

[Mark1031]

It's arithmetically possible to eliminate the deficit exclusively by cutting spending. Wisconsin Republican Rep. Paul Ryan's Roadmap does. But there's no political majority for those proposals.

It's arithmetically possible to erase the deficit by raising taxes, but the resulting tax rates would be politically and economically devastating. The challenge is fashioning a compromise that solves the problem and is politically viable.

This needs to be done by commission (tax increase+beni cuts) and passed on Christmas eve by a lame duck congress. Obama proposed such a commission and the Repubs wouldn’t go along. I’m sorry but I can’t apply equal blame for this:

There are many causes for the dysfunction: strident partisanship, unyielding ideology, a corrosive system of campaign financing, gerrymandering of House districts, endless filibusters, holds on executive appointees in the Senate, dwindling social interaction between senators of opposing parties and a caucus system that promotes party unity at the expense of bipartisan consensus.

Look at Republicans from 30 yrs ago. Look at Nixon domestically. The Republican party has moved massively right. Clinton moved right and then they moved further right and eliminated all moderates and impeached him so that now self identified Repubs have the crazy ideas in the polls cited.

If you look at the current Republican philosophy it is that government is bad, evil, incompetent, a threat to all that is good. Even if the adults in the party don’t really believe this when that is the position you sold to the base how can you compromise, how can you govern that which you want to destroy?

 

[Tani Coyote]

In Walker's book, he makes the point that we need to work on both ends. Entitlement spending cuts, discretionary spending cuts, and tax increases.

Tax increases where, however? We already give about 50% of our income up when all the various taxes are applied...

I think imposing a national sales tax and a land tax(which varies depending on how the land is used, with additional fines if there's an unused resource on it), while cutting the income tax slightly to offset the tax burden would be a good idea. It diversifies the tax burden, and also encourages people to make smarter decisions with their spending and investments.

Also raising the inheritance tax sky-high on liquid wealth would work nicely, I feel. Offers incentives to pool it into more solid things, such as expansion of business, or even just purchasing of products. Better that than it just sitting in a bank collecting interest, when it could be being spent to help create jobs...

 

[Cutlass]

Tax increases where, however? We already give about 50% of our income up when all the various taxes are applied...

Absolutely not. It's little over 30%. Varies by state. But I think the approximation is 34%, more or less.

I think imposing a national sales tax and a land tax(which varies depending on how the land is used, with additional fines if there's an unused resource on it), while cutting the income tax slightly to offset the tax burden would be a good idea. It diversifies the tax burden, and also encourages people to make smarter decisions with their spending and investments.

Also raising the inheritance tax sky-high on liquid wealth would work nicely, I feel. Offers incentives to pool it into more solid things, such as expansion of business, or even just purchasing of products. Better that than it just sitting in a bank collecting interest, when it could be being spent to help create jobs...

Simply eliminating all the deductions from existing tax rates, what is called tax expenditures, would raise a huge amount of money.

 

[Bei1052]

If only it were possible to levy taxes against hardcore liberals only in order to prevent cuts to those domestic programs they love so much-- They'd surely change their tune and come over to the proverbial dark side of "no rise in taxes"/"cut spending".

 

[Cutlass]

If only it were possible to levy taxes against hardcore liberals only in order to prevent cuts to those domestic programs they love so much-- They'd surely change their tune and come over to the proverbial dark side of "no rise in taxes".

Why should the primary beneficiaries of government get a free ride?

 

[Karalysia]

Because liberals don't pay taxes?

 

[Tani Coyote]

Absolutely not. It's little over 30%. Varies by state. But I think the approximation is 34%, more or less.

I suppose we're above that average then... our household income is 6 figures(dunno the exact number, it's somewhere between 150-200K for my father and however much for my mother, a manager at Wal-Mart). The small business itself makes about 750K, I think it was...

I'm not sure, since parents are rather hesitant to share financial info for some reason.

In Nevada, we don't have state taxes(we get our revenue from casinos), but nonetheless, he did say that when you put all the taxes he pays together, he ends up having given up about half his paycheck... probably more like 40%, but still high.

Then again, he praises Bachmann, calls Obama a socialist, and says that the Democrats are spending our - as in, my and my sister's - fortunes away... so who knows if he's a little batty despite his business successes.

Simply eliminating all the deductions from existing tax rates, what is called tax expenditures, would raise a huge amount of money.

Wouldn't the loss of deductions possibly hurt many people, if only for the short term until they could adjust?

Cutting expenses is obviously the main thing that needs to be focused on, given that it is the root of the problem. If cut enough, any tax raises could be negligible.

 

[Tani Coyote]

Because liberals don't pay taxes?

I understand that's likely sarcasm on your part, given the fact so many higher income earners support liberal policies.

If only it were possible to levy taxes against hardcore liberals only in order to prevent cuts to those domestic programs they love so much-- They'd surely change their tune and come over to the proverbial dark side of "no rise in taxes"/"cut spending".

Actually, if it was possible to make people pay for only programs they wanted, it could probably be a good idea(in theory). But there'd be an issue or two:

1. It would prevent being able to fill the demand for such things as small business loans, education grants, etc. Charity can only handle so much, after all.

2. This would backfire on any conservatives. Simply for the fact that means liberals get to disown the large military budget conservatives desire. They also get to stop paying for the death penalty, etc.

Conclusion: Let's pool all our money into one giant pot and try to find something agreeable to us all.

 

[Integral]

I made a long post on one of the healthcare threads that might be worth repeating here. It addresses some of the spending/tax increase concerns raised on this thread.

Spoiler :

...But here's a perspective from the resident tax wonk's end.

I'm fairly certain that if this bill didn't pass, then no health bill would have passed before the November elections. The reconciliation/Senate bill was the Democrats' only shot.

My primary worry is that there is no way for us to get future Congresses and Administrations to commit to any of the meager cost-side provisions of the bill. Previous Congresses have shown no inclination towards reducing entitlements of any kind; there is no reason to believe that future Congresses will be any different. The probability that the provisions of this bill become another unfunded entitlement is exceedingly high.

By forming a new entitlement, we risk seriously burdening ourselves by choosing an unsustainable package of fiscal policies and taxes. Federal tax revenues are consistently around 19%-21% of GDP; given that this situation already produces consistent deficits there is little chance that the current tax structure will be able to handle the new subsidies**. This implies that there will be a push for a new major tax. It'll either be the ones in the bill (focused on insurance packages and payroll taxes), or perhaps a VAT. You aren't going to squeeze much more than 1-2% of GDP out of the income tax system even if you raise taxes on the rich, the poor and everyone in between. Further, any tax increases you use to pay for this bill are revenue options that you can't use for deficit reduction.

We know that if something can't go on forever, it'll stop. But at the rate we're going, with a jump in Federal expenditures from its historical 23% of GDP to 26%, we're in for a harder landing than we otherwise would. The last fifty years or so, we've seen a tax share of GDP of about 19% and an expenditure share of about 21%; the resulting average 2% of GDP deficit could be absorbed by economic growth, and the debt/GDP ratio never exploded upward. But to raise Federal expenditures to 26% of GDP, which appears to be the new equilibrium, we would need to find 3% of GDP in new taxes to offset the rise in spending. This cannot come from the current income tax system and most would argue that it should not come from the payroll tax system. So we'll need new taxes, which will inevitably introduce yet more distortions in the marketplace and reduce economic efficiency. We'd be trading a bit of efficiency for a bit of equity. That tradeoff might be worth it, but it should be acknowledged that the tradeoff is real and the loss in efficiency may be substantial. Would it be substantial enough to knock us off of our 2.1% long-term real growth rate? We'll see.

An additional problem is that the projected growth of Medicare and Medcaid point to a fiscal path that is unsustainable. That is, even without a new insurance subsidy, we'd have to make very hard decisions over the next ten years about provider reimbursement, payment rates, and the like. Adding a new entitlement only accelerates this burden.

I hope this hasn't sounded too fatalistic/pessimistic/reactionary/whatever. I'd like to think that I'm far more sane than the screaming heads on the far right. But these are my concerns, and nothing in either the Administration's announcements or Congress's actions addressed them satisfactorily.

**These deficits have historically not been a problem: they have usually been less than GDP growth, so at the current menu of taxes and spending we can just about grow our way out of a potential debt crisis. Holding the world's reserve currency has helped as well, but should not be used as a cruch.