Posts Tagged ‘
Deficits and debt ’
Tuesday, November 16th, 2010
Ed Kilgore
Ed Kilgore is a PPI senior fellow, as well as managing editor of The Democratic Strategist, an online forum.
by Ed Kilgore
With the congressional lame duck session underway, ruminations on the midterm elections will yield to real-life events, but the furious partisan spin will if anything intensify. Republicans will seek to stall action on major legislative items until they swear in their new members in January, but must take some sort of position on the public debt limit, overdue appropriations, expiring tax cuts, unemployment benefits, the START treaty, and other items Democrat will bring to the House and Senate floors. Recently most of the intra-Republican maneuvering has involved conservative efforts to force the GOP Senate leadership to embrace a ban on so-called “earmarks,” which appears to have succeeded.
It’s the tax cut issue that could be the most complicated and contentious. The White House’s position (shared by progressive Democrats) has long been that expiring Bush income tax cuts should only be made permanent for middle-class taxpayers (defined, actually, as 98 percent of taxpayers), while Republicans are holding out for a straight and permanent extension. Polling backs the Democratic position, but the business community is poised to shriek about the negative economic impact of hiking taxes on anyone in a recession, and the small business lobby will claim any personal income tax hike for the top bracket will hurt its constituency badly. Blue Dog opposition to a partial extension helped delay resolution of the matter until after the midterms, and now Republicans are pressing for a temporary if not permanent extension of all the tax cuts. The impact on the deficit of any extension is another factor in the debate, though most Republican self-described deficit hawks have long internalized the conservative argument that failure to extend a tax cut is a tax increase and thus should be off the table.
An unwelcome distraction for Democrats is the ethics committee proceedings involving Rep. Charles Rangel of NY, who was found guilty by the panel today of 11 rules violations.
Outside Washington, there is continuing drama in a few unresolved 2010 races. The main event is in Minnesota, where Republicans appear to be digging in for a long legal battle to prevent the inauguration of apparent gubernatorial winner Mark Dayton. What they hope to produce is a situation where the newly elected legislature (both chambers were won by the GOP) takes office and works with holdover Gov. Tim Pawlenty (who under state law remains in office until a successor is sworn in) to rapidly enact conservative legislation. This patent offense to fair play and voter intent is rationalized by Republicans through the inevitable claim that Dayton benefitted from vote fraud, and Pawlenty, who is almost certainly running for president, will undoubtedly welcome the national attention he’d get for thumbing his nose at Democrats. GOPers also think of this scenario as payback for the 2009 legal battle by Democrats on behalf of Sen. Al Franken.
Aside from Pawlenty’s maneuvers, 2012 speculation has been fed by a batch of twelve Public Policy Polling surveys of 2010 Republican voters (in AK, FL, KY, ME, MN, NV, NC, OH, TX, WA, WV, WI) measuring their early presidential preferences among Mitch Daniels, Newt Gingrich, Mike Huckabee, Sarah Palin, Tim Pawlenty, Mike Pence Mitt Romney. In all twelve, Romney, Huckabee, Palin and Gingrich are in double digits; Pawlenty breaks double digits in his home state of MN (with 19 percent). Palin leads in ME, OH, TX, WA, WV, and WI; Huckabee leads in AK and KY; Romney in FL and NV; Gingrich in NC; and TimPaw in MN.
Nate Silver of 538 posted an argument that dark horse candidates are very unlikely to break through against the Big Four of Gingrich, Huckabee, Palin and Romney, while Jonathan Bernstein responded: “Early good polling based on name recognition for weak candidates really is meaningless — see Rudy Giuliani ’08, among many others.”
Photo credit : Thomas Hawk
Tags: 2012 Horserace, AK, Al Franken, Big Four of Gingrich, Blue Dog, business community, Charles Rangel, conservative legislation, Deficits and debt, earmarks, ethics committee, expiring tax cuts, FL, GOP, income tax hike, Jonathan Bernstein, KY, Lame Ducks, Mark Dayton, ME, middle-class taxpayers, midterm elections, Mike Huckabee, Mike Pence Mitt Romney, Minnesota, Mitch Daniels, MN, Nate Silver, NC, Newt Gingrich, NV, NY, OH, overdue appropriations, partisan spin, Pawlenty, public debt limit, Public Policy Polling, republicans, Rudy Giuliani, Sarah Palin, small business lobby, START treaty, Tim Pawlenty, TX, unemployment benefits, unresolved 2010 races, WA, WI, WV
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Tuesday, November 16th, 2010
Michael Mandel
Michael Mandel is the chief economic strategist at the Progressive Policy Institute and the founder of Visible Economy LLC, a New York-based news and education company.
by Michael Mandel
Read the entire memo
Since the Great Depression, the tools of choice for fighting economic downturns have been countercyclical monetary policy and countercyclical fiscal policy. That is, when the economy slowed, economists would recommend cutting interest rates, reducing taxes, and boosting government spending to pump up demand. And for 75 years, those policy measures were enough.
But in the aftermath of the financial crisis, we seem to have almost exhausted the limits of monetary and fiscal policy to create jobs. The Federal Reserve has pushed interest rates down to near zero, although it appears ready to try another round of quantitative easing.
Meanwhile, the federal budget deficit hit $1.3 trillion in fiscal year 2010. In the aftermath of the midterm election victories of candidates who ran against federal spending, it seems politically unlikely that there will be another round of fiscal stimulus.
Under the circumstances, it may be time to try something new: Countercyclical regulatory policy. That means following a very simple rule: Don’t add new regulations on innovative and growing sectors during economic downturns.
The goal: To encourage innovation and job creation by temporarily abstaining from additional regulation on innovative sectors, and perhaps even temporarily abating some existing regulations on innovative sectors (what I call innovation ecosystems).
The key word here, of course, is ‘temporarily.’ Like countercyclical monetary and fiscal policy, countercyclical regulatory policy is designed to provide a short-run stimulus to the economy by making decisions that can be reversed when the economy improves—the equivalent of a temporary investment tax credit. In other words, countercyclical regulatory policy is not the same as deregulation. It presupposes that regulators stay alert and take care of abuses.
Read the entire memo
Tags: countercyclical regulation, Deficits and debt, demand, deregulation, economic downturn, federal budget, Federal Reserve, financial crisis, government spending, Great Depression, Innovation, innovation ecosystems, interest rates, Jobs, midterm election, monetary policy, Regulatory policy, Taxes
Posted in
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Friday, November 12th, 2010
Ed Kilgore
Ed Kilgore is a PPI senior fellow, as well as managing editor of The Democratic Strategist, an online forum.
by Ed Kilgore
The post-election interpretive wars have continued and even intensified, but with current and future events very much in everyone’s mind.
Voices of self-restraint among Republicans are very rare. Highly typical is this take from University of Virginia professor of politics James Ceaser:
Of all the recent mid-term elections, 2010 is the closest the nation has ever come to a national referendum on overall policy direction or “ideology.” Obama, who ran in 2008 by subordinating ideology to his vague themes of hope and change, has governed as one of the most ideological and partisan of presidents. Some of his supporters like to argue in one breath that he is a pragmatist and centrist only to insist in the next that he has inaugurated the most historic transformation of American politics since the New Deal. The two claims are incompatible. Going back to the major political contests of 2009, beginning with the Governors’ races in Virginia and New Jersey and to the Senate race in Massachusetts, the electorate has been asked the same question about Obama’s agenda and has given the same response. The election of 2010 is the third or fourth reiteration of this judgment, only this time delivered more decisively. There is one label and one label only that can describe the result: the Great Repudiation.
Ceaser goes on to attack any Republicans who would urge a future course that eschews the sacking and burning of Obamaism in all its aspects.
So the triumphalist strain of conservative post-election interpretation is closely linked to a maximalist prescription for Republican behavior now. That helps explain why Republicans have been generally negative about the Bowles-Simpson deficit reduction proposal that was released earlier this week, even though it was clearly tailored (with its heavy emphasis on spending reductions and its crafting of revenue-raising measures in the context of rate-reducing “tax reform”) to appeal to them.
One conservative reaction was especially revealing: that of James Capretta in National Review, which trashed the Bowles-Simpson report for failing to embrace the repeal of health care reform, and indeed, for building on some of the health care cost containment measures in that legislation. The short-term goal of repealing “ObamaCare,” it seems, is more important to conservatives than the long-term goal of reducing deficits and debt.
But Capretta’s reaction illustrates another problem that will bedevil any bipartisan effort on spending and taxes: the Republican rejection, which began during the Bush administration but became endemic during the health reform debate, of neutral “scorekeepers” like the Congressional Budget Office, which enraged conservatives by accepting some of the cost containment claims of “ObamaCare.”
Among Democrats, as noted in the last political memo, those deducing major lessons from the midterms agree that the Obama administration should change its strategy and its public message, but sharply diverge along the usual ideological lines about which direction Democrats should take. There is genuine alarm on the Left, on both substantive and political grounds, about the White House’s apparent decision to reach an accommodation with Republicans on an extension of the Bush tax cuts, and strong hostility to the Bowles-Simpson recommendations (for which the President is held accountable, even though he has not embraced the proposals). For the first time, there is talk, though not that serious yet, of a protest candidate running against the President in the 2012 primaries.
Centrist Democrats seem divided between those who favor a decisive “move to the center” and support the Bowles-Simpson proposals pretty much as drafted, and those with more modest suggestions for changes in Obama’s approach to the opposition and to the major issues.
Aside from impending debates on taxes, health care, and the budget, the 2012 election cycle is already getting underway. It is beginning to sink in for Democrats that there are structural aspects to the congressional landscape in 2012 that limit possibilities for a “rebound,” even if the economy improves and the expected change in turnout patterns occurs. Two-thirds (23) of the 33 senators facing re-election that year are Democrats (by contrast, half (19) of the 37 Senate races in 2010 involved Democrat-held seats). Large Republican gains in control of state legislative chambers means that the House landscape will be significantly tilted in the GOP’s election through redistricting; some estimates of the impact are as high as 25 seats.
The presidential landscape, however, is another matter entirely. The ultramontanist mood among conservatives right now is not conducive to any trimming of ideological sails in the pursuit of a White House victory in 2012. There is considerable talk of an Establishment conspiracy to block any nomination for Sarah Palin, which indicates how seriously Republicans take her prospects if she decides to run. Another antagonist of said Establishment, Mike Huckabee, is in excellent position to once again win the Iowa Caucuses if Palin does not take the plunge. Mitt Romney remains haunted by his Massachusetts health reform effort, a problem that will grow worse during the upcoming conservative drive to repeal “ObamaCare.” And time is not on the side of the various dark horse possibilities (Daniels, Pence, Barbour) who may be famous in Washington but not so much in Des Moines or Manchester.
All in all, the impact of the midterms may fade faster than anyone expected as the future needs of the two parties, and of the country, take hold.
Tags: 2010 midterm election, 2012 Campaign, 2012 presidential election, Barbour, bipartisan, Bowles-Simpson, Bush tax cuts, Campaigns and elections, centrist, Congressional Budget Office, Daniels, Deficits and debt, Democrats, Des Moines, Establishment conspiracy, Great Repudiation, health care reform, ideology, Iowa Caucuses, James Capretta, James Ceaser, left, Manchester, Massachusetts, Mike Huckabee, Mitt Romney, national referendum, National Review, New Deal, New Jersey, Obama, Obamacare, Obamaism, Pence, pragmatist, Republican, Sarah Palin, scorekeepers, tax reform, ultramontanist, University of Virginia, Virginia, White House victory
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Tuesday, October 12th, 2010
Will Marshall
Will Marshall is the president of the Progressive Policy Institute.
by Will Marshall
President Obama’s call yesterday for $50 billion in new transportation spending is politically risky, given public worries about government spending and debt. But if linked to a strategic and sustained strategy for modernizing the nation’s infrastructure, it could signal the start of America’s economic comeback.
Even more important than the money, however, is an Obama initiative that didn’t get as much media play: a proposed National Infrastructure Bank. It is the key not only to leveraging business capital – U.S. companies are sitting on $2 trillion in potential “private stimulus” money – but also to making sure we invest that money wisely.
The president said he would ask the lame-duck Congress next month to approve the $50 billion measure, which would front-load money that otherwise would be spread over the life of a six-year surface transportation bill. He left little doubt his immediate goal is to goose the pace of the agonizingly slow economic recovery.
“Nearly one in five construction workers is still unemployed and needs a job. And that makes absolutely no sense when so much of America needs rebuilding,” Obama told reporters at the White House on Memorial Day. Attempting to preempt Republican objections that infrastructure spending is simply stimulus is drag, Obama noted that “Investing in infrastructure is something members of both parties have always supported.”
Maybe so, but it’s worth noting that the word “infrastructure” appears nowhere in the GOP’s 48-page Pledge to America. What’s more, Republicans are likely to over-interpret likely midterm gains as vindication of their attacks on Obama as a big spender, so good luck getting them to vote for infrastructure in the lame duck.
That’s a shame, because spending on infrastructure is both stimulus and investment. It could get more Americans working now, but it is also essential to building our country’s long-term capacity to compete in fast growing global markets for high speed rail, civilian nuclear energy, clean cars, intelligent transport systems and renewable fuels.
The federal government, of course, is constrained by enormous deficits and a growing national debt. That’s why we need a National Infrastructure Bank, which would structure public-private deals to fund big capital projects that can generate real economic returns. As noted by an economic analysis the White House released yesterday:
“There is currently very little direct private investment in our nation’s highway and transit systems due to the current method of funding infrastructure, which lacks effective mechanism to attract and repay direct private investment in specific infrastructure projects. … A National Infrastructure Bank would also perform a rigorous analysis that would result in support for projects that yield the greatest returns to society and are most likely to deliver long-run economic benefits that justify the up-front investments.”
An infrastructure bank, along with new public seed capital and a third element of the Obama infrastructure initiative – merging the many stovepiped “modal” transportation funding streams so public dollars can be used strategically – begin at last to push the economic debate in a constructive direction. The two great challenges America faces now are reviving our economic dynamism and shrinking a massive overhang of public debt. To meet them, the Obama administration needs to fashion an ambitious, “cut and invest” strategy aimed at slowing health care and entitlement spending generally, and using public dollars to leverage massive private investment in productivity-enhancing infrastructure.
That’s why President Obama should press ahead with his infrastructure plan, despite the political fallout from the midterm election. If Republicans want to frame the economic debate as a choice between more tax cuts and rebuilding the common foundations of American prosperity, so much the better. That’s one progressives can win.
Photo credit: Center for Neighborhood Technology
Tags: big capital projects, business capital, civilian nuclear energy, clean cars, cut and invest, debt, deficits, Deficits and debt, economic dynamism, economic recovery, federal government, global markets, GOP, government spending, Health care, high-speed rail, highway and transit systems, Infrastructure, infrastructure plan, intelligent transport systems, investment, long-term capacity, Memorial Day, midterm, midterm election, National Infrastructure Bank, new transportation spending, Pledge to America, President Obama, private stimulus, progressives, public-private, renewable fuels, Republican, stimulus, Transportation, transportation bill, White House
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Tuesday, September 28th, 2010
Lee Drutman
Lee Drutman is a senior fellow and the managing editor for the Progressive Policy Institute.
by Lee Drutman
President Obama has been quite supportive of building high-speed rail. In January he announced an $8 billion down payment. But that was just a start. Building high-speed rail is a major investment, and the big question is: how will we pay for it, especially in a time of increasing federal deficits?
PPI Fellow Mark Reutter has some ideas, and he writes about them in a new policy memo that PPI is releasing today. The memo is called: “ A smart way to finance high-speed rail: Restructuring the Highway Trust Fund into a results-driven transportation fund.”
Reutter argues that the money should come out of a cleaned-up Highway Trust Fund, which is currently larded with strategically aimless and costly programs:
Congress could easily allot $5 billion a year for HSR construction – without an increase in the gas tax – by cutting out earmarks and formula-based grants that now soak up billions of dollars, according to the General Accountability Office (GAO). Such fund reallocations could not only jumpstart HSR projects but serve as seed money to public-private partnerships to get the work done.
Although the Highway Trust Fund was once an elegant solution to funding the construction of the Interstate Highway System with gasoline taxes, it has over the years become more and more just a source of political pork.
Reutter thinks it’s time we use the almost $300 billion authorization (over six years) for building up genuine high-speed-rail routes. To that end, he makes seven specific policy recommendations for the next Highway Trust Fund re-authorization replacing the current authorization due to expire at the end of 2010.
- Change the name of the Highway Trust Fund to the Surface Transportation Trust Fund to better reflect its new mission for the 21st century.
- Allocate at least $5 billion in Trust Fund money in 2011 to HSR construction, with special emphasis on getting a demonstration high-speed line between Tampa and Orlando completed by 2015. (The Florida line received $1.25 billion in federal stimulus grants, but is still short of its $2.6 billion budget.)
- Increase HSR expenditures in years 2012-15 (if a five-year spending bill is enacted) to reflect the increased demand for grants as more states develop passenger rail plans.
- End the bureaucratic separation of highway and rail programs by establishing a team of planners to develop a HSR network in coordination with future highway building and restoration.
- Direct the U.S. Department of Transportation and state authorities to examine routes where HSR could use Interstate and other publicly owned highway corridors for rights of way. This approach, already being used in the Tampa-Orlando corridor, would greatly lower land acquisition costs for new rail lines.
- Base federal transportation decisions on clear analytic measures of performance rather than earmarks – and competition between states instead of preset formulas – to produce the greatest return on taxpayer dollars.
- Ensure that HSR, which uses about 20 percent less energy per passenger mile than automobiles, gets its fair share of any future revenues generated by carbon pricing.
Reutter also explores ways that policymakers can leverage private capital to augment public spending.
One approach is assembling land around potential HSR terminals for sale to private companies either operating or putting up part of the capital costs of HSR building.
Another is to encourage overseas operators with proven track records to invest in U.S. projects, at least initially, to allow U.S. companies to “learn the ropes” of building these highly sophisticated systems.
Ultimately, though, it’s going to take real political leadership. As Reutter concludes:
The Obama administration has repeatedly talked about its commitment to “green” technology and how fast trains could provide job growth and business opportunities to regions hard-hit by the loss of manufacturing. The administration needs to seize the initiative and make the case for HSR funding during the fall election cycle and in the next transportation reauthorization bill.
Reutter will be discussing high-speed rail Wednesday at a panel on “Keeping America on Track: The Future of High-Speed Rail,” which is part of the 2nd Annual North America Strategic Infrastructure Leadership Forum, co-sponsored by PPI.
Tags: 2nd Annual North America Strategic Infrastructure Leadership Forum, A smart way to finance high-speed rail: Restructuring the Highway Trust Fund into a results-driven transportation fund, Congress, Deficits and debt, federal deficits, Florida, GAO, gas tax, General Accountability Office, high-speed rail, Highway Trust Fund, HSR, IHS, Interstate Highway System, Keeping America on Track: The Future of High-Speed Rail, Mark Reutter, Orlando, Policy Memo, policymakers, political leadership, PPI, President Obama, private capital, public-private partnerships, Surface Transportation Trust Fund, Tampa, Tampa-Orlando corridor, taxpayer, Transportation, Trust Fund money, U.S. Department of Transportation
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Friday, July 16th, 2010
Robert Atkinson
Dr. Robert D. Atkinson is the founder and president of the Information Technology and Innovation Foundation, and the author of
The Past and Future of America’s Economy: Long Waves of Innovation That Power Cycles of Growth (Edward Elgar, 2005).
by Robert Atkinson
The International Monetary Fund recently scolded the U.S. government for running large budget deficits. Leaving aside the absurdity of cutting deficits when unemployment is still extremely high, it’s clear that at some point – as joblessness declines toward 5 percent – deficit reduction will need to begin in earnest. But the real question is how to do that. There’s a risk that the Washington economic class – grounded as they are in 20th century neo-classical economics — will fail to balance the twin imperatives of fiscal discipline and public investment.
Indeed the common refrain that has become the new “group think” in DC is that “everything should be on the table” when it comes to addressing the debt. For example, the Bipartisan Policy Center’s Debt Reduction Task Force says, “everything should be on the table.” Even President Obama, who has at least rhetorically talked about the need for increases in public investment and fought to include public investment in the stimulus, now says that everything should be on the table. Other groups echo this intellectually easy, but intellectually simplistic, position. Pete Peterson’s Concord Coalition likewise calls for “applying budget discipline to all parts of the budget.” The New America Foundation’s Committee for a Responsible Budget supports a budget freeze on all discretionary spending. For these budget hawks, subsidies to farmers to produce crops that aren’t needed fall in the same category as funding for the National Science Foundation to advance science and technology critical to our nation’s future: they both cost money and both should be cut.
The Government’s Role
But there are some things that governments do – on the tax and spending sides – which drive productivity, spur innovation, improve health, clean up the environment and create other benefits that most certainly should not be on the table. The National Commission on Surface Transportation Financing (which I had the honor of chairing) recently highlighted a federal highway and transit funding gap of nearly $400 billion over the next five years. Increased federal support for highways and transit would lead to significantly greater societal benefits (reduced traffic congestion, higher productivity) than the costs in revenues. Yet some groups wave the budget red flag to oppose expanded infrastructure investment, even if increased user fees, such as the gas tax, pay it for. As ITIF has demonstrated, increasing the Research and Experimentation Tax Credit from 14 to 20 percent would return $9 billion more to the Treasury than it would cost. And as ITIF and the Breakthrough Institute have shown, solving climate change requires significant increases in federal support for clean energy innovation, but the benefits (saving the planet) are massive.
If neo-classical-inspired budget hawks want everything to be on the table, liberal Keynesians want to put practically nothing on the table, except higher taxes on the wealthy and business. For example, economist Jamie Galbraith would take entitlement reform off the table. His solution: pray the Chinese keep lending us money. Likewise, Jeff Faux, founder of the liberal Economic Policy Institute argues that, “The deficit projections no more reflect a crisis of “entitlement” overspending than they reflect a ‘crisis’ in any other category of spending, like military spending or agricultural subsidies. Sensible governance understands that the fact that a program area is expanding does not make it the source of fiscal imbalance. But with entitlements off the table, you can’t solve the government’s fiscal problems simply by raising taxes on the rich.
All Spending Is Not the Same
What’s behind this widespread unwillingness to prioritize investment? Budget hawks fear that sparing one item from the chopping block will only validate the demands of interest groups to exempt their pet programs. In addition, many adhere to a neo-classical economics perspective, which holds that government plays a negligible role in economic growth and should be neutral with regard to private sector activity. In the purest form of this thinking, everything is on the table, because nothing is more important than anything else. To paraphrase Michael Boskin, a neo-classical Bush I economist, a dollar of public investment on computer chips has the same societal value as a dollar spent on potato chips. But government should be anything but neutral. Science and infrastructure funding is more valuable than farm subsidies. Government support for research in computer chips is more valuable than support for potato chips.
For liberals, reducing spending on entitlements will not only harm working Americans, but will also reduce economic growth, since Keynesian doctrine holds that growth comes from increasing aggregate demand – meaning pump more money into the economy, period.
In contrast, an innovation economics approach to the budget distinguishes between spending on consumption and spending on investment. For innovation economics advocates, all spending (either on the tax or expenditure side) should be on the table, and all investment (on the tax and expenditure side) should be off the table.
Tax, Cut and Invest
The last time Washington paid attention to deficits was in the first Clinton term. At that time PPI Vice President Rob Shapiro wrote a series of reports with the title, “Cut and Invest.” The notion was that we should cut unnecessary spending and use a significant share of the savings to invest in the nation’s future, including education, infrastructure and research. That was the right message then and it is the right message now. Although today, such a report might be best titled, “Tax, Cut and Invest.” To solve the budget deficit in a way that enables the significant increases needed in investment, we need to raise some taxes, cut some spending and increase some investment.
The general outline should look like this: On the tax side, we should let the Bush tax cuts on the wealthy expire, including: dividend taxes, estate taxes (above a certain modest size) and top marginal rates. We should increase the gas tax by at least 15 cents a gallon (and index it to inflation) and at the same time institute a carbon tax. We should consider a border-adjustable business activity tax. We should eliminate the home mortgage interest deduction. (Home ownership has many societal benefits, but as we see from other nations without these large tax incentives, nations can get high levels of home ownership without wasteful subsidies.)
On the spending side, we need to deal with entitlements, including: progressive indexing of Social Security benefits and increasing the retirement age, continued health care reform — particularly focused on driving innovation to cut costs and cutting entitlements to farmers — farm subsidies. This should be a gradual process to spread the pain over time.
And most importantly, we should significantly expand investments. We need to expand investments in education and training, science and research, technology (including, but not limited to clean energy) and physical infrastructure. In order to ensure that companies in the U.S. are globally competitive and create jobs here at home, we need to expand corporate tax expenditures. For example, create a new corporate competitiveness tax credit that would include a much more generous credit for research and development, and a credit for business investments in workforce training and new capital equipment, especially software. Making these investments will cost money in the short run. But they will also generate returns to the economy and the government in the long term. In economic downturns, successful corporations don’t cut key investments because they know that these investments are vital to gaining market share and competitive advantage in the moderate term. Governments should think the same way.
So let’s stop talking about putting everything on the table and instead recognize that not only do investments need to be off the table, they need to get more from what’s on the table.
Rob Atkinson is president and founder of ITIF, a Washington-based think tank providing cutting-edge thinking on technology and economic policy issues.
Photo Credit: Gliko’s Photostream
Tags: Barack Obama, Bill Clinton, Breakthrough Institute, Concord Coalition, Deficits and debt, International Monetary Fund, Jamie Galbraith, Jeff Faux, Michael Boskin, National Science Foundation, Peter G. Peterson, Rob Shapiro, Surface Transportation Financing
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Friday, July 2nd, 2010
Will Marshall
Will Marshall is the president of the Progressive Policy Institute.
by Will Marshall
The following is the is an excerpt from Will Marshall’s June 30 testimony before the National Commission on Fiscal Responsibility and Reform during the commission’s first public listening session:
Chairman Bowles, Chairman Simpson, and Members of the Commission, I appreciate the opportunity to appear before you to discuss ways to put America on a fiscally sustainable course.
Once unemployment rates start to fall, U.S. policy makers must be prepared to pivot sharply from fiscal stimulus to fiscal restraint. Otherwise, a large and growing federal debt will deplete our capital stock and thereby limit future economic growth. It will divert resources from productive investment to interest payments on the debt, half of which is already held by foreign lenders. And it will shake investor confidence, here and abroad, in the fundamental soundness of the U.S. economy, eventually driving interest rates up and the dollar down.
Despite these dire and entirely foreseeable consequences, too many federal policy makers remain in denial about the need for fiscal discipline. You have taken on what many consider a Mission Impossible: forging a bipartisan consensus on how to defuse the nation’s debt crisis. That’s put you in the crosshairs of extreme partisans of the left and right, who imagine this problem can be solved strictly at the other side’s expense. By refusing either to cut spending or raise taxes, the two have joined in a tacit conspiracy to bankrupt the country.
Common to both is the assumption that you can have fiscal responsibility, or you can have progressive government, but you can’t have both. We at the Progressive Policy Institute have always rejected this false choice. We believe that a progressive government can and must live within its means, and that if it instead chases the illusion of borrowed prosperity, it’s not really progressive.
To paraphrase Franklin Roosevelt, Americans know instinctively that borrowing routinely to consume more than you produce is both bad economics and bad morals. I don’t think it’s an accident that, as public worries about deficits have been mounting, public trust in government has been plummeting.
So there’s a lot riding on your ability to forge consensus behind a bold and balanced plan to restore fiscal responsibility. Let me offer some thoughts on what that plan should include from the perspective of a “progressive fiscal hawk.”
Read the entire testimony.
Tags: Budget, Deficits and debt, Democratic Party, Economy, Military, progressives, Public opinion, stimulus, Taxes
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Wednesday, June 30th, 2010
Steven Chlapecka
Steven K. Chlapecka is the director of public affairs for the Progressive Policy Institute.
by Steven Chlapecka
NEWS RELEASE
FOR IMMEDIATE RELEASE
June 30, 2010
PRESS CONTACT:
Steven Chlapecka—schlapecka@ppionline.org, T: 202.525.3931
PPI President to Offer Recommendations on Curbing National Deficit
WASHINGTON, D.C. – Will Marshall, president of the Progressive Policy Institute, will testify today at 2 p.m. before the National Commission on Fiscal Responsibility and Reform during the commission’s first public listening session. Marshall will urge the commission to carefully examine national spending and create an ambitious but attainable fiscal target to address the United States’ mid- and long-term deficit challenges. The commission’s listening session live webcast can be viewed at http://www.whitehouse.gov/live.
“There is a common assumption in Washington that you can either have a fiscally responsible government or a progressive government, but you can’t have both,” said PPI President Will Marshall. “But, I’ve always rejected this assumption as a false choice. A progressive government can and must live within its means. It’s not really progressive if it chases the illusion of borrowed prosperity.”
The bipartisan National Commission on Fiscal Responsibility and Reform, created by President Obama to address our nation’s fiscal challenges, is charged with creating a plan after the midterm election to start unwinding America’s massive debt.
“We are looking for ideas,” said Commission Co-Chairman Erskine Bowles opening the commission’s third meeting on June 30, 2010.
Marshall is a member of the Brookings-Heritage Fiscal Seminar, a nonpartisan group of 16 federal budget and policy experts and frequently writes on the need to control the large and growing federal debt.
For further questions, please contact Steven Chlapecka at schlapecka@ppionline.org, 202.525.3931 (office), or 202.556.1752 (cell).
# # #
Marshall’s testimony as prepared for delivery.
Tags: Barack Obama, bipartisanship, Budget, Deficits and debt, Democratic Party, Politics and politicians
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Friday, June 25th, 2010
Elbert Ventura
Elbert Ventura is the managing editor of Democracy: A Journal of Ideas. He formerly served as the managing editor of the Progressive Policy Institute.
by Elbert Ventura
Bruce Bartlett has a column up in today’s Fiscal Times that drills home just how far the Republican Party has veered from the center over the last few years. Bartlett recounts the story of the 1990 budget deal, which saw President George H.W. Bush reach across the aisle and strike a compromise with Democrats in an effort to shrink the deficit. The compromise on Bush’s end is, of course, now legendary: a violation of his “read my lips” pledge during the 1988 campaign that there would be no new taxes.
Working with Democratic majorities in both houses, the president knew that getting through measures on the spending side of the ledger would require some concessions on his part. Bartlett sums up the outcome of the budget negotiations:
Budget negotiations finally concluded in late September. The final deal cut spending by $324 billion over five years and raised revenues by $159 billion. The most politically toxic part of the deal, as far as congressional Republicans were concerned, involved an increase in the top statutory income tax rate to 31 percent from 28 percent, which had been established by the Tax Reform Act of 1986. The top rate had been 50 percent from 1981 to 1986 and 70 percent from 1965 to 1980.
More importantly, the deal contained powerful mechanisms for controlling future deficits. In particular, a strong pay-as-you-go (PAYGO) rule required that new spending or tax cuts had to be offset by spending cuts or tax increases. There were also caps on discretionary spending that were to be enforced by automatic spending cuts.
The conservative base, of course, went ballistic. Their opposition was reflected in the House of Representatives, where 163 Republicans voted against the budget, while only 10 voted for it. The Senate was a little better — half of Republicans approved the deal. These days, getting half of the Republican Senate caucus to go along with anything the Democratic majority pushes would be a minor miracle.
The consequences of Bush’s budget deal are well known. The violation of his tax pledge would prove to be a devastating weapon for political opponents in the 1992 campaign. But the economic consequences are less heralded. President Clinton deserves credit for bringing sanity and surpluses to the budget in the 1990s, but budget experts agree that his predecessor’s budget deal contributed to that achievement.
Bartlett quotes the GOP’s tax-cutting commissar, Grover Norquist, to underscore conservative suspicion of budget deals: “Budget deals where they actually restrain spending and raise taxes are unicorns.” Only spending cuts, Norquist argues, are permissible. The way the right is moving these days, we’re more likely to see a unicorn than a GOP leader going against party orthodoxy on taxes.
Photo credit: sdk
Tags: Bill Clinton, bipartisanship, Bruce Bartlett, Budget, Deficits and debt, George H.W. Bush, Grover Norquist, Republican Party, Taxes
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Wednesday, June 23rd, 2010
Will Marshall
Will Marshall is the president of the Progressive Policy Institute.
by Will Marshall
Congress isn’t always the first place you look for intellectually honest discussion of America’s fiscal dilemmas. Neither party has clean hands, yet each points smudged fingers at the other. How refreshing then to hear Rep. Steny Hoyer (D-MD) uttering blunt truths rather than partisan cant about America’s exploding debts.
“Unfortunately, we can blame our long-term deficit on policies that are almost universally popular,” the House Majority Leader said yesterday at a forum hosted by Third Way. “We’re lying to ourselves and our children if we say we can maintain our current levels of entitlement spending, defense spending, and taxation without bankrupting the country,” he added.
Hoyer also wondered aloud about the wisdom of permanently extending any of the Bush tax cuts absent a serious plan for long-term deficit reduction. It’s a pertinent question for both Republican anti-tax zealots and President Obama.
Even as they excoriate Obama and the Democrats for ballooning the federal deficit, Republicans insist that all the tax cuts passed in 2001 and 2003 be extended. That would cost a cool $3 trillion over the next decade, but don’t expect the GOP to fill that gaping hole in the federal budget with spending cuts. As Hoyer pointed out, Republicans have run like scalded dogs from Rep. Paul Ryan’s “roadmap” to a balanced budget, which calls for deep cuts in Medicare and Social Security.
But President Obama is in a bind as well. He has set up a fiscal commission to come up with a plan after the midterm election to start unwinding America’s massive debts. Many economists believe such a plan is essential to boost investor and lender confidence in the soundness of the U.S. economy, and to reverse the enormous imbalances in world financial flows.
During the 2008 campaign, however, Obama promised to extend the Bush cuts for the “middle class,” which he defined as families earning less than $250,000 and individuals earning less than $200,000. That promise helped him deflect GOP efforts to brand him as an inveterate tax hiker. But it carries a high price tag: about $1.4 trillion over the next decade according to the Joint Committee on Taxation.
What’s more, the nation’s fiscal outlook has deteriorated dramatically since the campaign. Massive public spending to avert a financial and economic collapse last year could push this year’s deficit to a record $1.7 trillion. The national debt now stands at about $13 trillion, and is on course to reach 90 percent of GDP by 2020 – not far from Greek-style proportions.
America really can’t afford any of the Bush tax cuts right now. Letting them expire would give the fiscal commission more room to devise a balanced package of spending and tax reforms aimed at whittling down our debts.
But with unemployment stuck in the stratosphere, and with Democrats apparently facing sizable losses in the midterm election, it’s hard to ask them to expose middle-class families to higher taxes – especially when Republicans can be counted on to indulge in monolithic, over-the-top demagoguery.
GOP Senate Minority Leader Mitch McConnell wasted no time in unloading on Hoyer yesterday. “It’s now official. Top Democrats on Capitol Hill are starting to signal their intention to raise taxes on the middle class,” he declared on the Senate floor.
To limit the long-term fiscal impact, centrist Democrats like Hoyer are considering a temporary extension of the middle-class tax cuts. Many liberals, however, are more concerned about the supposed dangers of “austerity” than the nation’s colossal debt burden. In fact, they want to make the cuts permanent now, while Democrats still enjoy big majorities in both Houses.
So chances are Congress will extend the middle-class tax cuts this fall, setting a less-than-inspiring example of restraint for the fiscal commission.
Nonetheless, Hoyer said House Democrats are pushing a budget resolution that would limit discretionary spending; cut deeper than the president’s budget; reinforce PAYGO rules; and commit to a vote on the fiscal commission’s recommendations. It’s a modest down payment on fiscal reform that’s unlikely to suppress demand and throw the economy into a tailspin.
In any case, the contrast between Hoyer’s fiscal realism and the GOP’s denial couldn’t be sharper. Let’s hope Democrats follow their leader.
Photo credit: Center for American Progress Action Fund
Tags: Budget, Deficits and debt, Democratic Party, fiscal crisis, Fiscal Responsibility, Medicare, Mitch McConnell, Paul Ryan, Republican Party, Social Security, Steny Hoyer, Taxes
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Thursday, May 27th, 2010
Steven Chlapecka
Steven K. Chlapecka is the director of public affairs for the Progressive Policy Institute.
by Steven Chlapecka
The following is an excerpt from Jim Arkedis’s op-ed in Forbes online:
The infamous Iron Triangle of Pentagon spending has officially challenged Defense Secretary Bob Gates. This week, the House Armed Service Committee approved its FY2011 budget authorization, which funds certain high-visibility weapons systems explicitly cut by Gates in this year’s budget request.
Here’s how this works. The Secretary of Defense submits a budget to Congress every year. Then, the military services essentially go behind the Secretary’s back and provide Congress with a list of “unfunded requirements,” a wish-list of weapons that the services want Congress to buy, but that the Secretary has chosen not to ask for. Congress is all too happy to provide money for these systems of dubious strategic or tactical merit because politically savvy defense contractors fill campaign coffers and open offices in most districts.
As an example, the “alternate engine” for the Joint Strike Fighter (Lockheed Martin) has become this year’s poster child for unfunded requirements. Gate’s budget request cut funding for one of the two engine designs under consideration — the F135 engine (Pratt & Whitney) was prioritized over the F136 engine (GE, Rolls-Royce).
Read the full column at Forbes.
Tags: Barack Obama, Defense Department, Deficits and debt, Foreign policy, Homeland security, Military, Robert Gates
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Sunday, May 9th, 2010
Steven Chlapecka
Steven K. Chlapecka is the director of public affairs for the Progressive Policy Institute.
by Steven Chlapecka
PPI National Security Director Jim Arkedis argues that selective cuts on military benefits will not solve the defense personnel cost:
A November report prepared by Jim Arkedis of the Washington-based Progressive Policy Institute (PPI) put projected 2010 costs at $59.7 billion: defense health program ($28 billion); military health care ($21 billion); and retiree health benefits ($10.7 billion).
Arkedis of the PPI said the recent wars have helped push costs skyward.
“You can’t nit-pick the problem away through selective cuts to benefit programs because, first, there’s a core constituency of hard-working military members, families and retirees who depend on them,” he said. “And second, frankly, it wouldn’t solve enough of the problem anyway. The key cost drivers are large-scale military deployments abroad.”
To Arkedis, “The moral of the story is that if you want to control personnel costs, you have to be really careful about which wars you fight – they better be the right ones.”
Read the entire article.
Tags: Defense Department, Deficits and debt, Health care, Military, personnel cost
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