Federal Budget

Baseball, Christie, Economy, Federal Budget, Immigration, Politics

The Deal

Posted on by christian

The System Worked…Barely

I predicted a week ago that the “sensible center” would ultimately behave like adults and avoid a federal government default, but by last weekend I’d revised my personal odds to 50-50 and raised my blood pressure to “unhealthy.” I just didn’t think they’d get so close to messing it all up.

The more sensible member of my household flatly predicted a deal at 8:30 pm (EDT) on Sunday. She was right, missing the President’s announcement of a bipartisan cease fire by an insignificant 10 minutes. So, disaster averted, but now what?

With the deal passed, signed and delivered, the post mortems are rolling in and it’s not very pretty. Wall Street turned on a dime once the deal was done and decided the underlying economy is still a mess. Those nations with decent economies, the countries that once quaked at the thought of American economic power, now shake their heads in disbelief that our political system came so close to going over the cliff of disaster. The political left labels “the socialist” president a sellout. Needing Tea Party support many Republicans now head home to, most likely, face more venom from those who think we can fix a decade of fiscal foolishness in one hot summer in Washington.

Utah’s Orrin Hatch, having it both ways and facing a primary challenge back home, praised the deal and then voted against it. Just for good measure virtually all the GOP presidential candidates now oppose the deal proving, as always, that the safest territory in politics is to be opposed to something while standing on the sidelines without responsibility.

Already the pundits predict a second major political meltdown when the Gang of 12 fails in their task to recommend the next major steps just as the holiday season descends on battle weary Americans who don’t seem to trust anyone on anything, especially when it comes to the economy and fiscal policy.

A new CNN/Opinion Research Corporation survey finds broad support – as in 77 percent support – for the notion that Washington’s leaders “acted like spoiled children” in reaching the deal on debt and deficits.

Trying to explain American politics to a British audience, historian Robert Dallek writes in the Daily Telegraph that, “something is at work here that makes you wonder if rational discourse is beyond the capacity of many American voters to understand.”

Dallek accurately describes a Democratic Party increasingly unhappy with Barack Obama, a Republican Party in the death grip of what that old curmudgeon John McCain calls “the hobbits” of the Tea Party movement and a media environment that simplifies and sensationalizes to the point of anger.

“The public,” Dallek writes, “is deeply cynical about politics and politicians. The Congress holds only a 17 percent approval rating and the President now has the approval of less than 50 percent of the public. Moreover, the latest polls show little enthusiasm for any of the potential Republican challengers. Neither Mitt Romney nor Tim Pawlenty nor Newt Gingrich nor Michelle Bachman nor any of the lesser-known names in the mix generate much excitement.”

So, other than that Mrs. Lincoln, how did we like this play? The best that can be said is that we dodged a big one, but in the dodging we displayed all the dysfunction, distrust and denial that got us into this mess in the first place.

Makes one wonder what will happen next time.

 

Baseball, Federal Budget, Immigration, Politics

Pat Moynihan

Posted on by christian

The Sensible Center

The late, great Senator from New York, Daniel Patrick Moynihan, was asked back in 1993, when Congress was debating an earlier federal budget deal, if there “would be a fight until death” over taxes.

Moynihan, intellect and wit in full flower, came back at NBC’s Tim Russert: “Fight until death over taxes? Oh no. Women, country, God, things like that. Taxes? No.”

We may see a grand deal struck this weekend in the long running Washington drama over taxes, spending and debt and it is a safe bet no one will fight until death, even if the rhetoric makes all of what has been going on in the nation’s capitol sound like Armageddon. A deal must be struck. The only Armageddon here would be the shape of national and world economy should the United States of America default on its debt, even for a little while.

No death, just some taxes.

The “big deal” in Washington has never been easy. Our tight system of checks and balances is designed to make it hard, messy and slow. In 1937, Franklin Roosevelt proposed enlarging the U.S. Supreme Court. The morning he rolled out his plan, and FDR was at the very zenith of his popularity at the time, many fellow Democrats declared the plan DOA. It took months of hearings, speeches, efforts at compromise, fights and feuds before Roosevelt’s blunder was disposed of by the Congress. These things take time.

I’m going to guess that the final features of the deal now being hammered out will strike most of the participants as vaguely surreal when the deal is done. They may well ask themselves and each other: how was this possible?

The Oregonian’s Steve Duin talked over a year ago to former Sen. Bob Packwood who had a major role in engineering the historic 1986 tax reform deal. Ronald Reagan was in the White House then, Republicans ran the Senate and the House was Democratic. It’s worth reading the piece to see how a deal got done back then, admittedly when the Senate was a decidedly more civil place, but also to appreciate that the Washington deal always involves a lot of sausage making.

As Duin wrote: “While those [Finance] committee meetings were high theater, the true wheeling and dealing occurred behind closed doors. The standard deduction was increased, preferential treatment for capital gains eliminated. The deduction for state and local taxes ended, the corporate tax rate lowered.

“All of this,” Packwood reminds Duin, “we’re doing in the back room. We’re not doing this in the daylight at all.

“People are willing to give things up for the good of the country if they’re not going to be hauled over the rack right away.”

The Washington deal, as the late Pat Moynihan knew, as Bob Packwood knows, takes time and doesn’t involve threats of death. It does involve at least a few good people willing to give things up for the good of the country.

I think – I fervently hope – the Congress and the President get a deal done that really is good for the country. I have a sneaking hunch the great majority of Americans will embrace such a deal. They want our leaders to lead the country forward not into a fight until death.

 

Baseball, Federal Budget, Immigration, Politics

The Answer

Posted on by christian

Every Serious Person Knows

The thing that may be the most maddening about the current deficit reduction/debt ceiling kabuki dance in Washington, D.C. is that every serious person inside the Beltway knows what must be done. Politics and posturing are, perhaps not surprisingly, ruling where reason should be in charge. At some point soon, a deal must be done and everyone who is a serious D.C. player knows the shape of the agreement. The real task for the President and Congressional Republicans is to manage the process to get to a deal.

Along with a small group of other folks a few months back I participated in an engaging and intense off-the-record visit with a very conservative member of the U.S. Congress. In a matter of minutes the discussion turned to the only real debate in Washington this year – how to control the deficit and bring federal spending in line with revenues. What is the answer the politician asked, I think, with genuine interest in hearing the views of the group. Immediately the answer came: cut spending, particularly on defense, reform entitlements like Medicare and Social Security and raise taxes. Our political interlocutor shook his head in the affirmative. Everyone knows what must be done.

The Bowles-Simpson Commission said the same thing. The bi-partisan group headed by former Sen. Pete Domenici and Alice Rivlin has said essentially the same thing.  Ask any retired Senator or Congressman – retired politicians are often the definition of statesmanship – and, unless they are running a hyper-partisan think tank, they will say the same. Reduce spending on the big stuff, do the once-in-a-generation tweaks to the big social programs and then go after the loopholes, tax breaks, special deals and out-and-out avoidance that is rampant in the tax code. Everything has to give and everyone has a piece of the pain.

With full acknowledgement that everyone involved in the D.C. dance is waltzing for maximum political benefit, I can’t help but believe that President Obama is looking like the only adult in the room. Nancy Pelosi seems petulant and not all that important to the process. Mitch McConnell is, well, he can’t help himself he is, after all, Mitch McConnell. Speaker Boehner often looks like the guy strangling two stools – his adult, experienced legislator side whispers that this is a Bob Packwood – Dan Rostenkowski moment where an historic budget and tax deal can be had as happened in 1986 when Ronald Reagan was president, but then Boehner’s “I must keep the Tea party Caucus in the tent” side kicks in the deal looks doubtful.

Obama is at his best as a deal maker who leaves the hyper-partisan rhetoric alone. He is at his worst when he plays like the Democratic National Committee chairman and bashes Republicans. He is winning the daily news cycle by, of all things, being the adult trying to do the right thing.

There is one other thing that everyone, except maybe Jim DeMint, agrees about: the nation simply cannot default on its debts. Can’t happen. The European papers are full of headlines about the prospect of a Greek default, so imagine, if you can, what a United States default would look like. It wouldn’t be the end of the world, but you could see the end from the wreckage that the D.C. dancers would leave in their wake. Cue the adults. They are out there. Everyone knows who they are and they know what must be done.

 

FDR, Federal Budget, Giffords, Humanities, Immigration, Public Television

Symbolic Cuts

Posted on by christian

burnsMinimal Money, Real Impact

Noted documentary filmmaker Ken Burns has waded into the fray over eliminating federal funding for the Corporation for Public Broadcasting and sharply reducing the measly dollars we spend on the national endowments for the humanities and the arts.

In a piece in the Washington Post, Burns – his Civil War documentary may be the best long-form television ever – asks us to remember that during the Great Depression somehow the country found the dollars to support artists, writers and photographers who produced some of the most enduring work of the 20th Century. Surely, he says, we can afford a fraction of a cent of our federal tax dollar for CPB and the endowments.

In the interest of full disclosure, loyal readers need to know I have a strong bias here. I cut my journalism teeth years ago with a daily half-hour broadcast on public television. I have volunteered for 15 years on various boards dedicated to the mission of the public humanities and the bringing of thoughtful programs on American and world culture, history, literature, religion and philosophy to Idahoans and Americans. I’m a true believer in these well established and minimally funded institutions and I also understand the federal budget.

The $420 million we spend on CPB, almost all of which goes to local public TV and radio stations and programs like those Ken Burns makes, and the $168 million we spend on each of the endowments is a total drop in the federal budget bucket. The Pentagon spends that much in an afternoon.

Case in point, Boeing just got an award from the Defense Department to build a new generation of aerial tankers – price tag $35 billion. Assuming Boeing builds a full fleet of 179 tankers, that averages out to about $195 million per plane. That buys a whole lot of what the endowments and CPB provide Americans.

I know, I know, we need new aerial tankers to replace those in service since Eisenhower was in the White House, but don’t we also need a place – for a tiny fraction of the cost – where Ken Burns’ documentaries reach a huge audience or where the humanities endowment supports a local museum or library?

Congress and the president continue the gandy dance around the real need to address the federal budget deficit. We have a crisis in three areas – defense spending, Medicare and Social Security. We need to address a combination of very difficult tradeoffs. Extend the retirement age, means test Medicare, reduce the size and scope of our military power on every continent and raise taxes. It’s easier to say than to cut, but there you have the real issues.

Anyone who tells you we can address the dismal federal deficit by cutting CPB and the National Endowments is practicing demagoguery on the scope of Huey Long, the subject, by the way, of a Ken Burns’ documentary.

Much of this debate, it must be noted, is about ideology rather than real budget savings. Some conservatives assail public broadcasting or the pointy headed humanities and arts community as the preserve of “liberals.” Nonsense. William F. Buckley found a home on PBS. Were the great man alive today, do you think he could find a place on Fox or CNN? Not a chance. Listen to a week of The NewsHour or Morning Edition and really consider the range of views, opinion and ideology you hear. Public TV and radio have become one of the few real clearinghouses of ideas about the American condition. Not liberal, not conservative, but truly fair and balanced.

America is a country of ideas. We have thrived for as long as we have because we value the big debate, the chance for lots of voices – from Ken Burns to the Red Green Show (on PBS) to the Trailing of the Sheep Festival and a summer teacher institute in Idaho (funded by the Idaho Humanities Council) – to be heard, considered, rejected and embraced.

We must get serious about the federal deficit. We must also recognize that a guy as talented as Ken Burns would never have a chance in the “marketplace media.” A long-form documentary on baseball, jazz, the National Parks or World War II simply won’t find a place in modern commercial broadcasting. So, eliminating that platform is really a decision to eliminate the ideas represented there.

If we lose what a Ken Burns represents, we lose a connection with our history and our culture that simply can’t be replaced. We will regret it, but not as much as our children.

Federal Budget, Immigration

Getting Serious

Posted on by christian

chartDefense Cuts = Deficit Control

You’ll hear a lot of politicians making speeches over the next few days regarding the imperative of getting the federal budget under control. Few will, I predict, be arguing for cutting the massive U.S. defense budget. If they’re not talking about defense they’re just not serious.

In inflation adjusted terms, we’re spending more money on the Pentagon than we did during the Vietnam War. We’re spending more than we spent in the first year of World War II. No kidding. Talk about something that is not sustainable, yet it is hardly seriously debated in Washington, Boise or Butte.

Give credit to Defense Secretary Robert Gates for starting the conversation about the need to reduce military spending, but then give yourself a reality check. The Gates budget for next year, released today by President Obama, is $553 billion. The cranky old Republican who co-chaired Obama’s deficit reduction commission, former Sen. Alan Simpson, calls Gates’ effort to reduce – “crappy little cuts.”

Further reality check – that $533 billion figure does not include what will likely be another $118 billion for actually fighting the wars in Iraq and Afghanistan. As McClatchy reported, the Pentagon budget for next year will “mark the 14th year in a row that Pentagon spending has increased, despite the disappearing presence in Iraq. In dollar terms, Pentagon spending has more than doubled in 10 years. Even adjusted for inflation, the Defense Department budget has risen 65 percent over the past decade.”

Lawrence Korb, a senior Defense Department official in the Reagan Administration, argues that the first place to start to trim the Pentagon budget is “reducing or eliminating funding for a number of unnecessary weapons programs, such as V-22 Osprey, rolling back the post-Sept. 11 growth in the ground forces and reducing the number of American forces deployed abroad outside of Iraq and Afghanistan.”

The U.S. maintains more than 800 military installations around the world in 46 counties. That contributes just a few bucks to the deficit we all worry about.

The American Empire is costly to maintain. Fact in, in the budget language of the day, it is not sustainable. Devotees of Ronald Reagan give him credit for bring the Soviet Union to its knees, in part because the old Communist state just couldn’t keep spending vast amounts on its military in an effort to keep up with us.

Here an example of part of the problem. Virtually every Congressional district in the country has a financial stake – jobs, bases, contractors – who live or die by the defense budget. Hence this story from the Columbus, Ohio Dispatch – “Central Ohio dodging a bullet on defense cuts.”

The paper says with reference to a proposed new Marine amphibious vehicle set to be manufactured in Ohio: “…lawmakers of both parties are less willing to cut defense spending in their states, fearing that it could lead to a loss of jobs.

“‘I think it’s necessary for our national defense,’ Rep. Steve Austria, R-Beavercreek, said of the Marine vehicle. ‘A lot of money has been invested in this vehicle.’

“‘Sen. Sherrod Brown, D-Ohio, said that ‘in some sense, it’s what makes the Marines the Marines. You don’t just cancel this and waste the investment … that we’ve already made as taxpayers. This program needs revamping, it needs updating, it needs perhaps a different direction. But we build on this rather than canceling it.”’

Translation for both Republicans and Democrats: don’t cut the military budget in my state, but gosh this federal spending really is out of control.

The vast U.S. military-industrial complex has a vice grip hold on our economy, but in a way that is, there’s that word again, unsustainable.

We’re not competing with Reagan’s “evil empire” anymore. Today we are the lone military superpower and have projected our military power around the world much as the British Empire did in the 1800’s. As the lone superpower, we certainly spend like a superpower.

Hope it doesn’t bankrupt us.

Eisenhower, Federal Budget, Idaho Statehouse, John Kennedy, Johnson, Martin Luther King

Great Speeches Week

Posted on by christian

JFKEisenhower, Kennedy and King

It is Martin Luther King, Jr, Day, a good day to remember Dr. King’s remarkable impact on the evolution of American notions about civil rights and to acknowledge the work that remains.

And, even though King made his most famous speech in August, no MLK Day is complete without remembering one of the great speeches ever delivered in the English language, his “I Have a Dream Speech” from 1963.

This week also marks the 50th anniversary of two other truly memorable speeches – Dwight Eisenhower’s farewell were he warned of the rise of the “unwarranted influence” of the “military-industrial complex” and John F. Kennedy’s inaugural where he summoned the nation to “ask not” what the country can do for us.

Remarkably these two speeches – delivered just three days apart in January 1961 – speak to us still across half a century.

Eisenhower, the popular president and former five star general, it is now clear, labored at length over his final speech from the White House considering it, as his grandson says, a significant part of his legacy of public service. Fifty years later, with the American military engaged in two wars and the nation’s enormous power projected in every corner of the world, Eisenhower’s words speak an enduring truth and, like Kennedy, he called the country to informed, engaged citizenship.

As David Eisenhower told NPR over the weekend, his grandfather’s “farewell address, in the final analysis, is about internal threats posed by vested interests to the democratic process. But above all, it is addressed to citizens — and about citizenship.”

Kennedy’s great speech, delivered on January 20, 1961, can be read as a companion piece to the speech of his predecessor and it was also about citizenship and responsibility. Speaking in the context of the nuclear arms race with the then-Soviet Union, Kennedy said: “So let us begin anew — remembering on both sides that civility is not a sign of weakness, and sincerity is always subject to proof. Let us never negotiate out of fear, but let us never fear to negotiate.”

Those words, in the context of our domestic politics today, certainly ring true.

In the age of Twitter and text messages some might argue that the spoken word or political rhetoric has lost its power to inform and stimulate. Three classic speeches we remember this week leave us with an entirely different message. Enduring truth, delivered with genuine conviction and deeply imbuded with knowledge, is always powerful.

As Dr. King so powerfully said: “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”

All three great Americans spoke in their most famous speeches to “the ultimate measure of a man” and their words live on.

American Presidents, Baseball, Federal Budget, Immigration, Obama, Politics

Tax Cut Politics

Posted on by christian

bush-70b-tax-cutFiscal Constraint Can Wait

Considering the strum und drang of many Democrats reacting to President Obama’s “deal” with congressional Republicans to extend the Bush-era tax cuts, one would think that there was ever a serious chance that Congress would actually change tax policy while the economy remains in the ditch. Wasn’t gonna happen, but if there is a missed fiscal responsibility moment here it may turn out to be the failure by Obama and Democrats to leverage the moment to force a long-term deal to get the nation’s fiscal house in order. Time will tell whether it was a missed opportunity.

Announcing the tax deal, Obama acknowledged the obvious – the economy would not react well to a tax hike on the upper 2% or so of taxpayers even if most everyone else would see little if any change in tax rates. Add to that economic reality the fact that Republicans have largely won the broad political message battle over taxes and its impossible not to conclude – Keith Olbermann aside – that the President had little choice but to give way on his campaign pledge to let the tax cuts expire for the wealthiest taxpayers.

The stark fiscal reality remains however, even as the politics of the moment crowd totals up the winners and losers. The co-chairman of the President’s Commission on getting the budget deficit under control, Democrat Erskine Bowles, nailed the missed opportunity. Had Democrats been thinking along with Obama, they might have seized this moment to press for the grand plan to deal with the terrible mess both parties have created over the last decade. Democrats have yet to conclude that the country is ready for a call for shared sacrifice, pain and realistic action to cut spending, enhance revenue, scale back entitlements and reduce defense spending. Fiscal constraint will have to wait apparently, while all of us what for adults in both parties to begin to deal with nation’s real fiscal problems.

Still, given the push back from some Democrats, Obama displayed both political courage and political pragmatism in getting his deal. He also, importantly, got an extension of unemployment benefits that will have the benefit of keeping real money in the hands of real people who will spend it. Over the longer term, with this deal Obama may have also taken a step toward reassuring some of the independents who seem to have abandoned him in droves.

Here is the real political reality: if Obama and Democrats don’t make serious progress in getting the economy moving by Labor Day 2011, and moving in a way that most people feel in their bones as well as their pocketbooks, he and many othe Democrats won’t have to worry about being around in 2013 to deal with controlling the deficit.

Federal Budget, Immigration

Those Awful Earmarks

Posted on by christian

capitol domeJust About the Least of the Problems

The Constitution of the United States of America says in Article I, Section 9:

“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

Just to be clear, it is the specific duty of the Congress of the United States to appropriate money. The Founders set it up that way. Deciding the priorities of how the federal government spends your money is what Congress does.

The federal budget represents one of the most excruciatingly complex processes in our democracy. It is difficult to explain in simple English, but it goes something like this: Federal agencies, through the Executive Branch (the president) present requests to the Legislative Branch (Congress). Congress considers those recommendations and authorizes a certain level of spending for, say, the Department of Defense. Then the Appropriations Committees of the House and Senate determine how much will be spent on this weapons system or that air base. A tiny fraction of the money authorized – one or two percent – has typically been directed to certain projects or purposes by your representatives. Think back to Article I, Section 9. These directed appropriations are the now toxic and dreaded earmarks.

Kentucky Sen. Mitch McConnell, the GOP leader in the Senate, has been a champion of securing earmarks for his state – $1 billion in recent years – but he has now sworn off the dirty business. Same goes for Colorado Democrat Mark Udall. President Obama is on the earmark ban-wagon.

Most of these sensible legislators and the president are vowing to disown earmarks not because ending their use really has anything to do with controlling the massive federal budget, but because the dreaded earmark has become a symbol for an out of control federal budget. Symbols can be useful, but frankly this debate is not helpful because it obscures the real challenges of controlling the budget.

Eliminating earmarks, even if the ban is strongly enforced and enterprising appropriators resist finding ways to finesse the ban, will reduce the budget by a tiny, tiny fraction. It’s the equivalent of filling your gas tank with 50 bucks worth of fuel and then not squeezing the last three or four cents of gas into the tank. You might save a few cents at the pump, but you’ve still spent 50 dollars on gas. Former Sen. Alan Simpson of Wyoming, the co-chair of the controversial deficit reduction commission, dismisses the earmark ban as “sparrow belch.” I think that means not consequential.

Earmarks are not the problem with the federal budget – not even close. The real problem is to provide a factual, realistic framework for what needs to be done to control the budget; a framework that the American public can understand. In short, political leaders need to do something that has virtually disappeared in our politics – they need to educate and inform in a sensible, candid manner.

If we devote all of the future debate about the budget to sideshows like bans on earmarks, the American people will never get engaged on what really needs to be done. Certainly there have been abuses of the earmark. Randy “Duke” Cunningham is in federal prison for essentially selling earmarks for political and personal favors, but the earmark is also the way a small state secures research dollars for a state university or a small hospital gets new equipment.

Banning earmarks will thwart another Duke Cunningham, but the cure may be worst than the disease and, fundamentally, a ban won’t mean a thing to the deficit.

Other emerging strategies won’t do much either. New GOP leaders in the Congress are proposing, as a budget strategy, a return to 2008 or earlier budget levels. Such a move might cut $100 billion in spending. The current deficit is about $1.3 trillion.

Small steps, including symbolic cuts like banning earmarks, don’t just fail to address the deficit problem they risk being intellectually dishonest and they may serve to avoid doing what is really necessary – a wholesale assessment of spending and taxing and significant adjustments in both.

You can see why politicians are reluctant to engage in this serious conversation. Closer to home, a new poll in Idaho shows how vast the disconnect has become between public wants and public realism and understanding. The new poll says, in essence, that Idahoans, with the legislature facing a $340 million deficit at the state level, want no more budget cuts and no tax increases. Oh, if pressed, we could handle a big increase in the cigarette tax. This is the cake and eat too approach to fiscal reality.

The wise and measured Fareed Zakaria, writing in TIME, wonders if this looming debate over the budget and the deficit signals a fundamental turning point in American fortunes. “Historians may well look back,” he says, “and say this was the point at which the U.S. began its long and seemingly irreversible decline.”

It may indeed be a rare moment in American history when serious people step forward to talk about serious issues, or we may just settle for banning earmarks.

 

Baseball, Federal Budget, Immigration, Politics

“We Need to Listen…”

Posted on by christian

deficitTime for an Adult Conversation?

I listened to CNN’s Candy Crowley the other night as she interviewed the new Congresswoman-elect from South Dakota, Kristi Noem.

Noem, who defeated the incumbent Democrat last week, was pressed repeatedly on how she intended to keep her promises to reduce spending and balance the out of control federal deficit. Her answer: We need an adult conversation, but no specifics.

Crowley pressed her, but what about specifics? Noem was smiling when she said “we need an adult conversation” about these things.

“I ran on the campaign that we needed smaller, more limited government,” Noem said in another interview, “we needed to cut our spending, we needed to make some tough decisions to make sure small businesses could still survive and exist. And that resonated across South Dakota.”

It certainly did and it resonates all across America. It will now be a fascinating exercise in political jujitsu to see how the newly elected – and re-elected – deal with the you-know-what that Erskine Bowles and Alan Simpson, the leaders of the bi-partisan deficit commission, just put in their pockets.

Bowles and Simpson offered an early sneak preview this week of some of the ideas that simply must be on the table if Congresswoman-to-be Noem and others are serious about their campaign promises. Predictably, the “dead on arrival” proclamations are already being issued, one by Nancy Pelosi who almost instantly declared her opposition. That’s crazy.

President Obama said the adult thing, “before anybody starts shooting down proposals, I think we need to listen, we need to gather up all the facts.”

Adult conversations really need to begin with the facts. Here are a couple: we’re not going to control the deficit by “symbolic” cuts in small discretionary spending, but nonetheless look for assaults on things like the Corporation for Public Broadcasting and the National Endowments as the sole answer.

When you hear the would-be adults debate these issues, if the first thing you hear is that we need to go after the Peace Corps budget, you know you’re listening to the kids squabble and not the adults converse.

We are also not going to control the deficit without addressing three sacred cows: entitlements (like Social Security and Medicare), the defense budget and the tax structure. Simply can’t happen. Adults, in conversation, know that and honest politicians in both parties need to start leveling with the American people.

Just one more adult thought: the U.S. defense budget, thanks in large part to endless wars in Iraq and Afghanistan, is now nearly as large as the defense budgets of the rest of the world combined. Do you think there is some savings to be had there?

“If people are, in fact, concerned about spending, debt, deficits and the future of our country,” Obama said yesterday, “then they’re going to need to be armed with the information about the kinds of choices that are going to be involved, and we can’t just engage in political rhetoric.”

You can get elected in America on a theory of how government and the economy works, but the reality of governing is based on facts, pain, shared sacrifice, honesty and candor.

Let the adult conversation begin.

American Presidents, Andrus, Basketball, Christie, Economy, FDR, Federal Budget, Immigration, Obama, Stimulus

Is 2010 Really 1938?

Posted on by christian

Getting an Economic Consensus

There are no perfect historical parallels. Nothing is ever precisely like it was in another time. At best, history can help illuminate the present and should, if we’re paying attention, help us avoid making the same mistakes over and over again. Take 1938, for example.

But, alas we are Americans. We can’t get agreement on how to crown a national college football champion, how can we possibly get consensus on what to do with the economy?

President Obama went to Cleveland this week to roll out a plan for more stimulus spending on infrastructure and small buisness tax cuts as a way to get people back to work. He was greeted by reactions ranging from ridicule to yawning. Meanwhile, House Speaker-in-Waiting John Boehner, developing economic policy while he measures the drapes, started dropping hints about what a Republican Congress would do with spending (cut it, including unspent stimulus dollars), the economy (grow it) and taxes (leave the Bush cuts in place). All the while leaving room for a few well placed subpoenas.

These two versions of economic policy couldn’t be more at odds. It does sound a good deal like 1937 and 1938.

As Franklin Roosevelt’s Democrats faced the mid-terms in his sixth year in office, the Great Depression was in its eighth year. Wall Street was restive. Labor unions were sitting down on the job. Democrats were frantic and the president’s counselors were divided. Should FDR double down on spending and fiscal policy aimed at reducing unemployment or should the administration send a message to the markets and business that it was determined to get a ballooning budget under control?

Confronted with what historian David Kennedy has described as, “repeated budget deficits, escalating regulatory burdens, threats of higher taxes, mounting labor costs, and, most important, persistent anxiety about what further provocations to business the New Deal had in store,” business confidence was sapped. “Capital,” Kennedy said, “was hibernating.” Sounds familiar, eh?

At a pivotal Cabinet meeting late in 1937, FDR fumed about his advisers constantly telling him about the sorry state of the economy, but “nobody suggests what I should do.” His economic and political advisers eventually won the debate. The president’s Treasury Secretary, Henry Morgenthau, a balanced budget advocate, put it succinctly.

“What business wants to know is: Are we headed toward state Socialism or are we going to continue on a capitalistic basis?”

FDR’s chief political lieutenant, Jim Farley, chimed in. “That’s what they want to know,” that the administration would reduce spending and balance the budget to reassure business and the markets.

“All right, Jim; I will turn on the old record,” Roosevelt responded. A new fiscal policy aimed at reducing spending and balancing the budget was ordered.

The New York Times’ Paul Krugman argues that FDR’s decision brought on the “Roosevelt Recession” of 1938, caused unemployment to top out at 20% and contributed to stunning Democratic losses – six Senate seats and 71 seats in the House – in the 1938 mid-terms. What’s more, Krugman asserts – and he’s critical of Obama from the left for being too timid with his stimulus efforts – the public in the late 1930’s took exactly the wrong lesson from FDR’s shift in policy. Americans became convinced that stimulus spending and job creation efforts hadn’t worked and wouldn’t work. That debate, check the morning paper, still rages.

I keep thinking there must be some middle ground somewhere in the current debate, but I’ve been wrong before. Couldn’t we get something approaching national consensus around two or three major issues?

One, Wall Street and investment banking excesses must be brought under control. Does anyone really think that what happened in the run up to the financial collapse shouldn’t be avoided in the future if at all possible? Regulating greed and excess is not a partisan issue.

Two, spending on well-conceived public works (OK, infrastructure) is both a good long-term investment and good short-term job stabilizer and, one hopes, job creator. The non-partisan Congressional Budget Office said recently that the stimulus has – big surprise – increased the deficit and reduced unemployment.

And, three, the deficit needs to come down, but maybe in a planned, systematic way. Maybe the timing on the expiration of those Bush-era tax cuts is really not very conducive to getting capital out of hibernation. Perhaps a compromise is in order?

Someone, the president or John Boehner or the ghost of Henry Morgenthau needs to find a way to knit all the pieces together into a 2010 whole cloth of economic growth, job creation and fiscal sanity. Not holding your breath? I understand.

There is a poem entitled “Nineteen-Thirty-Eight” by Andrea Hollander Budy. It’s about a young woman who lies about not graduating from high school in 1938:

yanked out
when her father lost his job.

Now it was her turn
to make herself useful, he told her.

Nineteen-Thirty-Eight was not a particularly good year and not one to repeat. That much history tells us very clearly.