Posted by AzBlueMeanie:
This was budget week in the Beltway, and the Beltway media villagers all fell in line with the Washington Post/Pete Peterson Foundation partnership "conventional wisdom" of deficit scold fear mongering. The Washington Post Lets Pete Peterson Write The News On The Deficit. On Tuesday, Pete Peterson the editors editorialized, somewhat disheartened, that the GOP budget plan from Rep. Paul Ryan (R-WI) does not immediately end Social Security and Medicare, Paul Ryan’s budget plan mixes good and unrealistic ideas - The Washington Post:
As such, the 91-page document is a never-going-to-become-law mélange of good ideas, bad ideas and ideas too unrealistic to worry about. Let’s start with the good ones, since that’s the shortest list. Though there’s no economic reason to fetishize a balanced budget by a particular date, we do agree with Mr. Ryan’s aggressive sense that Washington needs to get the national debt as a share of gross domestic product on a downward path.
Once again, Mr. Ryan proposes to convert Medicare into a premium-support program, under which seniors would receive a subsidy to shop for insurance on a regulated but competitive market. Unlike some reflexive critics of “vouchers,” we think the concept is worth discussing, in that it promises to achieve cost-control through market mechanisms. Alas, even if premium support is workable, Mr. Ryan wouldn’t start it for a decade, which makes it all the more disappointing that his budget only calls for a modest $129 billion trim to Medicare in the meantime.
There’s nothing concrete about Social Security in Mr. Ryan’s plan — not even an allusion to the more accurate inflation-adjustment mechanism known as “chained CPI” that could raise $225 billion over 10 years, from Social Security and other benefits as well as higher tax revenue.
Funny how the Washington Post editors never put in print the proposal to eliminate the wage cap on the FICA tax as a remedy, isn't it? That is because they are all in the top two percent of income earners, and it is their wages that will take a hit.
Today, Pete Peterson the editors finally got around to the Democratic budget proposal, which they also do not like because it does not immediately end Social Security and Medicare, The Democrats’ complacent budget plan - The Washington Post:
It is on the issue of entitlements that the Democrats’ document really disappoints. There is literally nothing — not a word — suggestive of trimming Social Security, whether through greater means-testing, a more realistic inflation adjustment or reforming disability benefits. The document’s fuzzy call for $275 billion in “health savings” is $125 billion less than the number President Obama has floated.
As for the coming flow of baby boomers into Medicare, the Democrats declare that “new retirees deserve the same promise of quality, affordable health care from which their parents have benefitted — and it is the position of the Senate Budget that they ought to get it.” There’s plenty of excoriation for the GOP “premium support” plan. But there’s no explanation of how the Democrats would pay for their “promise” — nary a hint of the many cost-saving reforms that would extend Medicare’s life without embracing the GOP plan.
In short, this document gives voters no reason to believe that Democrats have a viable plan for — or even a responsible public assessment of — the country’s long-term fiscal predicament.
So speaketh the all great and powerful Oz behind the curtain, Pete Peterson. I propose that we all give the Washington Post stable of conservative austerian pundits, the Pete Peterson Foundation and his "austerity twins" Simpson and Bowles from Fix The Debt, and the entire Beltway media deficit scold "conventional wisdom" the middle-finger salute and tell them all to "f#%k off!" Because there is a budget plan that will get us out of our immediate jobs crisis and begin addressing long-term debt as well.
Exra Klein writes, House Progressives have the best answer to Paul Ryan:
The correct counterpart to the unbridled ambition of the Ryan budget isn’t the cautious plan released by the Senate Democrats. It’s the “Back to Work” budget released by the House Progressives.
The “Back to Work” budget is about exactly what the name implies: Putting Americans back to work. The first sentence lays it out clearly: “We’re in a jobs crisis that isn’t going away.” So that’s the budget’s top priority: fixing the jobs crisis.
It begins with a stimulus program that makes the American Recovery and Reinvestment Act look tepid: $2.1 trillion in stimulus and investment from 2013-2015, including a $425 billion infrastructure program, a $340 billion middle-class tax cut, a $450 billion public-works initiative, and $179 billion in state and local aid.
That’s…a lot of stimulus. More than Congress passed in 2009, in fact. The liberal Economic Policy Institute estimates that would be sufficient to “boost gross domestic product (GDP) by 5.7 percent and employment by 6.9 million jobs at its peak level of effectiveness (within one year of implementation).
* * *
Investment on this scale will add trillions to the deficit. But the House Progressives have an answer for that: Higher taxes. About $4.2 trillion in higher taxes over the next decade, to be exact. The revenues come from raising marginal tax rates on high-income individuals and corporations, but also from closing a raft of deductions as well as adding a financial transactions tax and a carbon tax. They also set up a slew of super-high tax rates for the very rich, including a top rate of 49 percent on incomes over $1 billion.
But to the House Progressives, these taxes aren’t just about reducing the deficit — though they do set debt-to-GDP on a declining path. They’re also about reducing inequality and cutting carbon emissions and slowing down the financial sector. They’re not just raising revenues, but trying to solve other problems. [The always cautious Klein:] But they might create other problems, too. Adding this many taxes to the economy all at once is likely to slow economic growth.
As for the spending side, there’s more than $900 billion in defense cuts, as well as a public option that can bargain down prices alongside Medicare. But this budget isn’t about cutting spending. Indeed, the House Progressives add far more spending than they cut.
Is the House Progressives’ budget likely? Of course not. One involved staffer described it to me as a “wish list.” But that makes it the perfect analogue to Ryan’s budget.
Jamelle Bouie writes at Ezra Klein's Wonkblog, Do Congressional liberals have the only “Serious” budget in Washington?:
Overlooked in the coverage of Paul Ryan’s budget and the budget released by Senate Democrats was the one crafted and presented by members of the Congressional Progressive Caucus. Called the “Back to Work” budget, it’s focused on solving the country’s actual fiscal crisis — mass unemployment. And for good reason; not only is it the right thing to do, but without growth and lower unemployment, debt reduction requires pain for a large number of Americans. As such, congressional progressives have taken a Keynesian approach to the debt: Spend money now — taking advantage of low interest rates on Treasury bonds — and position the United States for long-term debt reduction.
Overall, the Back to Work budget increases spending by more than $2.2 trillion over the next ten years. This includes more than $156 billion for clean energy efforts, over $230 billion for education, training and social services, $312 billion for income security programs like the Supplemental Nutritional Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF), another $156 billion for health care programs, and $1 trillion in new infrastructure spending, meant to repair old structures (roads, pipes, bridges) and build new ones.
To pay for this, House Progressives propose a full overhaul of the federal tax code, with a new set of tax increases on the wealthiest Americans. For income over $250,000, taxes would revert to Bush-era rates (the Progressive Caucus maintains Bush rates for the remaining 98 percent of taxpayers).
From there, they call for several “millionaire and billionaire” tax rates: At $10 million, the marginal rate will increase to 45 percent, at $20 million, it increases to 46 percent, at $100 million it moves to 47 percent, from $100 million to $1 billion it goes to 48 percent, and for all income over $1 billion, it’s 49 percent. [Making the tax code more progressive.] In addition, this budget caps itemized deductions, lowers the exemption for the estate tax (and raises the rate), closes loopholes in the corporate tax code, and institutes a “financial transactions tax” designed to discourage high-volume, high-speed trading.
To raise further revenue for these spending programs, the Back to Work budget institutes a cap and trade regime, and reduces subsidies for agricultural and fossil fuel companies.
Insofar that there are major spending cuts, they’re on the defense side: An end to funding for the wars in Iraq and Afghanistan, base closures, and fewer modernization projects for older weapons systems. In total, the Back to Work budget achieves $897 billion in savings from adjusting the Pentagon budget, and $939 billion from ending all spending on the wars.
Other savings come from adjusting health care programs. Medicare is permitted to use its size to negotiate prescription drug prices — saving $157 billion over ten years — and a public option is added to the Affordable Care Act, saving an additional $104 billion.
On the whole, the Back to Work budget projects a short-term spike in deficits and debt — reflecting new spending — but then public debt is expected to reach 68.7 percent of GDP by 2023, nine points lower than what it would be under current law, and significantly lower than what it would be under Paul Ryan’s plan. And as for long-term health care costs, the Back to Work budget allows Obamacare to run its course, and adjusts Medicare so that it can use its size and clout to negotiate cheaper prices.
None of this is to say there aren’t problems with this plan, political and otherwise. . . But unlike the Ryan plan — and more so than the plan produced by Senate Democrats — this plan deals with the real economic problems faced by millions of Americans. Unemployment under the Back to Work framework is projected to fall to 5 percent within three years — a swift return to pre-recession levels. Moreover, it achieves $4.4 trillion in deficit reduction, reaching (and surpassing) the target set by Alan Simpson and Erksine Bowles. Which is to say that by Washington’s standards, this should be seen as a “serious” document when it comes to deficit reduction.
Unfortunately, the Beltway’s appetite for debt reduction isn’t matched by a craving for full employment. Instead, there’s an overwhelming call for spending cuts and “shared pain.” As such, the arbiters of “seriousness” are unlikely to pay attention to a budget that goes a long way toward accomplishing their stated goals.
Rep. Keith Ellison (D-MN), cochair of the Progressive Caucus, introduces the Back to Work Budget.
Dean Baker writing for the Center for Economic and Policy Research, The Congressional Progressive Caucus Budget: A Serious Budget That the Serious People Won't Take Seriously | CEPR Blog:
The Congressional Progressive Caucus (CPC) has produced a budget that is intended to make the unemployment situation better rather than worse.
The story of course is that we are still in a situation where we need the government as a source of demand in the economy.
* * *
The CPC decided to produce a budget that recognized this reality. It provides for a mix of short-term measures aimed at immediate job creation, such as jobs programs and additional money to defray state and local government revenue shortfalls, along with an ambitious long-term infrastructure agenda. According to estimates from the Economic Policy Institute this agenda would create 6.9 million additional jobs by the end of next year compared to the CBO baseline scenario.
The CPC also include measures that should make any serious deficit hawk happy. On the spending side they want savings from cutting the military budget, reducing payments to drug companies under Medicare, and establishing a public option in the health care exchanges that will go into place next year under the Affordable Care Act.
On the tax side, they propose eliminating a number of special interest tax breaks, establishing higher tax marginal tax brackets (up to 49 percent) for very high income households, a higher estate tax (55 percent) for the richest of the rich, and imposing a financial speculation tax and a carbon tax. The net effect of these policies stimulate now, cut later, and result in a deficit that is just over 1.0 percent of GDP by the middle of the decade and a debt to GDP ratio that is on a clear downward track.
The Serious People will undoubtedly claim that the CPC budget is not politically realistic and use this fact as an excuse for ignoring it. But this is a case of a serious double-standard.
* * *
Clearly political realism is not a criterion used in determining whether a budget proposal deserves attention. The public would do well to focus on the substance of the CPC budget and its rationale. The Washington insider crew is a tough lot to crack, but even they can sometimes be moved by a combination of evidence and public opinion.
You will need to pressure your Congress critters to consider seriously the proposals in the Progressive Caucus budget, and to "work the refs" -- by pounding some sense into your local media villagers who take their cues from the "conventional wisdom" of the Beltway media, most of whom don't know squat about macroeconomics and government budgets.