Friday, August 27, 2010


John Cole: Folding Like a Cheap Suit


With the economy rapidly weakening, some senior Democrats are having second thoughts about raising taxes on the nation’s wealthiest families and are pressing party leaders to consider extending the full array of Bush administration tax cuts, at least through next year.

This rethinking comes barely a month after Democrats trumpeted plans to stage a high-stakes battle over taxes in the final weeks before the November congressional elections.

The Bush tax cuts are set to expire in December. Republicans are pushing to extend them all, while President Obama has forcefully argued that the country cannot afford to keep tax breaks on income over $250,000 a year for families and $200,000 a year for individuals.

But a growing cadre of Democrats – alarmed by evidence that the recovery is losing steam and fearful of wounding conservative Democrats in a tough election year – are advocating a plan that would permanently extend tax cuts benefiting the middle class while renewing breaks for the wealthy through 2011, senior Democratic aides said.

Awesome strategery, Democrats. Extend tax cuts that do nothing to stimulate the economy and de facto cede the argument about tax cuts helping the economy, get blamed for the deficit costs of those tax cuts as more evidence of the free-spending liberals, continue the growth in income inequality and the distribution of wealth concentrated at the top of the tiers, leave less money available to engage in worthy projects, and demoralize your base while throwing a bone to people who are NEVER EVER EVER going to vote for you.

I hate being a Democrat.

Economic growth in the second quarter (April through June) was initially estimated to be pretty weak. This morning, the figure was revised downward -- from 2.4% to 1.6%. It's not only evidence of anemic growth, it points to a trend moving in the wrong direction, after two stronger quarters preceding it.

What's more, it's discouraging news that comes on top of other discouraging news. Just over the last couple of weeks, the reports on home sales were awful, and recovery in the manufacturing sector is also stalling.

On Wednesday, President Obama organized a conference call with his top economic advisers, reportedly considering "the next steps to keep the economy growing." But the White House agenda in the short term is not focused specifically on the economy -- on Sunday, Obama will be in New Orleans for the 5th anniversary of Hurricane Katrina, and on Tuesday, the president will deliver an Oval Office address on the war in Iraq. Later in the week, the focus will be on Middle East peace talks.

A White House official told ABC's Jake Tapper, "We know he needs to be out there to talk about the economy next week. We haven't yet figured out the way he's going to do that."

I think the sentiment is only partially true. A White House focus on the economy certainly makes sense, and "figuring out" a way to convey that to the public seems wise.

But getting Obama "out there to talk about the economy" isn't necessarily the answer -- that is, unless the president has something new to say. By all accounts, he doesn't.

The White House is pushing its $30 billion small business lending initiative and other measures to stimulate economic growth, such as the elimination of capital gains taxes for small business investments. But advisers say there is little appetite on Capitol Hill for any new spending programs, and limited time in the congressional calendar, suggesting that they feel there aren't any more major initiatives the administration will push in further attempts to revise the sputtering economy.

And that, I fear, is the problem.

The president can get "out there to talk about the economy," and he has a reasonable message to offer -- his policies prevented a catastrophe, created millions of jobs, and made economic growth possible. Had Republicans been in charge at the moment of crisis last year, the evidence is incontrovertible that we'd be in a much worse place.

But the message is also underwhelming. Obama is right, as a factual matter, to tout his economic successes, but in terms of real-world implications, it's wholly unpersuasive to struggling, anxiety-ridden Americans.

I don't want to see the president "out there to talk about the economy"; I want him out there with an ambitious agenda to improve the economy. He won't do that, however, because Republicans won't allow a vote on additional recovery efforts, and panicky Dems thinks voters will punish them for trying to do what works.

I guess that leaves the Fed?

Joan McCarter (Dkos): CBO: Repealing Medicare portions of health law would increase deficit by $455 billion

Of course, since Republicans don't actually care about the deficit, they just like to use it as a bogeyman, this letter from the CBO [pdf] (via the Wonk Room won't make them stop screaming "REPEAL!!!"

On balance, the two laws’ health care and revenue provisions are estimated to reduce the projected deficit in 2020 by $28 billion, and the education provisions of the Reconciliation Act are estimated to reduce the projected deficit in 2020 by $2 billion. [...]

Finally, you asked what the net deficit impact would be if certain provisions of PPACA and the Reconciliation Act that were estimated to generate net savings were eliminated—specifically, those which were originally estimated to generate a net reduction in mandatory outlays of $455 billion over the 2010–2019 period. The estimate of $455 billion mentioned in your letter represents the net effects of many provisions. Some of those provisions generated savings for Medicare, Medicaid, or the Children’s Health Insurance Program, and some generated costs. If those provisions were repealed, CBO estimates that there would be an increase in deficits similar to its original estimate of $455 billion in net savings over that period.

The "you" the CBO is responding to is Sen. Mike Crapo (R-ID), who must have thought that if he asked just one more time, the CBO would give him a pony in the form of the health law not reducing the deficit. It's really rather remarkable--the CBO originally said, make these changes and save $455 billion--did Crapo really think that repealing those provisions wouldn't then cost $455 billion? Sometimes the CBO must get very frustrated by the letters they get from Congress.

Igor Volsky adds:

If they were to repeal the law, Republicans would have replace it with something that makes up for the deficit increases (assuming, of course that they will still care about the deficits) and helps slow the growth rate in the Medicare program. The GOP’s old leadership backed plan and its reliance on medical malpractice reform as a money saver won’t be enough.

They don't care about the deficit. They don't care about trying to control the costs of the absolutely essential Medicare and Medicaid and CHIP, to keep them healthy and effective. And they sure as hell don't have a plan for making the nation's health care system work.

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