$1.2 Trillion in Cuts is Not Enough

November 7th, 2011 at 4:07 pm | 23 Comments |

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Everyone has an opinion on what the Joint Select Committee on Deficit Reduction (JSC) will produce by its Nov. 23rd deadline.

Except the members and staff of the JSC itself.

Rumors abound that the Republicans on the committee have already made a comprehensive offer to the Democrats. The offer seems quite straight-forward: Republicans will cap some tax loopholes in exchange for fundamental re-structuring of Medicare and reform of Medicaid.

Yet, if one reads the Washington Post editorial page over the weekend, one would think that it is only Republican tax allergies that have kept the JSC from reaching agreement.

In truth, both sides have shibboleths.

Any mention of fundamental reform of Medicare and Medicaid triggers the response that “Republicans want to throw Granny off the cliff.” Mention tax increases and Republicans respond with, “Tax and spend, tax and spend.”

President Obama essentially slipped out the side door of the great fiscal follies when he failed to endorse the recommendations of the fiscal commission that he, created.

Democrats have made an offer—raise some taxes, tinker with the non-beneficiary part of Medicare, and throw in a little bit of other slop to get beyond the required $1.2 trillion mandate of the JSC deliberations.

Republicans responded, quite accurately, that no fundamental changes in the Medicare structure were in the Democratic plan. Without Medicare reform, no tax increases, House Speaker John Boehner retorted.

The simpler things are in politics, the more clear-cut and logical the choices, the more difficult decisions become. The Budget Control Act, which created the JSC, hammered discretionary, appropriated accounts. But as everyone realizes, that is a small part of the budget and almost not any part of the debt crisis looming ahead.

It is hard to trim, fudge, or confuse the basic arithmetic of taxes and entitlements. We have a tax code that compels even Treasury officials to use outside help in order to file their taxes properly. We have made entitlement promises that clearly are beyond the ability of politicians to honor. We have an economy that is growing so slowly that it cannot accommodate new entrants into the work force, let along significantly reduce unemployment.

So in order to avoid the clear-cut, and hard, choices, Congress and the President have either walked away (to Bali this week, in the President’s case; back home to see district voters in the House’s case), or produced “talking point” proposals that merely begin the elections in earnest.

So while the JSC may produce some form of $1.2 trillion reduction in deficits over the next decade, those savings will yield almost no significant change in the nation’s debt trajectory. With Europe in financial turmoil once again, global investors are retreating into the relative safety of U.S. Treasury issuance. After a while, after the Greek, Italian, German, French governments fall as a result of political weakness and temporizing on their versions of entitlements, then global bond traders will begin to demand higher and higher returns on their investments in United States debt.

Within two weeks we will see a $1.2 trillion package. It may pass the House and Senate. It will pass neither the smell nor market tests.

Recent Posts by Steve Bell



23 Comments so far ↓

  • D Furlano

    “In truth, both sides have shibboleths.”

    You should include yourself in that remark.

    The amount the committee should reduce the debt is zero. They should increase the debt by many, many hundreds of billions of dollars.

    The myth that the debt is an issue is a total fabrication by either ideology or ignorance. Until the debt is raised by hundreds of billions of dollars via government spending the current economic situation will not change.

    You can make all the changes you want to entitlements, regulations, confidence, monetary policy or whatever other fairies you can conjure up but nothing will change until the government starts spending.

    btw; This is an outright lie.

    “We have made entitlement promises that clearly are beyond the ability of politicians to honor.”

    And OMG THE BOND VIGILANTES ARE COMING TO GET US!?! AGAIN!?! WTF!?!

    “..global bond traders will begin to demand higher and higher returns on their investments in United States debt.”

    • Fart Carbuncle

      “Until the debt is raised by hundreds of billions of dollars via government spending the current economic situation will not change.”

      Another Krugman lunatic fringe fantasy.

  • ottovbvs

    Needless to say Bell doesn’t mention the issue of revenue. This guy is so totally dishonest (he’s trotting out the bond vigilantes again) it’s not worth paying attention to him. The Republicans have allegedly offered some peanuts in terms of capping loopholes and in return want massive cuts in Medicare/Medicaid and some other programs. NO new revenue whatsoever. The Dems may occasionally be stupid but they are not that stupid. And Republicans are already talking about reneging on the deal and producing new legislation to get around the defense cuts they’ve already agreed to if they couldn’t come to a compromise. Why do they want to avoid defense cuts? Because it will cost jobs they say. Of course they also say that cuts in Medicare or Education WON’T cost jobs, it will actually create jobs. These people are so crooked if they swallowed a nail they’d shit corkscrews.

  • Oldskool

    Wasn’t it was about this time last year when everyone was saying that nothing much would be getting done before Christmas? And then one deal after another began to get done and before we knew it most everything was off the to-do list. It could happen again although after seeing the debt ceiling suicide bombers, it’s hard to be optimistic.

  • dugfromthearth

    deficits don’t matter

    • Graychin

      Yes they do – as long as the Hated Kenyan lives in the White House.

      • AKINR

        So deficits don’t matter when Republicans are implementing their agenda?

        • Graychin

          It doesn’t seem so. They gave huge tax cuts while putting two wars and a Medicare drug plan on the national credit card. We never heard a peep from any of them about deficits until Obama was elected.

          Maybe they have repented of their profligate ways. Or maybe they’re cynical a-holes? What do you think? I know what I think.

  • LFC

    “Republicans responded, quite accurately, that no fundamental changes in the Medicare structure were in the Democratic plan. Without Medicare reform, no tax increases, House Speaker John Boehner retorted.”

    At the end of FY 2010 the total Medicare deficit was about $37B. The fact is that this is a future problem, but currently we have a $1T+ structural deficit without Medicare. So where do we find $1T in non-Medicare cash? By cuts to big programs like defense and by bring tax revenues back up to Clinton era levels. There has not been a single realistic GOP plan (the Ryan plan is a freakin’ joke) because they are unable to come to grips with these truths.

    Fundamental changes in Medicare are required for the future, and they need to be done in an open and comprehensive matter, not in a few months by a committee already tasked with looking at every other option. The fact is that Republicans keep throwing up the red herring of Medicare because they don’t want to admit that they left us in an unsustainable revenue / spending situation even without Medicare.

    Republicans want to change Medicare immediately for two reasons; a) they hate the very idea of it and want to alter it in a way that will eventually destroy (and privatize) it and b) they want it to run a surplus so they can skim the excess (just like Social Security) to hide their big spending of the past decade.

  • think4yourself

    Yes, for both sides the politics are driving the discussion. But to say that Dems are equally (and your insuation is more) cupable than the GOP is not the case.

    I wish Obama had pushed for the conclusions of the leaders of his deficit commission. On the other hand, even I can read the writing on the wall; all legislation will require 60 votes in the Senate – and they won’t get it. So the President could have forced a vote and gotten nothing. I think he is playing a longer game. The GOP members of the commission made sure it didn’t get the requisite votes, end of story.

    I also wish Boehner had agreed to Obama’s “grand bargain” – but he didn’t. GOP pundits call that deal a strawman agreement to make the GOP look bad. We’ll never know because the GOP didn’t put Obama to the test (I think that he, like Clinton with welfare, would have made a deal).

    You argue that Boehner has said no tax increases without medicare reform. Boehner, McConnell and the rest of the GOP leadership have said no tax increases, period. Are the Dems blaming the GOP for throwing granny over the cliff? Some are – but I hear from the President, who is the leader of his party that we have to make tough choices which will include reforming S.S. and Medicare. I don’t hear any leaders of the GOP (or any GOP at all) say that we need to increase taxes (which are at almost historic lows). So it’s not the same.

    Steve, you’re right. Even if we get 1.2Trillion in cuts it doesn’t start solving the problem. But to place this at the feet of the Democrats is foolishness. I’ll believe that the GOP is really interested in fiscal conservatism when even one current GOP leader says “everything is on the table”.

  • Frumplestiltskin

    and Bell ignores that Obama himself proposed a far bigger deficit plan that included entitlements in exchange for tax increases and Boehner couldn’t sell the deal.

    “We have made entitlement promises that clearly are beyond the ability of politicians to honor. ” Absolute rubbish. Of course we can honor them, but lets say for the sake of argument we don’t and that future Social Security recepients get only 80% of what they are promised, how is that any different than changing the rules now to let them know that hey, you will only get 80% of what you are promised?

    This hysteria over the long term is just a Republican excuse to enact upper class tax cuts. If Bush did not raid the social security lock box to fund his tax cuts, we wouldn’t be in this mess right now.

    “After a while, after the Greek, Italian, German, French governments fall as a result of political weakness and temporizing on their versions of entitlements, then global bond traders will begin to demand higher and higher returns on their investments in United States debt.” Good lord, talk about a chicken little character. It is a wonder Bell managed to get out from hiding under his bed to write this. France recently passed a pretty tough austerity budget with revenue increases, Bell apparently is completely oblivous to this as he is too busy hiding from his shadow.

    And the funniest thing is Bell claims to be part of the no labels crowd. This guy is one of the biggest partisan hacks there is here.

  • Graychin

    Why do Republicans hate Medicare?

    Short term, debt and deficits are a phony issue. Short term, we ought to be creating jobs.

    Creating jobs is the last thing a guy like Mr. Bell would want to do. It might help the Hated Kenyan get re-elected.

  • LauraNo

    “We have made entitlement promises that clearly are beyond the ability of politicians to honor. ”

    I call bs. It is beyond the politician’s (mostly of the R variety) ability to raise some damn revenue. Honor has no part in this.

  • tommybones

    Is Bell ignorant? Or dishonest? One or the other…. possibly both to some extent.

  • jamesj

    “…Republicans on the committee have already made a comprehensive offer to the Democrats. The offer seems quite straight-forward: Republicans will cap some tax loopholes in exchange for fundamental re-structuring of Medicare and reform of Medicaid.”

    When did capping tax loopholes (something everyone agrees should be done) become a concession? You’re in the twilight zone. By “comprehensive”, do you mean “extreme by the standards of Western Civilization and the Republican party of even a decade ago”?

    This kind of intransigence has driven me from the party. Here you are writing an apologetic when you should be doing the opposite.

  • djmeph

    1.2 Trillion isn’t enough? End the wars.

  • tommybones

    Lost in this is the simple fact that doing NOTHING would make the biggest dent in the deficit. Let the tax cuts expire and leave SS and Medicare alone. People need those programs to SURVIVE. The wealthy can live without their third private jet.

    Add to that a financial transactions tax to Wall Street, you know, the guys who destroyed the world economy, and we’ll see a surplus soon enough. Use surplus to fund JOBS BILLS.

    Simple.

  • Ogemaniac

    “In truth, both sides have shibboleths”

    Bullhonkey. Bullhonkey. Bull manure.

    Democrats have put their sacred cows on the table, repeatedly and extensively. The Republican’s refuse to have theirs shed so much as one drop of blood. That is why our country is going to hell. Anyone who pretends otherwise is part of the problem, un-patriotic, and a liar. Seriously.

    Tell me, my Tea Partying friends, which blood of which of your cows you are willing to sacrifice. Show that you are serious about deficits. I quadruple-dog dare you. I’ll match you dollar for dollar (and not a penny more) with spending cuts to non-security related programs. Deal?

  • zaybu

    What’s missing in this article is that the GOP wants to get rid of Obama at any cost, even if that means destroying the country.

  • bdtex

    Bell took the bait. Articles like this are what the little leak to the WSJ was all about.

  • jdd_stl1

    “Republicans responded, quite accurately, that no fundamental changes in the Medicare structure were in the Democratic plan. Without Medicare reform, no tax increases, House Speaker John Boehner retorted.”

    Can someone give me a link to where Boehner said anything like this?
    Did he really say or imply that he would support tax increases
    if Medicare reform was on the table?