Tag Archives: Government

Sometimes I Think This Country Is Too Stupid To Survive — Part 2

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Part 1 dealt with one ridiculous aspect of the story: how the $3.5 trillion everybody is talking about ignores the taxes and cost savings that would approach $3.5 trillion and offset the spending. Paul Waldman of The Washington Post is disgusted with another aspect (“Our Budget Debates Are Insane”):

One of Congressā€™s main jobs ā€” perhaps its most important ā€” is to decide how to spend the governmentā€™s money. And thereā€™s quite a lot of it; in 2022 weā€™ll be spending around $6 trillion.

Yet the way we talk about budgets in Washington is misconceived, misleading and often downright mad.

Everything wrong with how we think of spending money can be seen in the current negotiations over the social infrastructure bill Democrats hope to pass through reconciliation. But to put this in its proper context, letā€™s consider another, much bigger bill.

On Thursday, by a vote ofĀ 316 to 113, the HouseĀ passed the National Defense Authorization Act, which will fund our military operations to the tune of $768 billion in the coming year. The nay votes were mostly conservative Republicans and liberal Democrats, presumably dissenting for opposite reasons.

If youā€™ve been following the reconciliation debate ā€” in which people have been absolutely obsessed with the supposedly terrifying number of $3.5 trillion [Note: which ignores the taxes and cost savings that would pay for it!!!] ā€” you might have thought the defense bill would produce enormous breast-beating about out-of-control spending and debt. After all, that $3.5 trillion is over 10 years, or $350 billion a year, less than half of what weā€™re going to spend on the military.

But thatā€™s not what happened. . . .Ā 

There were no painful negotiations, no ultimatums, no desperate threats. President Biden did not have to beg and plead to secure anyoneā€™s vote. And you sure didnā€™t see centrist members of Congress expressing deep concern about its size, claiming it was irresponsible to add so much to the national debt ā€” although weā€™ll easily be spending $8 or $9 trillion on the military over the same 10-year period.

Yet all that has happened on the social infrastructure bill. The billā€™s final spending total ā€” whatever it turns out to be ā€” has been imbued with a bizarre talismanic power, as though it represents something meaningfulĀ above and beyond what itā€™s actually buying.

Consider Sen. Joe Manchin IIIā€™s (D-W.Va.)Ā descriptionĀ of a White House meeting President Biden held with centrists to try to work out whatā€™s holding back their support:

ā€œHe just basically said find a number youā€™re comfortable with,ā€ Manchin said, adding that Bidenā€™s message was to ā€œplease just work on it. Give me a number”.ā€ Manchin told reporters that he didnā€™t give Biden a number . . .Ā 

. . . Not only do the centrists not know their preferred number, they donā€™t seem to have many real opinions aboutĀ what should actually be in the bill. They may object to an item here or there if you press them, but clearly their perspective starts from the conviction that $3.5 trillion is too big; theyā€™ll fill in the details later.

But thatā€™s completely backward. To negotiate a bill such as this is, you ought to begin by deciding what you want to do, thenĀ figure out how much it will cost.

Itā€™s not that cost is completely irrelevant, or that there are some things weā€™d like to do but wonā€™t because theyā€™re too expensive. But we have plenty of money to work with, and the defense bill proves it.

If we decided the reconciliation billā€™s paid family leave and universal pre-K and free community college and aggressive moves to promote clean energy were as important as all the guns and bombs and planes and ships in the defense bill, weā€™d treat it in the same way, by just buyingĀ everything without worrying about the price, because we think itā€™s worthwhile.

This isnā€™t the first time Democrats have convinced themselves that there was something magical about a particular budget number: In 2009, during internal debates about the American Recovery and Reinvestment Act and the Affordable Care Act, Obama White House advisers decided that crossing the threshold of a trillion dollars for either bill would make support melt away. As Michael Grunwald put it, ā€œA trillion was a psychological Rubicon.ā€

The trillion dollar number became like ā€œCandymanā€ ā€” intone the word too many times and a monster would come to destroy you. Voters would recoil in disgust, lawmakers would cower in terror and the bill would die. So they reduced the size of the recovery bill, even knowing it was too small to give the economy the boost it needed.

Today, the centrists seem to believe that $3.5 trillion ā€” if youā€™re spending it on Americansā€™ actual needs . . . Ā ā€” will have the same effect [on public opinion?] as $1 trillion did in 2009.

But you know who doesnā€™t care about numbers? Republicans. When they want to pass a gigantic tax cut for the wealthy and corporations, they just do it, no matter what it costs.

You know who else doesnā€™t care? The public. They donā€™t have strong feelings about whether the [spending side of the] social infrastructure bill should add up to $3.5 trillion or $2.5 trillion (hereā€™s a pollĀ showing that changing the dollar figure has no effect on opinion). Theyā€™re more interested in what government isĀ doingĀ for them.

Which is exactly as it should be. If only [all of the] Democrats in Washington had enough sense to see things the same way.

Sometimes I Think This Country Is Too Stupid To Survive

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Here’s an example (this one is from Catherine Rampell of The Washington Post, with my comments in italics):

How much does President Bidenā€™s proposed agenda cost?

This seems like a straightforward question, but the answer varies wildly depending on your accounting method. And this has caused headaches as Democrats try to lock in crucial . . . votes within their own party.

In recent years, there has been something of a budgeting double standard in the framing of Republican and Democratic economic proposals. Consider Republicansā€™ signature achievement during the T____ era, their 2017 tax cut. This bill was usually referred to as a “$1.5 trillionā€ tax cut because that was the initial estimate for itsĀ net costĀ over a decade.

A billā€™s net cost refers to the price if you add up all the provisions that raise money, subtract all the provisions that lose money and then see how it all washes out. For the 2017 tax bill, the net result was forecast as aĀ $1.5 trillionĀ increase in deficits over a decade. (This was later revised upward, toĀ nearly $2 trillion.)

If, however, we had counted only the lawā€™sĀ gross costsĀ (i.e., without offsetting revenue-raisers, such as the cap onĀ state and local taxĀ deductions), its price tag would have looked multiple times more expensive.

But thatā€™s exactly how most politicians and journalists are tallying the ā€œcostā€ of Democratsā€™ safety-net-and-climate legislation.

As Republicans did in 2017, Democrats are trying to pass their legislation through ā€œreconciliation,ā€ a process that requires only a party-line vote. Most references to the Democratsā€™ package describe it as costing $3.5 trillion.

That number reflects theĀ grossĀ costs of Democratsā€™ agenda items, such as paid leave, health-care expansions, universal pre-K and child tax credits.

In other words, the $3.5 trillion headline refers to only one side of the ledger. However, Democrats plan to pay for at least some of these priorities with various offsets, such as higher taxes on corporations and the wealthy. Once you include the offsets, the net cost will be lower.

How much lower? Thatā€™s TBD. Democrats are stillĀ fighting overĀ what will make it into the bill, including variousĀ tax hikes.

We know theĀ maximumĀ possible net cost, though. When a bill goes through reconciliation, lawmakers must commit in advance to a ceiling on how much the bill can raise deficits.

Last month, lawmakers agreed to a maximum deficit increase of aboutĀ $1.75 trillionĀ over a decade. They could ultimately choose a smaller number. The White House says itā€™s aiming for a fully paid-for bill ā€” i.e., with a net cost of zero ā€” though that outcome seems unlikely.

The $1.75Ā trillion maximumĀ netĀ cost has gotten almost no attention, while the $3.5 trillion gross figure dominates news coverage. This has irked White House officials, one of whom complained to me that ā€œ ā€˜$3.5 trillionā€™ is disconnected from any kind of meaningful measure of what this developing legislation is,ā€ since it doesnā€™t reflect the billā€™s deficit impact or even the total size of its spending items. (The proposal cuts some taxes, too.)

And the framing matters because it has been distorting congressional negotiations.

Sen. Joe Manchin III (D-W.Va.)Ā reportedlyĀ has drawn a red line for the billā€™s ā€œsizeā€ at no more than $1.5 trillion. If he were focusing on aĀ netĀ cost of up to $1.5 trillion, Democrats could cram a lot of priorities in the bill, so long as they also include substantial pay-fors. But Manchin has apparently anchored his demands around the billā€™sĀ grossĀ costs [ignoring how the bill would be paid for!].

That severely constrains what programs Democrats can create or expand, no matter how enormous the offsets are.

How come Republicans got to use bookkeeping that made their legislation seem less costly, while Democrats are saddled with metrics that overstate their fiscal profligacy?

. . . [One explanation is that] some Democrats emphasize their agendaā€™s gross costs because they want to play up the scale of progressive ambitions. When comparing an agenda to the New Deal, it helps to make it sound larger. And recentĀ pollsĀ suggest Democratic voters increasinglyĀ likeĀ the sound ofĀ Bigger Government.

So progressive leaders donā€™t guide the debate away from that $3.5 trillion gross figure, and reorient discussions toward (smaller) net costs, as White House officials might prefer; after Manchinā€™s downsizing demands, Sen. Bernie Sanders (I-Vt.) declared that $3.5 trillion is ā€œthe very leastā€ the plan should cost [even though it wouldn’t cost that much!]. . . .

Roads, Taxes and Rationality

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There’s no shortage of news being made and problems to be addressed, but the world seems a bit quite these days. Maybe the president has something to do with it:

Bidenā€™s words . . . have been counted along with his on-camera appearances and total one-third of those notched up by the previous president at the equivalent stage (The Guardian).

It clearly helps that there are rational people in charge of the federal government for a change, “rational” in the sense that they’re trying to fix problems instead of ignoring them or making them worse.Ā 

An excellent example is the problem of America’s “crumbling infrastructure”. The two words, “crumbling” and “infrastructure”, have been tied together for decades, like “manicured lawns”, “well-heeled lobbyists”, “potent symbols” and “hot topics”. Everybody agrees the country’s roads, bridges, dams, school buildings, electrical grid, etc. need work and it will cost a lot of money to modernize them. I just typed in “infrastructure” and got:

The cost to fix America’s crumbling infrastructure? Nearly $2.6 trillion, engineers say (CNN).

So it isn’t a surprise that Biden is announcing a big infrastructure plan tomorrow (unlike his predecessor, the orange guy, who kept promising a tremendous infrastructure plan to go along with his miraculous health insurance plan, neither of which ever materialized.)

Nor is it a surprise that Republicans won’t want to pay for it. From the Washington Post’s “Plum Line” blog:

New details are emerging about the massive infrastructure plan that Democrats will present this week, and it poses a problem for Republicans. This is exactly kind of government spending voters from both parties support ā€” every member of Congress would happily have a new bridge in their district.

But if it passes, it will be another victory for President Biden. So Republicans have to find a way to convince voters itā€™s a terrible idea, which theyā€™ll attempt through a series of misleading arguments.

Hereā€™s the latest on the package, from The Post:

Bidenā€™s plan will include approximately $650 billion to rebuild the United Statesā€™ infrastructure, such as its roads, bridges, highways and ports, the people said. The plan will also include in the range of $400 billion toward care for the elderly and the disabled, $300 billion for housing infrastructure and $300 billion to revive U.S. manufacturing. It will also include hundreds of billions of dollars to bolster the nationā€™s electric grid, enact nationwide high-speed broadband and revamp the nationā€™s water systems to ensure clean drinking water, among other major investments, the people said.

Those all seem like worthy goals. So how will Republicans argue against them?

One way will revolve around fearmongering about deficits and tax hikes. Another will seek to cherry-pick from the package to portray it as stuffed with wasteful boondoggles.

On the first, Biden is expected to ask congressional Democrats to roll back parts of his predecessorā€™s tax cuts for the wealthy and corporations, and to increase taxes on profits that corporations shelter offshore.

And Senate Minority Leader Mitch McConnell (R-Ky.) is already balking. ā€œIf you want to do an infrastructure bill, letā€™s do an infrastructure bill,ā€ is McConnellā€™s latest line. ā€œLetā€™s donā€™t turn it into a massive effort to raise taxes on businesses and individualsā€ [i.e. corporations and rich people].

The Republican game runs as follows. They say they support infrastructure repair in principle (which is true of some). But, they add, they donā€™t support paying for it either by driving up the deficit or with tax hikes that will kill jobs (as McConnell suggested).

Never mind that Republicans exploded the deficit with the very tax cuts for the rich and corporations that Democrats want to partly reverse, or that Republicans are pretending doing this would raise taxes on workers, or that the claim that tax hikes kill jobs has been perpetually proven wrong. . . .

Meanwhile, you will surely hear the name ā€œSolyndraā€ bandied about, in reference to what happened the last time a Democratic administration boosted green energy infrastructure (an even bigger component of Bidenā€™s plan).

Republicans are already making the case that last time millions in taxpayer dollars were squandered on green energy jobs that never materialized. They are road-testing a new slogan about whatā€™s coming: ā€œSolyndra Syndrome.ā€

But that actually points to how Democrats should respond to this attack. Because the truth is very different from what Republicans would have you believe.

Solyndra was indeed a failure: As part of a federal program to support promising companies, the Obama administration gave a $535 million loan to the firm. But their solar panel technology struggled to compete against low-cost panels from China, and the company eventually went bankrupt.

But the whole point of the loan program was to take risks, in the knowledge that some of them wouldnā€™t work out. And other loans paid off spectacularly well.

You may have heard of another up-and-coming green tech company that got a $465 million loan at around the same time, enabling it to start making passenger cars. Itā€™s called Tesla. It paid back its loan with interest, and today has more than 70,000 employees.

Republicans spent years trying to turn the Solyndra failure into a scandal. What they didnā€™t mention is that despite the loss the government took on it, the program that funded that loan quickly turned a profit, eventually earning billions.

So that part of the Obama Recovery Act was a success, even though Republicans convinced many people it was a failure. The reality tells the opposite story, and Democrats should say so.

Beyond all that, . . . Democrats have a good way to call the Republicans’ bluff: Renew the push for a boost in funding for the Internal Revenue Service, so it can start hauling in the huge piles of revenue that will likely to go uncollected in coming years ā€” much from the wealthy and corporations.

Tax experts say that due to IRS budget cuts and resulting lax enforcement, as much as $7.5 trillion in revenue could go uncollected over the next decade, a good deal of it from wealthy actors who are well resourced to evade payments. They also say netting even a fraction of that could bring in gobs of new revenue.

Sen. Ron Wyden (D-Ore.), the chairman of the Finance Committee, says Democrats should renew this push, tied to the debate over infrastructure, by arguing for more funding for IRS enforcement, and for reforms improving its efficacy:

The absolute bare minimum Republicans should get behind is ensuring the IRS has resources and trained staff to collect taxes that are currently owed. They wonā€™t have any credibility if their position is that not only can there be no new revenue, but we also canā€™t do significantly more to collect revenue thatā€™s owed.

Unquote.

Republicans won’t have any credibility? That’s never bothered them before.

So Where’s the Vaccine?

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Perhaps you’ve been wondering where the vaccine is and how much is on the way. We’d know more if the previous administration hadn’t displayed an extraordinary combination of malevolence and incompetence. The good news is that we’ll know more soon. From The Guardian:Ā 

TheĀ Biden administrationĀ has spent its first week in office attempting to manually track down 20m vaccine doses in the pipeline between federal distribution and administration at clinic sites, when a dose finally reaches a patientā€™s arm.

The Trump administrationā€™s strategy pushed the response to the coronavirus pandemic to individual states and omitted pipeline tracking information between distribution and when the shot is actually administered, Biden administration officials toldĀ Politico.

The lack of data has now forced federal health department officials to spend hours on the phone tracking down vaccine shipments, the news websiteĀ reported.

ā€œNobody had a complete picture,ā€ Dr Julie Morita, a member of the Biden transition team and executive vice-president of the Robert Wood Johnson Foundation, told Politico. ā€œThe plans that were being made were being made with the assumption that more information would be available and be revealed once they got into the White House.ā€

As of Saturday, 49 million doses of vaccine have been distributed by the federal government, but only 27 million administered by states, according to the US Centers for Disease Control and Prevention (CDC).

About two million of those doses are believed to be accounted for by a 72-hour lag in reported administration,Ā Politico reported. That still leaves millions in the pipeline between delivery and patient. At leastĀ 16 statesĀ have used less than half the vaccine doses distributed to them, USA Today reported this week.

ā€œMuch of our work over the next week is going to make sure that we can tighten up the timelines to understand where in the pipeline the vaccine actually is and when exactly it is administered,ā€ Dr Rochelle Walensky, [the new] director of the CDC, told USA Today.

. . . The CDCā€™s first report on early vaccine rollout is expected in February.

Two Charts (Signs of the Times)

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This first one is hard to believe. The rate on the government’s 10-year Treasury bond is around 0.70%. That’s the lowest it’s been for more than 150 years. Whoever buys one of these bonds is basically giving the government an interest-free loan, money the government could use to help people who’ve lost their jobs, small businesses that have lost their customers and local governments that are spending more and collecting less in taxes because of the virus.

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This second chart is easy to believe. It shows confirmed Covid-19 cases per million people. Although the president and his cronies claim that America’s response to the virus has been “spectacular”, compared to a country with a competent national government, South Korea, our response has been spectacularly bad. We’re the red line. South Korea is the blue.

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