Archive for July, 2011

The Republicans got everything they wanted from the Debt Deal

A debt deal has been struck and the winner is the Tea Party. The losers are Democrats, the economy, and the American people. Democrats and the President will try to say that it was a compromise and that both sides gave some and got some. Its not true, but they can’t very well get up in front of the cameras and say “this is a terrible, terrible deal which no one should support but for the fact that if we don’t vote for it, something even worse will happen.” That something worse would have a been a US government default, which would have pummeled the stock market, pushed banks under, tanked the value of the dollar, kept doctors, social security recipients or government employees from being paid and caused the interest rate to skyrocket on any kind of loan, be it a for a car, mortgage or on a credit card. In short, everyone in the United States had a ton to lose from a default. Everyone. There is not a single person who would have gained a thing in a US government default. But why was this disaster even a possibility? Its worth recounting how we got to this point.

Congress has been deficit spending since Clinton was President and every time you deficit spend, you have to increase the debt limit.  This time around, Republicans said they wanted to deficit spend without increasing the debt limit. They basically said “Woah, if you want us to keep the government from defaulting on the debt that we already voted for, you’re going to have to jump through a bunch of hoops and meet all of our demands.”

Republicans demanded a dollar in spending cuts for every dollar the debt limit would be increased. And they got it. Well, what about the fact that the main driver of our debt is  the tax cuts passed under George W. Bush? And how about the fact that domestic spending hasn’t even grown since 2001? Doesn’t matter, Republicans said that they wanted spending cuts, so they got spending cuts. The package agreed to will push back domestic discretionary spending to where it was under Dwight Eisenhower, (according to Pres. Obama) DWIGHT EISENHOWER! So we are going back to a level of domestic spending that existed back when there were no Pell Grants, no EPA, no interstate highway network to maintain, no Head Start program. We are supposed to run a post-industrial government with a budget from the Korean War period? That’s insanity.

What did Democrats get out of the deal? As any Republican will tell you, they got an increase in the debt ceiling as their prize. That’s right. Democrats got to protect the American people from a complete economic collapse. Stopping the Republicans from starting another Great Depression was their prize. This was a hostage situation in every meaning of the phrase. Republicans threatened to kill the hostage–they said they would cause an economic meltdown that would make 2008 look like Candyland unless all their demands were met. In the end, Democrats showed that they cared too much about the American economy to let the Republicans fulfill their threat. In a saner time, a political party who threatened to cause a US default for their own ideological ends, who used the health of the US economy as a bargaining chip, would never again be entrusted with any power by the American people. These are not sane times.

There you have it then. The only reason Democrats will vote for this package is because they do not want the US economy to implode. There is literally nothing in it for them to like. The richest Americans are not asked to pay a bit more to solve a crisis that their tax cuts largely created while Medicare, Medicaid and Social Security will likely be shrunk in the next round of cuts. All of the cuts come from the poor and middle class. Democrats’ only motivation to vote for this deal is to protect the American people from Republican recklessness. Republicans will vote for it because its everything they could have ever asked for. Some Republicans will still withhold their vote because they have decided that nothing less than a balanced budget amendment can win their vote. Those Republicans are even more ideological than the rest. They hate the government and they will never make any compromise for the good of the country.

Speaking of the good of the country, these cuts will slow down the economy and might even push us back into recession, if last quarter’s GDP numbers are any indication. A dollar less in government spending is a dollar less in the economy and there’s about to be a whole lot fewer dollars in the economy. These cuts come at a terrible time for the economy. The right time to make cuts is when the economy is already gorwing at a healthy pace, not when doing so will throw the economy back into recession.

God help us if Obama loses re-election. If he doesn’t win the election and end the Bush tax cuts once and for all, Republicans will just keep cutting until there is no more social safety net in America.

For more reading on the size of the GOP’s win here, look at this article.

Where I’ll be for the next week

Its unlikely that I’ll have any posts for the next week because I will be enjoying RAGBRAI, a week-long bike ride across Iowa. The week is sure to be full of a lot of exercise, great Midwestern scenery, delicious homemade pies, early mornings, and some of the friendliest people in the country. And besides, watching the debt limit negotiations come down to the wire would be sure to give me an aneurysm, so this will be a well-needed distraction. Maybe I’ll even see a Presidential candidate while I’m there!

More information here: http://ragbrai.com/

Missouri 2012 Elections Preview

Missouri is a swing state that has trended more Republican in recent years, but its politics are still very competitive. It has several key races coming up in 2012, and seeing as I am a Missouri resident, my blog will be following them. This is my first preview of Missouri’s 2012 races for Governor, US Senator and for Missouri’s second US Congressional seat.

Governor

Jay Nixon (D) is a first-term governor who won in a landslide in 2008. Nixon is a long-time Missouri public servant (he was Missouri’s Attorney General for several terms before becoming governor) and has built a reputation as a moderate Democrat. He has selectively used his veto pen to hem in the ambitions of the vastly Republican state legislature, picking fights only where he can be assured of public support (such as by striking down a law that sought to make it harder for workers to sue for discrimination) and withholding his veto power in cases that could embroil him in a costly, partisan battle (such as when laws limiting abortion rights come to his desk). He has avoided ruffling the feathers of any of the major interests in the state and has noticeably shied away from any intense, partisan battles. His timely and visible response to the Joplin tornado as well as his jobs tours around the state seem to have shown voters that he cares about their issues.

As a result, Nixon is one of the most popular governors in the country, despite presiding over a state that voted for John McCain in 2008 and swung strongly against Democrats in 2010.  His average approval rating is 48% while is average disapproval is 29%, making his net approval +19%, a very strong number (and also his margin of victory in 2008). This, added to the inherent advantages of  incumbency, makes Nixon a strong favorite for re-election. If the election is a referendum on his stewardship of the state, he will likely win.

His likely 2012 opponent is Lieutenant Governor Peter Kinder (R). Unfortunately for Kinder, the Lt. Governor of Missouri is slightly less useful than the Vice President of the United States. Besides chairing a few committees, Kinder really has no responsibilities or roles that could help him get his name out in front of the public in a positive light. Because of this, his list of accomplishments as Lt. Governor is very small (I really can’t think of any off-hand). He will be forced to run a campaign against a sitting, popular governor as a generic Republican. That doesn’t seem to hold much promise, but anything can change in over a year’s time.

As for fundraising, Nixon is kicking Kinder’s behind.

US Senate

Missouri also has a sitting, first-term Democratic Senator in Claire McCaskill. Claire’s numbers have not been so strong  since the debate over  health care reform (which is very unpopular in Missouri), but they have improved recently to the point where her disapproval and approval is about even. This race will be very difficult for the incumbent. While the governor’s race will focus on state politics, this race will be dominated by national politics. In conservative-leaning Missouri, the person with a (D) next to their name will be at more of a disadvantage in a  race dominated by President Obama. The Washington Post’s The Fix has rated McCaskill’s seat as the #3 most likely Senate seat to change hands in 2012. That’s not a good ranking to have.

Claire has been a fairly moderate senator, though she did vote for the Democrats’ big ticket bills (health reform, the stimulus) in the last Congress. Her opponent will use  those votes giddily in the campaign and that alone may be enough to sink her. Her greatest advantage is that she does not have a formidable opponent at the present time.

Sarah Steelman, the erratic and unpredictable former Missouri State Treasurer has had some problems gaining traction and as of last week had less than $200,000 in cash on hand. US Rep. Todd Akin, her primary opponent had $1.2 million and McCaskill had $2.8 million. Though Akin is a multi-term US Representative, he may be too far  to the right even for Missouri.

He is an avid Tea Party supporter who has made such incendiary and jaw-dropping statements as saying that Social Security is just “a tax…I don’t like it”, that liberals hate it when you say the pledge of allegiance, and most recently, that “At the heart of liberalism, really, is a hatred for God and a belief that government should replace God.” That last one got  him in a lot of trouble with a group of liberal pastors who, wouldn’t you know, don’t hate God and don’t think that the government should replace God. Akin, for his part hasn’t really apologized. Anyway, someone with such clear antagonism toward people with beliefs different than his own will have a harder time taking on Claire.

Missouri’s Second US Congressional Seat

Missouri redistricted this year, and the Republican legislature eliminated the Democratic seat in the St. Louis area occupied by Rep. Russ Carnahan. Missouri now has 2 Democratic leaning seats and 6 Republican-leaning seats. No, in case you were wondering, there are not 3 times as many Republicans in Missouri as Democrats,  in fact the Cook rankings say that Missouri is a mere 3 percentage points more Republican  than Democratic. But that’s beside the point. In 2012 there will be only one semi-competitive House seat in Missouri, the new second district.

The new second leans Republican, as it went only 46 percent for Obama in 2008. Since his district was eliminated, Russ Carnahan is being pushed to run in the Second. Though he does not actually live  in the new district, he would be a big name and could possibly pull that McCain district into the Democrats’ column. Carnahan has raised over a half million in in the first half of the year, showing that he could be competitive if he decides to run. If he does, it will definitely be an uphill slog. Carnahan won by only a few points last year in his Democratic-leaning district, though the electoral environment will probably be more friendly toward Democrats in 2012.

Carnahan’s two likely opponents, businessman Ed Martin and former Ambassador Anne Wagner have both been named to the first stage of the “Young Guns” program by the National Republican Congressional Committee, showing that he will have tough competition for the seat. Martin was Carnahan’s opponent last year and also resides outside of the district. Wagner was a major fundraiser for George W. Bush (she was a political appointee as ambassador) and a former state Republican Party chair so she should have no problem securing the backing of major donors and Republican higher-ups.

Initial race leanings:

Governor: Nixon is the strong favorite

Senate: McCaskill is a very slight favorite

MO-2: I’d give the edge to Wagner to win the GOP nod and the general election.

Is Mitt Romney the Rudy Giuliani of 2012?

I’ve been thinking recently about the possible similarities between Rudy Giuliani’s 2008 Presidential campaign and Mitt Romney’s 2012 Presidential campaign. Both were/are the national poll leaders more than six months out from the actual primaries, both were Republican executives from the Eastern US, both were/are favorites among big donors and both had/have taken stances or possessed attributes that are anathema to the Republican party’s base. In Rudy Giuliani’s case, it was his stances on gay rights and abortion (as well as his several divorces) and in Mitt Romney’s case, his past support for an individual health care mandate and his Mormon faith could make him unacceptable to many Republican voters.

Giuliani, as you might remember, fizzled out despite his large initial polling lead because he didn’t draw a significant vote total in any of the early primary/caucus states. He was nationally popular, but couldn’t build any momentum once the actual voting started because he was not popular in the first few states to nominate a candidate. Could Romney follow the same path? Continue reading

Should we raise taxes or cut Medicare?

Soon America must face a choice. Our government’s status quo taxing and spending policies cannot continue much longer. No, this isn’t based on Obama’s spending over the past few years or Republican intransigence over the debt limit. Those are important to this debate, but they’re not the long-term factors I’m talking about here. Spending and taxing have to change because we, as a society, are getting older and our health care costs are continuing to increase. Those two factors alone mean that our traditional rates and methods of taxation cannot support the traditional benefits given out by our government. The following graph shows that the effects of an aging population will mean that our country must spend 3.5 percent more of its GDP on Medicare by 2035 than it does today. The fact that health care costs grow faster than the economy as a whole means an additional 2 percent of GDP will have to go to Medicare by 2035.

via Ezra Klein

The very predictable rising cost of aging and health care leads us to a societal choice: either we give up the social contract that America has maintained for the past 50 years, or we raise taxes AND reform our programs to support the Baby Boomers just as the Baby Boomers supported their parents in retirement.

Republican lawmakers, by and large, have chosen the first option. Most have voted for Paul Ryan’s budget plan, which gets rid of traditional Medicare by changing it into a voucher program which only covers a third of seniors’ healthcare costs. That is the path you have to take if you do not want to raise taxes or get rid of tax loopholes to pay for the cost of Baby Boomers growing old. The most important thing to most Republicans is to protect the rich from increased taxes. If their vision wins out in the future, (tax revenues stay where they are right now) the government will have to shift costs onto seniors, undoing the social contract that we have in this country. Instead of the government covering seniors’ health insurance through Medicare, seniors will have to pay out of pocket to afford private insurance. If seniors living on fixed incomes can’t afford to buy private insurance with their voucher, then too bad for them. If the government doesn’t raise taxes, it cannot afford to help them.

There is another option though. If taxes are raised, or if we just clean up the tax code so that there are not so many loopholes, we do not have to face a world of seniors dying in their homes of diabetes or cancer because they could not afford private insurance. Its also important to emphasize that this is not a complete either/or question. We can still reform Medicare to make it cheaper while raising taxes to help pay for the inevitable additional costs the program will incur. This is generally the Democrats’  position.

Either we increase taxes (by raising rates or cutting loopholes), or we have to get rid of our Medicare program. The only other option is to adopt a complete system of socialized medical insurance  to keep our costs down. Those are our options. Americans must choose.

How many Republicans does it take to screw in a lightbulb?

Republicans have found the latest travesty perpetrated against the American people: America’s light bulb efficiency standards. Nearly every Republican in the Republican-controlled House of Representatives voted to repeal the energy-efficiency standard put in place in 2007 which requires light bulbs to be 40% more efficient than they were in 2007, according to the Wall Street Journal. This efficiency standard has been endorsed by the National Electrical Manufacturers Association, consumer and conservation groups and is expected to save the US economy $6 billion per year in reduced energy costs.

All relevant industry players are behind this law, it will save the US a not-trifling amount of money, the standard was signed into law by a Republican President and with considerable Republican support, so what is the problem? Republicans are arguing from the standpoint of consumer choice. They think that people should have the right to buy inefficient light bulbs if they so choose.

I suppose there is some amount of merit in that argument. All else equal, people should have as much choice as possible. However, the government has a legitimate interest in reducing our carbon emissions, decreasing the amount of energy we use, saving consumers money and preventing waste and promoting efficiency in the economy. But wait, I thought that using the free market was the ultimate way to promote efficiency in the economy? Well, not always. Sometimes using the free market leads to some very inefficient solutions to problems. The light bulb situation is a case-in-point. In a free market, people would choose light bulbs that waste energy. With government standards, consumers will save money and the economy works more efficiently.

When the government can make the private economy more efficient, especially when doing so will cause little or no discomfort to manufacturers, consumers and retailers, the government usually should do so.

Anyway, this will never pass the Senate or the White House, so put another futile and ideological tally mark in the “just wasting our time” column of the 112th House of Representatives’ score sheet.

Republican voters stand to lose the most in a US government default

As the US government fast approaches its legal debt limit, many Republicans have tried to argue that a government default would not be as bad as Democrats, the Secretary of the Treasury, Chairman of the Federal Reserve, independent economists, right-leaning magazines and Wall Street firms all say it will be. These very, very conservative (and very naïve) people say that the government has enough money to pay off all the interest on its debt and still meet some of its legal obligations, and anything beyond that will just be waste that needs to get trimmed. So, for this post I propose that we look beyond the irreparable harm that a default will cause to the “full faith and credit” of the US government, look beyond the fact that default will probably throw us back into recession and look beyond the fact that no one even has a plan for the avoiding raising the debt ceiling and just examine the direct harm that will ensue if the government defaults on much of its debt in August.

If Republicans refuse to increase the debt ceiling and the US government defaults on some of its debt on August 2, it is groups that tend to vote Republican will be the most harmed. How’s that, you ask? I though only hippy liberals and welfare queens needed the government? Let me explain.

The Tax Foundation has compiled a list of states that are net donors to the federal government and states that are net recipients of government aid. To do this, it took everything a state’s residents pay to the federal government in taxes and revenues in a given year and then subtracted everything that the federal government spent in that state in a given year. Expenditures include money spent on roads, education, military bases, social security, Medicare/Medicaid (everything that would be in jeopardy in a government shutdown). Then it gave a ratio of spending:revenue for each state. Here are the top ten states who received more from the Federal government than they put in:

For instance, Kentucky received $1.51 for ever $1 it sent to the Federal government. As you can see, eight of the ten states that rely most on federal aid voted for McCain in 2008. In 2004, all ten of these states voted for George W. Bush. If the debt limit is not raised, Federal spending will fall precipitously and these ten states likely stand to lose the most economically. They are also overwhelmingly Republican. Which states stand to lose the least by this metric?

You’ll note that all of these states voted for Barack Obama in 2008 and all of  them except Colorado and Nevada voted for John Kerry in 2004. They are by and large solidly Democratic states. They get much less from the federal government and give much more than their red neighbors. Looking at the debt ceiling showdown this way, it seems that Republicans are threatening to shoot their own voters in the foot by refusing to allow the government to make the payments owed primarily to people in red states. Voters in Republican states stand to lose the most if the government isn’t allowed to pay its bills once it hits the debt limit.

But of course there are some problems with looking at issues like this on a state-by-state, dollars-in vs. dollars-out measure, so let’s try another way of estimating who will be impacted by a government default.

Using this graph, we can roughly divide expenditures into 5 roughly equal groups: (for a more detailed breakdown, go here)

  1. Defense
  2. Social Security
  3. Medicare and Medicaid
  4. Interest on debt and other mandatory spending (including transportation, veterans’ pensions, unemployment, food stamps…)
  5. Discretionary programs (including foreign aid, education, disaster relief, NASA, border security…)

If the debt limit is not raised, about 40 percent of the government’s expenditures will immediately have to be cut (more will have to be cut after the initial cuts because hitting the debt ceiling wwill cause the economy to tank). So, initially about two of the five things in the list above will have to disappear overnight or some combination of 40% of all five. Who will that hurt? (Taking into account that we do not know what parts of the government Obama and Tim Geithner would choose to fund if this doomsday scenario were to come about, lets speculate about who is exposed to risk here.)

If parts #4 and #5, as well as Medicaid are cut, then that hurts a very mixed bag of people. Everyone from the TSA to scientists at the National Institutes of Health, to poor children, to border security guards, veterans and the recently unemployed will be affected by cuts in those areas that make up about 40% of expenditures. Many of the people in this group tend to vote Democratic, such as the poor, but this is such a varied constituency that it is difficult to speculate, although I assume that this group would tend to lean Democratic. However, it is easier to single out the people who would be affected by cuts in the rest of the government.

If it is Social Security and Medicare that get the ax (Medicare makes up the vast majority of MedicareandMedicaid expenditures) then that would dramatically hurt senior citizens. About 40% of the government goes directly to senior citizens through these 2 programs. Seniors were also the only age group to vote for McCain over Obama in 2008 and also voted strongly for Republicans in 2010. This Republican group stands to lose a lot if the government defaults.

If the military gets cut, that obviously hurts soldiers, their families, towns near bases and military contractors. Thats another 20% of the government. Soldiers and veterans are very Republican. Polls specifically of veterans seem to be rare, but Gallup found that veterans were solidly backing McCain by 22 points a couple months before the 2008 election, even though Obama was leading by 3 points nationally at that time. Veterans also went for Bush over Kerry by 16 points. The military and veterans currently eat up about a quarter of our budget, so they are very likely to be harmed by a default.

About two thirds of government spending goes towards groups that tend to support Republicans. If we move veterans benefits from the “other mandatory” part of the pie to the “defense” part of the pie, then we have about 65 percent of the government going towards seniors, the military and veterans, all of which tend to vote Republican.

Judging by both a state-based metric and an interest group-based metric, it would seem that Republican voters will be the ones most hurt in a government default. So why are many Republicans so hell-bent on not raising the debt limit? I have no idea. Its the triumph of ideology over socio-economic interests, I suppose.