Tag Archives: budget

President Obama’s Tea Party Credentials

By Marc Seltzer; originally published at care2.com on November 14, 2010

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I wonder if the story of the midterm elections is what it seems:  Tea Party Rejection of President Obama’s policies ushers in a Republican agenda.

In that story, President Obama is either the same old Washington problem, out to use tax-payer money and gov’t power for his own out-of-touch interests or an out-of-control Democrat-Socialist on a wild spending spree.  The deficit and debt represent the proof of the irresponsibility of the incumbents, and the new Republicans are the populist heroes who will reign in spending and balance the budget.

But I keep remembering candidate Obama saying “I am not doing this so I can pass the buck on the hard decisions.”  Difficult decisions are the ones where you take things from powerful people or make them pay what they cost, rather than offer give-aways.

Leave the financial crisis aside for a moment.

The current President inherited both short-term deficit spending (war, tax cuts, excess gov’t spending, etc. — unpaid for) and long term structural debt (Medicare, Medicaid, Social Security going up unsustainably per existing law and future demographics).  There are sometimes reasons to borrow money, to spend now and pay off debts later, but the past decade was not WWII.  Congress simply spent more than it took in, and it gave gifts such as tax cuts and Medicare benefits by borrowing money.

Along comes Barack Obama, talking about “bending the cost curve.”  Significant in the health care reform was removing tax subsidies for generous employer-sponsored health plans. Most Americans get their insurance from employer-sponsored health plans, and this substantial reform, however unpopular, will reduce the costs and waste of excessive medical care.  Mr. Obama also approved taking funds out of Medicare.  That’s hurting doctors and potentially forcing more cost containment on publicly funded health care for seniors.

The President also talked about reducing earmarks (the first budget under Obama contained earmarks prepared before his inauguration).  That hurts corporate interests and the politicians so aligned.   Then, Mr. Obama sought to reduce defense spending, with his Secretary of Defense standing up to criticism by congressional and corporate defense interests.

This sure seems like the long-term path of fiscal discipline.

What I’m wondering is, could the Tea Party movement be going in the same direction as the President?  Could it be that in order to balance the budget a lot of sacrifices will have to be made?  The President started down that path. (The financial crisis brought some unexpected costs — Bush’s TARP and Obama’s Stimulus — but not a recurring give-away). Now, the Tea Party-rejuvenated Republicans are all about cutting spending.

Doesn’t that really put them in the President’s camp?  Everyone with an interest, special or otherwise, will argue for their piece of the pie.  Tea Party Republicans are proposing to reform earmarks, cut defense spending and balance the budget.  They come at the problem as if it was the government that was devouring all the money.  But if they stay in the game for long enough, they will see that it’s not that simple.

In that case, President Obama may again appear the reformer:  A leader with a clear understanding of what needs to change to create a more sustainable America, waiting for people with integrity and discipline, a willingness to sacrifice, and political courage to join the fight against a system of entrenched interests.

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Listen to Marc Seltzer’s weekly podcasts on the U.S. Supreme Court at SupremePodcast.com

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No Tea Party in Canada

By Marc Seltzer; originally published at care2.com on October 13, 2010
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Democrats seem bewildered by the strength of the Tea Party movement.  Powerful incumbent Senators such as Boxer (CA) and Reid (NV), and numerous House Reps in leadership positions find themselves in difficult contests. Republicans are poised to gain significant numbers in the legislative branch in November’s mid-terms election.

Fighting back, Democrats and their supporters have gone after Tea Party-Republican candidates, focusing on their oddities, inconsistencies, and lack of coherent policies.  Rachel Maddow, among others, has exposed the remarkably poor caliber of some candidates propelled by the Tea Party to victory in the Republican primaries.

Be that as it may, the legitimate complaint of the Tea Party movement has not been effectively dealt with by Democrats.  The root groundswell of anti-government energy comes from fear and anger about deficit spending and debt.

Deficits matter.

In Canada, governments of the past decade worked hard to erase the substantial deficits of the 1990s.  When the 2008 financial crisis arrived, Canada was able to face the recession with sound economic fundamentals.   Increased public spending in 2009 and 2010 again created deficits, but helped Canada recover nearly all the jobs lost in 2008.  Embarking on a new deficit spending program did not faze the public, and Canadian leaders are now talking about returning to surplus budgets in the next 7 years.

There is no tea party movement in Canada.  National health care, yes.  Major tax protests, no.

For all the things wrong with aspects of the Tea Party movement, from blaming the Obama administration for current ills to dredging up misguided social views, the truth is that the U.S. would have braved the recession far more effectively if it had had a budget surplus.

In not addressing this aspect of the financial health of the nation directly from the start, with a coherent long-term plan, the Democrats have allowed the opposition to bundle legitimate disapproval of the government’s budget outlook with generalized anger at banks, unemployment, the Bush administration, Congress, taxes, and government spending.

It’s working for Republicans so far, and if this election looks bleak, imagine Sarah Palin filling a stadium near you in 2012.

(Marc Seltzer has been on paternity leave after the birth of his daughter in June.  Marc can also be heard reviewing U.S. Supreme Court cases at SupremePodcast.com)

Deficit Spending

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Originally published at care2.com on July 9, 2009

California government struggles.

Forced to match public spending with revenue (some monkey-business excluded), leaders have only two good options:  Cut spending or raise taxes.  You would think that this would be easy enough.  But either option takes money from people who feel it should be theirs. The conflict is so fierce, the interests so entrenched, that leaders will walk dangerously close to default, to failing to meet obligations, rather than give up what they defend.

In the federal government, we have a different problem.

The Bush administration did away with Clinton-era commitments to pay for spending increases or tax cuts by finding sources of revenue.  Without even that modest amount of discipline, legislators, who get elected by pleasing their constituents, consistently spent their way into incumbancy.

I do not fault the Bush or Obama administrations for their emergency efforts to buy off an economic Depression (or substantial risk thereof)through massive deficit spending on short-term stimulus.  It was the best judgment of the experts, and it seems to have worked.  A Depression is far more costly than the money spent on stimulus.  But neither does this deal with the underlying problems in long-term public spending.  How do we reverse course and begin to bring the long-term spending equation in line with the revenue picture?

It may be that our political system is able to solve the problem.  The public is aware and concern over public spending is growing.  President Barrack Obama has called for a return to “pay as you go” legislation. This will make it far more difficult for Congress to add new deficit spending.  Even the roughly one-trillion dollars discussed as a budget for health care reform is being treated as “pay as you go” spending requiring an offsetting spending cut or tax increase to protect the overall national budget.

However, we have traveled so far down the path of deficit spending, that we will have to do more than maintain our course.  Bloomberg podcast — “Rivlin Says Fed More Concerned About Deflation Than Inflation”

The nation has already made commitments to spending on Medicare and Medicaid that will dig us deeper in debt over the next ten years.  We would have to legislate cuts in Medicare and Medicaid in order to get out of those commitments, if we wanted to.  Therefore, new efforts must be made to raise revenue or cut spending in order to just maintain the level of deficit we have now.  We need courageous leadership, willing to ask for sacrifice from all parts of our society, and we need disciplined leaders, willing to put their careers on the line in order to do what is right.

The recession will end and revenue will therefore increase, but that does not mean we will be out of the woods.  If Congress is not able to legislate long-range fiscal responsibility we will need new solutions.  One approach, discussed in the past, is across-the-board spending cuts.  Another would be to create a deficit Czar or independent commission with responsibility for recommending spending cuts and revenue increases that would lead to a reasonable deficit.

We should think of the deficit as a percentage of the national economy, not a dollar figure.  When the percentage begins moving down, towards historic norms, we will be on the right track.

It might be that a group of leaders we trust, who are not elected officials, could do a better job giving us tough medicine than the people we pay to give us only good news.  In any case, the sooner we take the medicine, the sooner we will begin the road to recovery.