Posts Tagged Republicans
The end of majority rule?
The National Rifle Association is facing attacks from Gun Owners of America for being too soft on gun control. This is like a double cheeseburger coming under severe criticism for lacking enough cholesterol.
Universal background checks are supported by 91 percent of Americans. Yet there is enormous resistance in Congress to passing a strong bill to keep arms out of the wrong hands. What does “rule of the people” mean if a 9-to-1 issue is having so much trouble gaining traction?
Or consider the Morning Joe/Marist polllast week showing 64 percent of Americans saying that job creation should be the top priority for elected officials. Only 33 percent said their focus should be on reducing the deficit. In light of Friday’s disappointing jobs report, the public’s instinct is sound. Yet politicians in our nation’s capital are so obsessed with the deficit you’d imagine they still haven’t heard how many Americans are unemployed or underemployed.
These three non-randomly selected facts illustrate a deep structural tilt in our politics to the right. This distortion explains why election outcomes and the public’s preferences have so little impact on what is happening in Washington. At the moment, our democracy is not very democratic.
Start with the weirdness within the gun lobby. Once upon a time, the NRA supported background checks for gun buyers, and why not? Polls show that gun owners overwhelmingly support background checks, too.
But the political far right is, among other things, a big business. The NRA’s chief concern is not sane public policy. Its imperative is to maintain market share within a segment of our country that views the federal government as a conspiracy against its liberties and President Obama as an alien force imposed upon them by voters who aren’t part of “the real America.” Within this market niche, background checks are but a first step toward gun confiscation.
In a well-functioning democracy, the vast majority of politicians — conservative, moderate and liberal — would dismiss such views as just plain kooky. But here is the problem: A substantial portion of the Republican Party’s core electorate is now influenced both by hatred of Obama and by the views of the ultra-right. Strange conspiracy theories are admitted to the mainstream conversation through the GOP’s back door — and amplified by another fight for market share among talk radio hosts and Fox News commentators.
That’s because the Republican Party is no longer a broad and diverse alliance but a creature of the right. According to a March Washington Post/ABC News poll, 65 percent of Republicans called themselves conservative, just 27 percent were moderates and 7 percent were liberals. Democrats, by contrast, are far more middle of the road: 43 percent called themselves liberal, 38 percent moderate and 16 percent conservative. Among independents, moderates predominated at 46 percent.
Practical Democratic politicians thus need to worry about the political center. Practical Republican politicians, especially those in gerrymandered House districts where primaries are all that matter, will worry almost entirely about an increasingly radicalized right.
And our Constitution combines with the way we draw congressional districts to overrepresent conservatives in both houses. The 100-member Senate is based on two senators per state regardless of size. This gives rural states far more power than population-based representation would. The filibuster makes matters worse. It’s theoretically possible for 41 senators representing less than 11 percent of the population to block pretty much anything.
In the House, those gerrymanders helped Republicans keep control even though more Americans voted for Democrats in the 2012 congressional races.
This representational skew affects coverage in the media. Most Americans may care more about jobs than deficits. But if a right-tilted power structure is talking about deficits all the time, members of the media feel obligated to cover the argument they hear in Washington, even if that means downplaying views held by a majority of the voters — and even if the economic data say we should be talking about growth, not austerity.
There’s also this: While background checks probably would pass the Senate with relative ease if there were no filibuster, the media cover a world in which 60 votes is the new 51. Thus do the battles for 60 percent of the Senate, not the views of 91 percent of Americans, dominate journalistic accounts.
There is no immediate solution to the obstruction of the democratic will. But we need to acknowledge that our system is giving extremists far more influence than the voters would. That’s why American democracy is deadlocked.
- E.J. Dionne Jr.: Have voters in America embraced the end of majority rule? (sacbee.com)
- The end of majority rule on gun control?: E.J. Dionne Jr. (oregonlive.com)
- Dionne: The end of majority rule? (wickedlocal.com)
- Dionne: The end of majority rule? (metrowestdailynews.com)
- E.J. Dionne: Sane gun laws are coming (goerie.com)
- E.J. Dionne: Should only rich influence politics? (goerie.com)
- Will the GOP submit to the NRA and block background checks?: E.J. Dionne Jr. (oregonlive.com)
- Week In Politics: Jobs Numbers, President Obama’s Budget (npr.org)
- The case for using (and reforming) the political contributions system: E.J. Dionne Jr. (oregonlive.com)
- “The End Of Majority Rule?”: Giving Extremists Far More Influence, Our Democracy At The Moment Is Not Very Democratic (mykeystrokes.com)
The pre-sequester illegal immigrant release: Is Obama playing politics?
By Peter Weber | The Week – 8 hrs ago
Immigration officials have released hundreds of pending deportees, citing sequestration-related belt tightening. Republicans say they smell a rat
The Republicans arguing that the upcoming $85 billion in cuts to the federal budget are no big deal are facing their first big test. On Tuesday, the Immigration and Customs Enforcement agency (ICE)confirmed that it has released hundreds of immigrants awaiting deportation trials over the past few days to prepare for the sequestration slated to kick in March 1. “As fiscal uncertainty remains over the continuing resolution and possible sequestration, ICE has reviewed its detained population to ensure detention levels stay within ICE’s current budget,” explained ICE spokeswoman Gillian Christensen.
The released detainees are “noncriminals and other low-risk offenders who do not have serious criminal histories,” ICE says, and they will still be monitored through mandatory visits, ankle bracelets, or other supervised release while they await their court dates. But some Republicans smell a rat. “It’s abhorrent that President Obama is releasing criminals into our communities to promote his political agenda on sequestration,” said Rep. Bob Goodlatte (R-Va.), the chairman of the House Judiciary Committee. And even as he was urging senators to collectively get “off their ass” and pass a sequester-replacement bill, House Speaker John Boehner (R-Ohio) told CBS News it is “very hard for me to believe that they can’t find cuts elsewhere in their agency.”
I frankly think this is outrageous, and I’m looking for more facts, but I can’t believe that they can’t find the kind of savings they need out of the department short of letting criminals go free…. I think that the administration is trying to play games — play games with the American people, scare the American people. This is not, this is not leadership. [CBS News, via Politico]
Homeland Security Secretary Janet Napolitano, whose department includes ICE, issued a sort of prebuttal on Monday. “Look, we’re doing our very best to minimize the impacts of sequester, but there’s only so much I can do,” she said. A sudden 5.3 percent cut in the budget is a lot of money, and “I’m supposed to have 34,000 detention beds for immigration. How do I pay for those? We want to maintain 22,000-some odd Border Patrol agents. I got to be able to pay their salaries.”
But even supporters of easing America’s immigration laws say the mass release of detained immigrants is “unusual,” especially “as the sequester won’t even take effect until March 1,” says Suzy Khimm at The Washington Post. Politically motivated or not, “immigration advocates welcomed the news, having long been frustrated with a detention policy they consider draconian and wasteful.” The 30,773 people in ICE detention are each costing the government between $122 and $164 a day, according to the National Immigration Forum, and alternative, effective forms of detention, like ankle bracelets, cost between 30 cents and $14 a day. “It shouldn’t take a manufactured crisis in Washington to prompt our immigration agencies to actually take steps towards using government resources wisely or keeping families together,” said Carolina Canizales at the immigration reform group United We Dream.
None of that will stop Republicans from insisting “that this is some kind of publicity stunt by Obama to make ‘his’ sequester look bad to put pressure on the GOP to cave into his ‘unreasonable’ demands,”says Justin Rosario at Addicting Info. Well, welcome to “the Law of Unintended Consequences.” The GOP “gives a lot of lip service to ‘smarter government spending’ as well as cutting government spending,” and you might think they’d applaud Obama doing both in one fell swoop. But of course immigration hits a nerve with Republicans. They played with fired by pushing for big spending cuts. They’re getting burned.
The illegal immigrant release is “a great political move on the part of the White House,” says Mark Krikorian at National Review. Yes, Obama “achieves two goals in one fell swoop,”agrees Allahpundit at Hot Air, ”turning up the heat on the GOP to cave on cuts, yes, but also tossing the amnesty fans in his base a bone by reducing border enforcement.” But it could come back to bite him if it scuttles the delicate negotiations on an immigration overhaul bill. Still, Obama’s big preemptive strike “makes me more enthusiastic about the sequester, just because now I’m curious to see how derelict he’s willing to be in his duties to in the name of putting political pressure on the GOP. Next up: Suspending TSA checkpoints at America’s airports, maybe?”
“On its face, this is a brazen, outrageous move, indeed,” says James Joyner at Outside the Beltway. But when you read the details, you have to wonder why Obama didn’t just do this earlier. His administration has drastically ramped up the number of deportees, and some of them spend years in detention, in what amounts to legal limbo.
This isn’t a “supervised” release; it’s a supervised release. The use of electronic monitoring and other safeguards actually makes good sense as an alternative to incarceration for all sorts of minor criminals, much less those waiting to adjudicate immigration disputes. It’s massively cheaper and more productive. Not to mention less cruel.
- Illegal immigrants released before sequester (abclocal.go.com)
- DHS releasing illegal immigrants before sequester (amresolution.com)
- DHS releasing illegal immigrants before sequester ()
- Detained Illegal Immigrants Released (huffingtonpost.com)
- Decision to release illegal immigrants because of sequester slammed by GOP (thehill.com)
- DHS releasing illegal immigrants before sequester (news.yahoo.com)
- Gov. Brewer ‘appalled’ by illegal immigrant release (azfamily.com)
- DHS releasing illegal immigrants before sequester – Newsday (newsday.com)
- Illegal immigrants being released by DHS before sequester (oregonlive.com)
- DHS Releases Illegals, Blames Cuts (foxnews.com)
If you go to the website of Congressman Andy Harris of Maryland, you’ll see a whole page devoted to Hurricane Sandy recovery. You’ll see pictures of him touring flooded coastal towns. You’ll see the number to call if you lost your power. You’ll even see a link to the website for the National Flood Insurance Program.
Chris Weyant / The Hill
What you won’t see on his Hurricane Sandy Recovery Update is an explanation for why he voted against letting the flood insurance program borrow more money to pay flood insurance claims, 800 of which are pending in Maryland. That particular bit of malarkey is on anotherpage:
“The current national flood insurance program is obviously broken and must be reformed,” stated Harris. “Unfortunately, today’s vote does nothing to ensure the long-term stability of the national flood insurance program which is important to the Eastern Shore.”
Harris wasn’t the only congressman to vote against the first chunk of Sandy relief. In all, 67 members of congress voted No—all Republicans, bless their hearts. And Harris wasn’t even the only one representing a hurricane zone to vote against funding flood relief for Sandy, so maybe he doesn’t deserve more than his share of scorn.
There’s also Steve Palazzo from Mississippi’s Gulf Coast that was devastated by Hurricane Katrina. Farther down the coast you’ll find Randy Weber, who represents the area of Texas flooded by Hurricane Ike. Both voted No on Sandy relief.
Mo Brooks from Alabama offered a toxic excuse for his No vote on Sandy relief.
“People have to protect themselves from the risks of weather, particularly if they live in an area that is periodically hit by substantial storms,” said Brooks, who secured federal aid when his district that was hit by tornadoes in 2011. “They should not expect American taxpayers to subsidize a vacation home on the beach.”
It might help Brooks and his fellow Gulf Coast hypocrites sleep better if they believe that’s what congress approved, but that dog don’t hunt. People who live in coastal areas do protect themselves. It’s called buying flood insurance.
And congress wasn’t handing out money to anyone. Instead, it increased the borrowing power of the flood insurance program so it could pay claims. The program used to be self-sustained by flood insurance premiums, but the fund went deeply into debt after Hurricane Katrina.
This is where the hypocrisy of these virulent nitwits starts stinking up the fridge. Within two weeks of Katrina making landfall, congress had already passed two emergency relief packages totaling $62.3 billion, and they did it with the votes of at least 16 of those who voted against Sandy relief.
Members of the House Science Committee also show up prominently on the list of those who voted for Katrina relief but against Sandy relief, including Jim Sensenbrenner, who believes solar flares cause global warming, and Randy Neugebauer, whose response to the drought and tornadoes in 2011 was to sponsor aresolution calling on Americans to pray. Thank God. Without congress, I’m not sure Americans would remember to pray. Also on the science committee are our friends Brooks, Harris and Palazzo, so we’re in good hands there.
This is what the Party of Lincoln has come to: congressmen voting the flood insurance program into debt and then using that debt as an excuse to vote against funding flood insurance for flood victims who are only flood victims in the first place because of global warming, a problem they’re in charge of addressing but which they believe is an elaborate hoax.
“They’re a bunch of jackasses,” said former three-term Republican Sen. Al D’Amato, a resident of Long Island. “Every one of the 67 who voted no are nothing more than pawns of a philosophy that is not backed up by facts.”
A recent poll found congress was less popular than colonoscopies, used car salesmen, and Nickelback and only slightly more popular than gonorrhea. But maybe that’s not fair.
After all, you can cure gonorrhea.
- Sen. Harry Reid: Hurricane Katrina ‘was nothing in comparison’ to Sandy (video) (al.com)
- FEMA’s Flood Insurance Program Needs Bailout (sweetness-light.com)
- Right Wing Group Will Punish Republicans Voting for Sandy Flood Aid (littlegreenfootballs.com)
- Sen. Vitter calls Reid ‘idiot’ for comparing Hurricane Sandy to Hurricane Katrina (thehill.com)
- Congress to vote on Superstorm Sandy flood aid (kansascity.com)
- Flood insurance faces new stress (victoriasluxuryestates.wordpress.com)
- Government Is Worse Than Sandy (lewrockwell.com)
- Congress to vote on Superstorm Sandy flood aid (newsobserver.com)
- Congress to vote on Sandy flood aid (kypost.com)
- Superstorm Sandy relief measure to be considered in Congress (wjla.com)
Closing Loopholes Isn’t Enough
By LEONARD E. BURMAN and JOEL B. SLEMROD
Published: December 27, 2012
When, in an effort to avert the now infamous tax increases and spending cuts to take effect on Tuesday, House Speaker John A. Boehner proposed his so-called Plan B — which would have nudged up tax rates only for those earning over $1 million a year — rank-and-file Republicans promptly rebelled, storming their party caucus with the rhetorical equivalents of pitchforks.
One can’t argue with religion — and for some, the unwillingness to bend on marginal rates is just that. But for many politicians, the refusal to raise tax rates rests on a faulty premise.
The Congressional Budget Office projects that if the United States follows a likely scenario in terms of demographic changes, spending and economic growth through 2035, America’s coffers may fall short by as much as $2 trillion a year in current dollars. With a predicted gap so large, any deal to restore the country’s fiscal balance must include at least some new revenue.
But even those Republicans who acknowledge that additional tax dollars will be necessary say we can get what we need without increasing a single tax rate. All we have to do is close up some “loopholes” and “broaden the base”! We can keep in place the Bush-era tax cuts, they say, and make up any lost revenue simply by eliminating various deductions, exclusions and credits.
At first glance, the idea seems great. Who wouldn’t want to root out the tax evaders and finaglers who are shirking the shared burden? And the idea of a broader base of taxpayers paying lower rates across the board sounds so much simpler and fairer for every citizen.
But closing loopholes is neither sufficient to do the job nor as “fair” to everyone as it might seem.
There is no painless way to raise revenue, as past attempts have shown. Increased levies on corporations are ultimately passed along to shareholders, workers or customers. Raising taxes on foreign companies increases the cost of capital as businesses keep their cash overseas. Even a fix as “obvious” as doubling down on audits to catch tax cheaters ends up creating a burden for honest citizens caught in the snare.
Closing loopholes and purging deductions are no more exempt from the laws of tax physics than any of the above.
Both Democrats and Republicans have considered phasing out the mortgage interest deduction, and there are good economic arguments for doing that. But it might depress an already weak housing market and hit some middle-class homeowners hard.
Eliminating the charitable deduction could devastate many philanthropic organizations and the people they serve. You can go down the line with many exemptions, deductions and credits and find an unintended, and unfortunate, consequence.
Likewise, more sweeping attempts to broaden the base can end up doing more harm than good.
Most states tax only retail sales to consumers — but some, for example, also tax sales to other businesses. This tax, called a gross receipts tax, certainly has a larger base than a retail sales tax since businesses at each stage of manufacturing, distribution and marketing end up being taxed.
Supporters of the idea say this cascading tax can be assessed at a much lower rate and still collect the same revenue over all, spreading out the pain. But it is a poorly designed tax, because it taxes products that involve many stages of production more than those produced in only one or two steps. That, in turn, encourages companies to merge to avoid paying multiple layers of tax — whether or not that makes any business sense.
To be sure, there are constructive ways to broaden the base. There are few compelling reasons, for example, that employer-provided health insurance, which is part of compensation, should be exempt from income tax. This tax break costs around $250 billion a year and makes gold-plated health insurance more attractive to workers, which drives up health costs. Eliminating it would be a good first step in shoring up the federal budget.
We could also turn the mortgage interest deduction into a flat 15 percent tax credit and cut the maximum deductible mortgage to $500,000, which would help many homeowners who do not itemize deductions, while curtailing subsidies for high-income people who don’t need help. This would raise about $40 billion in 2014, according to the nonpartisan Tax Policy Center. And we could allow a deduction for charitable contributions over 2 percent of adjusted gross income, which would save $20 billion in 2014 without discouraging most donations.
But in the end, none of these fixes will be enough to raise the revenue we need to balance the budget, begin to pay off America’s debt and avoid the fiscal cliff. Nor can we cut spending enough to achieve those goals. An aging population expects the government to make good on promises for retirement support and increasingly expensive health care — so cuts in popular programs big enough to avoid higher taxes are simply not in the cards.
That leaves us with one choice: do all of the above. Let’s trim spending where we can, broaden the base where it makes the most sense and, yes, raise marginal tax rates as well. Returning tax rates to Clinton-era levels for married filers making over $250,000 a year and singles making $200,000 or more, as President Obama has proposed, would be a good start, and might provide the impetus for more serious discussions of tax and entitlement reform.
The only thing we shouldn’t do is pretend any of these fixes will be painless or easy for everyone. They won’t. Even in a happy, thriving democracy, someone ends up holding the bag.
- Republican Tax Nonsense (desertdogmeh.wordpress.com)
- The Working Poor Pay High Taxes, Too – Bloomberg (bloomberg.com)
- Fiscal Cliff: Flexibility in Tax Rates Debate? (newsy.com)
- Obama to Republicans: Raise taxes on rich or no fiscal cliff deal (rawstory.com)
- The plain truth about top marginal tax rates that shocked US Senators (qz.com)
- The Obamney tax plan (economist.com)
- Obama: No deal on ‘fiscal cliff’ without higher tax rates for the wealthy (newsday.com)
- Obama Runs Rings Around the Republicans on Tax “Cuts” and “Loopholes” (rushlimbaugh.com)
- Tax Arithmetic Shows Top Rate Is Just a Starter in Talks (nytimes.com)
- Big Business vs. Small at Edge of Fiscal Cliff (hispanicbusiness.com)
Tax chaos looms in wake of Boehner’s failed ‘Plan B’ proposal
By Bernie Becker and Peter Schroeder - 12/26/12 05:00 AM ET
The failure of House Speaker John Boehner’s “Plan B” could create chaos for taxpayers across the income spectrum.
With a slew of tax provisions scheduled to expire in less than two weeks, a dive off the fiscal cliff could also complicate the chances for a fundamental rewrite of the tax code — something top officials on both sides have said they want.
But with the clock ticking, some lawmakers aren’t so sure that their colleagues appreciate the possible upheaval if all current tax policies expire, even for just a few days or weeks.
“People have certainly been told,” said Sen. Kent Conrad (D-N.D.), who is retiring at year’s end and has spent much of the last two years pushing for a broad deficit deal.
“It’s always hard to know how people process what they hear, how much they really understand,” Conrad, the chairman of the Budget Committee, told The Hill. “Clearly the committees that deal with this, they understand.”
On Friday, President Obama called on Congress to pass a pared-down deficit reduction deal, extending tax rates for all but the highest income levels and extending unemployment benefits. At the same time, Obama added that policymakers could build off that measure with additional tax-and-spending measures.
That statement came a day after Boehner (R-Ohio) declined to put his proposal to lock in rates for annual income up to $1 million to a vote, after acknowledging that he didn’t have the support in the GOP conference to pass such a deal.
The Urban-Brookings Tax Policy Center has said that, all told, taxpayers would face more than $500 billion in larger bills in 2013 if Washington does nothing, from higher payroll taxes to increased individual tax rates to a broader estate tax.
All income tax rates, for instance, will rise on Jan. 1, with the top rate going from 35 percent to Obama’s preferred level of 39.6 percent. The top dividend and capital gains rates, now 15 percent, would shoot up to 39.6 percent and 20 percent, respectively.
The exemption for the estate tax would also shrink significantly, from roughly $5 million a person to $1 million, and the rate would rise from 35 percent to 55 percent.
Democrats, meanwhile, are fighting to keep stimulus-era expansions of tax breaks like the Earned Income Tax Credit, meant to help the working poor. Sevearl other targeted tax incentives are also scheduled to expire.
Figures from across the ideological spectrum have suggested many or all of those provisions could be dealt with retroactively, if it came to it.
But some changes would have an immediate impact on taxpayers. Obama’s most recent offer to Boehner, communicated before the Speaker shifted to “Plan B,” did not ask for an extension of the current 2-percentage point cut in the payroll tax.
Wall Street economists and the Congressional Budget Office have said that allowing that tax cut and expanded unemployment insurance to expire would drag down economic growth.
The IRS has also said that roughly two-thirds of 2012 tax returns could be delayed if Washington fails to roll back the reach of the Alternative Minimum Tax, a system meant to ensure that the wealthiest can’t legally evade paying taxes.
Congress did not patch the AMT for inflation when it was enacted, forcing lawmakers to routinely pass a “patch.” But the last patch expired at the end of 2011, and some 30 million more households could be hit by the tax for 2012 without congressional action.
With all that in mind, Sen. Olympia Snowe (R-Maine) said that, despite how the situation looks now, she doesn’t believe Congress and the White House would allow the economy to totally fall off the cliff.
“If you can’t do it now, how difficult is it going to be January 1st?” Snowe, who did not seek reelection this year, told reporters on Friday.
“You’re dealing with a new Congress, newly elected senators, members. It’s a whole new equation. It’s not going to be that easy to put the genie back in the bottle here.”
But top lawmakers on both sides of the aisle have expressed concern that politics could trump policy in the coming days.
Boehner, after being asked at a Friday news conference, declined to rule out bringing up a fiscal cliff measure that House Democrats would need to carry over the finish line.
Democrats in the chamber, meanwhile, urged Boehner to follow in the footsteps of Minority Leader Nancy Pelosi (D-Calif.), who as Speaker relied on Republicans to pass an Iraq War spending bill.
“It’s important that the Speaker put the good of the country above Republican House caucus politics,” Rep. Chris Van Hollen (D-Md.) said at a separate Friday news conference.
For their part, Boehner and other Republicans have said that, after “Plan B” went down, the burden was on Obama and Democrats to put together a deal that could make it through Congress.
“We all know it’s a disaster. We would like to solve it,” said Sen. Orrin Hatch (Utah), the top Republican on the Finance Committee. “Somehow, the president’s got to get in and say, ‘Yea, I’ll take this, I’m not going to veto this.’”
“I think they really want to go over the cliff, I really do. That’s pretty apparent to me,” Hatch added.
Allowing current tax policies to lapse would also underscore the challenge of tax reform, in which popular tax breaks and some supported by powerful lobbies would be put on the table as policymakers look for ways to streamline the code and lower rates.
But Sen. Ron Wyden (D-Ore.), a longtime fan of the last comprehensive tax revamp, from 1986, shot down any concerns that the late breakdown of deficit talks could complicate efforts to pursue broad tax reform in the coming year.
“We’re not doing tax reform bills in four days, but I think what’s going to happen between now and the end of the year positions us well for next year,” he said. “It’s obvious that both sides are going to keep searching for common ground and that’s the way it ought to be.”
- Tax chaos looms in wake of Boehner’s failed ‘Plan B’ proposal (thehill.com)
- Congress in Tizzy; One GOP Leader: Obama ‘Eager to Go Over the Cliff’ (bloomberg.com)
- Your financial cliff Q & A (dailyitem.com)
- Over the fiscal cliff: How hard a landing? (kansascity.com)
- Budget Showdown Leaves Taxpayers in Limbo Before Year End (bloomberg.com)
- Fear, finger-pointing mount over “fiscal cliff” – Reuters (reuters.com)
- Fear, finger-pointing mount over U.S. fiscal cliff (news.yahoo.com)
- Grand Bargain Shrinks as Congress Nears US Budget Deadline – Bloomberg (bloomberg.com)
- Budget deal showdown leaving taxpayers in Limbo before year end (bangordailynews.com)
- Sen. Barrasso: Obama sees a ‘political victory’ in going over the cliff (thehill.com)
Stabilization Won’t Save Us
By NASSIM NICHOLAS TALEB
Published: December 23, 2012
THE fiscal cliff is not really a “cliff”; the entire country won’t fall into the ocean if we hit it. Some automatic tax cuts will expire; the government will be forced to cut some expenditures. The cliff is really just a red herring.
Likewise, any last-minute deal to avoid the spending cuts and tax increases scheduled to go into effect on Jan. 1 isn’t likely to save us from economic turmoil. It would merely let us continue the policy mistakes we’ve been making for years, allowing us only to temporarily stabilize the economy rather than address its deep, systemic failures.
Stabilization, of course, has long been the economic playbook of the United States government; it has kept interest rates low, shored up banks, purchased bad debts and printed money. But the effect is akin to treating metastatic cancer with painkillers. It has not only let deeper problems fester, but also aggravated inequality. Bankers have continued to get rich using taxpayer dollars as both fuel and backstop. And printing money tends to disproportionately benefit a certain class. The rise in asset prices made the superrich even richer, while the median family income has dropped.
Overstabilization also corrects problems that ought not to be corrected and renders the economy more fragile; and in a fragile economy, even small errors can lead to crises and plunge the entire system into chaos. That’s what happened in 2008. More than four years after that financial crisis began, nothing has been done to address its root causes.
Our goal instead should be an antifragile system — one in which mistakes don’t ricochet throughout the economy, but can instead be used to fuel growth. The key elements to such a system are decentralization of decision making and ensuring that all economic and political actors have some “skin in the game.”
Two of the biggest policy mistakes of the past decade resulted from centralized decision making. First, the Iraq war, in addition to its tragic outcomes, cost between 40 and 100 times the original estimates. The second was the 2008 crisis, which I believe resulted from an all-too-powerful Federal Reserve providing cheap money to stifle economic volatility; this, in turn, led to the accumulation of hidden risks in the economic system, which cascaded into a major blowup.
Just as we didn’t forecast these two mistakes and their impact, we’ll miss the next ones unless we confront our error-prone system. Fortunately, the solution can be bipartisan, pleasing both those who decry a large federal government and those who distrust the market.
First, in a decentralized system, errors are by nature smaller. Switzerland is one of the world’s wealthiest and most stable countries. It is also highly decentralized — with 26 cantons that are self-governing and make most of their own budgetary decisions. The absence of a central monopoly on taxation makes them compete for tax and bureaucratic efficiency. And if the Jura canton goes bankrupt, it will not destabilize the entire Swiss economy.
In decentralized systems, problems can be solved early and when they are small; stakeholders are also generally more willing to pay to solve local challenges (like fixing a bridge), which often affect them in a direct way. And when there are terrible failures in economic management — a bankrupt county, a state ill-prepared for its pension obligations — these do not necessarily bring the national economy to its knees. In fact, states and municipalities will learn from the mistakes of others, ultimately making the economy stronger.
It’s a myth that centralization and size bring “efficiency.” Centralized states are deficit-prone precisely because they tend to be gamed by lobbyists and large corporations, which increase their size in order to get the protection of bailouts. No large company should ever be bailed out; it creates a moral hazard.
Consider the difference between Silicon Valley entrepreneurs, who are taught to “fail early and often,” and large corporations that leech off governments and demand bailouts when they’re in trouble on the pretext that they are too big to fail. Entrepreneurs don’t ask for bailouts, and their failures do not destabilize the economy as a whole.
Second, there must be skin in the game across the board, so that nobody can inflict harm on others without first harming himself. Bankers got rich — and are still rich — from transferring risk to taxpayers (and we still haven’t seen clawbacks of executive pay at companies that were bailed out). Likewise, Washington bureaucrats haven’t been exposed to punishment for their errors, whereas officials at the municipal level often have to face the wrath of voters (and neighbors) who are affected by their mistakes.
If we want our economy not to be merely resilient, but to flourish, we must strive for antifragility. It is the difference between something that breaks severely after a policy error, and something that thrives from such mistakes. Since we cannot stop making mistakes and prediction errors, let us make sure their impact is limited and localized, and can in the long term help ensure our prosperity and growth.
- Bill Black: Kill the “Fiscal Cliff” Instead of the Economy ” naked capitalism (mbcalyn.com)
- It’s Not A “Fiscal Cliff” … It’s The Descent Into Lawlessness (shiftfrequency.com)
- Wonkbook: Fiscal cliff deal moves to the Senate (washingtonpost.com)
- Poll: Americans view economy as poor, split on future (mbcalyn.com)
- Fiscal Cliff: Democrats Fiddle While Nation Burns (frontpagemag.com)
- Obama Playing Chicken With Economic Disaster (townhall.com)
- Diving into the fiscal economic mess (sgtreport.com)
- It’s Not a “Fiscal Cliff” … It’s the Descent Into Lawlessness (12160.info)
- Chaos Is Good for You (slate.com)
- Weighing the Week Ahead: Decision Time? (oldprof.typepad.com)
Hey, liberals: Ignore the NRA for now
Posted by Jonathan Bernstein on December 21, 2012
Greg Sargent really nailed it today with respect to today’s NRA press statement:
Keep in mind that all of this is deliberately designed to serve an overarching strategic goal — distraction. The NRA absolutely must keep the focus off of the problem of easy gun availability, and what can be done about it, for as long as possible.
The media narrative the NRA hopes for out of this presser is twofold: NRA criticizes media for maligning gun owners; and NRA calls for armed security guards in schools. This is standard obfuscation from the NRA, which always tries to distract from the discussion about the need for reform by characterizing the push for it as driven by elite cultural disdain for gun culture and ordinary gun owners. And focusing only on schools is about diverting the conversation away from the broader epidemic of gun violence.
That’s exactly right. And the best response from those who want new restrictions on guns isn’t to fight back against the NRA “proposal” for cops in schools; it’s to ignore it, and keep the focus on developing serious legislation.
The other thing to remember about the NRA and its president, Wayne LaPierre, is that (as David S. Bernstein has pointed out) they’re not only advocates for the gun industry but also competitors in the conservative marketplace. In that respect, saying outrageous things and getting a reaction from liberals helps them generate revenue, whether or not it helps their legislative strategy. It’s not exactly the case that liberals could make the NRA a fringe group by treating it as one, but it’s probably true that treating it as a major factor helps make it more so.
Besides that: If any bill is going to pass, it’s going to need House Republicans. It’s possible, if unlikely, that enough constituent pressure could push them to choose modest new measures over not passing that legislation.But if the Republicans are forced to choose between liberal Democrats and the NRA, they’re going to choose the NRA, no matter what the public opinion polls say.
Of course, those who favor new measures against guns and gun violence will have to engage other arguments at times. But Greg’s right — it’s one thing to engage serious arguments and another to fall for bait just meant to distract everyone. The best strategy for liberals — and anyone else who wants to get something signed into law — is to just ignore the NRA for now.
- Joe Scarborough, Newtown and the NRA (americantitanic.wordpress.com)
- New York City’s Tabloids Take On The NRA (buzzfeed.com)
- David Gregory Shocked By NRA’s LaPierre: You Fly In The Face Of Common Sense (thinkprogress.org)
- NRA finds few friends on Hill (politico.com)
- NRA doubles down: New gun laws won’t work (edition.cnn.com)
- NRA makes school guns call on American television (itv.com)
- Video: Gun control advocate and NRA member speaks out on defiant NRA (cbsnews.com)
- Amid calls for new restrictions on guns, NRA stands firm (kansascity.com)
- NRA’s statement on the Newtown shootings: the conservative reaction (guardian.co.uk)
- Michelle Malkin Responds to Left-Wing Gun Backlash: ‘NRA Has Been Demonized by Crazed, Anti-Gun, Liberal Media’ (foxnewsinsider.com)
“Why can’t those idiots in Washington get their act together and solve a problem like the fiscal cliff, when everyone knows what a realistic solution looks like?”
That’s pretty much the question I get asked these days when I run into people at the coffee shop or my favorite supermarket. There is no short answer, but let’s start with the fact that our elected representatives might be a lot of things, but “idiot” is not a word I would use to describe 99 percent of them.
J.D. Crowe / Mobile Press-Register
I teach a course on Federal Policy at the Duke Law School. The course requires law students to spend a semester in Washington D.C., where they work part time in some department of the federal government. As part of the course, they meet with members of Congress, congressional and executive branch staff, lobbyists, representatives of interest groups, TV and print reporters, and scholars from D.C. think tanks.
Last year the class had back-to-back meetings with Sen. John Kerry (D-Mass.) and Sen. John Barrasso (R-Wyo.). Sen. Kerry is Chairman of the Senate Foreign Relations Committee and of course was the Democratic Party’s nominee for President in 2004. I have known him for years and admire his intellectual ability and his work ethic. Sen. Barrasso is less well-known but is a rising star in the Republican Party. Elected to the Senate in 2008, he serves on the Republican leadership team as Chairman of the Senate Republican Policy Committee. He is an orthopedic surgeon. I like him a lot and respect his intellect and dedication to his job as a senator.
The focus of both meetings, and most of the questions asked by students, concerned the budget deficit. Sen. Barrasso gave a comprehensive presentation of his views on the issues and gave numerous examples of why these views were important to and supported by his constituents back in Wyoming. Sen. Kerry did the same thing, again citing support for his views in his home state.
After the meetings I asked the students what they thought of the presentations. They came away with two impressions of the speakers. First, they felt that neither senator was just presenting his party’s agenda; each was presenting what he personally felt was in play in the budget debate. Second, the students agreed that each senator’s comments fairly represented the view of the people in the state he represented. I did, too.
Massachusetts gave Obama 61 percent of the vote in the last election and Wyoming gave Romney 69 percent.
Does it really surprise you that these two sincere, intelligent men find it difficult to reach agreement?
The budget is not something that is just endlessly debated by politicians in Washington. That debate simply reflects the fact that people in different parts of this country have very different views on what we need to do to avoid the fiscal cliff. It is that divide in the country at large, not just the divisions among our politicians,that make a deal so difficult.
All that being said, I think the odds at this point are that we will go over the cliff (or the slope, more accurately) very briefly after Dec. 31. Why? All but 13 Republican members of Congress have signed a pledge to never raise taxes. In recent weeks, a few of them have backed away from that pledge, but not enough for the House of Representatives to pass the tax increase on upper-income households that President Obama is insisting on.
The Bush tax cuts expire on Dec. 31, and everyone’s taxes will automatically increase. Suddenly, everything will look different. Instead of voting to raise taxes on the upper 2 percent on Dec. 30, House members will be able to vote for a tax cut for the other 98 percent on Jan. 2.
Exactly the same outcome, but with symbolically different votes.
For those not in the top tax bracket, I doubt that even your first paycheck of 2013 will reflect any tax increase, because I expect the vote for a tax cut will come before Jan. 10, and we will avoid the immediate fiscal crisis.
On the longer range budget problems, I believe that in 2013 there will be a “grand bargain” between the President and Congress. The people I meet in my grocery store are right: We do know what a realistic solution looks like. The pieces are in place to make it happen, and I’ll be writing about them in future columns.
- Barrasso: A Fiscal Cliff Agreement Approved by the House Will Pass the Senate (freebeacon.com)
- On Foreign Policy, Kerry is Obama’s Good Soldier (blackamericaweb.com)
- Rice cooked, Kerry waits in wings (news.com.au)
- It’s All About Scott Brown, Not Susan Rice (lezgetreal.com)
- With Rice out, attention shifts to John Kerry for State post (firstread.nbcnews.com)
- Downing may run if Kerry leaves (wwlp.com)
- Susan Rice and the Myth of Statesmanship (businessweek.com)
- G.O.P. Unites Around John Kerry for Secretary of State (nytimes.com)
- Susan Rice withdraws from consideration for secretary of state (boston.com)
- John Kerry in line for secretary of state as Rice withdrawal opens the door (guardian.co.uk)
GOP Movement on Taxes Still Leaves Huge Budget Quandary
In a sign of movement toward resolving the fiscal cliff, House Republicans have begun to budge on their no-new-tax stance. In a development first broken by Politico, Speaker John Boehner privately to raise taxes on household income above $1 million.
This is not even close to President Obama’s campaign pitch of raising taxes on wealthy families who earn more than $250,000, but it’s a start to the beginning of a serious negotiation. And, the more revenue that Boehner puts on the table, the more open to entitlement cuts the administration will be, say sources close to the White House.
The only problem with the $1 million threshold is that it doesn’t clue Americans in on some long-term budget realities. Over the next decade, the deficit will unless the federal government gets a better handle on the amount of money it brings in, as well as the cost of its entitlement programs, including Medicare.
The federal government has promised to provide health insurance and Social Security payments for all of the baby boomers—and that’s a fiscal problem as well as a demographic one. Already, this is going to cause a huge spike in the cost of the entitlement programs in the coming years because a much greater share of people will sign up for the programs (at a time when healthcare costs continue to rise and when Americans pay a historically low level of federal taxes).
So, we’ve committed to spending tons of money just as we’re not bringing in enough cash to pay the bills. Moving the tax threshold to $1 million does not help that issue. Taxing household income above $1 million is estimated to bring in $463 billion over 10 years, whereas taxing rich families above the $250,000 threshold rakes in $829 billion, according to by the left-leaning Center on Budget and Policy Priorities. That’s a big difference.
But, the most significant problem with the $1 million mark is that politically it creates a false sense that we’ve solved the budget problem by raising taxes on the uber-rich. Not even close. If Americans want to keep the programs everyone seems to enjoy (and not drastically change the make-up of the federal government by cutting agencies, medical research, or education, as the Ryan budget proposes), then a greater share of people are going to have to pay more in taxes—and that inevitably will include families who earn more than $250,000 but also probably families that make over $100,000 a year. That’s because the bulk of the money in the tax code comes from households making between $100,000 and $200,000.
Setting the standard of only taxing millionaires lets politicians off the hook–both Democrats and Republicans. It doesn’t give Americans the larger, genuine picture about the long-term budget quandaries. It’s just a fabulous political slogan. After all, who is going to oppose asking people with incomes above $1 million to pay more?
- Sources: Boehner Caves On Taxes For Wealthiest Americans (huffingtonpost.com)
- AP source: Boehner offers millionaire tax hike (kansascity.com)
- Boehner proposes raising taxes on millionaires (cbsnews.com)
- Boehner Puts Tax Rate Increases On The Table (outsidethebeltway.com)
- AP source: Boehner offers millionaire tax hike (washingtontimes.com)
- AP source: Boehner offers millionaire tax hike (cnsnews.com)
- Movement Seen in ‘Fiscal Cliff’ Talks (aarp.org)
- Boehner pitches millionaire tax hike (politico.com)
- John Boehner Offers Millionaire Tax Hike (alan.com)
- Speaker John Boehner to propose tax hike on the very rich, Politico says (rawstory.com)