# Deficit

What Happens in a Bad Economy?

Politicians like to talk in abstractions.

Come to think of it, they like to argue and obfuscate in abstractions, as well. They campaign in abstractions and make abstract pledges until those abstractions turn into something tangible, like a subprime lending crisis or a downgrade from a particular private rating agency.

We spend so much time wading through abstractions that we cannot get to the meat of the issues that face us today. Enough of that.

What really happens in a bad economy? And what is the public's role during these tough times?

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IA-01: Braley asks Obama for cost accounting on Libya

Representative Bruce Braley (D, IA-01) has asked President Barack Obama to disclose all costs associated with the current U.S. military intervention in Libya. From Braley's March 24 press release:

"Just as we're struggling to cut federal spending and bring down our national deficit, we're also faced with the challenge of managing two military conflicts in Iraq and Afghanistan. If we're going to be involved in Libya, we must know how much a third military conflict will cost us," said Rep. Braley. "I know I'm not the only who's asking these questions - Speaker Boehner, for one, has also expressed his concerns - and I think it's important that the President give us and all American taxpayers an accurate answer on this issue. I will always stand with people fighting for freedom and democracy around the world, and I know both President Obama and Speaker Boehner would too. But America has to address many important challenges right here at home - with spending as the most critical one. And before we spend any money abroad, I want to know how much it's going to cost us."

The full text of Braley's letter to President Obama is after the jump.

Braley is right to ask substantive questions about the U.S. operation in Libya. I have been surprised by the Iowa delegation's muted reaction to our latest military intervention, given that Obama launched this operation without Congressional authorization. To my knowledge, Senators Chuck Grassley and Tom Harkin and Representatives Dave Loebsack, Leonard Boswell, Tom Latham and Steve King have not issued any official statement regarding "Operation Odyssey Dawn."

Braley's letter is consistent with his increased focus on fighting the deficit since last November's election. As I've written before, I disagree with austerity movement types who make the deficit out to be our country's biggest threat. Our national strength depends more on fixing other problems: reducing unemployment, reorienting our energy policy and fixing the still-broken health care system, to name a few. Getting the economy moving would do more to shrink the budget gap than the non-defense discretionary spending cuts deficit hawks demand.

I give Braley credit for acknowledging that the U.S. doesn't have unlimited free money to blow on wars around the globe. The same can't be said for many members of Congress who claim to care about excessive government spending.

UPDATE: Braley issued this statement on March 25:

Washington, DC - Today, Congressman Bruce Braley (IA-01) released the following statement after White House spokesperson Jay Carney was asked about Rep. Braley's letter calling for an accounting of the Libyan conflict. According to USA Today, Carney replied to reporters, "there are contingency funds...for this kind of thing." Today Rep. Braley said:

"Yesterday I asked for accountability on the question of how much this conflict is costing us, and I have yet to see a clear response from the White House. The fact that funds for contingency military operations exist doesn't answer the question of how much we're spending, and will continue to spend, in Libya. I'm not the only one asking these questions - the American people are demanding answers too. And the President must give Congress and all taxpayers an accurate answer."

Yesterday, Rep. Braley sent a letter to President Obama asking for a full accounting of the Libyan conflict and the costs to taxpayers. Speaker Boehner sent a similar letter to the President. Rep. Braley has previously called for a full accounting of the human and financial costs of the wars in Iraq and Afghanistan.

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IA-01: Braley reinventing himself as a deficit hawk

President Barack Obama presented his $3.73 trillion budget proposal for fiscal year 2012 yesterday. I had a post in progress highlighting some good ideas from the proposal, like more investments in high-speed rail and clean energy programs, and reducing taxpayer subsidies for the oil and gas industries. There are bad ideas too, such as a pathetically small "cut" of $78 billion for defense spending over 10 years. The word "cut" misleads here because we're talking about a slightly smaller rate of growth for the defense budget. Our military spending skyrocketed during the last decade and should be reduced substantially if Washington officials are serious about reducing the deficit.

The moral failure of Obama's budget becomes clear when you look at the $400 billion in cuts he proposes for non-defense discretionary spending (which is half as large a portion of the budget pie as the military). Many of those cuts will hurt the vulnerable: less money for the Low Income Home Energy Assistance Program and some student aid programs, to name a couple of egregious examples. Obama also wants a "bipartisan" conversation about "strengthening" Social Security, and Washington bipartisanship on Social Security is sure to harm working people and future retirees.

Since the Republican-controlled House of Representatives won't enact the president's spending plans, the budget document is important mainly as a sign of Obama's priorities and political calculations going into this year's negotiations with Congress.

Speaking of political calculations, I was struck by Representative Bruce Braley's statement on the president's draft budget document--so much that I shifted gears on this post. Braley's comments were another sign of a noticeable change in tone since he won a third term in Iowa's first Congressional district. During the last Congress, Braley's policy statements often emphasized the importance of public investments. In the past two months, he has he put deficit hawkishness front and center. Several examples are after the jump, along with background putting Braley's new rhetorical style in political context.

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Senate Republicans block extension of most Bush tax cuts, unemployment benefits

Republican filibusters on Saturday blocked two U.S. Senate attempts to vote on extending Bush tax cuts for all but the highest income levels. The first cloture attempt related to an amendment to permanently extend all tax cuts affecting the first $200,000 of income for individuals or $250,000 for families. It also would have extended unemployment benefits. It needed 60 votes to pass but received 53 yes votes and 36 no votes (roll call). Iowa’s Chuck Grassley joined all Republicans present and a handful of conservative Democrats to block this measure. All 11 senators who didn’t vote were Republicans. Perhaps they didn’t want to go on record voting against tax cuts.

The second cloture motion related to Senator Chuck Schumer’s amendment, which would have extended Bush tax cuts for all incomes below $1,000,000. The idea was to force Republicans to show that they would defend millionaires’ interests even if doing so torpedoed tax cuts for everyone else. But many Democrats objected to Schumer’s plan, because it would cost $400 billion over ten years and would tacitly redefine earners up to $1,000,000 per year as middle-class. The vote was 53-37, with 60 yes votes needed to invoke cloture. Iowa’s Tom Harkin was among the small group of Democrats who voted no, as did Grassley and the rest of the Republicans.

A deal that would have allowed votes today on two Republican-proposed amendments, extending all the Bush tax cuts permanently or for a limited time, “fell apart when a Republican objected to it at the last minute, leaving a surprised and embarrassed Mitch McConnell at the table empty-handed.” Click through for David Waldman’s explanation of the procedural issues and why a Republican would want to prevent those votes from happening during the lame-duck session.

Joan McCarter posted a revealing exchange between Schumer and Grassley during today’s Senate debate:

   Mr. Schumer: I thank my colleague. And through the chair, I’d simply like to ask my colleague this. I understand we have a different point of view here. We both care about deficit reduction. Could he please explain to me why it is okay to take $300 billion of tax cuts for those at the highest income levels, above a million, and not pay for it and yet we have to pay for unemployment insurance ex extension?

   Mr. Grassley: I thought I made that point very clear, because the taxpayers are smarter than we in Congress are. They know that they give another dollar to us to spend and it’s a license to spend $1.15. So it just increases the national debt. And when it comes to paying for unemployment compensation, we can pay for unemployment compensation because the stimulus bill was supposed to stimulate the economy and it’s not being spent. And if you put money from stimulus into unemployment, you don’t increase the deficit and you’ll also have the money spent right away.  

   Mr. Schumer: I would just say that the answer doesn’t deal with deficit reduction. If you care about deficit reduction, the two should be treated equally. A dollar of tax break for millionaire and a dollar of increased unemployment benefits increases the deficit the same amount. However, every economist — I saw we had a chart up about economists before — will tell you that a dollar into unemployment benefits stimulates the economy about four times as much as a dollar into tax decreases for millionaires. That’s pretty universal. Mark Zandy, John McCain’s economic advisor during his campaign, said that a dollar of tax breaks for millionaires stimulates the economy about 30 cents worth. A dollar of tax — a dollar of unemployment benefits increases the economy by about $1.62.

Grassley and the rest of the Republicans should stop pretending to care about the deficit.

If I were Senate Majority Leader Harry Reid, I would ignore whatever deal President Obama is working out with Republicans and refuse to schedule a vote on extending all the Bush tax cuts. Republicans had their chance to keep lower tax rates for everyone on their first $250,000 of income, but they said no.

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Estimate of Iraq war

they have estimated the cost of the Iraq war at 3 TRILLION dollars.  GWB said that it would perhaps cost 50 -60 billion dollars.  But the estimate right now is 3 TRILLION  dollars!  I am heartsick.  When I think of the things this country could have done with that kind of money.  When i see the Republicans yelling about Obama being a spendy, careless President that is sending our country to ruin, due to his deficit spending ,  I am outraged. 



Grassley backs Republican filibuster, killing jobs bill

The Senate version of a bill designed to create jobs, support state budgets and extend various tax credits and benefit programs failed to overcome a Republican filibuster yesterday. Tom Harkin was among 56 members of the Democratic caucus who voted for the cloture motion (which would end debate on the bill), but Ben Nelson of Nebraska and Joe Lieberman of Connecticut voted with all the Republicans present, including Chuck Grassley, to kill the bill (roll call here). Joan McCarter observed that Senate Majority Leader Harry Reid

voted yes, without changing his vote, signaling that this iteration of the bill is indeed dead.

Reid followed the vote by attempting to pass the emergency provisions of the bill, the “doc fix,” unemployment benefits extension, and FMAP as well as the homebuyer tax credit, as separate bills under unanimous consent. McConnell objected to each, so we’re stuck in further limbo.

Extending unemployment benefits should be a no-brainer when the percentage of unemployed Americans who have been out of work for more than six months is higher “than at any time since the government began keeping track in 1948.” Without the “doc fix,” medical providers’ reimbursements for Medicare patients stand to drop about 20 percent. FMAP stands for Federal Medical Assistance Percentage funding, relating to federal government reimbursements for part of each state’s Medicaid spending. The 2009 stimulus bill temporarily raised FMAP payments for states during the recession, with larger increases going to states with higher unemployment rates. Failing to extend this provision will put state budgets under further strain for the 2011 and 2012 fiscal years.

Republicans who blocked this bill claim we should not be adding to the federal deficit. A spokesman for GOP enabler Ben Nelson laid out his views here. Ezra Klein pointed out a few glaring problems with the analysis: the federal budget can’t start approaching balance with unemployment at 9 percent, polls show Americans are much more concerned about jobs than the deficit, and the current rate of economic recovery is “far, far too slow to really dent unemployment.” Meanwhile, the same senators who claim to oppose adding to the deficit also oppose rolling back tax cuts or tax loopholes for the wealthy in order to pay for extending unemployed benefits, state fiscal aid and tax credits.

I share John Aravosis’ view that it was a terrible mistake for President Barack Obama to talk tough about reducing the deficit earlier this year. As Aravosis writes,

[T]he President didn’t want to blame Bush and the GOP for the deficit, and he didn’t want to sufficiently defend the stimulus and explain to people that they had a choice between a Great Depression and a bigger deficit. […] If the public understood that the deficit was a) mostly caused by Bush, and b) not nearly as important as staving off a Depression and creating jobs, the GOP would be facing far more pressure not to launch these filibusters at all.

Perhaps no jobs bill passed this week would alter the economy enough to affect the November elections, but if we accept current unemployment levels and don’t pass additional fiscal aid to the states, the economy may still be very weak leading up to the 2012 election.

Share any relevant thoughts in this thread. From where I’m sitting, the case for Harkin’s filibuster reform proposal has never looked stronger.

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