The stories you want. The opinions that matter.
No, thanks
Tag: deficit reduction
Far More Republicans Believe In Climate Change And Evolution Than The Ever-Shrinking Deficit

Far More Republicans Believe In Climate Change And Evolution Than The Ever-Shrinking Deficit

A new Pew Research poll is getting a lot of attention because it shows the share of Republicans who believe in evolution has declined 11 percent since 2009, down to just 43 percent. In 2009, 54 percent said that human beings had “evolved over time.”

A quick poll of 2008 Republican candidates for president found that 7 out of 10 recognized the science of evolution. No such poll was taken during the 2012 GOP primary but not one of the eight candidates said he or she would be willing to accept a tax increase, even if it were paired with spending cuts at a rate of 10 to 1.

But in 2013, after the Bush tax rates expired, Congress voted to end the tax breaks for those earning $400,000, along with slightly higher taxes on capital gains and inheritances. The resulting increase in revenue along with budget cuts and the fastest growing job market since 2005 have resulted in a deficit that’s falling at nearly record rates.

The deficit was cut by $409 billion, or 37 percent, from the last fiscal year to $680 billion—$170 billion less than the Congressional Budget Office originally predicted.

While these numbers are still large, they’re even more impressive when you consider the key metric economists look at — deficit as a share of gross domestic product.

The White House presented this chart to illustrate how significant the reduction actually is:

deficitchart_v2_0

By actual dollar amounts and as a share of GDP, the budget deficit is falling — quickly.

Yet for some reason, the percentage of Republicans who believe deficit reduction is occurring is a fraction of those who believe in evolution or even climate change.

Only 12 percent of Republicans believed that progress was being made in reducing the deficit in a Pew poll released earlier this month — even though the deficit shrunk by more than a third!

12-19-2013-7

This matches a Bloomberg poll in October that showed two-thirds of Republicans, including 93 percent of Tea Partiers, believed the deficit was actually growing.

In an economy where millions are out of work, deficit reduction is most likely harmful. But the media goes out of its way to depict a deficit as inherently evil, while neglecting to make clear that it is actually shrinking precipitously.

When it comes to politics, most people are guilty of what Chris Mooney labels “motivated reasoning.”

Though climate change and evolution are theories that are accepted by the vast majority of scientists, they are still theories. The deficit, however, unquestionably exists. It was much larger the year before than it is now. Only 1 out of 10 Republicans is willing to accept this reality.

Before we start worrying about the right accepting scientific theories, let’s first try to get them to agree that facts exist.

Photo: Gage Skidmore via Flickr

Have We Been Looking At Deficit Reduction The Wrong Way?

Jared Bernstein–formerly a top economic advisor to Vice President Joe Biden, and a key figure in the Obama Administration’s attempt to get the economy back on track–has published a fascinating response to Ezra Klein’s analysis of the administration’s response to the Great Recession.

Bernstein closes with a poignant critique of official Washington’s irrational, and destructive, fear of deficit spending:

“The main question we want to ask…is not ‘is the deficit getting too large’ but ‘is it large enough?’ As long as the economy is operating under capacity and the spending is temporary—think Recovery Act, not Bush tax cuts—to do too little in the name of deficits, bond vigilantes, and Treasury rates (which are now at historic lows), is to condemn millions to unnecessary unemployment, declining living standards, and even, in the case of the young, permanent scarring.

And, yes, for many in Congress it’s a tactic—they don’t care about the deficit other than its use a cudgel against doing something to help someone other than their funders. But as long as we fail to understand the dynamics of deficits—their need to expand as much as necessary in bad times and contract in good ones—we will never be able to meet the market failures we face now or in the future.”

According to Bernstein, we have been looking at our national debt in the wrong way. Although debt reduction has emerged as one of the most effective talking points in our political discourse–and as of June, 59 percent of Americans wanted the government to make debt reduction its primary concern, even if it meant slowing down the economic recovery–Bernstein suggests that we should be going in the exact opposite direction.

The divide between Bernstein’s opinion and the public’s will is just another clear example in a long list of signs that our most commonly used political talking points have little to do with economic reality.

How Democrats Can Make Their Case For Raising Revenue

(Bloomberg) — Social Security may be known as the “third rail” of American politics, but it is the debate over taxes that has been the “kryptonite” of the Democratic Party in recent decades.

President Barack Obama has put the question of revenue increases on the front burner as part of his fiscal-policy agenda, and the discussion will grow in visibility and intensity as the early December deadline for a report from the congressional supercommittee approaches.

Although almost every expert, economist and open-minded leader in both parties (excluding, of course, the hard-line Republican leadership) agrees that we need more revenue to bring future deficits under control, the political danger for Democrats in the debate remains severe.

Indeed, one Democrat with a proven ear for politics, Bill Clinton, has expressed doubts about the administration’s decision to wade into the revenue controversy, saying, “I personally don’t believe we ought to be raising taxes or cutting spending until we get this economy off the ground.” (More recently, though, Clinton acknowledged that deficit reduction requires “adequate revenues,” scooting a bit closer to the administration’s line.)

How can Democrats tackle the tax question without courting political disaster?

Obama has tried two approaches. Last spring, when he was pressing for revenue increases during the debt-ceiling talks, his emphasis was on a “balanced approach”: If spending was to be cut, then revenue should be increased, too.

Not Balanced

The “balanced” argument was perhaps too effective. When the president reached a debt-limit deal with the Republicans that was all spending cuts and no revenue increases, he was excoriated for accepting a package that didn’t meet his own standards.

In the end, though, the argument for a balanced approach has limitations, because it requires only a mix of spending cuts and tax increases, without specifying how much of each — or both — is needed. That’s a bit like saying, “If you are going to serve liver, you should also serve Brussels sprouts” — perhaps correct, maybe even candid, but hardly compelling.

More recently, Obama has emphasized “fairness,” in particular in pushing for his proposed Buffett rule, which would raise taxes on incomes of $1 million a year or more, and with his plan to require private jets to pay a landing fee. The president has rallied his base with these populist appeals, and polls show that most Americans agree that those in the upmost tax brackets pay too little in taxes.

Fairer Package

In addition, because the bulk of the pain from spending cuts falls disproportionately on those at the bottom, tilting the revenue increases toward higher-end taxpayers would make any overall package fairer.

But the limitation of the fairness argument is that it frames the revenue increases as a penalty that should be imposed on the wealthy for paying too little. It is more of a jab at the rich than an appeal for raising needed revenue.

The argument that billionaire investor Warren Buffett should pay at least the same tax rate as his secretary fails to explain why either is paying what they are paying, or why anyone should be paying more. Even if middle-class voters are stirred by the populist sentiment behind such rhetoric, they may be unnerved by its implicit zeal to raise taxes, and the tone of the debate leaves the administration vulnerable to the usual caricatures of Democrats as overenthusiastic tax hikers.

Making the Argument

So what is a better way to make the case for much needed revenue increases?

First, the administration needs to reiterate, time and again, that tax increases — on anyone — are a last resort. This may seem like a tweak, but it is an important one. Even when voters favor mixed approaches to our ballooning deficit, more of them believe that our fiscal problems are caused by too much government spending, not too little taxation.

To avoid being burned by the tax debate, Democrats need to begin the conversation by reiterating that they support revenue increases — not because there are people who can afford to pay more, but because there is no other way to get our fiscal house in order.

Second, the administration needs to understand that this debate is playing out against a backdrop of unprecedented public doubt about the effectiveness of government spending. For political purposes, it matters little if Americans believe the government actually spent too little trying to reverse the Great Recession — as progressives such as Paul Krugman argue — or if they think government spent too much, as Republicans contend. Either way, the necessity for more revenue is being weighed in an environment that is highly skeptical of government’s ability to use that revenue wisely.

Mythical Muffins

The strong reaction to the report that the Justice Department bought $16 muffins — a story that, as should have been immediately obvious, was wrong — illustrates the depth of the public’s cynicism. The president and the Democrats must engage the tax debate with that skepticism in mind.

One approach that addresses this challenge is tying specific revenue increases to specific uses. For example, revenue from the so-called Buffett rule could be used to endow a trust fund dedicated to education reform and rebuilding our schools, popular investments in our nation’s future that are starved for resources. Revenue generated from new fees on private plane flights could be set aside to fund improvements at airports. This would neutralize arguments about “class warfare,” and remind the public of our vital shared needs.

Bush Cuts

The single largest revenue item — allowing the Bush-era tax cuts for the highest-income taxpayers to expire as scheduled at the end of next year — could be devoted to several purposes. For example, a large portion could be applied directly to paying down the debt. In other words, easing the future burden on our children, not expanded government spending.

Another dedicated use could be funding an infrastructure bank to rebuild roads and bridges, with projects selected by an independent board of governors, not elected officials.

Alternatively, a portion of the funds could be set aside for loans to small businesses to help spur economic growth; in the past, Small Business Administration loans have helped launch or grow some of the most innovative and successful U.S. companies, including Apple Inc., FedEx Corp., Nike Inc. and Under Armour Inc.

Here’s the bottom line: Tying tax increases to dedicated and popular uses insulates proposals for much-need revenue from attacks of “class warfare” or general anti-tax sentiment, and can help rebuild faith that marginal dollars collected by the government will be put to a clear and important public purpose.

Advocates of revenue increases need to develop an effective way of defending their side if they are to prevail in the contentious debate that will soon start in Congress, and in the critical election just 13 months from now.

(Ron Klain, a former chief of staff to Vice President Joe Biden and a senior adviser to President Barack Obama on the Recovery Act, is a Bloomberg View columnist. He is a senior executive with a private investment firm. The opinions expressed are his own.)

Copyright 2011 Bloomberg.

Spain Soaks The Rich To Trim Deficit

MADRID (AP) — Spain’s Parliament restored a deficit-reducing wealth tax Thursday in its final session before dissolving to make way for an election that opposition conservatives are favored to win.

Most opposition parties criticized the tax bill as a desperate electoral maneuver by the beleaguered ruling Socialists, who argue it is only fair to hit the rich harder in times of crisis, highlighted by Spain’s 21 percent jobless rate.

Still, there were only two votes against the new tax for no party wanted to be seen as coddling the wealthy in an election year. The yes votes totaled 176 — most from the Socialists — while 166 deputies abstained.

The government says the tax will affect 160,000 people whose net worth is more than euro700,000 ($950,000). It will run for only two years — 2011 and 2012 — to bring in euro2 billion ($2.7 billion) just as Spain needs it the most as it works to cut its deficit from 9.2 percent of GDP last year to the EU limit of 3 percent in 2013.

The net worth threshold is roughly seven times the one in a law the the same government suspended in 2008. At the time, the economic crisis was just starting to bite hard and the government argued that the tax — a levy on a person’s assets minus their debts — hit the middle class too hard.

Parliament will formally dissolve Monday to allow time for campaigning for Nov. 20 general election. Debate will be dominated by the staggering jobless rate, anemic growth and debt woes that prompt worries Spain might still need an international bailout.

The opposition Popular Party, which is favored to win the election, said the Socialists have left a major piece of business undone: a decree extending this year’s budget numbers into 2012, since there will not be time to pass a new budget for 2012 by the Dec. 31 deadline.

The conservative party said was how the Socialst government plans to avoid debating public finances and acknowledging during an election campaign that its growth forecasts — 1.3 percent GDP growth this year — are too optimistic. The European Union, the International Monetary Fund and many private economists have all issued lower forecasts.

“They do not want to acknowledge the inconsistency of their predictions,” said Soraya Saenz de Santamaria, a Popular Party spokeswoman.