Wednesday, January 30, 2013

The Half-Life of Twitter Spin

At 8:30 this morning, the Department of Commerce issued a press release announcing that real gross domestic product shrank by one-tenth of one percent (.1%) in the 4th quarter of 2012. While the media digested this information, Twitter began lighting up. A snarky tweet by National Review writer Jim Geraghty (@jimgeraghty) attempted to frame the message at 8:31 A.M.:

Economy shrank? Back in recession? Two reactions: "Bqhatevwr" and "What difference does it make?"
3 minutes later, Joe Pounder (@Pounderfile), the Republican National Committee’s research director tweeted this bon mot:

SHOT: Obama on Jan. 21 in inaugural address: "And economic recovery has begun." CHASER: Q4 GDP drops to -0.1%

But Geraghty and Pounder’s attempt to spin the number began to be debunked almost as quickly as they had tweeted. Within 12 minutes, Joe Wiesenthal (@thestalwart) had a response:

So military spending decline. That's a good thing. And there was less of an inventory build. Also fine.
And within 44 minutes of Geraghty’s initial tweet, Wiesenthal had a link[1] to a Business Insider article explaining the modest reduction in GDP was entirely due to a dramatic reduction in federal spending (something, ironically, Geraghty, Pounder and their ilk claim is needed to balance our books).

By 11:19, D.C.’s resident “wonk,” Ezra Klein (@ezraklein), had a full take down of the report[2] and thus, another skirmish in the never ending battle between truth and spin had been won. If speed kills, Twitter is the Terminator. On steroids. Dosing with deer antler extract.


Saturday, January 26, 2013

The Obama Majority

President Obama's Inaugural address was largely portrayed as an articulation of "liberalism." A liberalism that embraced civil, women's and gay rights, a climate change agenda and protection of the social safety net. And while the speech's prose illustrated the President's deft use of language[1], the substance was neither surprising nor outside the mainstream of current political thought in America. Indeed, the three part play that was the Democratic National Convention, the President's election night remarks and his Inaugural address neatly tied together the coalition he has assiduously courted and cultivated in an effort to hand the Democratic party the opportunity to carry on his legacy well into the future. 

But while the President noted that just because our rights are self-evident does not make them self-executing, it is equally true of Obama's progressive coalition. Having cobbled together a majority that is ascendent in its demographic trends and reflective of popular positions on everything from same sex marriage to protecting Social Security, Medicare and Medicaid, immigration reform to environmental protection, does not mean anything will change. While the GOP created a Potemkin village of inclusion at its national convention [2], the Democrats actually have a coalition that is reflective of this "new" America and receives overwhelming support from Hispanic, Asian and African Americans, single women, the LBGT community and even some white males. 

The question for the President, and for Democrats at the national and state level, is whether they will mobilize this coalition toward progressive and yes, popular ends. As its base erodes, the Republicans simply shout louder that their priorities, now primarily focused around fiscal austerity [3] and the idea that seniors and the poor should receive less while industries like defense are unaffected, demand attention. The problem for Republicans is two-fold; first, while Americans believe, in the abstract, that government spending should be cut, when they are asked what should be protected, it is the very programs that Democrats so zealously guard; and when asked who should be asked to give more, the answer is the wealthy that form a critical component of the Republican base, not to mention their fundraising. Second, because the President has adopted the mantles of "compromise" and "balance," it is difficult for Republicans to find space for their argument of austerity for the middle class and protection of favored tax breaks and loopholes for the well-to-do. The more they dig in their heels, the more Republicans appear out of step, the more Obama seems like the last reasonable man in Washington. Lather. Rinse. Repeat.

In word and deed, the President is cementing notions of inclusion, fairness and social justice. As the President takes direct action to aid the children of undocumented immigrants, Republicans are trying to shed their xenophobia and absurdities like "self-deportation," but the nativist streak that runs deeply through the party resists this attempt at moderation. As thousands of same sex couples marry, with exactly NO negative impact on the purported Judeo-Christian values Republicans so desperately cling to, the GOP's reactionaries seem that much more out of step. And as the President expands opportunities for women in uniform and Obamacare ensures comprehensive access to preventative medical care and family planning, Republicans may stop talking about non-sensical ideas like "legitimate rape [4]," but the party orthodoxy continues apace - just three weeks ago, the House GOP re-introduced a bill that would grant full legal rights to fetuses [5] (a so-called "personhood" bill). A cosponsor of this bill? Some guy named Paul Ryan. 

While a small window appeared to open after Obama's re-election where Republicans would re-evaluate their lockstep opposition to him and their narrow world view, that pivot appears to have been short-lived. The message from today's GOP at the national level is not that their policies are wrong, but that their communication is bad. Nothing could be further from the truth. Instead of moderating, by doubling down on economic terrorism through "hostage taking," the GOP is on the receiving end of corporate antipathy and voter opprobrium. Moreover, as the economy heals and budget cuts and tax increases now in place begin to take effect, the budget deficit will shrink and the idea that further cuts will have even less resonance. What skirmishes the Republicans have engaged Obama in over the budget and economy have been portrayed as wholesale failures for the GOP [6]. Regardless, as economic indicators in housing, the stock market and the unemployment rate continue to improve, intransigence will simply allow the President to reinforce the point that Republicans are willing to jeopardize our recovery to fight battles they cannot win at the ballot box. 

On the other hand, at the state level, failed attempts at voter suppression have been replaced by equally ill-thought ideas to rig voting in places like Virginia and Michigan to deprive the winner of the popular vote for President from collecting all the state's electoral votes. Meanwhile, the continued assault on abortion rights continues apace, with TRAP laws and other restrictions being considered and implemented in states throughout the country. Finally, some conservatives are beginning to flirt with the idea of eliminating state income taxes and hiking state sales taxes, a move that would make an already regressive form of taxation even worse, by redistributing the burden downward, because the poor and middle class spend more of their income for basic necessities compared to the wealthy. 

Today's GOP is not unlike a boxer against the ropes vulnerable to a knock out blow, the President need only reach back and swing to knock out his opponent, but to do so, he must do more than just give lofty speeches. It is not enough to demand the swift confirmation of Mary Jo White or Rob Cordray, it is to press, aggressively, and publicly, for those nominees until that happens. It is not enough to simply trumpet an executive order that helps "dreamers," it's necessary to get into the sausage making in Congress to make it happen and lobby for immigration reform outside Washington, D.C.  Making reasonable compromise in the name of budgetary sanity is all well and good, but not at the expense of the most vulnerable in our country or at the risk of losing our competitive advantage in the future by shortchanging education, research and development and student loans. A second term defined by long-term economic and budgetary stability, immigration reform, new gun control measures and continued progress toward full and equal rights for all would be a strong legacy upon which the Democrats' nominee in 2016 could run. Now, we just need the President's actions to meet his soaring rhetoric.

[1]  His not-so-subtle "takers" reference was a rhetorical stiletto aimed directly between the ribs of his vanquished foe Mitt Romney and his still-on-Capitol-Hill running mate Paul Ryan. 
[2]  Elected officials like Marco Rubio and Tim Scott notwithstanding, 89% of Republicans are "white." 
[3] These deficit scolds happily ran up the government's credit card debt under George Bush, passing massive tax cuts that disproportionately aided the wealthy and spent more than a trillion dollars on wars in Iraq and Afghanistan by borrowing against our collective future. 
[4] Unless you're Rep. Phil Gingrey.  
[6] I part company with the conventional wisdom on this one, as I wrote most recently:

Tuesday, January 22, 2013

Social Security 101

Perhaps if we called Social Security what it is - an old age pension, it would be better understood. Regardless, it's only the single most effective social welfare program in our nation's history and has protected tens of millions of seniors from poverty in old age. Moreover,  it is structured in an ingenious way - it is paid for through a dedicated funding source (a 6.2% tax on income you probably know as "FICA") that is immune to the vagaries of budget battles and income tax rates. The upshot? Social Security does not contribute to our budget deficit. In fact, it does just the opposite. Because the Social Security Trust Fund collects more in revenue than it pays out in benefits, it runs a surplus, which the government borrows against for day-to-day needs. In fact, over the years, the federal government has skimmed more than $5 trillion from the Social Security Trust Fund [1]. Even with its surplus being skimmed, and assuming that the funds the government has borrowed will never be paid back, Social Security can still pay out 100% of its benefits until 2036, at which point, it will begin running a deficit resulting in citizens receiving less than their full benefit. 

Regardless of the fact that the program is on strong footing for the next 23 years, officials in Washington want to solve this problem that does not really exist. So what are the options? Republicans have floated the idea of changing the way inflation is factored into cost of living increases in a way that will result in a benefit cut. This calculation, known colloquially as "chained CPI," would trim the program's costs by somewhere around $200 billion over its first 10 years and more going forward; however, it would reduce beneficiary payment by .2% each year, which would result in a nearly 10% decrease for a beneficiary between ages 65 and 90 [2]. While this may sound like a small bite, remember that the average Social Security check is about $1,230 a month, is relied on by nearly two-thirds of all seniors for the majority of their income, and keeps about 14 million senior citizens out of poverty every year [3]. 

Ok, so chained CPI would take a modest bite out of beneficiary checks that are relied on by the majority of those people for basic needs. Is there another way? Indeed, there is. FICA is a regressive tax - it is levied against people equally, but is capped at roughly $113,000, so all income you earn above that cap is not subject to the tax (the best estimate I could find is between 10-15% of workers earn $113,000 or more per year [4]). A study done by the Congressional Research Service indicated that removing the FICA cap would ensure Social Security's solvency for 75 years [5]. 

While eliminating the cap would be the simplest (and fairest) way to ensure the program's long-term solvency, Democrats may be reluctant to "raise taxes" on people earning $113,000, even though a tax bump at that level would hit less than one in five people. So what are some alternatives? I have three, any of which would be more progressive than switching to chained CPI and would accomplish the objective of extending the life of the Social Security trust fund:
Option 1: Simply raise the FICA cap to 90 percent of all income, or roughly $180,000 and enshrine that ratio in legislation so it increases along with advances in income. This proposal was advanced by former Clinton Labor Secretary Robert Reich [6], who pointed out that the last time a commission "reformed" Social Security (in 1983, when FICA taxation was raised to its current level), it recommended that FICA be collected at that ratio, but now, because of income disparity, the cap only collects about 80-85% of all income. 

Option 2: Create a "donut hole" for FICA and have it kick in again at the $400,000 income level that is now in place for income taxes. By doing so, FICA would be in harmony with the tax increase that was recently enacted and would affect fewer wage earners, as income between $113,000 and $400,000 would be exempt from FICA. 

Option 3: Raise the cap but lower the withholding rate. To me, this is the "middle ground" proposal that I would think might attract some bipartisan support. If the FICA tax was lowered from 6.2% to 4.2%, but the cap was raised to $400,000, that would provide a tax cut for middle class Americans (because less of their salary would be withheld) but would raise taxes on the wealthy because income that is not currently subject to FICA (i.e., anything above $113,000) would now be taxed. 

So, if you're scoring at home, we can tweak the way inflation is calculated to squeeze $50, or maybe $100 a year from poor seniors who need that money to live, or, we can ask people in the top 10-15% of wage earners to pay a little extra for a benefit that helps millions of people stay out of poverty. Doesn't seem like a tough call to me.


Saturday, January 19, 2013

Book Review - Hello, Goodbye, Hello

On a warm summer's day in August 1931, the fate of the world was almost changed. That afternoon, an affable young man named John Scott-Ellis was tooling around Berlin in his new Fiat when Adolph Hitler failed to look before crossing the street. Ellis, turning right and clipped the future Führer, knocking him to the ground. Had Ellis been going faster, Hitler might have been seriously injured, or even killed. And thus starts Craig Brown's eminently readable Hello, Goodbye, Hello, in which he weaves a tale of chance encounters between well known figures from the 20th century by daisy chaining his story, so that Hitler meets John Scott-Ellis who meets Rudyard Kipling who meets Mark Twain and so on. 101 meetings later, we have gone to the Oval Office with Elvis Presley, had dinner with James Dean and Alec Guinness (the latter warning the former not to drive his newly purchased Porsche 550), been flies on the wall in Morocco with the Rolling Stones and famed photographer Cecil Beaton and contemplated the meeting of two icons, Salvador Dalí and Sigmund Freud. 

Brown's eye for detail is all the more impressive when you consider that his vignettes are all precisely 1,001 words long (although some entries have footnotes that stretch that number by 50-100 words). In rich prose, he paints vivid pictures, like the one of an inebriated Peggy Lee stumbling through a set of music before one of our stiffest and least animated Presidents (Richard Nixon) before planting a kiss on Tricky Dick's lips and one of 91 year-old Bertrand Russell befriending 23 year-old Sarah Miles's dog in their London neighborhood, leading to a tea at the famous philosopher's flat where he surgically slices cucumbers while sneaking peeks at the young actresses's breasts. Brown reveals that celebrities are not above petty jealousies and slights, as he demonstrates when a seething Charlie Chaplin hisses at Groucho Marx during a tennis exhibition for playing Chaplin as a "straight man" while Marx makes a mockery of the event or during a dinner between Madonna and Michael Jackson at the Ivy in 1991, where the Material Girl quickly ditches the King of Pop for Warren Beatty and Jackson is consoled by Diana Ross, who refers to Madonna as "an awful woman." A story Brown relates late in his book about the photographer Anthony Armstrong-Jones (the future Lord Snowden, husband of Princess Margaret) taking revenge on the novelist Kingsley Amis for speaking ill of his then-girlfriend is spun deftly and made juicier by a footnote that brings in the aforementioned Cecil Beaton slagging Armstrong-Jones for his mediocre talent. 

The time shifting employed by Brown can be dizzying, but usually rewarding. We meet Cubby Broccoli as a young production assistant to Howard Hughes in 1940 as the idiosyncratic genius is fumbling with the rather pedestrian challenge of how to emphasize Jane Russell's ample bosom during the filming of The Outlaw without getting censored and then jump 25 years into the future, where Broccoli, now helming the James Bond franchise, meets George Lazenby in a barber shop (unbeknownst to Broccoli, Lazenby has plotted the meeting by scheduling a hair cut at the same time in the hope of impressing the movie producer). Brown also deploys research to great effect, as most of his stories have at least 5, and sometimes closer to 10 sources. The result can be gossipy, as he recounts a years-long spat between Jackie O and Andy Warhol stemming from the former's pique at the latter for arriving late to a 1978 Christmas party (eight years on, Warhol refers to Mrs. Kennedy as a "sour puss" at the wedding of Maria Shriver and Arnold Schwarzenegger), or disturbing, as when we learn about Dominick Dunne being on the receiving end of a punch to the face from a maître d' directed to do so by Frank Sinatra, who Brown portrays as a sinister guy not above intimidation or violence against people who cross him.

Hello, Goodbye, Hello has a decidedly English bent and casual readers (myself included) may be unfamiliar with some of the names Brown introduces us to, but some modest investigative work quickly sheds light on people like Tom Driberg, Simon Dee and George Galloway, which took nothing away from the enjoyment I experienced in learning about these creatures of history. Brown revels in the small details and in these nuances and idiosyncrasies, he makes people whose names we know, but whose lives we know little about, seem more tangible, more relatable. At 25, J.D. Salinger is not yet a notorious hermit, but just another star struck writer when he meets Ernest Hemingway months after the liberation of Paris. The larger than life President Theodore Roosevelt becomes just another Houdini fanboy when the two end up on the same ship, with the Bull Moose seeking the famous magician out to explain his tricks of the trade. Patti Smith strikes up a lifelong friendship with Allen Ginsburg when the poet mistakes her for a pretty boy and buys her a sandwich. Such are the "sliding door" moments of life, the small twists of fate that make this breezily paced book so much fun to read. 

The book closes its loop nicely. Story 1 finds us pondering the "what if" of a car accident could have prematurely ended Adolph Hitler's life. Story 101 finds the once Edward VIII and his wife, Wallis Simpson, visiting Germany as Hitler's guests in 1937. The now Duke and Duchess of York are spirited around the countryside with much fanfare, rubbing elbows with names that would one day go down in infamy - Goebbels, Himmler and Goring, among others. The visit makes few waves because the Duke is no longer King, and while we may lament that Hitler did not meet an untimely fate in 1931 at the hands of John Scott-Ellis, by ending his book on this note, Brown reminds us that chance works both ways. 

Thursday, January 10, 2013

Brown M&Ms

In 1982, and nearing the height of their powers, Van Halen embarked on a world tour that included a now famous contract “rider” provision. Specifically, arenas where the band played were required to provide M&M candy, but no brown M&Ms[1].  Why did the band include this quirky request? I am not sure, but I guess they did it for one simple reason – they could; because they knew they were in a strong negotiating position with any venue they chose to play and so, to prove their dick swung powerfully, some poor minimum wage slob in Grand Rapids had to sift through M&M bags, purging brown ones so a candy dish that probably went untouched was in compliance with the band’s terms of service.

Van Halen’s negotiating ploy will look familiar to anyone who has ever bargained over the floor mats in their new car or a credit on a home closing because there was some imperfection in the house they were about to move into. So long as one party is willing to stop a deal from happening and the other party is willing to put some price on it, anything is negotiable. In Washington, this point has been driven home most recently on two of the issues of the day – raising the debt ceiling and who President Obama appoints to his Cabinet.

Until Barack Obama became President, raising the nation’s borrowing limit had been a largely uncontroversial undertaking. While the debt limit itself may be an historical anomaly, the concept behind it is not – if the nation borrows money, it must pay it back. In the post-World War II era, the debt ceiling has been raised under every President since Eisenhower, including Ronald Reagan (18 times!) and George W. Bush, who raised the debt ceiling 7 times, including three times in a roughly 1 year period between late 2007 and 2008[2]. Congress simply passed a law allowing for additional borrowing authority because no one thought to jeopardize the full faith and credit of the United States over authorization to pay bills already incurred.

That was, until 2011, when the Republican majority in the House of Representatives decided that any new borrowing authority would need to be tied to spending cuts. Why did they do this? The short answer, like the “brown M&Ms rider,” seems to be “because they could.” These born again deficit scolds raised no such objections to borrowing when George W. Bush was President but they smartly realized they could achieve policy goals (cutting discretionary domestic spending) through alternative means (refusing to increase the debt ceiling) when a Democrat became President. And succeed they did. In order to get an increase in our borrowing authority, the Republicans extracted $1 trillion in future spending cuts from the President. In other words, they made Obama pick out the brown M&Ms. Never mind the fact that it was not normative behavior, because what is “normal” does not matter when one party is willing to change the rules and the other party does not object.

Similarly, two of the President’s recent Cabinet announcements, Republican former Senator Chuck Hagel as Defense Secretary and current White House Chief of Staff Jack Lew as Treasury Secretary have been met with skepticism by Senate Republicans. It’s not that either man is unqualified, but rather, that Republicans don’t particularly care for their policy views, suggesting a new standard for high level Cabinet appointments. Hagel’s major sins appear to be going against the Bush Administration when Iraq went south, and endorsing two Democrats, Barack Obama for President in 2008 and Bob Kerrey for Senate in 2012. Lew’s offense is even more absurd – he’s a good negotiator. Republicans don’t like Lew because he served as a staffer in Congress and under two Presidents as Director of the Office of Management & Budget and therefore, knows how our budget operates and attempts to cut deals in his side’s favor. Oh, the humanity.

In comparison, George W. Bush appointed a former CEO of Goldman Sachs as Treasury Secretary who was acclaimed by voice vote and nominated his National Security Adviser, who left a video trail a mile long of erroneous statements about Iraq’s weapons programs in her wake, as Secretary of State, and she was confirmed 85-13. When Obama hinted he might select Susan Rice to that same job, a single appearance on a single Sunday talk show about a matter she was not even involved with where she repeated information provided to her by the CIA (which turned out to be largely correct) was met with such fierce Republican opposition, she withdrew her name from consideration. In other words, both sides do not do it (obstruct), but rather, one side (the GOP) has decided that because it can obstruct, it will.

Of course, just as arenas were free to *not* sign the Van Halen rider, the President and Democrats have been free to not give into the new normal in Washington but have refused to do so. This must end. Democrats must snuff out the idea that “hostage taking” on things that were once pro forma is now acceptable. To do so, they must stop playing the game. So, on the debt ceiling this means not negotiating, period, over threats by Republicans to not raise the nation’s borrowing authority unless additional cuts to the budget are included. This means sending a bill to the House requesting an extension of the debt ceiling (or better yet, a law that rescinds Congress’s power to set or raise it) and dare Republicans not to move on it. If we default, well, so be it, because the alternative is to turn every increase in the debt ceiling into a hostage negotiation. Indeed, Speaker Boehner has floated the idea of extending the debt ceiling monthly, which would cause total paralysis in Washington, not to mention uncertainty in the economy.

Similarly, if Senate Democrats and the President want to cow Republican obstruction, they must reform the Senate rules in ways that still respect the rights of the minority party, but does not allow that minority to be the tail that wags the dog. One would think the Democrats would have learned that lesson already, after Republicans set all-time records for filibuster use in each succeeding Congress since 2007 or when Obama’s judicial nominees were confirmed at a slower rate than any other modern day President, or when Republicans stooped to filibuster minor appointments, such as that of the U.S. Public Printer, but that does not appear to be true. Senator Jeff Merkley and others have advocated for reform that would, among other things, force a “talking filibuster” on opponents of legislation and expedite the appointment process. These changes should be adopted immediately both to ensure smoother functioning of government and to send a clear message that obstruction no longer pays. Lastly, media tropes that frame things like debt ceiling extensions and Cabinet appointments, which were once unexceptional, into the latest skirmishes in the partisan war need to be called out for what they are – lazy and false.

If Democrats fail to stand up to these extortionist tactics, they will be picking a lot of brown M&Ms out of the bag for the next four years.



Monday, January 7, 2013

Picking Fights

The latest dispatch from Planet Clueless goes something like this: President Obama has somehow chosen to “pick a fight” with Republicans by nominating … wait for it …  A REPUBLICAN to serve as Secretary of Defense. Ordinarily, this would be heralded as a modest step in the direction of bipartisanship. After all, former Nebraska Senator Chuck Hagel would be the second Republican to join Obama’s Cabinet (Secretary of Transportation Ray LaHood, a former Illinois Congressman, has served since early 2009 and may stay on for Obama’s second term). Alas, Hagel’s selection has brought out the long knives, captured, with typical obsessiveness for the optics and politics of Washington, as opposed to the policy, by The Washington Post blogger Chris Cillizza:

Cillizza’s column makes passing reference to purported concerns Republicans have about Hagel – something something about his supposed lack of support for Israel and concerns over Iran, but what Republicans seem most chapped about is Hagel’s iconoclasm and unwillingness to kowtow to prevailing Republican orthodoxy. Apparently, he also committed the ultimate sin of endorsing fellow Vietnam Veteran (and Democrat) Bob Kerrey in the latter’s losing Senate race last year. Of course, when Joe Lieberman endorsed John McCain in 2008, no such dudgeon was raised in GOP circles and Democrats in the Senate returned Lieberman to his perch as Chairman of the Homeland Security Committee after Obama’s victory.

And this is not to impugn Cillizza specifically, the media-industrial complex is in full gear to frame this as just another chapter in the food fight that they portray Washington to be. But in reality, the so-called “battle” over Hagel is really just a massive Republican temper tantrum over the fact that one of their own chose sides against the party in a Senate race and (rightly) abandoned party orthodoxy during the Bush Administration. That Hagel is otherwise qualified, both by military and political experience (two things that ordinarily matter) and that, barring some legitimate disqualifying circumstance, Presidents are entitled to have their appointees confirmed (Republicans had no problem affirming Iraq war hawk Condoleezza Rice as Secretary of State) appears to be of no moment.

Instead of framing this “fight” as one Republicans are picking over a President’s right to have the appointees of his choosing, the media has perversely flipped the script in pointing the finger at the President for having the temerity to select the person he wants at the Pentagon. Having muscled out Susan Rice from consideration at the State Department, Senate Republicans are feeling their oats. A party that is on the one hand portrayed as being in disarray is chalking up tactical victories on everything from permanent extension of tax cuts to dictating Cabinet appointments. It plays in nicely to the media narrative of Washington as a zero sum game where power is either accumulating in, or ebbing from, one party to the other; however, it does little to ensure sound policy and decision making is made. That the mainstream media stokes these flames in the name of ginning up controversy is simply another example of why people outside the Beltway do not understand what it is that goes on inside it.

Friday, January 4, 2013

The GOP Is Not In Disarray

To watch the news or open a newspaper (people still do the latter, right?) this week is to read about the GOP in “disarray,” its members cowed into raising taxes and shamed by one of their own for failing to provide desperately needed relief to victims of Hurricane Sandy. On the surface, this narrative carries some weight, after all, the last time taxes were raised with Republican votes, George H.W. Bush was President, we had not yet fought our first war with Iraq and nobody knew Kurt Cobain. Further, Governor Chris Christie’s insta-classic press conference, with his pungent barbs directed at House Speaker John Boehner certainly offered more ammunition for this thesis; however, scratch a few inches below that surface and a different reality is found.

Less than 2 months ago, Barack Obama won a no-doubt-about-it second term, easily dispatching Mitt Romney with a convincing 51%-47%, 332 electoral vote, election-was- called-a-whopping-12-minutes-later-than-2008, rout. Democrats added seats in the House and Senate and, but for redistricting done after 2010, likely would have regained control of the House, based on the fact they garnered hundreds of thousands more votes than Republicans nationwide. Obama, we were told, had the dual cudgel of tax cut expiration and the implementation of across the board spending cuts (sequestration) to bludgeon the GOP into submission. After all, if nothing was done, everyone’s taxes would go up and huge cuts to defense spending would also be triggered - outcomes anathema to the Republicans. Negotiating from this position of strength, the commentariat, left, center and right, all agreed Obama had a winning hand against a fractured, drifting-to-obscurity GOP. Since that time, the supposedly disarrayed opposition has done the following:

·        Torpedoed, through a coordinated, deeply cynical (and largely false) smear campaign, any thought of the President appointing Susan Rice as Secretary of State;

·        Created deep reservations about a Republican (yes, a Republican) being appointed as Secretary of Defense;

·        Successfully negotiated the permanent extension of tax rates created under George W. Bush for 98.6% of Americans;

·        Raised the estate tax threshold above what it was when Bush was President while simultaneously lowering the tax rate on same, effectively shielding 99.8% of all estates from any federal taxation;

·        Watched Obama sign a five-year extension of a broad eavesdropping and wiretapping law implemented under George W. Bush;

·        Allowed the Violence Against Women Act to expire; and

·        Avoided having capital gains and dividends be taxed as ordinary income (up to 39.6%) and instead, permanently codified, even for people earning nearly a half-million dollars a year and up, at a maximum rate of 20%.

Did I mention these tax fixes were permanent? Something Bush himself, with a Republican Congress, could not do in 2001. In exchange for these enormous giveaways to the wealthiest Americans, the GOP “allowed” taxes to go up a whole 4.6 cents on the income you’ve earned after the first $400,000 if you’re single or $450,000 if you’re married. They also agreed to extend long-term unemployment insurance for a year and a bunch of tax credits that, in a prior life, would have been no brainers for things like college tuition and earned income (for the poor). Of course, these are only extended for 5 years, not permanently.  And even then, the bill only passed in the House because more than 170 Democrats voted for it. Further, implicit in the fiscal cliff deal is the absorption of Republican theory that low taxation correlates to better economic outcomes, even though what actually does drive economic growth – investment, research and development, infrastructure improvement and educational commitment, were nowhere to be found in this deal. Of course, if this is pointed out, you’re being disloyal to the Democratic Party.

And now that this latest peril of Pauline has been averted, we move to the next cliffhanger – the debt ceiling, where a President who swore up and down that tax rates would not be lowered for people making more than $250,000 is now swearing up and down that he will not negotiate over the next increase that is needed to the debt ceiling. Of course, he said something similar in 2011 and wound up agreeing to $1 trillion in domestic spending cuts over 10 years, but now, we are expected to take his word that he really means what he says?  By now, we should know that Obama is not apolitical, but hardly doctrinaire. Way back in 2009, at the zenith of his popularity, he passed a stimulus bill that was roughly 40% tax cuts in an effort to get Republican support (he got almost none). Then, when the Bush tax cuts were originally supposed to expire at the end of 2010, he agreed to extend all of them (a similar claim he would not extend them for those at the $250,000 level was made and jettisoned) for two years. A few months later, with an omnibus bill to fund the government languishing, he agreed to domestic spending cuts and then, that summer, agreed to a trillion dollars more in cuts as part of that aforementioned debt ceiling deal. So, the talking point that the fiscal cliff deal was a 43:1 new revenue to cuts deal is true on its face, but only if you ignore the lopsided cuts Obama has agreed to, the permanent enshrinement of Bush era tax rates on all but 1.4% of income earners, the essential elimination of the estate tax, modest pinch in dividends and capital gains and oh yeah, the precedent that has been set over and over that Republicans can take hostages and squeeze concessions out of the President.   

Moreover, each negotiation with Republicans has resulted in Democratic sacred cows being put on the bargaining table.  At various times, Obama has floated the idea of raising the Medicare eligibility age (2011 debt ceiling), changing the way Social Security benefits are calculated, (the so called “chained CPI) so that future benefits would be cut (2011 debt ceiling, 2012 fiscal cliff) and reducing spending in areas of non-defense discretionary spending (all of the above). Meanwhile, the supposed Republican orthodoxy that taxes must never be raised on anyone is somehow elevated to this same exalted status and accorded the same sanctity in the media, never mind the fact that the tax burden faced by the wealthy has been, for the last decade, at 1920s level low and wealth has been redistributed in their favor in ways unseen since those halcyon days while the true middle class and poor have slid backwards.

It is not just Obama’s willingness to put these programs on the table that is distressing, but the concession to the Republican point of view that so-called entitlements must be cut to put our fiscal house in order. Republican proposals for social welfare disproportionately harm the weakest in our society and at a time in their lives when they can ill afford to have their modest retirements affected, something Democrats, once upon a time, cared about. Instead, of playing on the Republican side of the field, Obama and the Democrats should be fighting for ideas that are progressive and have the attendant benefit of actually solving the problem. For example, economists will tell you that raising or eliminating the cap at which employees are taxed on Social Security (FICA) would extend the solvency of the program for 75 years or more. On the other hand, raising the eligibility age for Medicare would save very little while leaving people between age 65 and 67 to the predations of the private insurance market. Instead, why not lower the eligibility age for Medicare but require a greater premium be paid, in a way not different than those who accept a smaller benefit from Social Security if they begin collecting it before their full retirement age. Other ideas, like allowing Medicare to bargain for prescription drugs, encouraging outcome based, as opposed to treatment based, payment and more aggressively going after fraud and abuse will wring far greater savings out of the program and have the more important benefit of improving it.

It is also disappointing to see the President both buy into the belief that we have a deficit crisis while at the same time acceding to policies that do not provide the most stimulative bang for the buck. If one considers that three “stimulus” laws have been enacted (2009 Recovery Act, 2010 tax cut extension, 2012 fiscal cliff deal), nearly half of the first, and almost all of the second and third agreements went to cutting taxes or extending tax credits, an outcome most Republicans would have happily accepted had you told them this would happen the day Obama was sworn into office. Aside from unemployment extensions, which I will concede, are stimulative, the only meaningful “stimulus” was in the 2009 deal, and much of that – aid to states, infrastructure spending, and green tech investment, has been spent out. In addition, the temporary payroll tax cut was allowed to expire, which will result in a tax increase this year on all workers.  Expanding employment would go a long way toward addressing any near-term budgetary concerns we have, but time after time, these ideas end up on the cutting room floor in the negotiations the White House engages in with Congress.

Of course, few want to listen to those who point out that our current budget deficit is largely a consequence of the 2008 Great Recession (as recently as the end of Fiscal Year 2008, the federal budget deficit was $472 billion, less than half its current amount) because doing so would require that stimulus be directed not to across the board tax cuts, but to messier policy arguments involving mortgage loan forgiveness, research and development grants, massive public works projects and other efforts that are now verboten. Instead, more cuts to essential services are targeted. The lack of pushback on the reality of the non-discretionary domestic budget is particularly galling. As a share of the budget, these agencies comprise a smaller percentage of the overall budget than at any time in the last 60 years, and even if you literally defunded all of them, you still would not close the current budget deficit, but you would ensure that a lot of rotten food was eaten, a lot of potential terrorist activity was not investigated and a lot of roads never got repaired. Meanwhile, major pieces of legislation in areas like transportation and agriculture are now routinely slowed, blocked and extended for short durations of time instead of approved overwhelmingly (and for 5 years as they once were) and, at least in the Senate, appointments are slowed or blocked altogether, resulting in gaps at the top of many Cabinet agencies and a dearth of federal judges not seen when Republicans control the White House.

Frustration with the President is misread as disloyalty – it is not. It is the result of head scratching as to why a fiscal cliff deal that required 2/3rds of the Democratic caucus in the House to get through was so tilted in favor of permanent tax cuts and did not include infrastructure spending (something Obama initially requested), an extension of the payroll tax cut (which, now lapsed, will mitigate the effect of the permanent extension of the current tax rates), or other policies that would more directly benefit the economy. It is the realization that Republicans have succeeded in getting Democrats to do their policy bidding for them, even as they sit on the sidelines and lob hand grenades about slow job growth and exploding deficit and debt. It is mystification at why the President and Democratic leaders in Congress have bought into the idea of deficit reduction in social programs that benefit the poor, elderly and infirm.  It is the lack of understanding why a man who just became the first Democrat since FDR to win two terms with more than 51% of the vote in both of his elections seems so reluctant to utilize the power that the country is willing to give him to solve our problems and so eager to compromise well past halfway with an opposition that has spent the last four years maligning him. If this is the GOP in disarray, I would hate to see what they look like when they are winning.



Tuesday, January 1, 2013

Lucy, a football & Charlie Brown

As Washington absorbs the details of the deal agreed to that averts the manufactured "fiscal cliff," an Escher-esque feeling came over me. You see, once upon a time, I thought that the President negotiating with Republicans was best understood as Lucy (Republicans) holding the football (compromise) promising Charlie Brown (President) that this time, they SWORE, would not pull the ball away at the last minute. But now, I realize D.C. in the Era of Obama is an Escher within an Escher, a painting whose head swallows its tail, forever, because while the GOP dangles compromise only to pull it at the last minute, Lucy (President) holds the football (firm commitments) in front of Charlie Brown (Democrats) before caving, and every time the President swears he means what he says, he inevitably caves, and always for things that are temporary in exchange for things that are permanent, guaranteeing the cycle will continue.

You might remember the one campaign promise President Obama made this year, that he would allow the "Bush tax cuts" to expire on income above $200,000 for individuals and $250,000 for couples at the end of this year. He reiterated this point over and over again and continued banging the drum after he won a 51-47, 332 electoral vote, no-doubt-about-it mandate. And yet, here we are, waiting for the signing ceremony where he permanently codifies the Bush-era tax rates not at $200,000/$250,000, which would have only affected a mere 2% of workers, but at $400,000/$450,000, which will impact just 1.4%. If you're scoring at home, that is 4.6 extra tax cents on the dollar one earns beginning at $400,000 if you're single and $450,000 if you're married. In other words, barely a pinch for people at the high end. 

If that was not bad enough, Obama offered another enormous sop to Republicans by agreeing to an estate tax that is only triggered on estates above $5 million and at a tax rate at 40%, impacting about one-fifth of one percent (.2%) of estates. This rate would also be permanent and represents an enormous boon to the wealthy when one considers that as recently as 2000, the threshold for the estate tax was $675,000 with a maximum tax rate of 55%, and even then, only 2% of estates were impacted. The new rate is a higher threshold and a lower tax rate than existed even after both were tweaked under the 2001 Bush tax cuts, which ultimately topped out at a $3.5 million threshold and 45%. 

Lastly, the President agreed to permanently cap the tax paid on capital gains and dividends at 15% for those earning less than $400,000/$450,000 while raising the tax modestly to 20% for those above that financial threshold. Again, permanent extension of these rates is an enormous boon to the wealthy, who otherwise would have paid the same rate on this income as they do on regular income (39.6%). Ironically, having campaigned against a man whose modest tax burden (about 14%) was a focal point of the President's criticism, capitulating on this point is particularly ironic. While it is possible that the President's oft-cited example of Warren Buffet may now pay close to, or even a bit more, in taxes than his secretary, this is a far cry from asking the wealthy to pay their "fair share," particularly since they disproportionately benefit from this lower rate. 

In short, Obama is cementing in our tax code the permanent protection from tax hikes for people well outside what anyone would define as "middle class." While some (including me) questioned why the $250,000 floor was opted for in the first place, raising that floor another $200,000 is a joke, especially since doing nothing would have given the President the opportunity to completely reshuffle the tax deck with a new Congress with a smaller GOP majority in the House and a larger Democratic majority in the Senate. Moreover, having run against Exhibit A for the inequity in how we tax investment income (Mitt Romney, a man who earned $20 million in 2010 and paid slightly less than 14% in taxes), the capital gain and dividend give away is inexcusable. In exchange for these permanent changes, the GOP yet again agreed to temporary changes on unemployment (one year) and a grab bag of other tax cuts, including the child tax credit, earned income tax credit and college credit, for five years, while the payroll tax cut will disappear, resulting in a tax increase for everyone, regardless. 

And while the concessions Obama received are not nothing, they are not much when he's agreed to permanently extend the laundry list of tax cuts referenced above. Moreover, not only did he go back on his pledge to not allow tax cuts to remain in place for those at the $200,000/$250,000 level, but he also capitulated in his attempt to wrest the debt ceiling away from the GOP - starting out by saying it had to be taken off the table altogether, then asking for a 2 year extension, then 1 year, and ultimately, no extension, guaranteeing Republicans will attempt to use it as leverage a mere 60 days from now. Further, by agreeing to a 2 month delay in the so-called sequestration, he has simply kicked the can down the road for yet another "hostage taking" by the Republicans in Congress. 

Supporters of the President had argued that his prior concessions, both at the end of 2010 and with the 2011 debt ceiling deal were some form of 'three dimensional chess' whereby Republicans, faced with the dual threat of increased taxes and massive defense cuts, would be brought to heel by a resurgent (and re-elected) President. What has occurred instead is the President folding another winning hand, being bluffed out of a pot by a weakened opponent, even though all polling indicated the public strongly supported his position and he had sounded oh so firm in his rhetoric about where tax rates should be. In the balance, he has perversely redefined "middle class" all the way up to those earning nearly a half million dollars a year while receiving some temporary patches to things that were once routinely extended by Congress. 

More harmful (and disheartening) is the Lucy with the football aspect of the President's negotiating tactics to his base. It is not for nothing that this negotiation, as well as the now-guaranteed fight over the debt ceiling is taking place when the President's supporters could be most powerfully mobilized in the wake of his re-election. Instead, the most passionate voices in the President's favor are again deflated at his adoption of policies that are well past halfway to the Republican point of view. The President has twice been saved from making bad long-term deals by Speaker Boehner, first in 2011 when Boehner walked away from a deal that would have raised the Medicare eligibility age and implemented "chained CPI" for Social Security, and again just a week or so ago when he bailed out on a deal that would have included the chained CPI option but did not raise the Medicare eligibility age. Unfortunately, in the President's zeal to show his reasonableness he is souring the very people who he could deploy to help him make his case and instead continues to trade permanent changes for temporary ones. A losing formula no matter how you spin it. 

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