Let me start out by observing that I don't consider myself a Republican (I've termed myself a "Free Federalist"--not to be confused with Alexander Hamilton's Federalist Party, which advocated a strong central government, a national bank, and a mercantilist economic policy, all of which are anathema to me; I use the term 'federalist' in conjunction with the concept of federalism, to suggest that limited government should be prioritized from the bottom up, with any appropriate authority and resources delegated to the control of more localized government.); I'm nominally registered as a Republican in Maryland because the GOP nominates candidates with views closer to my perspective. I have been sharply critical of GOP Presidential candidates, the record of George Bush (e.g., his spending record, unpaid-for Medicare expansion, creation of the DHS super bureaucracy, record on civil liberties and nation building, and his handling of the economic tsunami), party policies (immigration and Big Defense), and political tactics (red meat tactics, predictable, dated campaigns, and poor organization).
In a rational world, Republicans would get the blame for the budget mess in Washington. In the George W. Bush era, they frittered impressive surpluses into unprecedented deficits. In 2011 they threatened to force the U.S. government into default if President Obama didn’t accept massive spending cuts, essentially taking the global economy hostage; the current sequester was part of their ransom. And now, even though the deficit is shrinking, even though just about everyone agrees that the sequester’s haphazard cuts will damage a fragile economy, GOP leaders won’t even discuss an alternative that includes new tax revenue.Excuse me! But in a rational world:
- No one would be be increasing tax rates on the economically successful, contracting the tax base, especially when the unlikely gains barely amount to little more than a down payment on new spending
- No one would expand the government's footprint in the healthcare industry, knowing first of all existing Medicaid/Medicare programs are unsustainable and second over 85% of Americans were satisfied with their existing private-sector plans. Adding premium-increasing benefit mandates and/or new taxes/penalties add to the cost of hiring, which is counterproductive in a below-full employment economy
- You do not add to a deficit without a credible deficit reduction plan when a national debt accumulates to the size of GDP, a natural debt limit, and especially after receiving the first debt downgrade in the history of the US. Debt service itself currently amounts to hundreds of billions of dollars--approaching the Pentagon's budget--even with manipulated low interest rates
- What is irrational is responding to the economic tsuanami with a reform that responds to government regulatory failure by doubling down on failed regulators like the Fed, implementing a mechanism for "too big to fail', the poster boy of crony capitalism, and not even addressing the actual entities that have been the principal beneficiaries of TARP funds at taxpayer expense, i.e., the GSE's (Fannie and Freddie), AIG and two of the Big 3 automakers.
/Now let's deal specifically with Grunwald's absurd polemics:
"In a rational world, Republicans would get the blame for the budget mess in Washington". Let's have a sanity check here. Before the 1994 elections, the Democrats had controlled at least the House, if not the Senate, for 25 years without a single balanced budget. Before 1994, Clinton was projected to run deficits. The fact is, it was a GOP-controlled Congress that held Clinton in check and the only 4 balanced/surplus budgets in recent American history. Let us not forget the Dems were in charge of the House or Senate for 4 of the 8 years of the Bush Administration. I do think that Bush's spending was, until Obama, the most generous since LBJ. I do think the GOP lost its way from 2003-2006, and pandering for earmarks was unconscionable, although I should point out the Dems got their fare share.
Grunwald, of course, conveniently forgets that Clinton failed to fix entitlements, Bush at least attempted to reform social security, but not only has Obama failed to advance a single comprehensive proposal to shore up over $80T in unfunded liabilities, he failed to back the majority-supported Simpson-Bowles commission recommendations. Every GOP senator on the commission supported the deal. So while Obama and the Democrats create a straw man of the GOP as the Party of No, Obama had a proposal in front of him that he refused to back. It's far less of an "irrational GOP" and more of an "irrational President".
Obama could have restored ALL the Clinton tax rates without raising a finger--but he arbitrarily pretended the 75% of Bush cuts below the top 2 brackets were necessary and "affordable"--yet more evidence of an "irrational President".
There is only one reason the Democrats passed continuing resolutions instead of Bush's budget--because they thought they could get more spending under Obama. The hypocrisy of Obama and his partisan colleagues are palpable and part of the public record: in 2006 Obama voted against increasing the debt limit and running up debt on the Chinese credit card. Did the hypocritical Dems roll back, for instance, Bush's huge increase in education spending? No--in fact, Ted Kennedy argued, despite more than a 50% increase, Bush wasn't spending nearly enough. Did the Democrats strip away the unpaid-for Medicare drug benefit? No--in fact, they promoted their role in closing the out-of-pocket "doughnut hole", i.e, lowering the government-pays-all threshold. Did the Democrats roll back Bush's high-end increases to six-figure civil servants and bonuses? In fact, Obama initially froze salaries of only a handful of political appointees.
The big cost drivers of the federal budget are in the 60-odd% mandatory spending, principally senior entitlements and Medicaid. The Dems are in a state of denial about social security, pointing out the reserve won't melt away for maybe another generation. Social security is already running at a deficit. The government is running at an operational deficit which means it has to raise public debt to pay off social security reserve IOU's.. The fact is that the GOP, not the Dems, is the only party to discuss shoring up the programs. It is true that Obama has floated his willingness to consider GOP ideas of means-testing benefits, moderating inflation adjustments, and deferring eligibility; first, that's not a plan; second, he's getting pushback from his own party even on these. This is not just a financial issue but a moral one; it's basically shifting the cost burden to the next generation.
" In the George W. Bush era, they frittered impressive surpluses into unprecedented deficits." Grunwald has a convenient, distorted view of reality. It is true that Bush added nearly $5T over 8 years. but he faced the aftermath of the Nasdaq stock bubble crash, 9/11, the financial scandals (Enron, Tyco, etc.). and most of the Great Recessions and its job losses appeared on his watch. He was bookended by recessions, which exacerbated budget problems because of relief program spending and lower taxable income. Moreover, Bush's biggest deficits were at the end of his Presidency when the Democrats controlled Congress. And Bush never ran a trillion dollar deficit. (Some try to hold Bush responsible for the FY2009 despite the fact Bush only served 4 of the 12 months of FY2009, and the Dems never passed Bush's budget.) Obama has continued to run trillion dollar deficits more than 3 years into the "recovery".
"In 2011 they threatened to force the U.S. government into default if President Obama didn’t accept massive spending cuts, essentially taking the global economy hostage; the current sequester was part of their ransom." It's bad enough that Grunwald is a mediocre analyst and writer, but he takes partisan talking points at face value. First, Grunwald doesn't understand the concept of a default. If you don't make your mortgage payment, it doesn't mean you don't eat or don't pay other bills but you are in default. It would have been fiscally irresponsible with a national debt near the size of the economy, for the GOP to say, we're going to increase spending our grandchildren's money and make no effort to cut down on spending. I bet I could find more money lost in White House couches than Obama has cut on his own. Almost no layoffs, no asset sales, no program cuts, etc--everybody else was cutting spending--unemployed people, households, most businesses, cities, counties, states: everybody else is expected to live within his means, but not Obama and the Congressional Democrats. Let's be clear: debt service amounts to about 10% of the budget. We have incoming revenues that amount to 60% of the budget. What Obama didn't want to do in in effect was make his mortgage payment:, even though he has 6 times the income needed to make that payment. Other parts of the budget may have been stressed--but the only way we would go in default is if Obama deliberately chose to do so, which I would regard an impeachable offense. As I recall, Boehner's terms for extending the debt limit were not Draconian--I think he would have settled for a modest year-over-year reduction, but Obama was intransigent every step of the way--Obama didn't want to cut spending, period: it runs against his Keynesian principles. As for the sequester, let me point out, after all is said and done, the federal budget this fiscal year will STILL be more than last year's.
"And now, even though the deficit is shrinking, even though just about everyone agrees that the sequester’s haphazard cuts will damage a fragile economy, GOP leaders won’t even discuss an alternative that includes new tax revenue." I absolutely disagree with this departure from reality. It is true that the way Obama has chosen to implement cuts--and note that he has arbitrarily excluded manpower cuts, e.g., from Defense--in a way he hopes will exact damage on the GOP. There is duplication and waste across government--far in excess of $85B. Keep in mind that the federal government is spending over $1T more than when the GOP last controlled the Senate in 2006. The federal budget is taking a higher percentage bite (around 23%) of GDP than at any time next to WWII--roughly 19% since then. Keep in mind the payroll tax holiday cost about as much as the sequester cuts--not to mention the Clinton tax hikes; the hypocritical Grunwald doesn't seem to worry about the fragility of taking money out of the productive, more efficient, effective private sector and giving it to the wasteful, dysfunctional government. Grunwald is also being intellectually dishonest; the "tax revenue" he's referring to involves streamlining deductions, and the GOP has already said it's willing to consider this issue in the context of tax simplification reform with lower base tax rates--something that is part of Simpson-Bowles. Obama decided that he wanted to unilaterally change the terms of the sequester after finally winning restoration of the Clinton tax hikes.
Grunwald also fails to understand basic economics: despite lower upper-income rates, federal tax revenues actually grew under Harding/Coolidge, JFK-LBJ, Reagan and Bush; what led to deficits was increased spending. I can point to several taxpayer studies showing up to a trillion a year wasted in government spending (Cato Institute, CAGW, etc.) I am not well-to-do, and I'm not making a penny from this blog. Why am I objecting to populist tax-the-rich rhetoric? Because I think it's both bad economics and morally corrosive. Higher-income individuals not only have more discretionary income to stimulate the economy, but they save and invest, the seed corn of future economic growth. If you are going to tax income--not exactly the sharpest knife in the economic policy drawer--the flatter or proportional, the better.
Grunwald had more to say--I just quoted his opening paragraph. But it doesn't get any better.
I have no further use of this witness.
