Monday, January 7, 2013

Republican Dysfunction Is Killing Us

I was watching "Meet the Press" for some God-forsaken reason on Sunday, and heard every Republican refer to spending as the real problem, and try to make it sound like there's broad agreement on that. Like many Americans who voted with the majority in the 2012 election (Democrats got more votes in all federal races), I'm kind of tired of this discussion of deficits and debt, and I entirely reject their argument that this is the top issue facing us, or that we need to cut spending to solve it.

Our "debt" is in bond form, and the bond market has pretty much said America does not have a debt problem. Bond buyers are still buying our debt at record-low, near zero interest rates, even today in 2013. While the $16 trillion number is big and scary, and is about 100% of GDP, it's really not a big deal to the private market forces that are needed to keep it. Our deficits are small compared to our GDP each year, and the market will buy it. We do have a long-term debt problem, that doesn't elicit much debate, but what will happen in 2035 is not currently the most pressing issue facing us. Our crumbling infrastructure, underachieving schools, underperforming health care system, energy issues, and food safety issues are much more pressing to me than the long term debt, and much easier solved when you can borrow money at a zero interest rate. A basic course correction in the moment can allow us to do what needs to be done on the pressing issues, and come back to the debt later on.

Even if we do want to deal with this now, there is no agreement that spending is the big issue. Taxes are at a historical low in America, even today, and don't really compare to big growth decades like the 50s, 60s, and even 90s. Most of us would agree that while spending is a part of the solution, we have to collect more revenue. Any spending cuts in a deal right now should be coupled with closing loopholes in the tax code that take revenue away. Any cuts should also not come from low spending departments like say, Education, as anyone with a brain who looks at our budget can tell. The 2013 budget:
ItemRequested[33]
Individual income tax1,359
Corporate income tax348
Social Security and other payroll tax959
Excise tax88
Customs duties33
Estate and gift taxes13
Deposits of earnings and Federal Reserve System80
Other miscellaneous receipts21
Total2902
Total outlays by agency (in billions of dollars):
AgencyDiscretionaryMandatoryTotal
Department of Defense including Overseas Contingency Operations666.26.7672.9
Department of Health and Human Services including Medicare and Medicaid80.6860.3940.9
Department of Education67.74.271.9
Department of Veterans Affairs60.479.4139.7
Department of Housing and Urban Development41.15.246.3
Department of State and Other International Programs56.13.459.5
Department of Homeland Security54.90.555.4
Department of Energy35.6–0.635.0
Department of Justice23.912.736.5
Department of Agriculture26.8127.7154.5
National Aeronautics and Space Administration17.8–0.0217.8
National Intelligence Program52.6052.6
Department of Transportation24.074.598.5
Department of the Treasury14.196.2110.3
Department of the Interior12.31.213.5
Department of Labor13.288.4101.7
Social Security Administration11.7871.0882.7
Department of Commerce9.5–0.59.0
Army Corps of Engineers Civil Works8.2–0.0078.2
Environmental Protection Agency9.2–0.28.9
National Science Foundation7.40.27.5
Small Business Administration1.4–0.0061.4
Corporation for National and Community Service1.10.0071.1
Net interest2460246
Disaster costs202
Other spending34.0-61.729.5
Total1,5102,2933,803

Let's just be honest, our government spends on defense, health care, and Social Security, and not much else. If we're going to make cuts, let's make them to actual spending, and not waste our time cutting the small amounts of money spent on domestic programs that help the public. We don't spend but barely over $200 billion on energy, education, and transportation combined, but spend just shy of $700 billion on the Defense Department alone, almost all of it not on payroll or benefits for troops.

Mitch McConnell knows that, and knows that he can't propose to cut Defense, or to cut entitlements without taking a political hit. This is why he's proposing a no revenue bill, with big spending cuts, in exchange for Congress lifting the artificial debt ceiling to pay our old bills, and requiring the Democrats to propose the spending cuts. He doesn't want to take the political hit for it. He knows his position is not realistic, and he wants to not have his handprints on it.

There's literally no reason for the President to take this deal. If there's going to be a deal on the debt ceiling, it should go something like this: the GOP agrees to eliminate the debt ceiling all together, forever, and in exchange the President negotiates actual cuts to future entitlement spending that saves money. Basically, they give up their leverage chip forever, and the President in exchange negotiates a deal on the spending cuts that actually would effect the total budget.

In reality though, this is total dysfunction, and the President should consider not even getting involved. The debt ceiling must be raised by an act of Congress, approved by him. Essentially, the House should pass their version, the Senate their's, and then Congress negotiate a deal that ultimately passes. At that point, in theory, the President should join then. In reality, Congress should give up the debt ceiling power all together as well, and end it for all times. Congress' power is over spending, not administrating the government, and these kinds of fights get into day-to-day functions of government. House Republicans should take the deal I mentioned above, give up this power for good, and seek to enact their agenda under their functional power, which is to pass continuing resolutions to fund the government, or pass an omnibus, or pass whatever form of spending bill they'd like. They should be passing legislation that builds their own institutional power, and is actually what they belong doing.

They can't take up their fight through the less damaging appropriations process because the House Republicans, and for that matter the Senate ones too, are not functional bodies. Paul Ryan in the House continues to pass a budget annually that has zero chance of passing the Senate, and can't be signed into law by a President who opposes it. On the Senate side, the Senate GOP filibusters virtually every bill now, and makes it impossible to get 60 votes for a budget to move out of the chamber. Since the Republicans are too dysfunctional to allow Congress to pass one budget for the year, there's virtually no way they can put the added pressure on Continuing Resolutions to actually set spending levels. Instead they have to manufacture insane little crises', one after another, and get budget control acts to force things like sequester on us. They create these continual and perpetual fights, then expect the Democrats who disagree with the beginning premise, to take the hits for actually governing. This is not helping the country, and is putting us all at the mercy of a dysfunctional party full of ideological people who don't get reality. This is no way to run a country.

3 comments:

Anonymous said...

Rich,

There are some mixed signals in your post.

Right on for more revenue.

There needs to be greater care in this debt question. The "bond market" rates customers on the likelihood to pay necessary interest costs (definitely) and principle (nice to have). They don't lend on if the money is needed or if it is spent well. And if you look at the numbers, we spend A LOT on interest, and likely will for some time.

If we borrow to pay social security, or payroll, we may be borrowing now at low rates, but we add to our pile of principle. We will eventually roll over the debt, maybe at higher rates, which crowds out other spending on tomorrow's priorities.


The problems you list are all real, but it is unclear how some would be bettered through borrowed capital and investment. Is infrastructure really the problem of our education system?

2035 isn't so far off, and things have a way of coming up. So you don't have to wear a tin hat to be concerned about the current "solution set". -G

Rich said...

G,

I'm in agreement with you on why bond marketeers (is that a word?) buy our bonds. If we were selling them bonds to dump money into the ocean, but would pay back, they'd buy. Really, it's on us to spend the money we borrow correctly. I'm of the theory that we have a once in a generation opportunity right now to borrow at zero, so i'm seeing us spending now, and allowing the crowding out later.

The only thing is, I'm mentioning infrastructure and education as distinctly different here. We need roads and bridges.

GDub said...

To an extent, trying to parse our budget between borrowed and taxed inflows is difficult to do. Money is fungible.

I agree, to an extent, with borrowing at zero. If you are a major city and want to upgrade/modernize your transit system, this is the right time to do it. Same with borrowing to fix public works systems (sewer, etc) or transport hubs. Why not have the Feds organize a program to let some metropolitan areas and states benefit from the lower federal rate?

The problem is that most of these "problems" conveniently become solved through borrowing for more hiring or higher public wages/pensions, or higher social service costs. Even within public works programs, a huge percentage ends up going for labor costs (not in and of itself bad, but limits the effect of monies spent). This can hardly be called "investment" since the "investment" will be bought for virtually forever.