A Bum Deal

Earlier this week, Congressman Ryan and Senator Murray put together a budget deal that should stave off another government shutdown for quite some time. It was passed by the House tonight and will likely go through the Senate tomorrow. Here are the details. The basic gist is that half of the sequester for 2014 is cancelled for a spending hike of $40 billion, mostly in military spending. A quarter of FY 2015’s sequester is cancelled as well. These are paid for by increasing employee contributions to federal pensions, increasing some user fees and not delaying Medicare’s SGR cuts, which will cut doctor’s fees by a quarter if they go into effect, with a likely damaging effect on Medicare. In addition, unemployment benefits will not be extended which means over a million people will lose them starting in January. Overall, the deficit will go down about $20 billion more than it would have before, but that may change if Congress changes its mind on SGR.

It’s not the worst deal ever, but it’s not a good deal and it’s not the deal we needed. It has no desperately needed fixes to the tax code. It decreases the deficit mainly through little tweaks here and there. It has no changes to entitlements or mandatory spending at all. That was what the Republicans needed to get if they were going to cave on sequestration and they didn’t.

Moving Toward A Resolution

Congress has passed a budget for the rest of the year that keeps the sequestration in place. Now all we need is a rise in the debt ceiling and FY2013’s budget is finished.

Obviously, I’d like some entitlement reform. But moving toward an actual budget process is a first step toward sane fiscal policy. Flat spending trends will bring the deficit at least under $1 trillion for the first time since Obama and possibly much lower, depending on how the economy does and exactly how much the sequester bring down spending. That’s progress, albiet slow and painful one. But entitlement and tax reform are the next steps that need to be taken. Because the long term is where we’re screwed.

A Tale of Two Budgets

Earlier this week, Alex posted on the first Senate budget in four years. I have little to add to his criticism. The Democrats claim it continues the good work of the last two years — you know, the flat spending that they have continually claimed is going to ruin the economy and that their budget undoes. Remember that last point: our economy is supposed to be falling into ruin right now because of the payroll tax hike and the sequester. We have yet to see post-sequester numbers, but February saw solid gains in jobs and consumer spending. If the economy continues to move, it will be solid evidence that “austerity”, such as it is, is not necessarily ruinous.

But even liberals, if they are honest, have to be disappointed with this budget. In contrasting it against Ryan’s budget, which I’ll get to in a moment, Ezra Klein notes:

But even given that difference in objective, Murray’s budget is deeply, even excessively, respectful of existing institutions. If the problem of Ryan’s budget is that it wants to do far too much, the problem with Murray’s budget is that it is almost entirely devoted to saying what it won’t do, and it gets very vague when the topic turns to what it will.

If the budget is vague about what it would change, it is specific and effusive about what it will keep. A tremendous amount of the budget document is, in fact, an appreciation of what the federal government is already doing.

About all we really know of this budget is the top lines: It plans $975 billion in tax increases, though it doesn’t say precisely how it will get there, and it plans $975 billion in spending cuts, though it doesn’t say precisely where they will come from.

So Ryan’s budget is preferable, right? Well, not exactly. It keeps all of the Obamacare tax hikes. It proposes tax reform but, again, is not specific in how it is going to cut rates without getting rid of cherished deductions (probably because it can’t). It relies on the CBO’s very optimistic growth projections to keep revenue up.

Most importantly, it also punts on the most important issues. Medicare reform is put off for ten years. Social Security reform is not mentioned. Making the math work requires heavy reductions in discretionary spending which are not the cause of our budget woes.

It also relies on two things that are simply not going to happen under this President: a repeal of Obamacare and huge reduction in tax rates. Look, I can appreciate that the Republicans are trying to contrast their vision against the Presidents. But a plan that has no chance of passing — and only works if those undoable things are done — is not really a serious plan.

These are steps in the right direction. We seem to be returning to a budget process rather than a self-created series of bullshit crises. So I’m hoping a bargain can be struck. But a real bargain — a Simpson-Bowles style one — has to rely on something that is in neither plan: near term reform of both Social Security and Medicare. Until that’s on the tabls, we’re just chipping away at the problem and hoping an economic boom allows to paste over the deficiencies.

Update: Of course, when it comes to bullshit budget plans, no one does it better than the Congressional Regressive Caucus, whose plan was praised by Paul Krugman today. It calls for an immediate 6% spending hike which they claim will bring us back to full employment within a year.

Yeah, ‘cuz that worked so well last time.

Notes On A Sequester

A few notes on the budget sequester that is schedule to happen tonight.

First, it’s going to happen. We may, eventually, get something else to replace it. But it has been obvious to me for two weeks now that the sequester is going to happen. The writing on the wall was when Congress went on vacation and the politicos spent time blaming each other rather than talking about solutions.

The reason it’s going to happen is not because it’s necessarily a good idea. It’s because replacing it entails a lot more work and political risk than our lazy cowardly leaders are willing to take on. They would much rather throw some blame on those idiots in the last Congress and the last Administration and hope that no one notices that the two groups of idiots are almost exactly the same. In fact, one of them still occupies the same big white house he did back in 2011.

The Woodward story Alex cites below (and the subsequent liberal freakout) comes from the allegation by Woodward that the sequester was Obama’s idea. Obama can tolerate a sequester; but he won’t tolerate being blamed for it. That, in a nutshell, is the sequester debate.

Second, the sequester is a very poor way of cutting spending. To give you just a few examples. Vaccination programs are going to be cut, perhaps resulting in tens or hundreds of thousands of missed shots. Vaccinations are a public interest. Unvaccinated kids don’t just put themselves at risk; they put everyone at risk because they compromise herd immunity. You’d have to dig pretty deep into Ayn Rand or Adam Smith to justify putting the public health at risk.

To give you another example, detained immigrants are being released because we won’t have the personnel to keep them in detention (although this raises a host of side issues, such as the atrocity of illegals being in detention for years awaiting hearing). On the other hand, it appears that supervised release is both perfectly doable and infinitely cheaper. In the end, this may be a win-win.

State governments are also up in arms including many died-in-the-wool conservatives like Jindal, Haley, McDonnell, Hubert and Walker. They are, inadvertently, revealing how often “responsible balanced state budgets” are balanced by the influx of federal dollars. But they are also very aware that a blind cut in education spending, for example, runs into a thorn maze of regulations, union rules and laws. The end result may be disastrous.

Supporters have pointed that $85 billion isn’t a lot in a $3.5 trillion budget. It is, a lot, however, when it is narrowed to a thin slice of spending with almost all entitlements exempted. For most programs, you’re looking at 10% cuts. And programs that need to be completely gutted — ethanol support for example — are hurt just as much as programs that are desperately needed like law enforcement.

However, …

Third, I don’t think this is going to be the economic disaster a lot are foretelling. I’ve seen estimates that this could destroy a couple of million jobs and plunge us back into recession. That seems absurd, given the scale of cut we’re talking about and Congress’s ability to reverse them. We’ve had cuts much larger than this in the past. Somehow, we’ve survived.

Fourth, I think this once again demonstrates how useless our leaders are. They came up with the sequester a year and a half ago as a way to force themselves to make smart cuts in the budget. This could be replaced, quite easily, with a package that reins in entitlements (e.g, chained CPI on Social Security) and kills some pointless government programs (e.g., ethanol subsidies, the second engine for the hyper-expensive F-35). They have had eighteen fucking months of holding that gun to their own heads. And now they are sitting on their hands waiting for the gun to go off so they can blame each other.

Why do we even have a Congress? Why do we even have a President? They aren’t doing their jobs. Maybe it’s time for the governors to say “that’s it” and pull the plug on this shit show.

In the end, this will be a relatively small cut in spending that could have very bad side effects and does nothing to address the tens of trillions in unfunded liability for entitlements (to which Obamacare is now estimated to add $6.2 trillion). That’s not exactly a solution.

(Disclosure: As a grant-funded scientist, I should note what the sequester will do to research funding (which has strangely been falling under the leadership of the “Party of Science”). You can see details here. No matter how you slice it, you’re looking at thousands of scientists out of work. And not scientists doing research on crab boners or something. This includes NIH-funded research on medicine, cancer treatment, public health and antibiotics. I suspect this will also mean a lot of people leaving for other countries to do research.

I won’t comment on the wisdom of this; my opinion is probably easy to discern. I mention it here so you can weigh it in considering my opinion of the sequester in general.)

The State of the Campaign

Here’s the thing that struck me as I read Obama’s State of the Union address: very little of this is going to happen. There is no way he will get even 10% of his agenda through a Republican House. Most of it would not even go through a Democratic House. This read less like a SOTU speech and more like a rally for liberals.

That would be fine except that … there are some things that kind of need to happen. Entitlements need to be reigned in. Our tax and regulatory structure are desperate for an overhaul. We need to cut spending and in a smarter way than the sequester does. So, in the end, this is fiddling while Rome burns. Or, more accurately, making MSNBC fawn over themselves while the country stumbles and bumbles.

Let’s go through a few talking points.

Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion – mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans. As a result, we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances.

Technically, this is true. In reality, almost all of these “cuts” are in future budgets, not current ones. Spending has been flat over the last couple of years (after the 2009 runup) and it is now likely our deficit will fall under $1 trillion this year. If we can maintain that semi-discipline, the deficit will be a little less disastrous. But that budget control has come over the frothing opposition of the President’s party and every liberal commentator out there. And it’s still more like a few hundred billion, at most. You can’t really claim budget cuts that haven’t happened yet, especially when the rest of your agenda amounts to MOAR SPENDING!

Obama comes out against the sequester, which is indeed a crude and likely destructive tool compared to more targeted cuts (of course, he happily ignores his role in creating the sequester). It also doesn’t address, as he notes, entitlements. Oh, but on that subject:

On Medicare, I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission. Already, the Affordable Care Act is helping to slow the growth of health care costs. The reforms I’m proposing go even further. We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors. We’ll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital – they should be based on the quality of care that our seniors receive. And I am open to additional reforms from both parties, so long as they don’t violate the guarantee of a secure retirement. Our government shouldn’t make promises we cannot keep – but we must keep the promises we’ve already made.

Let’s get this straight: Obama’s healthcare reforms have not slowed the cost of healthcare costs. That slowing began before Obamacare was passed and was likely related to the Great Recession. Furthermore, his healthcare reforms have completely screwed young people, saving money by restricting what insurance companies can charge older people and therefore jacking up insurance rates on young people. (Yeah, how do you feel about voting for Obama by 24 points now, young people?)

He then talks about tax reform. But unless the mortgage interest deduction is on the table, such talk in unserious. That is not only one of the largest deductions (and one that heavily benefits the wealthy; for most middle class people, the mortgage interest deduction is less than their standard deduction), the unwillingness to challenge it is a sign of fecklessness. If you’re not willing to at least have it one the table at some point, you’re not serious about tax reform. Obama isn’t.

Obama then pivots to the economy for about the eighth time this week.

After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three.

Almost all of those jobs were created by 2012. It’s nice they are coming back. But that has nothing to do with government policy and everything to do with smart business. Many businesses have realized that outsourcing wasn’t such a hot idea. They are bringing back some of their manufacturing. But most of it will remain overseas. And those trends have nothing to do with Obama’s policies.

Obama then talks up science and technology — fair enough. But then we get this whopper:

We produce more oil at home than we have in 15 years. We have doubled the distance our cars will go on a gallon of gas, and the amount of renewable energy we generate from sources like wind and solar – with tens of thousands of good, American jobs to show for it. We produce more natural gas than ever before – and nearly everyone’s energy bill is lower because of it. And over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen.

Good Lord, there’s a lot of BS in here. First of all, we have not doubled the distance our cars will go on a gallon of gas. That’s a goal in the law, but it is not reality. We encounter this over and over with Obama. He thinks that just passing a law calling for something to be done is the same as actually doing it. He fundamentally believes that law has the ability to change reality, alter the laws of physics and create the future. So, in his mind, we have doubled the mileage of cars. We passed a law, didn’t we? So.. done! QED. It’s the same logic by which he claims we have cut spending by $2.5 trillion because we passed a law calling on future Congresses to do so.

Second, jobs are being created in renewables but government investment is hurting that trend by funneling money to politically connected dead ends. Third, production of oil and gas have boomed over liberal protestations. Fourth, energy bills are not down (even with subsidies, renewables cost more per kwH than fossil fuels). And fifth, our emissions are down, in large part, because we have moved energy production from carbon-intensive coal to less carbon-intensive natural gas. None of this, none of it, is because of Obama’s policies. It is all because of innovation in the private sector.

He then talks of supporting McCain’s cap-and-trade scheme — the one that would put strings in every corner of industry and create hundreds of billions in federal slush funds. He propose that revenues from energy sources on federal lands go to an “Energy Security Trust” — another slush fund. This is the same stuff he has rolled out every year and it has gone nowhere.

America’s energy sector is just one part of an aging infrastructure badly in need of repair. Ask any CEO where they’d rather locate and hire: a country with deteriorating roads and bridges, or one with high-speed rail and internet; high-tech schools and self-healing power grids.

Tonight, I propose a “Fix-It-First” program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country. And to make sure taxpayers don’t shoulder the whole burden, I’m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children.

I’ve gone over the massively overstated case that our infrastructure is crumbling (such statements come from groups that lobby for more infrastructure spending). The Partnership to Rebuild America sounds very iffy. I’d much rather see privatization.

After talking about re-inflating the housing bubble, he turns to Universal Union Employment, er, Pre-K:

Study after study shows that the sooner a child begins learning, the better he or she does down the road. But today, fewer than 3 in 10 four year-olds are enrolled in a high-quality preschool program. Most middle-class parents can’t afford a few hundred bucks a week for private preschool. And for poor kids who need help the most, this lack of access to preschool education can shadow them for the rest of their lives.

Tonight, I propose working with states to make high-quality preschool available to every child in America.

I have taken on this subject before. There is no evidence that universal pre-K — yes, even in Oklahoma and Georgia — does anything. In fact, American kids start school performing quite well compared to international peers. But the longer they are in the public system, the more their performance decays. There is simply no good case to be made — other than wishful thinking and good feelings — that a lack of universal pre-K is the biggest problem with our education system. There’s frankly not a lot of evidence that it’s a problem at all. The logic amounts to “other countries have universal pre-K (even though many don’t) and other countries have better educational performance, therefore …” That ain’t logic. That’s rationalizing millions more union jobs.

Sandwiched in between Obama’s bullshit about pre-K and bullshit about college education is a not so bad idea:

Let’s also make sure that a high school diploma puts our kids on a path to a good job. Right now, countries like Germany focus on graduating their high school students with the equivalent of a technical degree from one of our community colleges, so that they’re ready for a job. At schools like P-Tech in Brooklyn, a collaboration between New York Public Schools, the City University of New York, and IBM, students will graduate with a high school diploma and an associate degree in computers or engineering.

We need to give every American student opportunities like this. Four years ago, we started Race to the Top – a competition that convinced almost every state to develop smarter curricula and higher standards, for about 1 percent of what we spend on education each year. Tonight, I’m announcing a new challenge to redesign America’s high schools so they better equip graduates for the demands of a high-tech economy. We’ll reward schools that develop new partnerships with colleges and employers, and create classes that focus on science, technology, engineering, and math – the skills today’s employers are looking for to fill jobs right now and in the future.

This is, in fact, something that Bobby Jindal has been pushing in Louisiana. Most people do not need a college education to get a good job that matches their skills. A better high school education — focused more on skills than abstraction — could obviate the need for crushing student debt and bloated universities.

Oh, about that higher education. Obama claims to have brought down costs (he hasn’t) and proposes that student loans be more conditional on education utility rather than just being handed out. Of course, that could be achieved very easily and cheaply if we 1) re-privatized the student loan market; and 2) made student loans dischargeable in bankruptcy. This would guarantee that $100,000 loans for degrees in puppetry wouldn’t happen. But, of course, that wouldn’t create more government spending and control.

Obama then digs into immigration, which I’ve already blogged about. He urges passage of the Violence Against Women Act (a bad piece of legislation wrapped in good sound bites) and the Paycheck Fairness Act. He proposes raising the minimum wage and linking it to the cost of living (as Romney proposed). Of course, that ignores that the COLA fell in recent years. Would the government then cut the minimum wage appropriately? I think not.

And this year, my Administration will begin to partner with 20 of the hardest-hit towns in America to get these communities back on their feet. We’ll work with local leaders to target resources at public safety, education, and housing. We’ll give new tax credits to businesses that hire and invest. And we’ll work to strengthen families by removing the financial deterrents to marriage for low-income couples, and doing more to encourage fatherhood – because what makes you a man isn’t the ability to conceive a child; it’s having the courage to raise one.

Spend, spend, spend on dead towns. Create collaborations between local government, federal government and business to maximize corruption. That’s the way to move an economy!

Obama then shifts to foreign policy. He promises to get out troops out of Afghanistan and adds this:

Different al Qaeda affiliates and extremist groups have emerged – from the Arabian Peninsula to Africa. The threat these groups pose is evolving. But to meet this threat, we don’t need to send tens of thousands of our sons and daughters abroad, or occupy other nations. Instead, we will need to help countries like Yemen, Libya, and Somalia provide for their own security, and help allies who take the fight to terrorists, as we have in Mali. And, where necessary, through a range of capabilities, we will continue to take direct action against those terrorists who pose the gravest threat to Americans.

I don’t disagree entirely with this. But it seems like this has been obvious for quite some time and it took a disaster in Benghazi for the Administration to figure out that they were wielding the guns of august.

Here is the biggest whopper of the night:

As we do, we must enlist our values in the fight. That is why my Administration has worked tirelessly to forge a durable legal and policy framework to guide our counterterrorism operations. Throughout, we have kept Congress fully informed of our efforts. I recognize that in our democracy, no one should just take my word that we’re doing things the right way. So, in the months ahead, I will continue to engage with Congress to ensure not only that our targeting, detention, and prosecution of terrorists remains consistent with our laws and system of checks and balances, but that our efforts are even more transparent to the American people and to the world.

This is, frankly, a lie. The Administration only recently shared their drone policies with some members of Congress after being excoriated for the ambiguities in their “white paper” on the subject. They have asserted just as much executive authority as Bush did and with even less transparency. This Administration has killed an American citizen and his son and refused to disclose the rationale. They have asserted their ability to kill American citizens without any kind of due process of external review. To talk as though they were the most accountable transparent Administration ever is absurd and offensive.

After burbling inanities on Russia, Iran, North Korea and third world poverty, he gets to his final issue, which is gun control:

Overwhelming majorities of Americans – Americans who believe in the 2nd Amendment – have come together around commonsense reform – like background checks that will make it harder for criminals to get their hands on a gun. Senators of both parties are working together on tough new laws to prevent anyone from buying guns for resale to criminals. Police chiefs are asking our help to get weapons of war and massive ammunition magazines off our streets, because they are tired of being outgunned.

Most of this I don’t have a problem with (although I don’t like citing victims of tragedy in support of any law). The problem here is the last sentence which claims that our citizens have “weapons of war” and the police are outgunned. This is simply false. Automatic weapons are heavily regulated and illegal in most areas. And the proliferation of para-military SWAT teams and no-knock raids that results in such things as the killing of Jose Guerena (a military man who responded to what he thought were robbers with a military weapon) cries against this bleating about police being outgunned. In fact, police fatalities have been declining steadily for nearly four decades.

All, in all, it was what I expected. A huge declaration of a big liberal agenda that will never happen. Punting on the most important issues and staying the course of this bumbling presidency. And always deferring to the state and the law for progress.

SOTU’s are never very substantive. With each one, I become more and more convinced that Thomas Jefferson got it right and the SOTU should be a letter instead of a monarchial speech. But it does give us a chance to see what kind of agenda that President’s party thinks they should be flogging. And this agenda is … well, what we expect after four years. Bigger government in the language of smaller; “new ideas” that aren’t; bold initiatives that are throwbacks to yesteryear; Bush policies in prettier packaging.

Change!