By Bill Schneider
The deficit is going down. Woo-hoo! Let the celebrations begin.
Oh, wait. That may not be altogether a good thing. Certainly not for Republicans. They need an out-of-control deficit to bludgeon Democrats into cutting more spending. It may not be good news for the economic recovery either. Budget austerity means slower growth. Want proof? Look at Europe.
The Congressional Budget Office estimates that this year’s federal budget deficit will drop from $1.1 trillion to $845 billion. Economists at Goldman Sachs project that we will get the deficit under control within two years. Why is this happening?
Ideology won’t solve our debt problem. It will require practical policies that can give the nation the vibrant economic growth, middle class living standards, and secure safety net for the aged and vulnerable that we have come to expect. Read more in: Growth, Not Greece: A Growth-Focused Deficit Reduction Agenda.
by Michael Tomasky, The Daily Beast
I think I’m going to start labeling certain posts WBI, for Wonky But Important. I’ll try to make these posts relatively brief, but they’ll all elucidate a policy point that I think we all should know in order to have an intelligent conversation.
Our first WBI is built around a March 8 CBO report brought to my attention this morning by Congressman Chris van Hollen—my very own Montgomery County Md. representative, I am happy to say—finding that half of this year’s expected budget deficit of around $800 billion—half!—can be laid at the door of the struggling economy.
In other words: When the economy is revved up, it reduces the deficit, because there are more tax revenues from all those employed people and businesses working to capacity (and, concomitantly, fewer government expenditures—there’s no need for stimulus spending or lots of unemployment benefits during a humming economy). They measure this in terms of what they call “automatic stabilizers”—the reductions in revenues and increases in outlays that are the result of the weak economy.
By Bill Schneider
More than 25 years ago, Representative Jack Kemp told me, “In the past, the left had a thesis: spending, redistribution of wealth and deficits. Republicans were the antithesis: spending is bad.”
He went on to explain, “Ronald Reagan represented a breakthrough for our party. We could talk about lower taxes and more growth. We didn’t have to spend all our time preaching austerity and spending cuts. The question now is: Do we take our thesis and move it further, or do we revert to an anti-spending party?”
We now have the answer. Republicans have reverted to an anti-spending party. Their latest cause? Austerity. Their argument? A shrinking economy is better than big government.
By Stephanie Kirchgaessner, Financial Times
From long delays at the nation’s airports, to huge potential layoffs of government workers, to less accurate weather forecasts, Americans may soon feel the pinch of austerity.
Despite political manoeuvring by Republicans and the White House to find a solution to the so-called “sequester”, there are no serious proposals to avoid the $1.2tn in automatic spending cuts that are expected to take effect on March 1.
What happens next is the subject of intense speculation on Capitol Hill … Budget experts describe a dire picture of the sequester’s effect on economic activity and everyday life.
Law and order
- Impact: 3,700 fewer federal law enforcement agents and 975 fewer attorneys
- Consequence: More than 26,000 fewer arrests and more than 12,000 fewer convictions
- Impact: Bureau of Prisons could have to lay off 6,891 more correctional officers
- Consequence: Inmate-to-staff ratios could jump from 4.95 to 6.52
- Impact: 25 per cent fewer border agents
- Consequence: Fewer than seven agents per mile on the southern border or no agents along the northern border and coastal areas
- Impact: Cuts Environmental Protection Agency Clean Air Act inspections and enforcement
- Consequences: More than 50 deaths from heart and lung disease and more than 900 new asthma cases
- Impact: Some 608 fewer Food Safety and Inspection Service inspectors checking meat and poultry
- Consequences: Almost 50,000 more cases of food-borne illnesses
- Impact: Instant background check shut down for nine hours on weekend days
- Consequences: Weekend business for gun shows and stores limited, increased odds of false clearance for criminals
Read more in “Austerity threat to everyday American life” from the Financial Times.
By Bill Schneider, Politico
Can Republicans sell austerity? That’s the message Mitt Romney is sending by naming Rep. Paul Ryan (R-Wis.) as his running mate.
The Ryan move signals a major redefinition of the Romney campaign. It’s no longer about creating jobs and turning around the economy. It’s about fiscal discipline and turning around the budget. That’s Ryan’s calling. He is, after all, chairman of the House Budget Committee.
Why is Romney doing this? Simple. The old campaign wasn’t working. Voters are getting the message: Romney’s experience was not in creating jobs. It was in creating wealth — for himself and his investors. That’s what private equity firms do. The polls, which have been virtually tied all year, are beginning to show an Obama lead. Romney is under pressure to change course — fast. Hence, Ryan.
How’s that austerity thing workin’ for ya?
Since the 2009 depths of financial crisis devastation, President Obama’s stimulus programs have have produced modest-but-steady U.S. job growth, while Eurozone adopted austerity-only measures—favored by many U.S. conservatives—have faltered.