“… voters have rejected both parties on Social Security. Although Democrats have spent billions of dollars over the past decade to bludgeon Republicans for seeking to privatize Social Security and voucherize Medicare, the only age group that Democrats cannot seem to win is senior citizens. In 2012, President Obama lost them by 12 points and congressional Democrats lost them by 11.”
“It’s Time for a National Commission on Social Security” by David Brown, Gabe Horwitz, Jim Kessler, and David Kendall
Fiscal crisis? What fiscal crisis? The stock market is up, unemployment is down and the deficit is shrinking.
The fiscal crisis is in Washington, and it’s a crisis of Washington’s own devising. All those deadlines! January 1: the fiscal cliff. March 1: sequesters. March 27: a possible government shutdown. Sometime in August: the debt ceiling, again.
The unending fiscal crisis could take up the entire year. President Barack Obama desperately wants to end it. For one thing, more spending cuts could bring on a recession. For another, an unending fiscal crisis would monopolize the agenda. No time for Congress to take up immigration reform or gun control or the minimum wage or preschool education.
President Obama and his Republican dining companions showed last week that bipartisan schmoozing is back. Whether bipartisan deal-making will follow is anyone’s guess. But if it does, there are reasons to believe tax reform will be on the menu.
The most visible movement on tax reform is in the House of Representatives. Speaker John Boehner (R-OH) last week announced that the bill name “H.R. 1” would be reserved for tax reform. Traditionally, House speakers have given that title to bills that are among their top priorities. Consider some of the recent bills with that name: the stimulus package of 2009 and the Medicare prescription drug law of 2003.
The H.R. 1 designation signals the end of an internal Republican dispute over whether to proceed with tax reform. Majority Leader Eric Cantor (R-OH) previously advised the party to avoid the issue, because its progress could require votes on controversial topics like the mortgage and charitable deductions. But now, with Boehner’s blessing, House Ways and Means Committee Chairman Dave Camp (R-MI) has a green light to pursue his priority issue.
Earlier in January when President Karzai visited Washington and President Obama, all the focus was on these two leaders. However, these discussions leave out an important player in any foreign policy debate—Congress. As the United States looks toward the coming transition, Congress has a crucial role to play in ensuring that America’s best interests are met over the next 10 years in Afghanistan.
First, our Constitution grants Congress the power of the purse. Congress is charged with the duty of funding our government—and this includes our military. While every American wants the best military money can buy, it’s no secret that our current debt levels could cause problems—even our top brass at the Pentagon agree. As the former chairman of the Joint Chiefs, Admiral Mike Mullen said in late 2011, thebiggest threatto U.S. national security is this massive debt. Along these lines, waging war isn’t cheap; the Department of Defense spends between$850,000 and $1.4 millionper year to equip and keep a soldier in Afghanistan, and aCenter for Strategic and International Studies reportestimates that we’ve already spent over $600 billion in the war. While agreement between the two parties is rare, both Republicans and Democrats conclude that we have to address our debt. As Congress debates the 2014 defense budget, they will have to allocate funding to provide our troops in Afghanistan with the best equipment and support they need, while also balancing concerns for our economy.
Returning tax rates on the wealthy to Clinton-era levels can and should make up a sizable portion of a grand bargain. But only raising taxes on the wealthy cannot deliver the revenue needed to solve long-term deficits.
CLAIM: The deficit is not a real economic problem.
FACT: Our current fiscal path, unchanged, guarantees higher interest rates and lower economic growth.
In the last eight years, U.S. public debt has doubled, from 36% to 72% of GDP. That’s a level many economists consider unhealthy over a sustained period.
We’ve had debt this high before, during World War II, but the nature of today’s debt is different. In the post-war decade, foreign governments and investors held 5% of U.S. debt. Last year, foreigners held 46% of U.S. debt. Foreign-held debt constrains U.S. influence with competitors like China—which holds much of our debt—and it means our costly interest payments go overseas, rather than staying in the domestic economy.
Even after the economy returns to full capacity, the debt problem will worsen. In six years, the share of our economy needed for debt payments will be double today’s. That’s largely because economy-wide interest rates are expected to rise from their historically low level. Worse, interest rates on U.S. Treasury bonds, in particular, could rise further if investors begin to perceive them as less secure. When this happens, our economy will slow. Should it slow to a recession, the government won’t have the cheap credit needed to borrow and stimulate our way out. This time, our only option will be painful austerity. We’ve seen what this has done to Europe both in terms of jobs and their safety net.
PROOF: 6 - The number of years it will take for payments on the debt to double, as a share of the economy, if current policies remain.
Obama and the Democrats have treated entitlement reform like an untouchable third rail, but new polls indicate that the electorate is out in front of both parties when it comes to demanding real improvements.
The voters gave President Obama a second term, and now he’s counting on them to help him resolve the fiscal cliff in a responsible way. You’d think people would be weary of hearing about an economic issue that so far is all talk and no action. But a Pew Research Center survey found that more Americans followed the debate over the fiscal cliff more closely than they watched the sex, lies, and emails that led to the resignation of CIA Director David Petraeus, a testament to the public’s ability to sort through what most affects their own lives and pocketbooks.
(Carolyn Kaster / AP Photo)
Obama spent the better part of this year campaigning for a balanced approach to bring down the deficit. That means reining in the country’s most cherished entitlement programs—Social Security, Medicare, and Medicaid—in addition to raising taxes on the top 2 percent of households. A poll commissioned by Third Way, a moderate Democratic group, found that the coalition that elected Obama overwhelmingly backs a compromise that would include entitlement reform, a third rail that Democrats have long avoided touching.
The numbers reflect a new awareness even among liberals that the programs they feel are essential must be part of any grand compromise reached by Obama and the Republicans. Eighty-three percent of Obama voters say that reducing the deficit must be an important priority, and 79 percent say it would be better for Congress to address Social Security and Medicare than to do nothing.
The conventional wisdom has arrived: 2012 was a status quo election. The President was re-elected. Democrats continue to have a majority in the Senate. Republicans still control the House. Only two states changed their presidential votes from 2008 to 2012 (North Carolina and Indiana). Six billion dollars were spent and almost nothing changed!
The conventional wisdom is wrong. Things have indeed changed. Voters came out to defend the revolution of 2008. They rejected a return to the old order.
The status quo candidate in this election was Mitt Romney. Romney represented the old order that’s been in power since 1980: the Reagan regime with its power base of older white men. Bill Clinton, the only Democrat to win the White House during that regime, tried to make accommodations with it. They impeached him.
All that changed with the revolution of 2008. The New America, led by Barack Obama, came to power. It was a movement of young people, working women, African-Americans, Latinos, Asian-Americans, union members, liberals, gays and other groups that had long been out of power.
The Republican Party focuses on mobilizing its conservative base to win elections. The Democratic Party focuses on mobilizing its liberal base. But the bulk of votes are in the middle. Presidential elections have featured more moderate voters than either liberals or conservatives in every year since exit polls began asking the question. In the battle for the White House, moderates dominate.