Some Thoughts on a Pseudo-Wonk’s Thoughts on the Coming Fiscal Cliff

I don’t ordinarily take guys like Ezra Klein seriously.  He is, after all, the pseudo-wonk who claimed in all seriousness, during a December 2010 interview on MSNBC’s “The Daily Rundown,” that our Constitution doesn’t matter; it’s just an inconvenient scrap of paper too often in the way of the Progressives’ Proper Way:

[The Constitution of the United States] has no binding power on anything.  …the text is confusing because it was written more than a hundred years ago….

However, since he is taken seriously by so many on the Left, and he’s just written another tendentious piece of misunderstanding, I find myself drawn to comment.  In writing for Newsday just after Christmas, he made the remarks described below.

I’ll begin by briefly addressing Klein’s windy argument concerning Conservative distrust of Democrats’ spending cut promises.  Klein insists that welching on such promises is a good thing:

The point of austerity is to solve a deficit problem, not yoke the future to the imperfect forecasts of the past.  Once the deficit problem goes away, so too does the reason for austerity.

He also makes his view of the moral appropriateness of breaking promises explicit:

After 1997, spending rose.  But by then, the economy was roaring, and within a few years, we were at surpluses.  So why shouldn’t Congress have been a bit looser with the purse?

And

But if the economy in eight years is far better than we expect it to be today, Congress should change course.  If the cuts to spending don’t need to be so deep, then huzzah! Ratchet them back.

Because—well, Klein never offers a reason.  For him, Big Government spending Americans’ money is the Natural Order.  Big Government is its own raison d’être.

I’ll address his disingenuousness in claiming that leaving more money in the hands of Americans, rather than those of Big Government—reducing government spending, making possible reducing taxes—is somehow austere later.  First, I’ll talk about his outright lie:

[Conservatives’] goal isn’t to reduce deficits.  If it was, they’d be open to tax increases.

And

[Conservatives’] real goal: Not smaller deficits, but smaller government.

Because raising taxes is the One True Way to reduce deficits.

Actually, on one level, Klein’s charge isn’t a malicious slur, at all: Conservatives aren’t interested in reducing deficits; they’re interested in eliminating them altogether.  But Klein wasn’t going there.  Here’s the thing: Conservatives are interested in…reducing…deficits, by cutting spending.  Conservatives also see the optimal long-term path to this—especially in light of Progressives’ view that breaking promises is morally sound—as being to shrink government back to a small, limited entity that the Sovereign people can better control.  The existence of these alternate paths proves the lie in Klein’s charge.

Interestingly, Klein makes his lie as if he believes, in all sincerity, that smaller government is somehow bad.  But one of his movement’s founding forebears, Herb Croly, has already enshrined that concept in the Progressive religion:

To be sure, any increase in centralized power and responsibility, expedient or inexpedient, is injurious to certain aspects of traditional American democracy.  But the fault in that case lies with the democratic tradition; and the erroneous and misleading tradition must yield before the march of constructive national democracy….  [T]he average American individual is morally and intellectually inadequate to serious and consistent conception of his responsibilities as a democrat.

Klein argues, to return to the question of austerity and to questions of spending, taxes, and Big Government:

The point of austerity is to solve a deficit problem, not yoke the future to the imperfect forecasts of the past.  Once the deficit problem goes away, so too does the reason for austerity.

Of course, it should go the other way, too. The Bush tax cuts, which were passed to pay down a surplus, should be rescinded now that deficits have returned.  But Republicans don’t see it that way.

Based on what theory, exactly, should taxes be increased?  Klein declines to offer any support at all for this bald, unsubstantiated claim.  Not the first particle of a fact, not a single line of logic.  Part of his failure, though, stems from his misunderstanding that the Bush tax cuts were intended to “pay down a surplus” (has there been a more cynically offered non sequitur—”pay down a surplus?”) rather than to leave more of Americans’ money in their own hands.  But this is symptomatic of Klein’s blinders (yes, that’s contradictory.  Deal with it).  Big Government is such an obviously positive wonder that explanation seems contained in the statement.

He adds to his curious remark above this:

Rather, austerity is one of many arguments marshaled toward the long-term end of shrinking the size of government.  That’s why a deal that solves the deficit problem and then sees government spending rise in its eight year is a failure rather than a success—it betrayed the actual goal of shrinking the size of the government, even if it succeeded in the putative goal of balancing the budget.

Here’s the cynicism of his austerity claims.  Klein conflates austerity with reduced government spending, austerity with leaving more money in the hands of the individuals otherwise taxed—as though more money in private hands makes somehow for a more limited existence.  No, what is austere is taking money away from those who already are paying far more than their share by raising taxes on them; or taking money away from anyone by raising taxes in the middle of a failed recovery or while deficit spending remains out of control.

He does states a truth, yet fails to recognize it.  A budget that grows government is, rather tautologically, a failure.  One of the points of the goal of shrinking the size of government (beyond facilitating the preservation of individual freedoms and duties) is to exercise better control over its budget—so as to eliminate deficits (not just reduce them), so as to pay down (if not eliminate, from time to time) the debt and keep it under control.

Moreover, Conservatives don’t see the effectivity of raising taxes in times of deficits.  Of course, they don’t—spending cuts also reduce/eliminate deficits, and more efficiently so.  Spending cuts are immediate and direct (note that I’m talking about actual cuts, not the accounting games that both parties play, wherein they claim a reduction in the rise in spending rate is a cut).  Tax increases, though, however well-intended, get diverted into funding another neat program—there’s always a neat program waiting for money—rather than get used to reduce deficits.

But Klein, like all pseudo-wonks of the Left, simply can’t conceive of spending cuts.  He can’t conceive of letting Americans see to their own ends without (his) Big Government hanging over their shoulder making sure that the ends are appropriate and that their satisfaction is via an approved means.

Klein concludes

There’s little doubt that a mixture of tax increases and spending cuts could bring deficits to manageable levels within a few years.  Add in some stimulus and we could even protect the recovery between here and there.  Moreover, since the discretionary spending cuts have already been made, the next set of spending cuts will likely focus on entitlements.

“Add in some stimulus….”  So much for the spending cuts.  He just doesn’t understand the whole premise of reducing spending.  But economics also is more than 100 years old, and so confusing to someone who finds it inconvenient.

And, yes, Ezra, there is considerable doubt that “a mixture of tax increases and spending cuts could bring deficits to manageable levels.”  That’s why there’s this debate in DC.

Finally: shrinking government would accomplish all of this, too, and it would make the manageability of the deficits more permanent.  But Klein ignores the larger point (I’m confident that he sees it, for all his confusion): even a manageable deficit represents debt growth, and our current debt of $161/3 trillion and growing already is at unsustainable levels—interest payments alone currently run to $220 billion/year and that’s only going to get worse as the coming Bernanke Inflation begins to take hold, driving up interest rates.  Imagine the precious entitlements that could be funded with that money were it not wasted on the debt of the profligate.  Imagine the national defense capability that could be had for that kind of money (which would represent a one-third increase in the 2012 DoD budget).  Imagine the real stimulus our economy could have were that money committed to a $220 billion reduction in the taxes Americans pay to Klein’s bloated government.

Spending cuts, though, as the means to eliminate deficits in order to enable paying down national debt, and shrinking government to a proper size so as to maintain that reduced spending and taxation, is inconceivable to today’s Progressives.

The Fiscal Cliff “Deal”

It’s a bad deal, and the Republicans in the House should vote it down.  Indeed, they should refuse even to take up the bill until the Senate has actually voted on the budget bill which the House passed in spring of last year, which would obviate all of this, or on the House-passed fiscal cliff solution from last September (which CBSNews claims doesn’t address the fiscal cliff, even though it significantly reduces Federal spending).

If the House Republicans accede to this deal, there’ll be no meaningful spending cuts, no chance for deficit elimination, no chance for debt pay down, the coming debt ceiling “negotiations” notwithstanding.  No, the Republicans will only be confirming their failure in summer of 2011, and their Senate failure last night, and solidifying their habit of folding under pressure.  And so it will be easy for them to fold, yet again, in two months’ time.

But quite aside from that political failure, they will be creating an economic and social failure: there is no need for the Federal government to receive yet more revenue.  Yet allowing the government to expand its raids on the private pocketbook, they will be condemning Americans to existence as government wards.  After all, President Barack Obama is on record in his victory speech yesterday as saying he intends to use this tax increase to fund additional “welfare,” rather than to pay down the debt, and as saying he wants yet more tax increases in the next round of talks—with which to expand “welfare.”

Even the chump change spending cuts in this deal represent abject surrender for the emasculated party.  The deal agrees to slip the sequester by two months, but that only achieves a spending cut of $24 billion.  That’s one surrender, but it could have been choked down in favor of dealing seriously with spending in the coming debt ceiling debate.  However,

Republicans had insisted the cuts of $24 billion be offset with savings in other areas.  The White House wanted some of the offset to be in the form of tax increases, not just other spending cuts.

Republicans folded (there’s that habit, again).

The deal pays for delaying the sequester with a mix of new taxes and spending cuts[.]  …$12 billion would come from a shift in the rules affecting workplace-based 401(k) plans.

A tax increase from which President Barack Obama’s union allies are carefully shielded, no matter their incomes.

This is a bad deal.

Kill it.

Some Outcomes of the Obama Fiscal Cliff

Sudeep Reddy described, in a recent Wall Street Journal op-ed, a few that will occur in the coming year.

  • Jan 1: New provisions take effect including higher payroll taxes, income taxes and investment taxes.

In truth, the payroll tax “holiday” was an act of monumental stupidity by both parties—but then I repeat myself.  With Social Security already nearing bankruptcy (the timing works out to just a Presidential election cycle or two from today), reduce the funding for it by nearly a sixth.  Yeah.

The payroll tax cut also points up the dishonesty of the Progressives in Congress and in the White House.  President Barack Obama, for instance, is on record as saying that such a cut in Americans’ taxes is good for all Americans.  Indeed, he’s gone so far as to propose boosting it to 3% and including businesses by proposing a 3% cut in their side of the payroll taxes.  Yet he, and his fellow Progressives, refuse to consider making those 3% an income tax cut and making the reduction permanent.

  • Jan 2: $110 billion in spending cuts scheduled to begin, hitting domestic and military spending.

This is as inevitable as Obama can make it.  Enormous defense cuts have been a Progressive dream for 50 years.

  • Late February, early March: the US is expected to reach its congressionally mandated borrowing limit.
  • March 27: A deal to fund the federal government expires.
  • Mid-2013: If Congress crafts a two-step deal to avert the fiscal cliff, this could be the deadline for tackling part two, including any unresolved tax and entitlement issues.

The tax and entitlement “issues” are already settled.  Senator Chuck Schumer (D, NY), et al., has already said that there are no entitlement issues; entitlements are not to be cut; they’re not even to be discussed.  Period.  Moreover, Obama has already said he’ll veto any bill that doesn’t include tax rate increases (his latest “flexibility” on that item is just eye-wash for the chattering classes.  That’s clear from his “stopgap” proposal: let taxes rise for those above his originally demand demanded threshold—$200k/$250k.)  The tax question already has been resolved in another way, too: Obama gets his tax rate increases in the absence of a deal.

Progressive Cooperation and the Fiscal Cliff

In last weekend’s interview with NBC‘s “Meet the Press,” President Barack Obama said this with a straight face, according to The Wall Street Journal:

Singling out the two GOP legislative leaders, House Speaker John Boehner of Ohio and Mr [Mitch] McConnell of Kentucky, the president added that “Congress has not been able to get this stuff done.” The reason, he said, is “not because Democrats in Congress don’t want to go ahead and cooperate, but because I think it’s been very hard for Speaker Boehner and Republican leader McConnell to accept the fact that taxes on the wealthiest Americans should go up a little bit, as part of an overall deficit reduction package.”

Really?  Based on what theory must “taxes on the wealthiest Americans…go up a little bit?”  The revenues collected won’t amount to walking around money compared to your budget deficits.

Democrats want to cooperate?  What was the Senate vote on the fiscal cliff spending solution (albeit for only six months) which the House passed last September?

What were the vote outcomes on the Federal budgets the House passed each of the last two years?

What were the Senate votes on any of the 40, or so, jobs-related bills passed by the House and sent up to the Senate in this Congressional session?

What were the deficits contained in your own budget proposals which you sent to Congress in each of the last three years?  Oh, wait—most of the Democrats (yourself, only, excluded) did cooperate on these: you couldn’t even get a single vote, Democrat or Republican, on any of those “budgets.”

Where are your Democrats on entitlement reform or on spending cuts—real ones, now, not reductions in growth rates that you masquerade as cuts, to occur some time in a nebulous future?

What was it you threatened to do in your 2013 inaugural and State of the Union speeches if you don’t get your way on taxes?  Oh, yeah.  You said

[you] would use [your] inaugural address and [your] State of the Union speech to tell the country the Republicans were at fault.

You berate Republicans for acting against 98% of Americans by holding out for no tax increase on the remaining 2%.  Yet you’re ready—anxious—to blow up our economy and gravely harm honest, hard-working Americans because, having already gotten 98% of what you claim you want, You’re greedy and want more.  Where’s your cooperation?

Where is any Democrat’s cooperation, Mr Obama?  You’ve offered no evidence to support your assertion.

Good Faith Negotiations

Here’s another example of good faith, Progressive style.  This occurred in the failed fiscal cliff “negotiations:”

At one point, according to notes taken by a participant, Mr Boehner told the president, “I put $800 billion [in tax revenue] on the table.  What do I get for that?”

“You get nothing,” the president said.  “I get that for free.”

It’s certainly true that a number of chuckleheads, as one Republican participant called them, let themselves be confused into thinking that voting to preserve the present tax rates for 99.8% of Americans was the same as voting for a tax increase—even though the Great Grover Norquist had given permission for such a vote.

But the fact is, that President Barack Obama has been discussing in bad faith all along: he wants the cliff.  With the cliff, he gets tax rate increases all across the board, he gets to gut Defense spending, and he gets to blame Republicans for the economic and security disaster that will result—all Progressive dreams.  And that blame is as important to Obama’s ego as are the tax increases and the Defense cuts.

It is unfortunate that the GOP has chosen to be complicit in this shameful affair, but there it is.  They’ve emasculated themselves with an idiotic civil war, and they’ve rendered themselves impotent for the next two years.  Look for the Progressives to retain control of the Senate and regain control of the House in 2014, and to retain the White House in 2016.

Had the Republicans been able to pass Plan B in the House, those chuckleheads would have achieved three things: they would have voted for the present tax rates for nearly all Americans, they would have put the onus on the Progressives—as Speaker of the House John Boehnor (R, OH) put it

[T]he president will have a decision to make.  He can call on the Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history

—to come up with an honest counterproposal.  And put the failure of the negotiations squarely on the shoulders of the Progressives in the Senate and the White House.

Now, Republicans don’t have anything at all for the debt ceiling debate other than an understanding of how to fail.

Congratulations, guys.