A $140 Billion Solution?

Let's assume for the sake of argument that the whole "fiscal cliff" debate isn't just about rich people trying to force the mass public to accept an awful "grand bargain" compromise to shred the social safety net, and let us further assume that those participating in this discourse are trying in all sincerity to simultaneously achieve long-term deficit reduction while propping up economic growth in the near term. (Okay, I agree that both of those assumptions are very shaky...but let's play along.) But then shouldn't this CBO chart be the starting point for all serious discussions of how to balance deficit reduction with GDP growth? What the CBO chart basically shows is that, due to widely divergent fiscal multipliers, the tax cuts--particularly the high end tax cuts, which have a truly miniscule GDP effect--provide much less "bang for the buck" than government spending, payroll holiday, or unemployment benefits. Of course, we knew that already, but it is nice to see it confirmed and depicted in a simple chart created just for the occasion. This suggests to me that anyone truly concerned with avoiding the negative fiscal effects scheduled for Jan 1, 2013, would restore all government spending first and foremost (including, alas, defense spending--hey, maybe that is something the GOP can "get" in the negotiations?) by undoing the ridiculous "sequester," as well as preserving payroll holiday (or something equivalent) and extended unemployment insurance. The tax cuts, on the other hand, have an underwhelming and disproportionately low impact on GDP, even though they consume the lion's share of the government funds (66% if I have calculated correctly!) Indeed, letting all the income tax cuts expire actually would have less GDP impact than the other components together, even though the latter cost much less. And, hey, while we're at it, since government spending has such a high multiplier, why don't we just go ahead and let all the Bush tax cuts expire ($330b), then redirect a portion of the savings sufficient to generate an equivalent GDP--and if nondefense spending of $40b is associated with 0.4% of GDP, as the chart indicates, then we will only need about $140b of the $330b--and then we can bank the rest as deficit reduction! (Not that we need deficit reduction desperately right now anyway, but since that's what they say they want...) And $140 billion could buy a lot of important things, either directly at the federal level or through subsidies to state and local government: K-12 education, state universities, alternative energy research, environmental conservation, infrastructure spending, you name it--everything we've been watching get pummeled since the 2009 stimulus bill started winding down. So it seems that Obama's whole strategy may be wrong, despite his strengthened bargaining position. Maybe he needs to be asking to allow the whole tax cut to expire and then to spend half of the money on government programs that people value even more than the tax cuts, which are, it must be said, disproportionately skewed towards those closer to the top--whether Obama's "top" of $250k or GOP's "top" of infinity. (And am I the only one who finds Obama's whole "My2K" gambit aggravating??) How about, instead of My2K, "Our $140B"? (I also happened to notice that Medicare and Social Security are not on this "fiscal cliff" chart anywhere. And I sure hope Obama realizes how desperately most Americans want to keep it that way!)

The "Buffett Rule" Rule

I would like to humbly propose a new political rule, which I am dubbing the "Buffett Rule" rule. Given all the whining from Republicans, such as Mitt Romney, about how "little" money the Buffett Rule would raise by taxing the very rich--$46.7 billion over 10 years--here is the new rule: Anyone who opposes the Buffett Rule on the grounds that it doesn't raise a significant amount of money and is therefore a "political gimmick" must henceforth be forbidden from complaining about any government expenditure less than $4.67 billion per year (the 10 year figure divided by 10). If this simple rule of argumentative consistency is observed, it should save us all a lot of conservative whining. To be sure, the Buffett Rule is only a small start in improving the fairness of our tax system. I am no great fan of the Obama Administration's timid approach to policy. The Buffett Rule is really the bare minimum we should be doing. I don't see how anyone who claims to be concerned about the long-term budget deficit could possibly oppose raising $46.7 billion over ten years from the people most able to afford it. But, even if this timid yet sensible proposal fails (which it seems destined to do, at least in the short term) from now on I hope we can enforce the "Buffett Rule" rule against anyone who claims $46.7 billion is a gimmicky, insignificant sum.

In the comments to this NY Times The Caucus blog post about the wonderful budget compromise, FF writes:

Wait -- I thought compromise meant that each sides gets some of what
they want. So Republicans get nearly $40 billion in spending cuts and
Democrats got... single payer health care? Increased social security
benefits? Tax hikes on the rich? Oh yeah, that's right, they got
nothing, except limiting the scope of the catastrophe. God I'd love to
negotiate with Obama.

That seems about right to me.

Cracking down on fraudulent loans

Finally, the government has put someone in jail for one of the masses of fraudulent loans perpetrated during the housing bubble. You remember, the one that helped destroy the world economy? Of course, this country being run by and for the rich, it wouldn't do to have someone who made millions selling those loans go to jail. Heavens no. Jail is for little people, like this guy from California, who is now serving two years for lying about his income on a mortgage application. Good job, feds! The world seems so much safer, and fairer, now.

Teachers vs. Wall Street

If you haven't seen this Daily Show clip yet, I recommend watching it. It's a good example of how different the rules are in the US these days for the rich than they are for everybody else.

http://www.thedailyshow.com/watch/thu-march-3-2011/crisis-in-the-dairyland---for-richer-and-poorer---teachers-and-wall-street?xrs=share_copy

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Crisis in Dairyland - For Richer and Poorer - Teachers and Wall Street
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