Archive for the ‘ Fiscal Responsibility ’ Category

Win Dixie

Tuesday, March 9th, 2010
Ed Kilgore



Ed Kilgore is a PPI senior fellow, as well as managing editor of The Democratic Strategist, an online forum.

by Ed Kilgore

As we all understand, Republicans are about to have a pretty good election in November. Much of the GOP excitement revolves around congressional races that could unseat “red-state” Democrats who won during the 2006 or 2008 cycles, along with a number of incumbents (some of whom have decided to retire) who have been around much longer. Ground zero for the Republican tsunami is, of course, the Deep South, where in some areas John McCain did better in 2008 than George W. Bush did in 2004, and where every available indicator shows the president to be very unpopular among white voters.

But beneath this storyline, some odd and counterintuitive things are going on. In three Deep South states, Georgia, Alabama, and South Carolina, Democrats have a decent chance of retaking long-lost governorships, in part because of infighting among Republican candidates, and in part because Republican rule in those states has not been terribly successful or popular. It’s far too early to make predictions, but it’s possible that we’re in for a repeat of the astounding gubernatorial Trifecta that Democrats pulled off in those same three states in 1998. That event confounded widespread assessments that the South had become a one-party GOP region, and it could happen again, in even more unlikely circumstances.

Our own appraisal begins in Georgia, with one of the surprise winners of 1998, former Governor Roy Barnes. Barnes lost his reelection bid in 2002 to Sonny Perdue, a party-switching state senator, despite the power of incumbency and a huge financial advantage. Since then, Barnes has regularly admitted his mistakes. And, amazingly enough, in the latest Georgia gubernatorial poll, he’s running ahead of every single Republican candidate.

Meanwhile, Georgia Republicans, who have dominated state politics since 2002, are having some serious problems with their own gubernatorial bench. The consistent frontrunner in the polls, longtime insurance commissioner John Oxendine, is awash in ethics allegations about contributions from the insurance companies that he is responsible for regulating. His record is so blatantly bad that none other than Erick Erickson, the Georgia-based proprietor of the nationally influential, hard-core conservative web site RedState, has said he’d vote for Barnes if Oxendine is the GOP nominee.

Rather pathetically, the alternative to Oxendine and the favorite of some party insiders is Representative Nathan Deal of Georgia’s Ninth District (like Perdue, a party-switcher), who recently said he would resign his congressional seat after a health care vote to concentrate on his gubernatorial campaign. As it happens, Deal’s resignation managed to short-circuit a House Ethics Committee investigation into a no-bid state auto-salvage contract that was awarded to a company which Deal controls. The insider buzz in Atlanta is that Deal was motivated to resign, in part, because of panic among Georgia Republican pooh-bahs who worried that Oxendine would walk away with the gubernatorial nomination on name ID alone.

The rest of the Republican gubernatorial hopefuls are struggling as well. The entire party, and several of the gubernatorial candidates, were tainted by association with disgraced former House Speaker Glenn Richardson, who was forced to resign after a lurid sex-and-lobbying scandal. The one candidate who seems ethically starchy, Secretary of State Karen Handel, has struggled to raise the money necessary to win, and also suffers from the perception that she’s the unpopular Sonny Perdue’s chosen successor.

All these Republican problems could eventually fade, and Roy Barnes must also navigate a Democratic primary against Attorney General Thurbert Baker, a law-’n-order conservative who is one of the nation’s longest-serving African American statewide elected officials (as well as two other lesser but credible opponents). Nevertheless at present, Barnes—or Baker, if he could somehow upset Barnes—looks entirely viable for November.

Next door in Alabama, you’d think that the Democratic gubernatorial frontrunner, Congressman Artur Davis, wouldn’t stand a chance. He’s a member of the much-hated United States Congress; he’s African American; he’s a close personal friend of Barack Obama; and he’s frequently been tagged, like the president, as an Ivy League-educated, twenty-first-century–style black politician. But the sparse public polling available shows Davis in a very strong position for the general election, assuming that he dispenses with a primary challenge from state agriculture commissioner Ron Sparks, who’s been struggling to raise money. Davis, who has long nursed gubernatorial ambitions, carefully tailored his congressional record to Alabama public opinion: He voted against health care reform in the House, and he was also the first Congressional Black Caucus member (and, for that matter, the first one on the Ways and Means Committee) to call for Charlie Rangel to step aside from his powerful chairmanship.

Meanwhile, there is no real frontrunner in the Republican gubernatorial primary, which bids fair to become an ideological flame war. Back in 2002, the “establishment” candidate, state Senator Bradley Byrne, made the fatal mistake of voting for a-tax reform initiative that was soundly defeated in an emphatic expression of Alabamians’ mistrust of government. Tim James, son of former conservative Democratic and Republican Governor Fob James, was one of the main opponents of that initiative, and he will bring it up constantly. Meanwhile Christian Right warhorse Roy Moore, the famous “Ten Commandments Judge,” is actually running second to Byrne in early polls. All of the dynamics in the race will pull the GOP candidates to the hard-right, while Artur Davis continues to occupy the political center; and his candidacy will almost certainly boost African American turnout to near-2008 levels. That means anything could happen in November.

South Carolina is often thought of as the most Republican of Southern states. But Mark Sanford, the disgraced incumbent governor, has complicated his party’s prospects. Meanwhile, an ideological civil war is brewing that reflects the growing tension between the state’s two Republican senators, right-wing bomb thrower Jim DeMint and the more moderate Lindsey Graham (Graham, long suspect among home-state conservatives for his friendship with John McCain and his occasional bipartisanship, has recently been formally censured by two of South Carolina’s county GOP organizations for a variety of sins). As in Georgia and Alabama, the Republican gubernatorial field is a mess: Nobody is a frontrunner and all the candidates are stampeding to the hard right. And I do mean hard right. In a sign of the times, Lieutenant Governor Andre Bauer, who has few friends in the state’s Republican establishment, delivered a speech comparing recipients of subsidized school lunches to “stray animals” who should no longer be fed unconditionally. While he took a few shots from fellow Republicans for his indiscreet language, nobody disputed, and some praised, his basic premise that any form of public assistance corrupts its recipients and should come with some sort of reciprocal obligation.

The frontrunners in early polls are Bauer and Attorney General Henry McMaster. Upstate Congressman Gresham Barrett, who must overcome the opprobrium of voting for TARP, is close behind. Meanwhile, Sanford’s protégé, state Representative Nikki Haley (who was even endorsed by the governor’s ex-wife), is trying to push the campaign hard right by opposing any expenditure of federal stimulus dollars in this high-unemployment state. At a recent candidate forum, when the rivals were pushed to call themselves “DeMint Republicans” or “Graham Republicans,” Bauer and Haley flatly identified with DeMint, while McMasters and Barrett dodged the question.

On the Democratic side, a Rasmussen poll in December showed the front-running Democrat, State School Superintendent Jim Rex, actually beating Bauer and running within single digits against other GOP candidates. (State Representative Vincent Sheheen is also a credible Democratic candidate). Again, anything could happen, but the assumption that Republicans have a lock on this state’s elections is as dubious as the same assumption back in 1998.

So, at a time when Democrats are despairing of good news, it’s important to understand that the donkey isn’t quite dead, even in the Deep South. There are consequences to Republican extremism and malfeasance in office. And, when GOP candidates battle for first place on the crazy train of contemporary conservatism, it’s Democrats who stand to benefit.

This item is cross-posted at The Democratic Strategist.

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Blue Dogs Only Chasing Their Tail

Tuesday, March 9th, 2010
Will Marshall



Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

It often seems that Blue Dog Democrats, along with a handful of Senate moderates, are the only people in Washington who are serious about fiscal responsibility. Chasing the will-o-the-wisp of a balanced budget amendment, however, seems more likely to distract from than advance that essential cause.

The idea is seductively simple: The only way to restrain deficit spending in Washington is to make it unconstitutional. That’s how the states keep their books balanced, and there’s no reason the federal government shouldn’t do the same.

In fact, there are several. Consider that today’s federal deficit is about 12 percent of GDP. It’s going to go down as the economy recovers, but the spending and tax adjustments that would have to be made to get it all the way down to zero would be unduly draconian and disruptive. Also, unlike state mandates, a federal balanced budget amendment for accounting reasons would not distinguish between capital investment and consumption. But government borrowing to invest in public infrastructure or higher education, for example, makes economic sense, because it will generate more economic activity and amortize itself over time.

What’s more, the federal government acts as the nation’s fiscal safety valve, or strategic reserve. During severe economic downturns, the only way many states can provide services while preserving their fiscal virtue is to get counter-cyclical assistance (or revenue sharing) from Washington. A constitutional ban on deficits could prevent Washington from responding to emergencies of all kinds.

In truth, we don’t need a balanced federal budget — we need a disciplined federal budget. Congress would be better off adopting Sen. Mike Bennett’s (D-CO) sensible suggestion that federal deficits be held first to four percent, then to three percent of GDP each year. At that level, they’d be gradually whittled down by economic growth, and the government could borrow without swelling the national debt.

A balanced budget amendment, moreover, is a blunter instrument than we need to deal with overspending and undertaxing in Washington. It doesn’t hone in on the real problem, which is the automatic and unsustainable growth in entitlement spending. A better idea, from the Brookings-Heritage Fiscal Seminar, is to bring Medicare, Medicaid and Social Security on budget, which would require Congress to periodically reconcile income and spending to keep the programs solvent.

Finally, a balanced budget amendment is just too damn difficult to enact. Congress has to approve Constitutional amendments by a two-thirds vote, well nigh inconceivable given how hard it is to muster the 60 votes needed to break a filibuster. Then three-fourths of the states would have to approve an amendment.

Demanding a balanced budget amendment thus is more of a symbolic gesture than a real solution to America’s fiscal crisis. Recall that it was a key plank in the GOP’s 1994 Contract with America, but Republicans quickly lost interest once they won control of Congress. Nonetheless, Newt Gingrich has endorsed the amendment in a bid to recapture the old magic for this year’s midterm elections.

Unlike the Republicans, of course, the Blue Dogs have real street cred when it comes to fiscal rectitude. They fought successfully to resurrect “pay go” rules that require Congress to offset new spending with tax hikes or budget cuts. And key Blue Dog leaders like Rep. Jim Cooper (D-TN) have led the charge for a bipartisan commission to get entitlement spending under control.

It’s vital, though, that progressive deficit hawks not let the holy grail of a constitutional amendment deflect them from the gritty, day-to-day battles in Congress to get America’s exploding deficits and debts under control.

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The Bunning Blockade Ends

Wednesday, March 3rd, 2010
Elbert Ventura



Elbert Ventura is the managing editor of the Progressive Policy Institute.

by Elbert Ventura

Sen. Jim Bunning (R-KY), who had held up Senate passage of a $10 billion short-term benefits extension for days, finally relented yesterday and allowed the measure to come for a vote. Bunning’s objection to unanimous consent to pass the package resulted in the elapsing of funding for a host of federal programs, including infrastructure projects, unemployment benefits, and Medicare payments.

The Kentucky senator, who is retiring after this year (with a helpful nudge from his fellow Republicans), had demanded that Democrats find offsets in the budget for the legislation. Democrats retorted that the bill was a short-term emergency measure that did not fall under “pay-go” rules. (Democrats, on a party-line vote, reinstituted “pay-as-you-go” rules in January.)

The Bunning blockade proved to be a heaven-sent illustration of Republican obstructionism and heartlessness. McClatchy came up with a handy graphic depicting its state-by-state effects:

Even as the blockade stretched over the first couple of days of this week – leaving about 1.2 million unemployed people high and dry, 2,000 Department of Transportation workers furloughed, and numerous projects halted – some of Bunning’s colleagues actually voiced their support for his actions. Sen. John Cornyn (TX) said:

It’s not fun to be accused of having no compassion for the people who are out of work, the people for who these benefits should be forthcoming, and I believe will be forthcoming. But somebody has to stand up, finally, and say enough is enough, no more inter-generational theft from our children and grandchildren by not meeting our responsibilities today.

Meanwhile, Sen. Jon Kyl (AZ), in response to Bunning’s filibuster of unemployment compensation, helpfully noted: “In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.” Even newly minted Sen. Scott Brown gave Bunning’s efforts a thumbs-up:

The perception in Massachusetts and other parts of the country is that Washington is broken. And if it takes one guy to get up and make a stand, to point out that we need a funding source to pay for everything that’s being pushed here, I think that speaks for itself.

Here’s the best part: Bunning, along with every Republican in the Senate, voted against “pay-as-you-go” legislation. Republicans had thundered that the pay-go bill was a political fig leaf and that Democrats weren’t really serious about budget sanity. Considering that previous pay-go rules elapsed in 2002 under the Republicans’ watch, and that they also presided over the ballooning of the deficit, I suppose they’re experts on the subject.

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Evening Fix

Thursday, February 25th, 2010
Elbert Ventura



Elbert Ventura is the managing editor of the Progressive Policy Institute.

by Elbert Ventura

Some of the day’s best reads:

  • Peter Beinart urges Democrats to pass health reform through reconciliation: “The GOP actually has a point here: There is something undemocratic about passing laws that a majority of Americans oppose. We just don’t happen to live in a democracy; we live in a democratic republic.”
  • The Hill on Charlie Crist sounding more and more like an independent: “The campaign is definitely headed in a different direction, which is to be understood, what with its declining poll numbers. The question is what kind of direction.”
  • Politico on the left’s suspicions over a deficit reduction commission: “Liberals aren’t entirely enthralled by the concept of a deficit commission, let alone one that gives a voice to a prominent conservative such as former Wyoming Sen. Alan Simpson.”
  • Political scientist John Sides on conservatives and government spending: “Conservatives agree that the government spends too much. But ask them what to cut…”
  • A Denver Post photo essay on the U.S. offensive in Marjah.
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GOP Complaints on Health Care Process Ring Hollow

Wednesday, February 24th, 2010
Will Marshall



Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

Republicans are warning of ominous political consequences if the Democrats use budget reconciliation rules to help pass health care reform. It would be “a huge mistake,” averred Sen. Olympia Snowe, the chief object of Senate Democrats’ unconsummated quest for bipartisan cooperation on health reform.

Evidently, for the Democrats to resort to reconciliation would be an intolerable abuse of congressional rules, whereas the Republican habit of filibustering everything in sight is perfectly within bounds. Passing health measures by a simple majority vote, the GOP maintains, would be the political equivalent of nuclear war: It would pulverize what little remains of comity and good will in Washington.

It’s a little late for the GOP to be worrying about that. Nor are Republicans more convincing when they complain that it’s somehow illegitimate for President Obama to start the bidding in tomorrow’s health care summit with a plan derived from bills that have passed both houses of Congress.

“I don’t think the people like this any more than…the approach that came down the pike earlier,” House Republican Whip Eric Cantor said. “People are incredulous. I just think they are wondering, does the White House not get it?” He was referring, of course, to polls showing majority opposition to the main health care proposals before Congress.

Cantor seems to be arguing that shifting public attitudes matter more than election results, and that Congress shouldn’t pass legislation that doesn’t poll well. Does the House minority whip not get representative democracy? (It was a good thing he wasn’t around when Lincoln pushed Congress to enact a draft to win the Civil War.) And if Republicans really are so sure Democrats will self-destruct politically by passing Obamacare, why not lash them on?

One reason might be that the health care summit will highlight the embarrassing fact that Cantor and company offer no serious alternative to the president’s approach. (House Republicans last year labored mightily to produce a mouse of a bill that would cover just three million of America’s 40-plus million uninsured.) The real choice is between the president’s far-from-perfect health care reform, and none at all.

And in a way that’s too bad, because if we had a serious opposition, it might help the president push back against some of the bad ideas coming from his own party. An example: under pressure from labor and liberals, Obama has drastically scaled down and delayed an excise tax on expensive employer-paid health plans. Not only does that reduce revenue needed to pay for health reform, it also barely grazes an open-ended federal tax subsidy that economists believe contributes greatly to medical cost inflation. Rather than insist on limiting that government subsidy, many Republicans claim it’s a violation of Obama’s pledge not to raise taxes on the middle class.

In a similar vein, the Republicans have lambasted Obama’s proposal to cut hundreds of billions from Medicare to defray the expenses of expanding coverage. And so in its blindly partisan attacks on Obama’s push for health reform, the GOP has managed to 1) shred its credibility as a force for fiscal responsibility; 2) thwart efforts to rein in runaway health care costs; and 3) reinforce their well-deserved reputation as a party that measures compassion by the thimble-full.

On health care, the Republicans have hit the trifecta of demagoguery – which is why their complaints about parliamentary foul play ring hollow.

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Evening Fix

Tuesday, February 23rd, 2010
Elbert Ventura



Elbert Ventura is the managing editor of the Progressive Policy Institute.

by Elbert Ventura

Some of the day’s best reads:

  • Jagdish Bhagwati and Arvind Panagariya on trade protectionism: “The truth of the matter is that, frightened by competition from our exports, the American and European unions seek relief.”
  • Jonathan Cohn on medical malpractice reform: “The key is finding ways to fix the malpractice system so that it helps both physicians and the patients, rather than one at the expense of the other. And there are several promising possibilities for achieving that.”
  • NRDC’s Frances Beinecke on clean energy and jobs: “I believe America can still lead the clean energy market. If we pass strong climate legislation and focus our unparalleled innovation and entrepreneurial spirit, we can dominate the annual $230 billion clean energy investment the global clean energy industry is projected to attract by 2020.”
  • The CBO reports that the Recovery Act created up to 2.1 millions jobs.
  • The Hill compiled the 290 bills that have passed the House but have yet to be acted on in the Senate.
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Obama’s Deficit Commission

Thursday, February 18th, 2010
Will Marshall



Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

The present era of polarization may have reached its nadir on January 25, 2010. That was the day Senate GOP leader Mitch McConnell led a filibuster to kill a deficit reduction commission — something he’d loudly demanded earlier. All it took was President Obama’s endorsement to turn McConnell and the six Senate Republicans who co-sponsored it against the bill.

Senate Republicans, have you no shame? Well, keep in mind that this is the same gang that’s now posturing as the saviors of Medicare, which Obama proposes to cut to help pay for health care reform.

Undeterred by the flight of the GOP’s fiscal chicken hawks, President Obama today unveiled an 18-member special commission to tackle the nation’s budget crisis. Named to lead the panel were Democrat Erskine Bowles, chief of staff to President Clinton, and former Senate Republican leader Alan Simpson.

It’s easy to be cynical about such “blue ribbon” commissions. They are supposed to signal that political leaders are serious about solving intractable problems, but often convey the opposite — a craven desire to punt tough decisions to retired dignitaries who don’t have to face the voters.

And setting up a commission by executive order is distinctly inferior to enacting one into law, since the president can’t compel Congress to give his panel’s recommendations an up-or-down vote. Speaker Nancy Pelosi has offered distinctly unenthusiastic assurances that the House will consider the commission’s suggestions.

Still, such commissions are sometimes the only way to break a political impasse — recall the 1983 Greenspan Commission for Social Security reform, or the congressionally mandated military base-closing commission. Such action-forcing mechanisms give politicians just enough bipartisan cover to embolden them to vote for reforms everyone knows are necessary if unpopular.

In a bow to political reality, the president’s commission will report its recommendations after the midterm election, before the end of the year. Presumably, that will tee up the debate for the next Congress, while giving the economy this year to gain strength and whittle down the unemployment rate.

That’s the right timing, and it belies claims by Obama’s liberal critics that highlighting the urgent need to put America on a more sustainable fiscal course is antithetical to economic recovery. After all, only about $300 billion of Obama’s $800-plus stimulus package has been spent, and Congress is crafting a jobs bill intended to give a smaller but more targeted boost to employment.

But here’s what really irks Obama’s critics on the left: they see the commission setting the stage for an assault on entitlement programs. They are not entirely wrong: it’s the unsustainable growth of Medicare, Medicaid, and Social Security that’s driving America’s long-term fiscal woes. But progressives ought to have more confidence in Obama’s ability to take a balanced approach to reforming the Big Three. It’s better, and safer, to do that now rather than risk handing off the job to some future Republican president who may be hostile to the idea of social insurance.

The president’s commission must do what lawmakers in Washington won’t — craft a balanced program of benefit cuts and tax increases to slow the growth rate of health and retirement benefits and move them toward solvency. Otherwise, those programs will consume the equivalent of every penny Washington now raises in taxes, necessitating unprecedented tax hikes, or borrowing at levels that will jeopardize America’s growth and fiscal stability.

But the commission shouldn’t just look at the Big Three, it should also look at the federal government’s massive spending on tax entitlements. Washington spends over $1 trillion a year on tax breaks and subsidies, including such popular items as the mortgage interest deduction and exclusion of employer-paid health benefits, crop subsidies, and a raft of special bennies for politically influential industries, aka, corporate welfare. There are also lots of important breaks for low-income Americans, like my own favorite, the earned income tax credit. All of these tax expenditures have rationales and constituencies, none should be regarded as sacrosanct.

This will raise hackles among Republicans, just as talk of benefit cuts (which should be focused on upper income beneficiaries) makes Democrats nervous. Both the left and the right will have to give ground to cut a responsible, and politically sustainable, deal that can restore out nation’s fiscal health.

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Champion Enterprise, Not Paternalism

Thursday, February 18th, 2010
Will Marshall



Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

The following piece was written for a conference on progressive governance being held this week in London by the Policy Network, an international think tank dedicated to promoting progressive policies:

For many on the left, the near-collapse of America’s financial system during the winter of 2008-2009 was irrefutable proof of the failure of free market ideas. The new consensus — let’s call it the anti-Washington consensus — was solemnized by business and political elites in Davos last month. Fittingly enough, French President Nicolas Sarkozy delivered the eulogy for neoliberalism.

The Anglo-American model is dead. Long live state capitalism!

Not so fast. In America at least, popular attitudes have not lurched in a more interventionist or social democratic direction. If anything, there’s been a backlash against the emergency measures the Obama administration has undertaken to unlock credit, bail out big banks holding worthless securities, reduce home foreclosures, and keep big U.S. auto companies afloat.

That has perplexed and frustrated Democrats, who believe the government should get more credit for again saving capitalism from the capitalists, just as it did in Franklin Roosevelt’s day. But Wall Street’s fall from grace doesn’t automatically translate into rising public receptivity to a more active state. Anti-business and anti-government attitudes can and do co-exist easily in the American mind.

President Obama maintains, quite plausibly, that Washington’s decisive intervention kept the economy from tumbling into the abyss. But unprecedented public deficits, the government’s effective takeover of large finance and auto companies, and, yes, Obama’s push for comprehensive health care reform, also seem to have resurrected old fears about “big government.”

One likely reason is the sheer, pharaonic scale of government spending to rescue the economy: nearly $4 trillion when you add the Federal Reserve’s efforts to pump liquidity into financial markets, aid for failing banks, last year’s $787 billion “stimulus” plan, and another $100 billion jobs bill for this year. And many in middle America are barking mad that political elites have used tax dollars to shield economic elites from the consequences of their own greed and ineptitude. This is especially true of the independent voters who helped Obama to win a solid majority in 2008, but whose defection over the past year has fueled Republican victories in elections in Virginia, New Jersey, and, most shockingly, the liberal bastion of Massachusetts.

Meanwhile, the U.S. economy is growing again, by a gaudy 5.7 percent of GDP in the last quarter of 2009. There’s been little crowing at the White House, however, not when many small businesses still can’t get credit, people continue to lose their homes, and unemployment remains stuck in double digits.

For Obama and the Democrats, the central economic challenge is not to sell some new model of state-managed capitalism to a public already worried about government spending and overreach. It’s to rebuild the American economy’s capacities for brisk innovation and job creation. That will require striking a careful balance between new regulation and entrepreneurial risk-taking.

With Wall Street again reaping huge profits (and dishing out fat bonuses), some sort of financial regulation likely will pass soon. The key tasks here are reducing moral hazard by ensuring that no financial institution becomes too big or interconnected to fail, raising capital requirements to curb excessively leveraged speculation, and creating transparency in the trading of exotic financial products like derivatives.

But what the country needs even more is a progressive opportunity agenda that emphasizes technological innovation, small business creation, American competitiveness, fiscal discipline, better schools, and middle-class jobs. Such an agenda would include the following elements:

An aggressive infrastructure initiative. Washington must reverse decades of neglect and double or triple spending aimed at modernizing America’s aging and inadequate public infrastructure. Even that, however, won’t be nearly enough, which is why progressives are calling for a National Infrastructure Bank to leverage private investment in high-speed rail, intelligent transportation systems, a smart electricity grid, and next-generation broadband.

A big boost for clean and efficient energy. The United States needs to put a price on carbon, which would raise billions to invest in developing clean fuels and technologies. Unfortunately, Obama’s “cap and trade” proposal is languishing in Congress, a victim of Republican obscurantism on climate change.

More exports. Obama wants to double U.S. exports, but the White House has not pushed Congress hard to pass the U.S.-Korea trade pact. Nor has it confronted China and other Asian nations whose currency manipulations keep U.S. (and European) goods at a competitive disadvantaged.

Fiscal restraint. America’s heavy borrowing from abroad weakens the dollar and deepens our reliance on foreign creditors. To maintain the nation’s fiscal integrity and independence, Obama must walk a fine line between winding down our enormous public deficits and debts and continuing to pump up domestic demand. The key is to reduce the unsustainable growth of public health care costs, which is why Obama is right not to give up on health care reform this year.

An entrepreneurial climate. Over the last three decades, firms less than five years old have accounted for nearly all net job creation in the United States. U.S. progressives should embrace policies that foster innovation and entrepreneurship: more public spending on research, a light-handed approach to regulating and taxing new enterprises, fiscal discipline to keep capital costs low, dramatic improvements in education and preferences for skilled immigrants.

In the ideological hothouse of Washington, it’s natural for Democrats to argue that the financial crisis has discredited market fundamentalism. But the antidote isn’t more government, it’s a progressive model for innovation-led growth that champions individual enterprise and middle class aspiration.

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Where Today’s Large Deficits Come From

Wednesday, February 17th, 2010
Elbert Ventura



Elbert Ventura is the managing editor of the Progressive Policy Institute.

by Elbert Ventura

One year after the passage of the Recovery Act, the Obama administration continues to come under fire from Republicans over the size of the deficit. The administration’s propensity for spending, these critics argue, are behind the eye-popping deficits we see today. But as the Center on Budget and Policy Priorities makes clear in a new report, that is simply not true. Analyzing debt projections based on Congressional Budget Office estimates, the report found that the recession that began in 2008 battered the budget by driving down tax revenues and forcing an increase in government spending programs. In the near-term, the Obama administration contributed to the deficit with its financial rescues and stimulus plan, which economists agree saved the country from plunging into a deeper recession. But the effects of those programs pale in comparison to the long-term harm done by the Bush tax cuts and the wars in Iraq and Afghanistan, according to the CBPP.

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A Fiscal Dr. Strangelove

Friday, February 5th, 2010
Will Marshall



Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

Paul Krugman wants Americans to stop worrying and learn how to love the bomb – the fiscal bomb that is.

Just as Dr. Strangelove in the eponymous film classic assures the president that America can survive thermonuclear war, Krugman professes blithe disregard for the impact of massive government borrowing on U.S. fiscal stability.

The public and a good many economists may beg to differ, but what do they know? Voter concern about deficits has grown salient over the past year, as Washington has spent trillions to prop up the economy. Last March, a slight majority approved of President Obama’s handling of the federal budget deficit; in January, a CNN/Opinion Research poll found that 62 percent disapprove.

Krugman dismisses such concerns as “hysteria” and puts them down to a combination of economic ignorance and Republican propaganda.

On one point, the intensely partisan Krugman is dead right: GOP credibility on fiscal discipline is shot to pieces. The Bush Republicans squandered the budget surplus President Clinton bequeathed them on tax cuts and profligate spending. In 2003, they rammed through Congress a trillion-dollar prescription drug benefit for Medicare recipients but somehow forgot to pay for it. Quite a contrast to President Obama, who took pains to insist that Congress fully offset the costs of his health reform plan – with Republicans all the while hooting inanely about “socialism” from the peanut gallery.

But on the fundamental question – whether progressives should ignore America’s huge and growing fiscal imbalances – Krugman is flat wrong. GOP hypocrisy aside, plenty of progressive economists are sounding the fiscal alarm.

Jeff Garten, for example, believes America’s ballooning national debt will lead to “the slow but inexorable decline of the U.S. dollar,” undermining a key source of U.S. prosperity and influence in the world.

In a compelling Time essay, Jeffrey Sachs argues that the mounting public debt is symptomatic of a breakdown in political responsibility in Washington that stymies the nation’s progress. Republicans won’t abandon their anti-tax fetish, Democrats won’t rein in spending, especially on fast-growing entitlements, and the result is paralysis. “Until both political parties make a serious effort to improve the performance of government while shrinking its swelling deficits, Americans will watch both their quality of life and their country’s standing in the world erode,” he maintains.

Liberals, says Sachs, are wrong to cite deficit spending during the New Deal as proof that Americans shouldn’t worry about government borrowing today. During the height of the Depression, he notes, the federal government was running deficits of around about 5 percent of GDP as opposed to 10 percent today. Back then, he notes, we financed our debts domestically. Today about half of our national debt is held by foreign creditors, especially China and Japan.

Now, Sachs is neither an economic ignoramus nor a Republican stooge. He believes, as Krugman does, that public investment is an imperative to create jobs, rebuild U.S. infrastructure, and restore shared prosperity. But unlike Krugman, he recognizes that Washington’s unwillingness to defuse the public debt bomb is relentlessly squeezing out fiscal space for such investment.

President Obama gets it too. He is trying to strike a balance between massive, short-term spending (although not massive enough for Krugman) to stimulate the economy, and the need to restore fiscal discipline over the long haul by freezing domestic spending and creating a bipartisan commission to tackle entitlement reform.

That’s not easy, and he deserves more help than he is getting from liberals like Krugman who pose a false choice between progressive reform and fiscal responsibility.

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Another Teachable Moment

Friday, February 5th, 2010
Ed Kilgore



Ed Kilgore is a PPI senior fellow, as well as managing editor of The Democratic Strategist, an online forum.

by Ed Kilgore

Sen. Richard Shelby (R-AL) has done a very irresponsible thing that nonetheless offers Democrats a classic “teachable moment” about the true fidelity of Republicans to fiscal discipline. Shelby put a hold on all presidential appointments (70 are pending at present ) until he gets his way on a couple of big projects — one involving a Shelby appropriations “earmark” — benefiting Alabama.

Some may recall that during the 2008 presidential campaign, Republicans talked as though earmarks were the primary cause of the federal government’s budget problems. And here’s one of their own gumming up the entire executive branch over one of them, while also trying to control the exact language of a federal contract on another project to steer money to his own state.

Shelby’s action could also help draw attention to the disgraceful pattern of Republican obstruction of presidential appointments, which has left dozens of federal agencies without key personnel.

“Holds” by senators are an atavistic tradition in the first place. Democrats should not let Shelby get away with the unprecedented step of a “blanket” hold, in order to shake down the administration for earmarked money, even as his party demagogues endlessly about runaway spending. Congressional Republicans should finally begin to pay a political price for their hypocrisy and cynicism on fiscal issues.

This item is cross-posted at The Democratic Strategist.

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Translating Growth into Jobs

Monday, February 1st, 2010
Will Marshall



Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

The U.S. economy ended 2009 with a bang, growing at a torrid pace of 5.7 percent in the final quarter of the year. That’s an impressive number at any time, but the Obama administration isn’t popping corks because, with at least 10 percent of Americans out of work, the nation’s mood is still in recession.

Many economists attribute the expansion to a one-time surge in business purchases of goods and equipment. Take away this “inventory bounce,” and growth was only around 2.2 percent, the same as the third quarter. And they worry that growth will sag when the government runs out of stimulus money this year.

In normal times, economic growth eventually translates into more jobs. But these are not normal times, and with the midterm election looming on the horizon, President Obama wants to goose the pace of recovery. His new budget for 2010 includes $100 billion to stimulate job creation.

In his State of the Union address, the president outlined a bundle of sensible if modest steps to induce community banks to lend to small business, speed up business investment in new plant and equipment, and encourage U.S. companies to create jobs at home instead of shifting operations overseas. All this could help on the margins, but in reality there is little that this or any president can do to plug the jobs gap.

According to Brookings Institute economist Gary Burtless, we need more than eight million more jobs to bring the unemployment rate down to 4.5 percent, or close to what economists define as “full employment.” Given the scale of the challenge, and the risk of a “double dip recession” as federal spending ebbs, some liberals are clamoring for another big stimulus package.

But the White House also has to keep an eye on America’s unprecedented run-up of debt. That’s why the president has called for freezing domestic spending in 2011 and endorsed a bipartisan commission to tackle entitlement reform.

Unlike his critics, Obama has to balance competing national priorities, not simply pick one at the expense of another. Given the economy’s hopeful trajectory, his decision to tweak job creation rather than massively expand government spending is the right one, and it deserves progressives’ support.

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