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Everything Should Not be on the Budget Cutting Table: The Case for Expanding Public Investment

Friday, July 16th, 2010
Robert Atkinson


Dr. Robert D. Atkinson is the founder and president of the Information Technology and Innovation Foundation, and the author of The Past and Future of America’s Economy: Long Waves of Innovation That Power Cycles of Growth (Edward Elgar, 2005).

by Robert Atkinson

The International Monetary Fund recently scolded the U.S. government for running large budget deficits. Leaving aside the absurdity of cutting deficits when unemployment is still extremely high, it’s clear that at some point – as joblessness declines toward 5 percent – deficit reduction will need to begin in earnest. But the real question is how to do that. There’s a risk that the Washington economic class – grounded as they are in 20th century neo-classical economics — will fail to balance the twin imperatives of fiscal discipline and public investment.

Indeed the common refrain that has become the new “group think” in DC is that “everything should be on the table” when it comes to addressing the debt. For example, the Bipartisan Policy Center’s Debt Reduction Task Force says, “everything should be on the table.” Even President Obama, who has at least rhetorically talked about the need for increases in public investment and fought to include public investment in the stimulus, now says that everything should be on the table. Other groups echo this intellectually easy, but intellectually simplistic, position. Pete Peterson’s Concord Coalition likewise calls for “applying budget discipline to all parts of the budget.” The New America Foundation’s Committee for a Responsible Budget supports a budget freeze on all discretionary spending. For these budget hawks, subsidies to farmers to produce crops that aren’t needed fall in the same category as funding for the National Science Foundation to advance science and technology critical to our nation’s future: they both cost money and both should be cut.

The Government’s Role

But there are some things that governments do – on the tax and spending sides – which drive productivity, spur innovation, improve health, clean up the environment and create other benefits that most certainly should not be on the table. The National Commission on Surface Transportation Financing (which I had the honor of chairing) recently highlighted a federal highway and transit funding gap of nearly $400 billion over the next five years. Increased federal support for highways and transit would lead to significantly greater societal benefits (reduced traffic congestion, higher productivity) than the costs in revenues. Yet some groups wave the budget red flag to oppose expanded infrastructure investment, even if increased user fees, such as the gas tax, pay it for. As ITIF has demonstrated, increasing the Research and Experimentation Tax Credit from 14 to 20 percent would return $9 billion more to the Treasury than it would cost. And as ITIF and the Breakthrough Institute have shown, solving climate change requires significant increases in federal support for clean energy innovation, but the benefits (saving the planet) are massive.

If neo-classical-inspired budget hawks want everything to be on the table, liberal Keynesians want to put practically nothing on the table, except higher taxes on the wealthy and business. For example, economist Jamie Galbraith would take entitlement reform off the table. His solution: pray the Chinese keep lending us money. Likewise, Jeff Faux, founder of the liberal Economic Policy Institute argues that, “The deficit projections no more reflect a crisis of “entitlement” overspending than they reflect a ‘crisis’ in any other category of spending, like military spending or agricultural subsidies. Sensible governance understands that the fact that a program area is expanding does not make it the source of fiscal imbalance. But with entitlements off the table, you can’t solve the government’s fiscal problems simply by raising taxes on the rich.

All Spending Is Not the Same

What’s behind this widespread unwillingness to prioritize investment? Budget hawks fear that sparing one item from the chopping block will only validate the demands of interest groups to exempt their pet programs. In addition, many adhere to a neo-classical economics perspective, which holds that government plays a negligible role in economic growth and should be neutral with regard to private sector activity. In the purest form of this thinking, everything is on the table, because nothing is more important than anything else. To paraphrase Michael Boskin, a neo-classical Bush I economist, a dollar of public investment on computer chips has the same societal value as a dollar spent on potato chips. But government should be anything but neutral. Science and infrastructure funding is more valuable than farm subsidies. Government support for research in computer chips is more valuable than support for potato chips.

For liberals, reducing spending on entitlements will not only harm working Americans, but will also reduce economic growth, since Keynesian doctrine holds that growth comes from increasing aggregate demand – meaning pump more money into the economy, period.

In contrast, an innovation economics approach to the budget distinguishes between spending on consumption and spending on investment. For innovation economics advocates, all spending (either on the tax or expenditure side) should be on the table, and all investment (on the tax and expenditure side) should be off the table.

Tax, Cut and Invest

The last time Washington paid attention to deficits was in the first Clinton term. At that time PPI Vice President Rob Shapiro wrote a series of reports with the title, “Cut and Invest.” The notion was that we should cut unnecessary spending and use a significant share of the savings to invest in the nation’s future, including education, infrastructure and research. That was the right message then and it is the right message now. Although today, such a report might be best titled, “Tax, Cut and Invest.” To solve the budget deficit in a way that enables the significant increases needed in investment, we need to raise some taxes, cut some spending and increase some investment.

The general outline should look like this: On the tax side, we should let the Bush tax cuts on the wealthy expire, including: dividend taxes, estate taxes (above a certain modest size) and top marginal rates. We should increase the gas tax by at least 15 cents a gallon (and index it to inflation) and at the same time institute a carbon tax. We should consider a border-adjustable business activity tax. We should eliminate the home mortgage interest deduction. (Home ownership has many societal benefits, but as we see from other nations without these large tax incentives, nations can get high levels of home ownership without wasteful subsidies.)

On the spending side, we need to deal with entitlements, including: progressive indexing of Social Security benefits and increasing the retirement age, continued health care reform — particularly focused on driving innovation to cut costs and cutting entitlements to farmers — farm subsidies. This should be a gradual process to spread the pain over time.

And most importantly, we should significantly expand investments. We need to expand investments in education and training, science and research, technology (including, but not limited to clean energy) and physical infrastructure. In order to ensure that companies in the U.S. are globally competitive and create jobs here at home, we need to expand corporate tax expenditures. For example, create a new corporate competitiveness tax credit that would include a much more generous credit for research and development, and a credit for business investments in workforce training and new capital equipment, especially software. Making these investments will cost money in the short run. But they will also generate returns to the economy and the government in the long term. In economic downturns, successful corporations don’t cut key investments because they know that these investments are vital to gaining market share and competitive advantage in the moderate term. Governments should think the same way.

So let’s stop talking about putting everything on the table and instead recognize that not only do investments need to be off the table, they need to get more from what’s on the table.

Rob Atkinson is president and founder of ITIF, a Washington-based think tank providing cutting-edge thinking on technology and economic policy issues.

Photo Credit: Gliko’s Photostream

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Recommendations on Curbing the National Deficit

Friday, July 2nd, 2010
Will Marshall


Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

The following is the is an excerpt from Will Marshall’s June 30 testimony before the National Commission on Fiscal Responsibility and Reform during the commission’s first public listening session:

Chairman Bowles, Chairman Simpson, and Members of the Commission, I appreciate the opportunity to appear before you to discuss ways to put America on a fiscally sustainable course.

Once unemployment rates start to fall, U.S. policy makers must be prepared to pivot sharply from fiscal stimulus to fiscal restraint. Otherwise, a large and growing federal debt will deplete our capital stock and thereby limit future economic growth. It will divert resources from productive investment to interest payments on the debt, half of which is already held by foreign lenders. And it will shake investor confidence, here and abroad, in the fundamental soundness of the U.S. economy, eventually driving interest rates up and the dollar down.

Despite these dire and entirely foreseeable consequences, too many federal policy makers remain in denial about the need for fiscal discipline. You have taken on what many consider a Mission Impossible: forging a bipartisan consensus on how to defuse the nation’s debt crisis. That’s put you in the crosshairs of extreme partisans of the left and right, who imagine this problem can be solved strictly at the other side’s expense. By refusing either to cut spending or raise taxes, the two have joined in a tacit conspiracy to bankrupt the country.

Common to both is the assumption that you can have fiscal responsibility, or you can have progressive government, but you can’t have both. We at the Progressive Policy Institute have always rejected this false choice. We believe that a progressive government can and must live within its means, and that if it instead chases the illusion of borrowed prosperity, it’s not really progressive.

To paraphrase Franklin Roosevelt, Americans know instinctively that borrowing routinely to consume more than you produce is both bad economics and bad morals. I don’t think it’s an accident that, as public worries about deficits have been mounting, public trust in government has been plummeting.

So there’s a lot riding on your ability to forge consensus behind a bold and balanced plan to restore fiscal responsibility. Let me offer some thoughts on what that plan should include from the perspective of a “progressive fiscal hawk.”

Read the entire testimony.

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Marshall to Testify Before National Commission on Fiscal Responsibility and Reform

Wednesday, June 30th, 2010
Steven Chlapecka


Steven K. Chlapecka is the director of public affairs for the Progressive Policy Institute.

by Steven Chlapecka

NEWS RELEASE
FOR IMMEDIATE RELEASE
June 30, 2010

PRESS CONTACT:
Steven Chlapecka—schlapecka@ppionline.org, T: 202.525.3931

PPI President to Offer Recommendations on Curbing National Deficit

WASHINGTON, D.C. – Will Marshall, president of the Progressive Policy Institute, will testify today at 2 p.m. before the National Commission on Fiscal Responsibility and Reform during the commission’s first public listening session. Marshall will urge the commission to carefully examine national spending and create an ambitious but attainable fiscal target to address the United States’ mid- and long-term deficit challenges. The commission’s listening session live webcast can be viewed at http://www.whitehouse.gov/live.

“There is a common assumption in Washington that you can either have a fiscally responsible government or a progressive government, but you can’t have both,” said PPI President Will Marshall. “But, I’ve always rejected this assumption as a false choice. A progressive government can and must live within its means. It’s not really progressive if it chases the illusion of borrowed prosperity.”

The bipartisan National Commission on Fiscal Responsibility and Reform, created by President Obama to address our nation’s fiscal challenges, is charged with creating a plan after the midterm election to start unwinding America’s massive debt.

“We are looking for ideas,” said Commission Co-Chairman Erskine Bowles opening the commission’s third meeting on June 30, 2010.

Marshall is a member of the Brookings-Heritage Fiscal Seminar, a nonpartisan group of 16 federal budget and policy experts and frequently writes on the need to control the large and growing federal debt.

For further questions, please contact Steven Chlapecka at schlapecka@ppionline.org, 202.525.3931 (office), or 202.556.1752 (cell).

# # #

Marshall’s testimony as prepared for delivery.

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Ancient History

Friday, June 25th, 2010
Elbert Ventura


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

by Elbert Ventura

Bruce Bartlett has a column up in today’s Fiscal Times that drills home just how far the Republican Party has veered from the center over the last few years. Bartlett recounts the story of the 1990 budget deal, which saw President George H.W. Bush reach across the aisle and strike a compromise with Democrats in an effort to shrink the deficit. The compromise on Bush’s end is, of course, now legendary: a violation of his “read my lips” pledge during the 1988 campaign that there would be no new taxes.

Working with Democratic majorities in both houses, the president knew that getting through measures on the spending side of the ledger would require some concessions on his part. Bartlett sums up the outcome of the budget negotiations:

Budget negotiations finally concluded in late September. The final deal cut spending by $324 billion over five years and raised revenues by $159 billion. The most politically toxic part of the deal, as far as congressional Republicans were concerned, involved an increase in the top statutory income tax rate to 31 percent from 28 percent, which had been established by the Tax Reform Act of 1986. The top rate had been 50 percent from 1981 to 1986 and 70 percent from 1965 to 1980.

More importantly, the deal contained powerful mechanisms for controlling future deficits. In particular, a strong pay-as-you-go (PAYGO) rule required that new spending or tax cuts had to be offset by spending cuts or tax increases. There were also caps on discretionary spending that were to be enforced by automatic spending cuts.

The conservative base, of course, went ballistic. Their opposition was reflected in the House of Representatives, where 163 Republicans voted against the budget, while only 10 voted for it. The Senate was a little better — half of Republicans approved the deal. These days, getting half of the Republican Senate caucus to go along with anything the Democratic majority pushes would be a minor miracle.

The consequences of Bush’s budget deal are well known. The violation of his tax pledge would prove to be a devastating weapon for political opponents in the 1992 campaign. But the economic consequences are less heralded. President Clinton deserves credit for bringing sanity and surpluses to the budget in the 1990s, but budget experts agree that his predecessor’s budget deal contributed to that achievement.

Bartlett quotes the GOP’s tax-cutting commissar, Grover Norquist, to underscore conservative suspicion of budget deals: “Budget deals where they actually restrain spending and raise taxes are unicorns.” Only spending cuts, Norquist argues, are permissible. The way the right is moving these days, we’re more likely to see a unicorn than a GOP leader going against party orthodoxy on taxes.

Photo credit: sdk

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Follow the Leader

Wednesday, June 23rd, 2010
Will Marshall


Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

Congress isn’t always the first place you look for intellectually honest discussion of America’s fiscal dilemmas. Neither party has clean hands, yet each points smudged fingers at the other. How refreshing then to hear Rep. Steny Hoyer (D-MD) uttering blunt truths rather than partisan cant about America’s exploding debts.

“Unfortunately, we can blame our long-term deficit on policies that are almost universally popular,” the House Majority Leader said yesterday at a forum hosted by Third Way. “We’re lying to ourselves and our children if we say we can maintain our current levels of entitlement spending, defense spending, and taxation without bankrupting the country,” he added.

Hoyer also wondered aloud about the wisdom of permanently extending any of the Bush tax cuts absent a serious plan for long-term deficit reduction. It’s a pertinent question for both Republican anti-tax zealots and President Obama.

Even as they excoriate Obama and the Democrats for ballooning the federal deficit, Republicans insist that all the tax cuts passed in 2001 and 2003 be extended. That would cost a cool $3 trillion over the next decade, but don’t expect the GOP to fill that gaping hole in the federal budget with spending cuts. As Hoyer pointed out, Republicans have run like scalded dogs from Rep. Paul Ryan’s “roadmap” to a balanced budget, which calls for deep cuts in Medicare and Social Security.

But President Obama is in a bind as well. He has set up a fiscal commission to come up with a plan after the midterm election to start unwinding America’s massive debts. Many economists believe such a plan is essential to boost investor and lender confidence in the soundness of the U.S. economy, and to reverse the enormous imbalances in world financial flows.

During the 2008 campaign, however, Obama promised to extend the Bush cuts for the “middle class,” which he defined as families earning less than $250,000 and individuals earning less than $200,000. That promise helped him deflect GOP efforts to brand him as an inveterate tax hiker. But it carries a high price tag: about $1.4 trillion over the next decade according to the Joint Committee on Taxation.

What’s more, the nation’s fiscal outlook has deteriorated dramatically since the campaign. Massive public spending to avert a financial and economic collapse last year could push this year’s deficit to a record $1.7 trillion. The national debt now stands at about $13 trillion, and is on course to reach 90 percent of GDP by 2020 – not far from Greek-style proportions.

America really can’t afford any of the Bush tax cuts right now. Letting them expire would give the fiscal commission more room to devise a balanced package of spending and tax reforms aimed at whittling down our debts.

But with unemployment stuck in the stratosphere, and with Democrats apparently facing sizable losses in the midterm election, it’s hard to ask them to expose middle-class families to higher taxes – especially when Republicans can be counted on to indulge in monolithic, over-the-top demagoguery.

GOP Senate Minority Leader Mitch McConnell wasted no time in unloading on Hoyer yesterday. “It’s now official. Top Democrats on Capitol Hill are starting to signal their intention to raise taxes on the middle class,” he declared on the Senate floor.

To limit the long-term fiscal impact, centrist Democrats like Hoyer are considering a temporary extension of the middle-class tax cuts. Many liberals, however, are more concerned about the supposed dangers of “austerity” than the nation’s colossal debt burden. In fact, they want to make the cuts permanent now, while Democrats still enjoy big majorities in both Houses.

So chances are Congress will extend the middle-class tax cuts this fall, setting a less-than-inspiring example of restraint for the fiscal commission.

Nonetheless, Hoyer said House Democrats are pushing a budget resolution that would limit discretionary spending; cut deeper than the president’s budget; reinforce PAYGO rules; and commit to a vote on the fiscal commission’s recommendations. It’s a modest down payment on fiscal reform that’s unlikely to suppress demand and throw the economy into a tailspin.

In any case, the contrast between Hoyer’s fiscal realism and the GOP’s denial couldn’t be sharper. Let’s hope Democrats follow their leader.

Photo credit: Center for American Progress Action Fund

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Defense Spending Fight Could Turn Nasty

Thursday, May 27th, 2010
Steven Chlapecka


Steven K. Chlapecka is the director of public affairs for the Progressive Policy Institute.

by Steven Chlapecka

The following is an excerpt from Jim Arkedis’s op-ed in Forbes online:

The infamous Iron Triangle of Pentagon spending has officially challenged Defense Secretary Bob Gates.  This week, the House Armed Service Committee approved its FY2011 budget authorization, which funds certain high-visibility weapons systems explicitly cut by Gates in this year’s budget request.

Here’s how this works.  The Secretary of Defense submits a budget to Congress every year.  Then, the military services essentially go behind the Secretary’s back and provide Congress with a list of “unfunded requirements,” a wish-list of weapons that the services want Congress to buy, but that the Secretary has chosen not to ask for.  Congress is all too happy to provide money for these systems of dubious strategic or tactical merit because politically savvy defense contractors fill campaign coffers and open offices in most districts.

As an example, the “alternate engine” for the Joint Strike Fighter (Lockheed Martin) has become this year’s poster child for unfunded requirements.  Gate’s budget request cut funding for one of the two engine designs under consideration — the F135 engine (Pratt & Whitney) was prioritized over the F136 engine (GE, Rolls-Royce).

Read the full column at Forbes.

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Defense News: Senior DoD Leaders Warn of Rising Personnel Costs

Sunday, May 9th, 2010
Steven Chlapecka


Steven K. Chlapecka is the director of public affairs for the Progressive Policy Institute.

by Steven Chlapecka

PPI National Security Director Jim Arkedis argues that selective cuts on military benefits will not solve the defense personnel cost:

A November report prepared by Jim Arkedis of the Washington-based Progressive Policy Institute (PPI) put projected 2010 costs at $59.7 billion: defense health program ($28 billion); military health care ($21 billion); and retiree health benefits ($10.7 billion).

Arkedis of the PPI said the recent wars have helped push costs skyward.

“You can’t nit-pick the problem away through selective cuts to benefit programs because, first, there’s a core constituency of hard-working military members, families and retirees who depend on them,” he said. “And second, frankly, it wouldn’t solve enough of the problem anyway. The key cost drivers are large-scale military deployments abroad.”

To Arkedis, “The moral of the story is that if you want to control personnel costs, you have to be really careful about which wars you fight – they better be the right ones.”

Read the entire article.

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Clinton Talks Deficits and Debt at Fiscal Summit

Wednesday, April 28th, 2010
Will Marshall


Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

Politicians, especially at the national level, have little credibility on matters of fiscal discipline. Bill Clinton is an exception.

As president, Clinton inherited fast-rising budget deficits that threatened to capsize an economy emerging from recession. He made deficit reduction a top priority, incurring the wrath of liberals who accused him of governing like an Eisenhower Republican. Such complaints evaporated as jobs and economic growth surged in the late 1990s, and Clinton handed his successor budget surpluses.

In an act of monumental political irresponsibility, George W. Bush promptly squandered the surplus on big tax cuts and a $1 trillion-plus Medicare prescription drug entitlement that Republicans simply added to the nation’s charge account.

So it was worth listening to Clinton speak about the fiscal challenge facing President Obama, as he did today at a big “fiscal summit” in Washington sponsored by the Peter G. Peterson Foundation.

“I think this is a national sovereignty issue,” said Clinton, noting that foreign creditors hold 48 percent of America’s debt. As that debt grows –- Clinton’s treasury secretary, Bob Rubin, cited projections that it could reach 130 percent of GDP by 2030 –- so will the influence over U.S. policy of foreign bondholders.

As America grows older, Clinton said, “delivery systems” like health care and education become rigid and society in general tends to put a premium on security. It’s no accident that the government’s biggest programs are defense, Medicare, Medicaid and Social Security. By letting this programs continue to eat up a greater share of national output, politicians put a severe squeeze on discretionary programs that invest in the well-being of children and families.

“The future always has a smaller constituency than the present,” the former president said. “We’ve got to be a tomorrow country. We can’t do it if we mortgage our future to people in other countries.”

Clinton also noted that Congress is not organized to deal with America’s fiscal crisis. Congressional committees expand programs and mint new ones; none is charged with putting America back on a sustainable fiscal course.

Since Congress also punted on forming a deficit reduction commission, President Obama has been forced to empanel his own. As it met yesterday at the White House for the first time, Obama vowed that “everything will be on the table.”

Thanks to the cost of bailing out the financial sector and mitigating a severe recession, Obama faces a bigger fiscal challenge than Clinton’s. Budget deficits are now running at about $1.3 trillion a year, a whopping nine percent of GDP. The president’s commission needs to come up with a plan for whittling deficits down to size. But it’s even more important, as Clinton argued, to attack the structural roots of exploding debts, lest America lose control of its own economic destiny.

Photo credit: http://www.flickr.com/photos/bestrated1/ / CC BY-NC-ND 2.0

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Immigration, the Tea Partiers and the GOP’s Future

Tuesday, April 13th, 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

It’s long been apparent that immigration is an issue that is the political equivalent of unstable nitroglycerine: complex and dangerous. It arguably splits both major parties, although national Democratic politicians generally favor “comprehensive immigration reform” (basically a “path to citizenship” for undocumented workers who meet certain conditions and legalize themselves, along with various degrees of restriction on future immigration flows), and with George W. Bush gone, most Republicans oppose it.

It is of most passionate concern, for obvious reasons, to Latino voters, and also to many grassroots conservatives for which widespread immigration from Mexico into new areas of the country has become a great symbol of an unwelcome change in the nation’s complexion. But the fact remains that perceived hostility to immigrants has become a major stumbling block for Republican recruitment of otherwise-conservative Latino voters, which explains (along with business support for relatively free immigration) the otherwise odd phenomenon that it was a Republican administration that last pursued comprehensive immigration reform. (Some may remember, in fact, that immigration reform was and remains a big part of Karl Rove’s strategy for insuring a long-range Republican majority.)

I’m not sure how many progressives understand that immigration policy is a significant part of the narrative of “betrayal” that conservatives have written about the Bush administration — right up there with Medicare Part D, No Child Left Behind, and big budget deficits. And implicitly, at least, when Republicans talk about “returning the GOP to its conservative principles,” many would make repudiation of any interest in comprehensive immigration reform — or, as they typically call it, “amnesty for Illegals” — part of the litmus test.

This is one issue of many where professional Republican pols are almost certainly happy that Barack Obama is in office right now — they don’t have to take a definitive position on immigration policy unless the president first pulls the trigger by moving a proposal in Congress, and it’s unlikely he will until other priorities are met.

But at some point, and particularly if Republicans win control of the House in November and inherit the dubious prize of partial responsibility for governance, they will come under intense pressure to turn the page decisively on the Bush-Rove embrace of comprehensive immigration reform. And no matter what Obama does, immigration will definitely be an issue in the 2012 Republican presidential competition.

So it’s of more than passing interest to note that the pressure on Republicans to take a national position on this issue has been significantly increased by the rise of the Tea Party Movement.

At 538.com today, Tom Schaller writes up a new study of tea partiers and racial-ethnic attitude in seven key states from the University of Washington’s Christopher Parker. While the whole thing is of considerable interest, I can’t tease much of immediate political signficance from the fragmentary findings that Parker has initially released, beyond the unsurprising news that Tea Partiers have general views on race, ethnicity and GLBT rights that you’d expect from a very conservative portion of the electorate.

But one finding really does just jump off the page: Among the 22 percent of white voters who say they “strongly support” the Tea Party Movement in the seven states involved in the study, nearly half (45 percent to be exact) favor the very radical proposition that “all undocumented immigrants in the U.S. should be deported immediately.” That’s interesting not only because it shows how strong anti-immigrant sentiment is in the Tea Party “base,” but because it embraces a very specific and proactive postion that goes far beyond resistance to comprehensive immigration reform or “amnesty.” The finding is all the more remarkable because it comes from a survey on “racial attitudes”; I don’t know what sorts of controls Parker deployed, but polls that dwell on such issues often elicit less-than-honest answers from respondents who naturally don’t want to sound intolerant.

So if and when push becomes shove for the GOP on immigration, the shove from the Tea Partiers could be especially strong. And that won’t make the GOP happy: Republican elites understand that however bright things look for them this November (in a midterm contest that almost always produces an older-and-whiter-than-average electorate), their party’s base of support is in elements of the population that are steadily losing demographic ground. Beginning in 2012, that will become an enduring and ever-worsening problem for the GOP, and a position on immigration guaranteed to repel Latinos would be a very heavy millstone, just as Karl Rove concluded when he pushed W. to embrace comprehensive immigration reform.

The issue is already becoming a factor in the 2010 cycle. This is most obvious in Arizona, where J.D. Hayworth’s Tea-Party-oriented challenge to John McCain is in part payback for McCain’s longstanding support for comprehensive immigration reform. But it could matter elsewhere as well. You’d think that Cuban-American Senate candidate Marco Rubio would be in a good position to do very well among Florida Latinos. But actually, his potential achilles heel in a likely general election matchup with Democrat Kendrick Meek (who, as it happens, is an African-American with his own close ties to South Florida’s Cuban-American community) is a weak standing among Latinos, particulary the non-Cuban Latino community in Central Florida, attributable in no small part to his vocal opposition to comprehensive immigration reform. Indeed, even if he defeats Meek, if Rubio gets waxed among Florida Latinos, Republicans will have an especially graphic illustration of the continuing political peril of opposing legalization of undocumented workers, even when advanced by a Latino politician.

The real acid test for Republicans on immigration could come in California, the state where in 1994 GOP governor Pete Wilson fatally alienated Latino voters from his party for years to come by championing a cutoff of public benefits for undocumented workers (a far less draconian proposal than immediate deportation, it should be noted). Underdog conservative gubernatorial candidate Steve Poizner has made his campaign all about reviving Wilson’s proposal. If Republican front-runner Meg Whitman can crush Poizner without any accomodation of his views on immigration, it could help her overcome a problem with Latino voters that emanates not only from Democrat Jerry Brown’s longstanding ties to the Latino community, but from the fact that her campaign chairman is none other than Pete Wilson.

In any event, whether it’s now or later, in 2010 or in 2012 and beyond, the Republican Party is going to have to deal with the political consequences of its base’s hostility to the levels of Latino immigration, and to growing demands for steps ranging from benefit cutoffs to deportation of undocumented workers. With the Tea Partiers exemplifying instensely held grassroots conservative demands for a more aggressively anti-immigration posture, even as the political costs of obeying these demands continues to rise, Republicans will be juggling explosives on this issue for the foreseeable future.

This item is cross-posted at The Democratic Strategist.

Photo credit: http://www.flickr.com/people/vpickering/

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The Wait Is Over

Thursday, March 18th, 2010
Elbert Ventura


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

by Elbert Ventura

It took longer than expected, but the wait was worth it. The CBO score for the Senate health care reform bill and amendments that the House will vote on this weekend is now out (well, in leaked form anyway) and the numbers, at first glance, look good for reform’s prospects.

According to House Majority Leader Steny Hoyer, the legislation got slapped with a price tag of $940 billion over the next decade, more expensive than the Senate version, which makes sense since expanding coverage is one of the fixes the House wants to enact. But the CBO reportedly said the legislation would cut the deficit by $130 billion over the next decade and $1.2 trillion the decade after that — steeper deficit cuts than the Senate bill had. As Ezra Klein summed it up, “that’s more deficit reduction than either the House or Senate bill, and more coverage than the Senate bill.” Hoyer noted that it’s the biggest deficit reduction act since the 1993 Clinton budget.

It’ll be interesting to see how the bill achieves that goal. There had been word in the last 24 hours that the excise tax on Cadillac plans — something labor unions had opposed — had to be tweaked to make sure the legislation met its deficit-reduction aims. Will a more robust excise tax on high-end plans weaken labor’s support for the bill? One thing is certain: with the release of the CBO’s numbers, moderate Democrats concerned about the fiscal impact of the bill can now rest easier and support it.

One wait is over, but another one begins. With the official release of the CBO score later today, the clock officially begins on the 72-hour window that Democrats had promised to give members before voting on the legislation. This pegs the vote for Sunday — though Republicans have promised to pull out all the stops to delay the process.

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It’s All About Democratic Unity

Wednesday, March 17th, 2010
Will Marshall


Will Marshall is the president of the Progressive Policy Institute.

by Will Marshall

Politico

Forget about reconciliation and other parliamentary maneuvers. Forget, too, about Cadillac plans and the Cornhusker Kickback. On health care, we’re down to the heart of the matter: Can Democrats act like a disciplined, cohesive political party?

For decades, they’ve fought for the principle of universal and affordable health coverage. If they don’t pass health reform now, with medical costs mounting, with a president willing to go for broke and with sizable — and perishable — majorities in Congress, you have to wonder if they ever will.

There will be no shortage of excuses if they fail: a populist backlash against bailouts and joblessness; GOP obstructionism and rising public antipathy for Washington and Big Government in general.

But let’s face it: If health care reform crashes and burns, it will be because Democrats couldn’t summon the courage and internal coherence to deliver on a key progressive commitment.

Labor unions, Blue Dogs, single-payer stalwarts, favor-extorting moderates, Latinos, anti-abortion Roman Catholics — it’s no use singling out one culprit, because all the party’s tribes will have contributed to the debacle.

By holding firm for comprehensive reform, President Barack Obama has put his party, especially House Democrats, on the spot. He’s asking doubters to put their party’s collective interest above their personal interests and views.

That’s a tough ask, especially for those from marginal districts who could lose their seats by voting for the Senate bill. It’s easy for self-righteous lefties to brand them as trimmers or cowards, but swing-district Democrats can argue plausibly that a “no” vote would more accurately reflect majority sentiment among their constituents. Liberals from overwhelmingly Democratic districts have no such excuse.

Still, Congress is a national legislature, and its members have a responsibility to act in the national interest. For most Democrats, that surely means ending the injustice of leaving millions of Americans vulnerable to financial ruin or death due to illness or injury. It also means beginning to get a handle on the runaway growth of health care costs that bedevils U.S. workers and businesses.

While party unity isn’t the highest political value, being a member of a party does carry some obligation to its fundamental principles. Tactically, it makes sense for party leaders to give Democrats in tough districts a pass on tough votes — as long as there are votes to spare.

That’s not the case on health care reform. Speaker Nancy Pelosi needs every vote she can get.

Not one Republican will vote for the Senate bill. About a dozen or so anti-abortion Democrats say they won’t either. Pelosi can afford to lose only 37 of the party’s 253 members to get to the magic number of 216. That probably means persuading some of the 39 Democrats who voted against the House plan to support the more centrist Senate blueprint.

Moderate Democrats, including those in the 49 districts that Sen. John McCain won in 2008, face political risks. Voting to support a major health reform bill on a party-line vote could, conceivably, cost them their seats. But if Democrats again stumble on health care, it could also trigger a “wave” election, like 1994, which would engulf marginal seats.

Some party pollsters claim that Democrats already have lost the debate and can only make things worse by passing reform anyway. But a careful reading of polls shows that many skeptical voters don’t think the bills go far enough, and most favor key provisions such as banning insurers from cherry-picking healthy patients and setting up insurance exchanges.

Reasons for this ambivalence are complicated, but it’s probably not because voters have pored over the details of the Senate health bill or the “fixes” Democrats aim to pass on reconciliation. In any case, who thinks Democrats will gain public respect by giving up on their top priority?

Obama was elected on a promise to tackle the nation’s biggest challenges — with health reform as Exhibit A. Independent voters have drifted away from his winning 2008 coalition during the past year, in part because they are losing confidence in the Democrats’ ability to govern.

The party may thus have more to fear from wasting a year to produce nothing than from passing a controversial bill. Failure won’t just make Democrats look bad; it will also vindicate the Republicans’ hyperpartisan campaign to torpedo comprehensive reform.

Sometimes, parties gain even when they lose — especially when they stand on principle. The odds facing Obama and Pelosi and company are daunting.

But the task is doable — as long as enough Democrats recognize that their careers won’t amount to much if their party can’t deliver on its core commitments.

Read the column at Politico.

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Posted in Daily Fix, Fixing Our Broken Politics, PPI in the News | 1 Comment »

Knowing What You Paid For

Tuesday, March 16th, 2010
Elbert Ventura


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

by Elbert Ventura

‘Tis the season to fill out your tax forms — and, for many Americans, to complain about all the tax dollars that disappear into the maw of what they see as an indifferent government. But it doesn’t have to be this way. Democracy’s Ethan Porter has a great idea to increase Americans’ sense of investment in their government:

[L]et’s offer individual taxpayers a clear breakdown of what they’re getting in return for their taxes. The IRS should provide individual taxpayers with a receipt. To be as accurate a reflection of spending as possible, such a receipt would be mailed at the beginning of the year following the April 15 deadline. So, for example, I would receive a receipt for my 2009 tax return, filed in 2010, in the beginning of 2011 estimating where my money has gone thus far, and will go until I file my next return. Soon after, the president would unveil a new budget resolution, and, as April loomed, the process would begin again.

By necessity, such a receipt would be an estimate, broken down according to what each taxpayer had paid the previous April. (Only the portion of the budget consisting of money generated by individual taxpayers would be deconstructed for each person.) The receipt would necessarily represent a bit of an oversimplification–the federal budget is a monstrously complicated thing. For our purposes, comprehensibility, as opposed to comprehensiveness, should be prized. The text should be simple, and the accompanying graph should be clear. We have the capacity to do this already: Today, numerous outside groups, the Center on Budget and Policy Priorities probably the best among them, produce material along these lines. But they don’t do so in accordance with the federal government, and their work isn’t distributed to every taxpayer.

If done right, a receipt could have powerful and lasting consequences. It would make clear the enormous amount of goods and services provided by the government.

Even as conservatives have launched a largely successful crusade against taxes over the last couple of decades, public demand for services that the government provides hasn’t waned. The result is a disconnect: anger at the level of taxation — which has already been generally decreasing since the 1970s — and yet a steady expectation of goods and services from a government that relies on taxpayer money to sustain itself.

Considering the misconceptions the public has about where their taxpayer money goes, Porter’s idea could be a great corrective to the conservative narrative of a government squandering its tax dollars or prioritizing areas of less importance to them. As Porter points out, Americans tend to overestimate how much of the money goes toward things like welfare and foreign aid. When confronted with the fact that those numbers are actually small compared to other expenses like national defense and Social Security, taxpayers may see the check that they’re dropping in the mailbox every spring in a whole new light.

It’s no secret that the U.S. is going to have to find new ways to cut spending or raise revenues to steer us off our current path of fiscal disaster. An informed taxpayer might be more realistic about the hard choices necessary on both sides of the budgetary ledger. A receipt for our tax dollars will make for a less inflamed electorate — and, by extension, plant the seeds for a more reasonable fiscal politics.

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Posted in A New Framework for Growth and Equity, Daily Fix | 1 Comment »

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