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Obama’s “mess of pottage”

9:45 am in Uncategorized by Eric Laursen

Barak Obama is the first Democratic president to advocate cutting Social Security benefits. Whatever happens next, this is a historic change of direction for his party and an ominous turning point for the American social/economic compact.

Esau Selling His Birthright

In the Bible—Book of Genesis, to be precise—Esau returns, exhausted and famished, from working in the fields, and sees his brother Jacob eating. He asks if he can share, and Jacob says yes—but as the price of his “mess of pottage,” he must give Jacob his birthright. He agrees, and thus is inaugurated the prosperity of the descendants of Jacob and the impoverishment of Esau’s.

This ancient tale is being repeated today in Washington, where the first months of the second Obama administration are shaping up as a historic disaster for American working people. It’s also a momentous turning point for the Democratic Party, now led by a business and professional elite convinced that to survive as a brand, the party must serve as executioner of the social contract that created that brand to begin with.

First, the Obama administration, and congressional Democrats, agreed to a deal to end the artificial “fiscal cliff” crisis that made the vast majority of the Bush tax cuts permanent—in fact, rescued them from imminent expiration. In return, they got a temporary extension of unemployment benefits, a two-month delay of sequestration, and extension of child care and tuition tax credits. All of which are quite nice in their own way, but small potatoes—nothing that Washington couldn’t easily scuttle at some point in the near future, just as it cast aside Obama’s signature anti-poverty measure, the Making Work pay tax credit, when that one became inconvenient.

The president, in other words, received a “mess of pottage” in return for surrendering something of inestimable value to the Republicans, something the GOP had been fighting for a decade to consummate. Crucially, only nine of the 77 members of the House Progressive Caucus voted against the bill, encouraging the White House that it could go further and making clear to voters from working households that their ability to hold their alleged champions in line is fading. The fiscal cliff drama served notice that less and less of an effective countervailing force exists to the Washington consensus, deepening the chasm that separates The Village from any meaningful connection with the 99%.

Now, it’s happening again, via the president’s budget. This time, the deal is for another $680 billion-some in revenues over 10 years by limiting tax breaks. This is calculated to please the deficit hawks by raising Obama’s 10-year deficit reduction total to $4.3 trillion, topping the $4 trillion that the center-right cargo cult has touted as its magic number. In return, the White House proposes, quite literally, to surrender the Democratic Party’s birthright—its stewardship of Social Security, the capstone of the New Deal and the foundation of working Americans’ party loyalty—what remains of it, that is.

By beginning the process of redefining Social Security downward, the Obama administration is taking the first major step toward dismantling the Democratic “brand”—its commitment, never perfect to begin with, to provide a social underpinning to American capitalism. For the vast majority of Americans, the “Democratic Party” label means less and less. Read the rest of this entry →

Paul Ryan’s Hammock

9:59 am in Uncategorized by Eric Laursen

How stands the Social Security discussion in Washington following State-of-the-Union night? More or less where it was before. Which, for defenders of the program is mostly not good.

President Obama honored his pledge to congressional Democrats over the previous weekend not to endorse cuts to the program. In fact, he went a bit farther, rejecting any plan that would include “slashing benefits for future generations.”

There’s more to say about that. But first, what about Paul Ryan and that Michele Bachmann? Neither of them mentioned Social Security. TV’s talking heads, both before and after the SOTU and the two response speeches, couldn’t stop repeating themselves that the Republican leadership had a big problem: the Tea Partiers were out of control and embarrassing the party with their obstreperousness and their fringe views.

Nonsense. Bachmann’s speech was if anything less of a fire-eating act than Ryan’s, mostly confined to self-congratulation at the Tea Party victories in November, statistics about unemployment and the national debt, and an invocation of the raising of the flag at Iwo Jima (more than 65 years ago). Her actual policy positions were completely unsurprising: repeal Obamacare, pass a Balanced Budget Amendment, cut spending to create a “leaner” government.

Nothing Bachmann said veered even slightly from the official position of the Republican leadership. If anything, the party benefited from her speech, since it allowed them to use prime TV airtime to appeal directly to Tea Party voters who were perhaps turned off by the leadership’s propensity to make deals with the administration during the recent lame-duck session. She’s not a rebel. She’s a bridge to the new wave for Boehner, McConnell, and company. . . . Read the rest of this entry →

The Payroll Tax: Just Another Tax?

4:55 am in Uncategorized by Eric Laursen

What does it mean that the U.S. no longer has a permanent tax code? That every major tax Americans pay, including income tax and the payroll tax covering Social Security, is now a temporary measure subject to — effectively — mandatory revision by Congress in the next one to two years? With passage of the Obama-McConnell “stimulus” package, American government is entering a fun-house period like no other in its history.

The tax cut/stimulus bill passed, of course. Indeed, the skids were really greased on this baby (to use then-Treasury Department official Bob Rubin’s choice phrase) like nothing since the 1983 Amendments to the Social Security Act. Here’s how the Wall Street Journal describes the situation we’re about to be living under:

Welcome to the world of the temporary tax code.

In the late 1990s, there were typically fewer than a dozen tax provisions that had just a limited lease on life and needed to be renewed every year or so.

Today there are 141.

Now Congress, taking up a deal worked out between the Obama administration and Republican leaders, is poised to turn the whole personal income-tax system into something of a temporary structure. The plan embraces a broad range of provisions—an extension of Bush-era rates, a new estate-tax formula—but for only two years. A payroll-tax cut in the bill is for a single year.

This means that if the compromise passes largely intact, the U.S. will have no permanent regime governing levies on salaries, capital gains and dividends, the Social Security tax, as well as a slew of targeted breaks for families, students and other groups. This on top of dozens of corporate-tax provisions that already were subject to annual renewal.

Word on the street in Washington is that the Obama-McConnell deal, which includes a one-year, partial payroll tax holiday – the first such interference with the revenue stream for Social Security in the program’s history – is just the first of a series of deals between the White House and the Republican leadership. The next step will be a deal to be concluded as part of negotiations to raise the debt ceiling – a necessary act of Congress if the federal government is to keep funding its activities past this coming spring.

As described by Robert Kuttner in Politico.com, the deal will be for the president to propose adopting much of the agenda the co-chairs of his deficit commission paid out, including cutting Social Security. doubtless, this will raise a torrent of opposition. Roger Hickey of Campaign for America’s Future is calling for working Americans to flood the White House with faxes, emails, and phone calls demanding that he stop this exercise in self-immolation and refuse to be blackmailed over the debt ceiling increase.

The problem is the situation set up by the Obama-McConnell deal. To put this in perspective a bit, payroll taxes have always been a thing removed from the rest of the tax code. Changes in payroll tax rates have never been negotiated in tandem with any other federal tax, because they’re dedicated to one purpose only: funding Social Security.

Today, we’re being told that payroll taxes should be reduced. This despite the fact that the program is expected to face a shortfall at some point in the future, and for a reason that has nothing to do with Social Security itself: economic stimulus. Of course, getting the economy moving again is a worthy goal, and Obama is replacing the lost funds out of general revenues. But the point is that this is a breach of faith with the millions of people who pay payroll tax with the understanding that it will be used to insure them against poverty in old age, as survivors, or in account of a disability.

Thanks to this exercise in bipartisanship, there will no longer be anything sacrosanct or special about payroll taxes. They will be merely one more set of chips in the now endless poker game over how to manipulate the U.S. tax system. This year, and next year, and every year after that. The Republican leadership has made clear that the only way to end this state of flux is to permanently extend the Bush tax cuts, abolish the estate tax, and begin phasing out Social Security and Medicare.

That’s not going to happen right away. But the way is being prepared. Because the inevitable result of putting payroll taxes in play is that Social Security itself will stop being regarded as singular either. It will be just another government program, not a social insurance system built on collective trust and participation.

Perhaps this shouldn’t be surprising coming from Obama. Historically, he can be seen as the third of America’s post-New Deal American Democratic presidents. The first was Jimmy Carter, who once surprised one of the program’s godfathers, Wilbur Cohen, by saying, “But Social Security is not sacrosanct.”

Carter had to scuttle an attempt to cut the program that his HHS secretary cooked up; Bill Clinton came close to making a deal with Newt Gingrich. Both had to be persuaded not to go down that path by a vigorous grassroots campaign against such a move. An even stronger effort is going to be necessary this time, because the payroll tax has already been compromised, and because the discussion is no longer a relatively simple one about Social Security. It’s about the entire U.S. tax code.

In this fun-house discourse, the inevitable question is, If we can reform the tax system be reducing income tax rates and eliminating tax loopholes, why can’t we “reform” payroll taxes as well? The slippery slope leads from there.

Bowles-Simpson: The Unequal Marriage of Reaganomics and Rubinomics

12:54 pm in Uncategorized by Eric Laursen

The Bowles-Simpson plan isn’t a fair and equitable way to reduce the long-term federal deficit, whatever its co-authors might claim. In fact, it’s the biggest proposed experiment in supply-side economics since early Reagan.

Long story short: The proposal put on the table last week by the co-chairs of the president’s National Commission on Fiscal Responsibility and Reform is essentially a wedding of Rubinomics and Reaganomics. As such, it’s what we might get if Bill Clinton and the late Ronald Reagan were locked in a room together and required to cut the long-term budget deficit – without any regard for the impact of their handiwork on low- and middle-income people.

You’ve probably guessed which partner has the upper hand in this deal. Read the rest of this entry →

“Gaming” the System, Again

10:49 am in Uncategorized by Eric Laursen

The Website Industry Gamers reports that Erskine Bowles, co-chair of President Obama’s deficit commission, has approached Microsoft about creating a deficit-reduction video game to help “educate” the public about the need for fiscal austerity. Bowles, apparently, sees the commission’s work as not just to suggest ways to cut the deficit but to convert the unconverted.

To anyone who was around and thinking about the deficit during the first Clinton administration, the deja vu is overwhelming. Back then, Bill Clinton, in appreciation of Bob Kerrey’s vote for his first big package of economic legislation, let the Nebraska senator run a Bipartisan Commission on Entitlement and Tax Reform: the direct precursor of Obama’s National Commission on Fiscal Responsibility and Reform. Read the rest of this entry →