The CBO has just published a snapshot of the results of the GOP’s “Tax Scam” combined with the Bipartisan Budget Act and the Consolidated Appropriations Act. Our GOP-dominated government has significantly cut revenues and increased outlays and our national debt will grow to the largest percentage since just after World War II.
This was not by accident or oversight. They were not just drunk with power.
This is part of their concerted war on the middle class and the poor. They will manipulate anger and fear to cement their power over us and the coup de grâce will be making us hand over our social insurance programs that allow us to live with dignity in this, the richest and most powerful country in the world.
The GOP now has two strategies they’re working on to deflect blame from themselves.
#1: Due to savage reviews of the bi-partisan Omnibus Spending bill from his supporters, Trump has demanded line-item veto power to retroactively cut out programs supported by Democrats. Although the 1974 Budget Act would allow a Senate rescission resolution to pass on a simple majority vote, this type of veto was declared unconstitutional by the Supreme Court in the past. Trump and congressional Republicans are considering forcing this to a vote anyway.
#2: The House is slated to vote this week on the incredibly cynical H.J. Res. 2, a balanced budget amendment to the Constitution. Those GOP unfortunate enough to be on 2018 ballots need to be able to say “I voted for a balanced-budget amendment” when confronted by angry constituents. They also want to get us used to the idea of cutting “entitlement” programs, by saying the word over and over with a negative spin and attaching to lots of homespun analogies, like “families having to tighten their belts”. Translation: “our families”, not theirs. Their goal is to eviscerate the programs where they can, and privatize (Medicare and Social Security) the ones they can’t into profit centers for their lobbyist friends.
Minimal script: I’m calling from [zip code] and I want Rep. [___] to vociferously object to any recission efforts, up to and including another lawsuit, and to H.J. Res. 2, the balanced budget amendment.
Contact your Legislator
Rep. Julia Brownley: (CA-26): DC (202) 225-5811, Oxnard (805) 379-1779, T.O. (805) 379-1779
or Rep. Salud Carbajal: (CA-24): DC (202) 225-3601, SB (805) 730-1710 SLO (805) 546-8348
Other Rep Contacts: www.phoneyourrep.com
Deeper Dives for those who are interested…
Remember how we started down this path. The Tax Scam led the way.
What exactly is H.J. Res. 2?
H.J. Res. 2 requires that Congress not spend more than it receives in revenues. It also requires a true majority of each chamber to pass tax increases and a three-fifths majority to raise the debt limit.
Here are the 54 Republicans and the one Democrat (What’s going on, Rep. DeFazio (D-OR)?!?) who are supporting this. These are the factors that make it clear that this House GOP effort is politically motivated, fiscally insincere and totally sanctimonious.
- Like Glinda tells Dorothy in the ‘Wizard of Oz’, Congress has always had the power to help themselves. No constitutional or statutory amendment has ever been required to create a balanced budget.
- They don’t really want this bill to pass. An all-GOP government signed off on legislation that will result in permanent deficits of $1 trillion or more.
- It would take a long time to enact, maybe more than a decade, long enough for those who sign on to the Balanced Budget Amendment to skedaddle before they have to ink their names on truly hideous spending cuts and tax increases that will inflame their constituents.
- Since the states have absolutely no motivation to enable the Federal government to cut the money they receive from Washington, the lowest hanging fruit in future cuts, it may never be ratified.
- It may not even be constitutional to do this. In the early 1990s, (conservative Republican) Solicitor General Robert Bork told Congress that the proposed BBA then under consideration had potentially fatal flaws that would make it very hard or even impossible to enforce.
How would a balanced budget amendment affect us during a weak economy?
(cbpp.org) The economic problems with such an amendment are the most serious. By requiring a balanced budget every year, no matter the state of the economy, such an amendment would raise serious risks of tipping weak economies into recession and making recessions longer and deeper, causing very large job losses. That’s because the amendment would force policymakers to cut federal programs, raise taxes, or both when the economy is weak or already in recession — the exact opposite of what good economic policy would advise.
Financial institutions: (cbpp.org) A constitutional balanced-budget amendment would have hindered swift federal action to rescue the savings and loan industry in the 1980’s and people who put their savings into those institutions, or to rapidly put the Troubled Assets Relief Program in place.
The federal government also provides deposit insurance for accounts of up to $250,000 per depositor. This insurance and the confidence it gives depositors, is critical to avoiding panics, as occurred in the early 1930s. A constitutional prohibition of any deficits could remove the guarantee that federal deposit insurance provides.Embed from Getty Images
Social Security: (cbpp.org) By design, the Social Security trust fund is building up reserves, in the form of Treasury securities backed by the government. These will be drawn down to help pay benefits when the number of retired “baby boomers” peaks in the late 2020s and early 2030s. Currently, Social Security holds $2.9 trillion in Treasury securities. However, under a balanced budget amendment, it would essentially be unconstitutional for Social Security to draw down these savings to pay promised benefits. Instead, benefits could have to be cut, because they, like all other expenditures, would have to be covered by tax revenues collected during that same year. Social Security would only be able to access its accumulated securities if the rest of the government showed a surplus, or the legislature voted to permit deficits.
Medicare Part A: The “Hospital Insurance” trust fund, has the same structure as Social Security. Although that trust fund currently holds about $200 billion in Treasury securities, under a balanced budget amendment, it would be unconstitutional for Medicare to use their savings. All Medicare payments would have to be covered by taxes collected in the same year.
Military retirement and civil service retirement: These trust funds would be affected in the same way. They would not be able to draw down their accumulated balances unless the rest of the budget ran offsetting surpluses. As a result, the $700 billion in Treasury securities held by the military retirement trust fund and the $900 billion in Treasury securities held by the civil service retirement trust fund would be unavailable to pay promised retirement pensions.
The CBO Report
See the report here.
The nonpartisan Congressional Budget Office on Monday released its 10-year budget and economic outlook, and the news isn’t good. “The legislation has significantly reduced revenues and increased outlays anticipated under current law,” the CBO report notes.
The report shows a notable deterioration in the country’s debt outlook, thanks largely to the trillions in tax cuts passed by Republicans and a pricey two-year budget deal and spending bill recently passed by both parties. The CBO now projects trillion-dollar deficits will start in 2020, two years ahead of what it projected just 10 months ago, although it will come close ($981 billion) by next year. By 2028, the agency expects the deficit to top $1.5 trillion.
Trillion-dollar deficits, of course, were a hallmark of the financial crisis a decade ago — and its aftermath, the Great Recession. Economic activity fell off a cliff and interest rates dropped to historic lows. Moreover, if lawmakers changed current law to maintain certain current policies—preventing a significant increase in individual income taxes in 2026 and drops in funding for defense and nondefense discretionary programs in 2020, for example—the result would be even larger increases in debt. Such high and rising debt could have serious negative consequences for the budget and the nation:
- Federal spending on interest payments on that debt would increase substantially, especially because interest rates are projected to rise over the next few years.
- Because federal borrowing reduces total saving in the economy over time, the nation’s capital stock would ultimately be smaller, and productivity and total wages would be lower.
- Lawmakers would have less flexibility to use tax and spending policies to respond to unexpected challenges.
- We become much more vulnerable to recession-causing events. There would be a greater risk that investors would become unwilling to finance the government’s borrowing unless they were compensated with very high interest rates; if that happened, interest rates on federal debt would rise suddenly and sharply.
- Anti-immigrant racism and xenophobia could also help drop us into the next recession. The loss of our immigrant communities due to the administration’s agressive actions against them is adding up to a huge financial hit.
Sticks and Stones – Language CAN actually really hurt us.
Social Security, Medicare, and Medicaid
We are locked into arguments as to whether these are “entitlements” or “earned benefits“, whether they are deserved by virtue or by simply being human. Social Security and Medicare are most accurately described as social insurance programs. Social insurance, according to Jacob Hacker, is “the notion that certain risks can be effectively dealt with only through institutions that spread their costs across rich and poor, healthy and sick, able-bodied and disabled, young and old.”
“When President Franklin D. Roosevelt established a “Committee on Economic Security” in 1934 to deliberate over the creation of a social insurance system that could ease the country’s economic crisis and protect it from a future Great Depression, the Committee’s discussions ranged well beyond the limited question of providing for old-age pensions. Instead, the system that emerged as “Social Security was meant to be a social contract between all members of society to protect one another from all of the “vicissitudes of modern life,” of which old age was but one element.” (Steven Attewell)
By referring to these programs as “entitlements,” conservatives are able to evoke notions (and suspicions) of people unworthy of support, guzzling at in the public trough. Just as important, if one could be “entitled” to something, one could arguably be “unentitled.” With this, conservatives find it easier to speak of social program elimination, zero-based budgeting, means-testing Social Security and an array of efforts at fiscal contraction literally unthinkable a decade or so earlier.
The Government Budget is NOT the same as a family budget, or a personal credit card, or whatever other stupid analogy the GOP comes up with.
Here’s a nice resource on the government vs. “family budget” analogy. (the guardian)
Here’s a resource on why the “credit card” analogy is wrong. (reuters)
“Large fiscal gaps simply mean more debt that will be left to our children and grandchildren to pay off”. (ftalphaville)
Quick read…(Jared Bernstein Blog) “Heading into work the other day, I heard a Congresswoman on the radio using a common argument that always sticks in my craw—or it would if I knew what a ‘craw’ was.
Here’s the gist: “The federal budget is just like a family budget, and we in government must tight our belts and live within our means just like families do.”
There are similarities which I’ll note below, but it’s almost always used as an argument for cutting everything to the bone right away, and in that sense it’s wrong.
First of all, it’s bass-akwards: when families are tightening their belts, the federal government is the one institution that can actually help the economy—and these belt-tightening families—by loosening its belt and running a deficit.
That deficit should be temporary and should come down when the private economy climbs up off the mat—which again tweaks the analogy: when families start to loosen, gov’t should eventually start to tighten (“eventually” because these transitions can be fragile and if gov’t tightens too soon, it can reverse the early gains–see UK).
But there’s another fundamental way in which this family budget analogy gets misused. Families borrow to make investments and to get over rough patches. They run deficits too. I went into pretty deep debt to finance college and grad school and I’m glad I did.
The whole credit system is based on the fact that if we had to pay cash-as-we-go for everything, we’d seriously underinvest. And that’s true for families and governments—and yes, you can overdo the borrowing thing. But to flip too far the other way is equally dangerous.
So, while it sounds good and has some merit, I’d use the “gov’t budget=family budget” argument with care and I’d discount those who want to use it as a hammer to insist on instant cuts.”