It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Monday, August 1, 2011

Obama Budget Deal

Obama still reminds me of Trudeau. The original one. Just the smartest guy in the room by a long shot, and different, which drives all the interchangeable grey suits crazy.

Many people are reading Obama's moves wrong, I think. He really did get something out of the deal. See here and here.

The White House official summary is here.

The idea that this doesn't raise taxes is wrong. Obama gets to veto an extension of the Bush Jr. tax cuts:
The Enforcement Mechanism Complements the Forcing Event Already In Law – the Expiration of the Bush Tax Cuts – To Create Pressure for a Balanced Deal: The Bush tax cuts expire as of 1/1/2013, the same date that the spending sequester would go into effect. These two events together will force balanced deficit reduction. Absent a balanced deal, it would enable the President to use his veto pen to ensure nearly $1 trillion in additional deficit reduction by not extending the high-income tax cuts.
Liberal Democrats as usual are declaring defeat but I guess I don't see why. Maybe it's because the press is garbling it. But remember, that's their job.


Steve Bloom said...

Er, the problem with the Bush tax cuts is that they cover the middle class as well as the rich.

Broadly, if the Republicans want more spending cuts and Obama doesn't, he loses every single time. You'll see what I mean in the forthcoming budget struggle.

Re the New Catfood Commission, even one Blue Dog on it guarantees no major new revenue, although I expect a few loopholes will be closed by way of a fig leaf.

James Annan said...

Are you saying that Boehner softened up at the last minute?

Deech56 said...

Good commentary by Steve Benen, whose views durng this situation are a must read: Link John COle from Balloon Juice also provides a good perspective. James, after exhausting the nutter choices, Boehner was faced with a bill that was able to get the Democratic votes that were needed for passing a bill that the Senate would approve.

Andy F said...

Both of the libbloggers frame a victory almost entirely in terms of what makes Obama look good vs. teh crazy. Asking what the point of that is in the comments gets you yelled at.

What does the WH promote as a victory?

"These discretionary caps will put us on track to reduce non-defense discretionary spending to its lowest level since Dwight Eisenhower was President."

Take a gander at the relative population sizes between 2010 and 1960. You suppose they're still trying to make nice with the teabaggers by splitting the difference with the Jackson administration?

Dan Olner said...

Comment at Krugman: "What a time to be an economics undergrad... it's like learning about history on the bow of the Titanic."

You can call me Elle. said...

I have to respectfully disagree, MT. He won't veto the Bush Tax cuts because he doesn't want to veto the Bush Tax cuts: he could've done away with them before, and didn't. I have to agree with Dean Baker and Glenn Greenwald on this one: Obama is not "caving" to anyone's demands. He is a conservative, at least fiscally, and sometimes I wonder if he's a social conservative as well, though I hold out hope on that front. Nobody held a gun to his head and forced him to hire Clinton's economic team: he's a neo-liberal all the way.

Michael Tobis said...

Well, much as I'm a Keynesian in principle, if you actually look at the deficit numbers, they were pretty much exploding. I think you can take Keynes too far (as the Chinese seem to be doing.)

The thing is, as some economists keep pointing out, there is no new source of "demand", which is to say, the world is already full of underused crap and there is no need to make more.

They keep wondering when things will get back to "normal". I have the nerve to not only expect, but really hope, that they won't.

Granted, there is a lot of infrastructure work to be done, but that sort of requires a political consensus on what the new infrastructure will look like, which we are far from having.

Obama is putting out fires with remarkable effectiveness. That is the best he can do. This is not the time for progress. This is the time for gluing together the pieces that Bush Jr. left smashed on the floor.

If you want to blame him for anything, blame him for booting the midterm elections. But maybe even that was calculated. The country now sees the Tea Party for what they are; a bunch of well-intentioned buffoons with no capacity for government.

James, in my opinion Boehner is a relative pragmatist. He would not have used the default weapon but was forced to by the radical dynamic in his party. He and Obama have worked together to create an object lesson for the extremist novices in the House.

Yes, there will be continued unemployment. In some sectors this will be continued pain. I agree with the Krugmanites that we could afford a year or two of stimulus, but it's not a slam dunk. Obama did save most of what is left of the safety net.

The dollar remains sound, and the lunatics have achieved only symbolic victories, combined with a good solid dose of embarrassment.

And slowed growth, after all, is the right long term goal, despite what everyone on both sides is required to say. A burst of stimulus to get everything "back to normal" is just getting back to overheated and insane, I think.

The right thing to do, presuming that I'm right that we have finally reached a state where there is a permanent job shortage, is to move further toward a welfare state, like France or Sweden or Quebec. That's not on the cards anytime soon, and that's the problem.

But given the immensely hostile environment he had to work with, I think Obama has performed very well. I am impressed.

Brian Brademeyer said...

>>> I am impressed.

Destined for the same notoriety as "Heck of a job, Brownie."

Michael Tobis said...

I don't think my opinion carries that much weight. But obviously I don't agree.

Andy F said...

Methinks you're pulling a Keith on this.

Stimulus is not the sole province of the "Krugmanites" (the set of Keynsians with NYT columns?). The Economist wonders what they hell they're thinking, too. I'm not sure what portion of the budget outside of DoD goes to underused crap in comparison to personal income above 250K, but what they're apparently cutting is student loans and food stamps. And you're worried about alienating people with gas taxes?

coby said...

That's some mighty fast spinning from the linked Sullivan and Daily Kos articles. It is like saying after a mugging what a success it was because you didn't get shot after you handed over your wallet. Please.

Note this from Kos: "If these cuts occur, a major GOP constituency will be in a world of hurt, but the funds will be freed up for other programs. Huh? If those funds are cut from the budget they are not available for anything anymore. People are trying way too hard to make lemonade of this, it is not even lemons.

How many times will Obama give away the store before his die-hard supporters stop using the excuse "yeah, but look what a good position he is in for the next negotiation!". He did not veto the Bush tax cuts last time, why would he do it next time? The republicans were single minded and ruthless this time (well maybe less single minded but much more ruthless) they will be single minded and ruthless next time.

Now, the much more prolonged recession will cause the deficit to grow even more.

As for arguments about whether or not growth is actually a justifiable goal or not, that really is a different conversation unless you think Obama is secretly trying to bring about such a radical transformation through the back door. If not, he has turned out to be a naive fool who values his useless image as "bipartisan" more than any of his speech's convictions.

Marion Delgado said...

Oh, curse you, Michael for playing to my weakness for PET! :)

I hope you're right about Mr. O.

PET's greatness was his willing to be very, very specific. A real "wonk" as they say now.