Tag Archives: spending

These Quotes Should Really Worry You About The Debt Ceiling

House Speaker John Boehner

Let’s start with this doozy from freshman GOP Rep. Ted Yoho over the weekend: “I think we need to have that moment where we realize [we’re] going broke. If the debt ceiling isn’t raised, that will sure as heck be a moment. I think, personally, it would bring stability to the world markets.

Oh good, now we have a Congressman who actually believes that breaching the debt ceiling will bring “stability to world markets”. Because nothing says stability and confidence quite like defaulting on one’s debts and obligations.

These next two quotes can work in tandem, but only because they come from mutually exclusive positions:

House Speaker John Boehner on [not] raising the debt ceiling: “We are not going to pass a ‘clean’ debt-limit increase.”

And from the White House we have Treasury Secretary Jack Lew: “[Republicans] need to open the government. They need to fund our ability to pay our bills. And then we’re open to negotiation.”

So we have The White House refusing to sign anything but a clean increase in the debt-ceiling, and Boehner signalling his party’s intent to refuse to pass a clean increase in the debt-ceiling.

Compounded by the fact that Rep. Yoho is not the only member of his party to actually believe that defaulting on the debt-ceiling is a good thing — and good for the economy!! — and you start to wonder if these people can figure this out in the next 10 days. Probably not.

Photo: Medill DC

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Chart(s) Of The Day: Peace On The Horizon?

20130812-100836.jpg

No, we aren’t going to live in a world without war, but the chart above and the corresponding work attributed to it show that as a global society, we’re devoting a smaller percentage of manpower and income to the military industry:

The black line is the average across countries of military spending as a percentage of GDP, using the Correlates of War (COW) estimate of total spending divided by World Bank GDP figures (which only start in 1960). The red line is the average across countries of armed forces per 1,000 population, again using COW estimates.

You see really striking long-run declines in the West, Eastern Europe and the former Soviet Union, and Asia. In these areas it almost looks as if demobilization from World War II has taken place gradually and over 60+ years. In Latin America and North Africa/Middle East, you see pretty striking declines since the end of the Cold War, and perhaps some decline in subSaharan Africa since around 2000.

One possible long-term explanation? Democracy:

On the domestic side of things, there is pretty good evidence that the spread of democracy has been a significant factor. Not worth getting into the details here, but if you look at the data country by country you find that on average, when countries transition to democracy their military spending and army sizes go down, quite substantially.* In fact they tend to go down when they transition from very autocratic to only somewhat autocratic (that is, to “anocracies”, or semi-democracies using the Polity data).

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Everything you need to know about the White House budget proposal

I’ve been trying to come up with a way to sum up the White House budget plan in one word. It’s been difficult. Budgets are long, droll documents that can bore even the geekiest of economics nerds. I’ve been pouring over the details all morning and I think the best word to describe everything I’ve been reading is: concessions.

President Obama’s 10 year budget proposal calls for almost $300 billion in new spending on jobs, public works and expanded pre-school education (nice), and nearly $800 billion in new taxes, including an extra 94 cents a pack on cigarettes. Serves us smokers right.

But the plan would also cut more than $1 trillion from programs across the federal government — for the first time targeting Social Security benefits — in an effort to persuade congressional Republicans to join him in finishing the job of debt reduction they started two years ago.

“Our economy is poised for progress, as long as Washington doesn’t get in the way,” Obama said in announcing his budget plan in the White House Rose Garden. He said his budget represents “a fiscally responsible blueprint for middle-class jobs and growth.”

He said his fiscal year 2014 budget replaces “the foolish across-the-board spending cuts” known as the sequester that are “already hurting our economy.” The plan reduces the deficit and makes necessary investments “because we can do both,” he said. “We can grow our economy, and shrink our deficits.” He added: “The numbers work. There’s not a lot of smoke and mirrors in here.”

As the White House sees it, there are two possible outcomes to this budget. One is that it actually leads to a grand bargain, either now or in a couple of months. Another is that it proves to the press and the public that Republican intransigence is what’s standing in the way of a grand bargain.

I’ve written several times about how I don’t think a Grand Bargain will happen, by any means, so this budget is more for show than action. At least that’s my take. A compromise does nothing for the Republican platform, and also takes a valuable weapon from the Democrats in their bid to win back Congress.

But going through the budget plan, there’s one huge kicker: the difference between Obama and the House Republicans’ respective proposals is roughly $4.6 trillion over the next decade. That’s trillion.

The GOP plan sees revenues from taxes totaling 18.8 percent of GDP over the next decade, while the White House budget puts that revenue at 19.1 percent. The difference over 10 years is about $640 billion.

House Republicans see an average deficit of 0.6 percent over the next decade, while Obama’s looking at 2.5 percent. The difference there is 1.9 percent of GDP, or more than $4 trillion.

So if your wondering why the Republican budget is totally different from the one released by the White House today, the short answer is $4.6 trillion. It’s the reason why in the Republican budget you see such drastic cuts to various social programs, while in the Obama budget, much is saved and things like pre-kindergarden spending is added.

Ezra has a good contrast between the two plans’ premises:

The Republican budget argues that its cuts aren’t so much a choice as a necessity. “Unless we change course,” reads the introduction, “we will have a debt crisis.” But that’s incomplete. The truth of the Republican budget is that it’s only necessary if you refuse to raise taxes and if you insist on balancing the budget within 10 years.

Obama’s budget is meant to expose those premises: It’s a demonstration of how more modest spending cuts, when added to new revenues, can stabilize the debt while leaving room for new investments. In other words, the federal government can do most of the things it’s doing now, and more. Deep cuts aren’t a necessity so much as a choice.

Finally, your “Winners and Losers”.

WINNERS:
1. Medicaid

– Mostly spared from the $370 billion cut to Medicare.

2. Low income tax payers

– The Earned Income Tax Credit and Child Tax Credit are now both permanent fixtures.

3. Hospitals

– The plan delays more than $500 million in cuts to hospitals, due to kick in next year.

4. Scientists

– Spending for R&D is kicked up a clean 9%.

5. Preschool

– A large expansion of preschool to cover all low- and middle-income 4-year-olds across the country. Paid for by smokers.

6. Recipients of food aid

– An additional 17 million people will have access to food aid.

LOSERS:
1. The wealthy

– The budget includes a number of tax hikes on upper-income Americans. Hedge fund managers and private equity partners will have to pay higher tax rates on their income (this is known as closing the “carried interest” loophole). The estate tax would revert to higher, 2009-era levels. And the budget would levy a new fee on the largest financial institutions.

2. Rich Medicare recipients

– A basic tax hike in premiums for upper-income seniors on Medicare B and D

3. Social Security recipients

– The dreaded Chained CPI

4. Farms

– A variety of farm subsidies are cut over a 10 year stretch.

5. Smokers

– We deserve it. A 94 cent kick per pack.

6. Oil, gas and coal companies

– About $44 billion – a really modest sum in all actuality – will be raised in the next 10 years by removing tax breaks to fossil fuel companies.

8. The EPA

– 3.5 percent cut across the board. Who needs clean air anyway?

9. NASA

– A sad, unnecessary and petty $50 million dollar cut to the tiny NASA budget.

PS. All of this is assuming the budget is adopted.

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