Archive for the ‘Budget’ Category

Deficits and Elections

You read stuff like this WaPo article from David Cho all the time and it’s just never based on anything but vapors in the reporter’s imagination:

But by suggesting the deficit may have peaked, administration officials are taking a political gamble. If the favorable number does not hold up in coming months and the budget shortfall surpasses the $1.4 trillion recorded last year, voters in the November midterm elections could punish the Democrats for offering false hope.

Political Scientist Henry Farrell from the Monkey Cage offers this rejoinder.

It is certainly true that the electorate ‘could’ punish the Democrats for offering false hope on the deficit. But it’s also possible that the electorate ‘could’ punish the Democrats for how much Tim Burton’s latest movie sucked, for increases in shark attacks, or for failing to prevent the massive invasion of green alien space monkeys that’s due to take place this summer. Actually, there is some interesting evidence on the shark attacks. The false hopes, Alice in Wonderland and green space monkey effects? Not so much.



The Truth About Republican Fiscal Irresponsibility

The House Budget Committee has some really fantastic charts I want to share…they desperately need to be seen more widely as the budget debate kicks into high gear.

View this document on Scribd

As my political mentor Howard Dean always says, you can’t trust Republicans to manage your money.


The DC Council Thinks You’re Stupid

Specifically, Councillors Jack Evans, Kwame Brown, David Catania, Vincent Gray, Marion Barry, Muriel Bowser and Mary Cheh. These are the sponsors and co-sponsors of the “Global Security and Aerospace Industry Tax Abatement Act of 2010“, a proposed tax giveaway to gigantic war contractor Northrop Grumman. In the midst of a budget crisis, they believe our scarce resources are best used throwing $25 million at a rich, politically-connected corporation? It’s just infuriating that even in an overwhelmingly liberal Democratic city, the politicians here claim the budget shortfall is causing them to make cuts to schools, public transportation, homeless shelters and even failing to provide core emergency services like snow removal, yet have the gall to offer millions in tax breaks to a top defense contractor already bloated on the taxpayer dole. It’s a very telling statement about where the priorities of these elected officials really are.

Here’s some background on the Northrop Grumman corporate welfare bill:

Northrop Grumman Corp. would receive $25 million in incentives to relocate its headquarters to D.C. under a bill introduced Tuesday by the D.C. Council.

The “Global Security and Aerospace Industry Tax Abatement Act of 2010” would provide $19.5 million in real estate tax breaks over 10 years and up to $5.5 million in grants to offset relocation costs the company could incur in its planned move from Los Angeles.

The bill is sponsored by Councilman Jack Evans, D-Ward 2, along with six other of the city’s 13 council members. Evans said the bill “sends a clear message to Northrop Grumman that we are absolutely interested in having them as one of our corporate citizens.”

He said if the city can provide a comparable financial package to the suburbs then he believes D.C. has a chance to land the company because of its proximity to the Capitol, White House and Pentagon.

Yes, that’s probably true. DC does likely have some chance or other to get the company’s HQ within its borders. However, those tax incentives probably wouldn’t be what brings them here. Good Jobs First has spent a great deal of effort chronicling the nefarious impacts of such giveaways (and is a great resource for further research on the subject if you’re interested). As the case of subsidies for foreign auto assembly plants shows us, corporate decisions on where to locate their activities generally are predicated on two major factors: proximity to markets and labor costs (in terms of corporate headquarters, quality of life in the region also makes a difference).

Taxes do matter, but to a much lesser extent than the other considerations. Often, a company has made up its mind where to locate before an announcement is made, then it plays neighboring local jurisdictions against each other to secure a nice chunk of change from the state or locality where they were going to go anyway.

And that extortion money offered by the city, in this case DC? It’s not exactly money the city can afford to spare:

All the subsidies are subject to inclusion in the city’s budget, which would add to hundreds of millions of dollars of budget gaps already expected in the coming years….

The company would also likely qualify for further tax breaks through a 2000 law aimed at luring tech companies. Called NET 2000, the legislation offers to eliminate the city’s 9.98 percent franchise tax for five years and charge a 6 percent rate thereafter.

Well, yeah. Sure sounds like a boondoggle. But…..really, it’d be worth the investment and create tons of new jobs for the city, right?

Fenty has said his administration will do whatever it can to lure Northrop’s headquarters and an expected 100 to 150 new jobs to the area. His deputy mayor for planning and economic development, Valerie Santos, says she was “working very aggressively” to assemble a package for the company that would beat those being offered in Maryland and Virginia.

$25 million – and possibly much more – for just 100-150 jobs going to people who are probably gonna live in Virginia? DEFINITELY a boondoggle. It’s truly amazing that nearly half of the overwhelmingly Democratic city council would consider this to be a prudent measure of their tax dollar priorities.

Thankfully, this all may very well be a moot point here anyway.

Sources on the public and private side of negotiations have said the Meridian Group’s National Gateway in Crystal City is leading the pack of potential sites.

And that’s why I brought up all that stuff about the uselessness of tax incentives in influencing relocation decisions. Chances are, Northrop Grumman has already decided to go to Crystal City, simply because it’s a stone’s throw away from their cash cow in the Pentagon. If they do end up coming to DC, it’s because they’d rather be closer to the White House and Congress. Location location location, baby.

Neither DC nor Virginia should get suckered into thinking it’s about anything other than that.

But just in case, definitely drop the offending Councillors a call or e-mail, especially chief sponsor Jack Evans. Let them know just how much you appreciate their pro-corporate-welfare priorities.


Green Budget 2011 and Clean Coal

Always glad to see reporting on green budget issues over at Grist:

The Obama administration released its 2011 budget proposal today and the internets are choked with stories about it. The four biggest green stories are EPA funding, fossil-fuel defunding, nuke and clean energy spending, and the cap-and-trade placeholder.

Also at Grist is this great video were Obama addresses some questions about “clean coal”


The Filibuster

From Carrots and Sticks buddy and advisor David Waldman:

In case you missed it — and very few of you did, from the looks of things — Sen. Tom Udall (D-NM) has issued a call for reform of Senate cloture rules both on the floor of the Senate, and in a diary right here at Daily Kos.

You can review the Senator’s diary for a run-down on the logic behind what Republicans called the “constitutional option” when they were threatening to invoke it in 2005, during a fight over President George W. Bush’s stalled judicial nominations. The facts and the history are correct, and will give you a good general background on where Udall is coming from. And in case you were wondering, one difference between what we knew as the “nuclear option” and Republicans called the “constitutional option” was that the scholarly writing (PDF) which gave Republicans their preferred name for this maneuver was very, very clear about the conditions under which the option was justified under the precedents: at the beginning of a new Congress. Republicans, of course, wanted to ignore most of the “constitutional” part, but keep the “option” anyway.

What I always say, and what I told David the other day, is that sooner or later the Republicans will be in charge and they’ll pull the trigger and end the filibuster. They took a run at doing that a few years ago despite the timing being illegitimate and the issue only being of moderate importance. If an important party goal was at stake and reconciliation couldn’t be used they won’t hesitate to weather a few rounds of media condemnations.

Beyond speculation on the future the Republicans have already end-rounded the filibuster via reconciliation to explode the deficit, so unwillingness by the Democrats to use the reconciliation process on deficit reducing bill like health care creates a substantial disequilibrium in the system.


Dean Baker on a Financial Transaction Tax

Still waiting for a response from the E*TRADE baby.

Solutions That Fit The Problem

President Obama’s explanation of why we got into the budget hole:

At the beginning of the last decade, the year 2000, America had a budget surplus of over $200 billion. (Applause.) By the time I took office, we had a one-year deficit of over $1 trillion and projected deficits of $8 trillion over the next decade. Most of this was the result of not paying for two wars, two tax cuts, and an expensive prescription drug program. On top of that, the effects of the recession put a $3 trillion hole in our budget.

So to review: generalized tax reductions, unfunded wars, economic recession and medicare expansion are the drivers of increased federal debt. And his spending side plan to address the debt issue is to freeze spending except for “national security, Medicare, Medicaid, and Social Security”. All the stuff that didn’t contribute to the problem needs to be cut back.

The freeze proposal contributes to the false belief that runaway government spending is primarily related to some bureaucrat in Interior, Agriculture, Energy, HHS, or HUD successfully talking Congress into spending ever greater amounts of money into their programs. That’s just not what’s happening.

We need to fit solutions to problems or else long term problems just won’t get solved.


Federal Spending Freeze

This Morning Matthew Yglesias put forth the following scenarios to describe what happens when Obama’s proposed spending freeze gets to Congress:

Scenario one is that self-proclaimed deficit hawks like Kent Conrad turn out to like farm subsidies, decline to implement those cuts, and pass a budget that doesn’t actually freeze spending. Then Obama gets to chide them, and say it’s not his fault congress is so spendy.

Scenario two is that self-proclaimed deficit hawks turn out to like farm subsidies, and Obama launches a big political crusade on behalf of his cuts, threatening to veto anything that doesn’t come close to the spirit of what he’s proposing. That would be . . . interesting.

Scenario three, the really troubling one, is that self-proclaimed deficit hawks turn out to like farm subsidies, and Obama draws a line in the sand over the concept of a freeze, while being flexible about the details. Under that scenario, the weak claims don’t get cut and instead the politically powerless need to bear the brunt of the burden of a tactical political gambit.

Last, though probably least likely (call it Scenario Q) the administration has actually tried to draw up what it thinks is a politically realistic list of spending cuts that doesn’t touch the most famously untouchable areas of the budget. I don’t even have any idea what that would look like.

I doubt any of these scenarios exclusively sum up what the Administration is trying to do or what will actually happen. Whatever these proposed cuts are, the Administration almost certainly will include both realistic and unrealistic cuts.

As for the third scenario about politically powerless budget claims bearing the burden of political gambits, it’s already happening. Just nobody, left or right, thinks that good budgets claims match up with political power. So if you change the math regarding available funds then good programs hit.