budget – Page 3 – Hank Kalet

Translation of the funding fight

Bob Braun’s column today cut through the nonsense and offered a basic translation of the arguments made yesterday before the state Supreme Court. The issue, as he pointed out, is a political one:

Here’s the real question: Will a court under siege buy into the governor’s political views about spending or will it find the collective nerve to tell Chris Christie his oath of office requires him to obey all constitutional mandates, including the one to maintain a thorough and efficient school system?

It’s simple: Without the justices’ permission, the governor’s budget, adopted by the Legislature, cut $1 billion from a school aid formula the court, just a year before, ruled constitutional if funded. To cut that billion, Christie—and lawmakers—had to make choices.

Like not raising taxes on rich people. A political choice.

Braun’s point, essentially, is that all budgeting choices are political choices, meaning they come down to specific policies and priorities. The governor opted to slash school spending rather than ask New Jersey’s top tax bracket to pay a bit more to fund government.

As Braun points out — and I’ve written numerous times — our elected officials at all levels of government balance myriad interests in crafting budgets. What is a permissible level of taxation? Who should pay? How? What kinds of programs should we provide? Which should get more money and which should get less? These are political questions and need to be hashed out in the political arena, honestly and openly.

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Read poetry at The Subterranean.
Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
Suburban Pastoral, a chapbook by Hank Kalet, available here.

East Brunswick: Every town New Jersey

The East Brunswick Township Council is preparing for what it expects will be a nightmare budget season — which is exactly what every town in the state should be expecting to face. The reason? About 15-18 years of games and gimmicks at the state level that has made it impossible for the state to help local government and a current governor with an ideological predisposition to slash and burn.

Send me an e-mail.
Read poetry at The Subterranean.
Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
Suburban Pastoral, a chapbook by Hank Kalet, available here.

The consequences of cuts

New Jerseyans need to be reminded — as this story does — that budget cuts have consequences. It’s not just about an individual tax bill, but about snow plowing and services for the disabled and police officers and teachers. We have a choice.

Send me an e-mail.
Read poetry at The Subterranean.
Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
Suburban Pastoral, a chapbook by Hank Kalet, available here.

A deficit of sound judgment

Can anyone tell me what is wrong with the lede paragraph in this allegedly unbiased news story in The New York Times?

I’ll give you a hint: The Times reporters apparently have made up their minds on the value of the Simpson-Bowles commission’s suggestions, positioning “fiscal health” as a long-term good, while casting critics of both tax hikes and/or spending cuts as fearful of their short-term political health.

Here is the lede:

The chairmen of President Obama’s debt-reduction commission have been unable to win support from any of the panel’s elected officials for their proposed spending cuts and tax increases, underscoring the reluctance of both parties to risk short-term political backlash in pursuit of the nation’s long-term fiscal health.

The problem, however, is not the politics so much as the lack of consensus on addressing long-term budget deficits — especially when the remedies being offered as skewed against the middle class and poor and favor those with the cash.

Mainstream Washington might be fixated on the deficit (at a time of high unemployment, a fact that boggles the mind), but there are economists willing to challenge the capital consensus. Dean Baker, at the Center for Economic and Policy Research, a populist liberal economist, questions the basic assumptions on which the battle to beat the deficit is built:

The fundamental premise of the commission is that the country suffers from serious deficit problems that Congress is unable to address through its normal processes. This view does not correspond with the facts as can be easily shown.

There has been no explosion of spending whatsoever. This is entirely an invention of those with their own agenda. The Congressional Budget Office shows that non-interest spending was 19.8 percent of GDP in 1980. Its analysis of President Obama’s 2011 budget projects that non-interest spending will be 21.1 percent of spending in 2020. This means that in 40 years, spending other than interest will have increased by just 1.3 percentage points of GDP.

Rather than being a cause for concern, the rise in the deficit in the downturn has been essential for sustaining demand in the economy. Annual demand in the private sector has fallen by more than $1.2 trillion as a result of the collapse of the bubbles in residential and non-residential real estate. This led to a plunge in construction and also consumption that was driven by housing bubble wealth. Remarkably, the co-chairs of the commission never seemed to have considered a tax on the financial sector as a source of revenue (a policy that is even recommended by the IMF), in spite of the fact that it was largely responsible for the current crisis.

The projections of longer-term budget problems are almost entirely due to a projected explosion in health care costs. The United States already pays more than twice as much per person for its health care as other wealthy countries with the same or longer life expectancies. This ratio is projected to rise to three and four to one in the decades ahead.

However, rather than honestly discuss the problems of the U.S. health care system, Simpson and Bowles have used the projections of exploding health care costs as an argument for gutting Medicare and Medicaid, leaving tens of millions at risk of not being able to afford health care.

And then there is Robert Reich, a former Clinton labor secretary, who included the anticipated release of the deficit commission report tomorrow in a post called “National Fiscal Hypocrisy Week“:

Finally, on Wednesday, the President’s deficit commission will issue a report on how to reduce the nation’s long-term deficit. The initial draft was regressive — cutting $3 of spending for every $1 of tax increase, and decimating the Earned Income Tax Credit, among other things.

The best outcome would be a unanimous report that focused on taming rising health-care costs (see first item above), rejected Republican calls to extend the Bush tax cuts for the wealthy (see second item above), and supported extending unemployment benefits for the long-term jobless and a new WPA (third item). Ideally, the report would also call for new investments in infrastructure and education that would grow the economy and thereby shrink the deficit as a share of GDP.

Likelihood, zero.

And that pretty much sums up the likelihood of this plan making a difference in the deficit.

Send me an e-mail.
Read poetry at The Subterranean.
Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
Suburban Pastoral, a chapbook by Hank Kalet, available here.

Bad medicine for a bad economy

The New York Times buys into the nonsense being peddled by the president’s Fiscal Commission, calling their proposal a dose of fiscal reality and shared pain — though sharing the pain is far from what this plan would do.

The plan, the Times says,

frankly acknowledges what most politicians are too cowardly to admit — that deficit reduction will require shared sacrifice.

It lays out sensible principles, prominent among them that deficit reduction should start gradually, beginning in 2012, to avoid disrupting the fragile economic recovery. It also affirms the need to protect the most vulnerable Americans and to invest in education, infrastructure and research and development.

Then it does what any successful deficit reduction plan must do: It puts everything on the table, including tax reform to raise revenue and cuts in spending on health care and defense. It even dares to mention the need to find significant savings in Social Security, Medicare and other mandatory programs.

But Social Security is not the problem (minor fixes will address a potential problem in the retirement program that has been blown out of proportion) and the kind of tax reform being proposed is the kind that the people who run our corporate state will appreciate, but that those of us in the middle class will be none too happy about.

The focus should be on addressing healthcare costs — which the Obama health-care plan is supposed to do, but won’t because it left the contours of the for-profit corporate system in place. A single-payer system is what is needed, with less of a focus on high-end technology and more on preventative medicine. But that is another debate.

The issue here is the plan on the table, which is a right-wing economist’s dream come true. As Jeff Madrick, a senior fellow at the Roosevelt Institute, writes on Huffington Post, the radical reduction in the federal income tax rate (the bulk of which would go to top earners) “is simply right wing ideology at work, and has nothing to do with deficit issues.”

To the contrary, the authors are using deficit alarms to present a new tax agenda. Is Obama really going to stand behind it? There is no commonly accepted evidence that current marginal tax rates, or even higher ones, suppress economic growth.

He also is critical of the arbitrary slashing of federal outlays — to 21 percent from an expected 24 percent (and the current 22 percent) and what he calls Draconian (and unnecessary) cuts in debt levels.

Why the reduction? There is no reason at all to do so, except an ideological one: less government is always better. Again, there is no absolutely commonly accepted evidence that higher levels of government suppress growth. Yet the proposal is willing to make painful cuts in programs to meet this spurious goal. And it will leave no room for more public investment.

Third, the proposal’s goal is to reduce debt levels to 60 percent of GDP and eventually 40 percent. To do so requires a deficit on average of 2.2 percent of GDP. Again, there is no evidence that debt levels of 60 percent are better than levels of 70 percent, for example. Reducing the debt levels to 40 percent is simply Draconian. One argument is to keep them low to be able to respond to emergencies, as the nation just did. It would be far better to devote attention to avoiding the extreme emergencies.

The spending cuts, as Madrick points out, will be counterproductive in this broken economy, making it more difficult to address stagnant employment or help those dislocated by the damage done by the very economic elites likely to benefit from its medicine.

Send me an e-mail.
Read poetry at The Subterranean.
Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
Suburban Pastoral, a chapbook by Hank Kalet, available here.