I'm just going to compare the short-term deficit and debt effects of the two proposals.
Growing faster than Europe is a low bar and not a useful comparison.
President Obama's diagnosis is wrong in two respects.
DEFENSE SECRETARY HAGEL: To close these gaps, the President’s budget will include an Opportunity, Growth and Security Initiative. This initiative is a detailed proposal that is part of the President’s budget submission. It would provide an additional $26 billion for the Defense Department in Fiscal Year 2015.
Source for $88 B number: Congressional Budget Office, “Insurance Coverage Provisions of the Affordable Care Act–CBO’s February 2014 Baseline,” Table 1 (Net cost of coverage provisions for FY 2015).
Here is VP Biden, speaking this morning to all Governors:
THE VICE PRESIDENT: It’s great to see you all. And I don’t know about you all, I had a great time last night and got a chance to actually do what we should be doing more of — talking without thinking about politics and figuring how we can solve problems.
And here is President Obama, speaking at a dinner last Thursday night to just the Democratic Governors:
THE PRESIDENT: Now, unfortunately, state by state, Republican governors are implementing a different agenda. They’re pursuing the same top-down, failed economic policies that don’t help Americans get ahead. They’re paying for it by cutting investments in the middle class, oftentimes doing everything they can to squeeze folks who are bargaining on behalf of workers. Some of them, their economies have improved in part because the overall economy has improved, and they take credit for it instead of saying that Obama had anything to do with it. I get that. There’s nothing wrong with that. But they’re making it harder for working families to access health insurance. In some states, they’re making it harder even for Americans to exercise their right to vote.
Policies that destroy jobs are bad. Let's instead maximize the opportunities for people at all levels of education, skills and abilities to find work.
I’ll let President Obama’s words and CBO’s analyses speak for themselves.
THE PRESIDENT: … that has jeopardized middle-class America’s basic bargain — that if you work hard, you have a chance to get ahead.
I believe this is the defining challenge of our time: Making sure our economy works for every working American. It’s why I ran for President. It was at the center of last year’s campaign. It drives everything I do in this office.
Source: President Barack Obama, Remarks by the President on Economic Mobility (The ARC, Washington, DC, December 4, 2013.)
CBO: Once fully implemented in the second half of 2015, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects.
Source: Congressional Budget Office, The Effects of a Minimum-Wage Increase on Employment and Family Income (February 18, 2014) Summary, page 1
CBO: The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers for about 2.0 million in 2017, rising to about 2.5 million in 2024.
Source: Congressional Budget Office, The Budget and Economic Outlook: 2014 to 2024, Appendix C, “The Labor Market Effects of the Affordable Care Act: Updated Estimates” (February 2014) page 117.
CBO: About one-tenth of a percentage point is attributable to the incentives generated in 2013 by extensions of UI benefits (from the usual 26 weeks to as much as 99 weeks), primarily because the program’s rules led some people to remain in the labor force and to continue to search for work in order to remain eligible.
Source: Congressional Budget Office, The Slow Recovery of the Labor Market (February 2014) page 8.
THE PRESIDENT: So our job is to not only get the economy growing but also to reverse these trends and make sure that everybody can succeed. We’ve got to build an economy that works for everybody, not just the fortunate few. Opportunity for all — that’s the essence of America. No matter who you are, no matter where you come from, no matter how you start out, if you’re willing to work hard and take responsibility, you can succeed.
Source: President Barack Obama, Remarks by the President on Fuel Efficiency Standards of Medium and Heavy-Duty Vehicles (Safeway Distribution Center, Upper Marlboro, Maryland, February 18, 2014).
The Obama Administration is trumpeting that the budget deficit has been cut by half, “the largest four-year reduction since the demobilization from World War II.” Indeed, CBO projects the deficit this year will be 3 percent, maybe dropping a few tenths over the next few years before beginning an inexorable climb driven by demographics, health cost growth, and unsustainable entitlement benefit promises to seniors. If you listen to the President, our only problem is that future one and that’s a few years off. Now that deficits have come down, he says we’re OK for the time being. Deficits around 3 percent will hold debt constant relative to the size of the U.S. economy, and he appears to think that’s fine.
I don’t. Look at this graph from CBO.
In their recently released annual Economic and Budget Outlook CBO lays out the four costs of higher debt (page 7).
- “Federal spending on interest payments will increase substantially as interest rates rise to more typical levels;”
- “Because federal borrowing generally reduces national saving, the capital stock and wages will be smaller than if debt was lower;”
- “Lawmakers would have less flexibility … to respond to unanticipated challenges;”
- “A large debt poses a greater risk of precipitating a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates.”
CBO attributes these damaging effects to “high and rising debt,” and doesn’t distinguish between high (where we are now, in the mid 70s as a share of GDP) and future entitlement spending-driven growth. The same logic applies both to today’s high debt and to future even higher debt. These are real and significant costs we are bearing today.
It’s obvious that we can’t allow debt to increase forever as it will begin to do a few years from now but there’s an additional important question that is being largely ignored. Momentarily setting aside future projected debt growth, is debt/GDP in the mid-70s acceptable? Should the goal be to not let the problem get worse, or both to solve the future debt growth and, over time, to reduce debt/GDP to be closer to the historic pre-crisis average?
CBO has done policymakers a great service by explaining these four costs of high and rising debt, and I wish more members of Congress understood them and talked about them. This […]
The single thing that Republican politicians hate and fear the most, and that is when they’re forced to tell the truth. It makes their heads explode. And actually look, this debt ceiling example is a perfect example. The Republican members of the Senate, they all wanted the perfect show vote. So the whole fight was, was every Senator in the Senate going to consent to allow a clean debt ceiling, to allow Barack Obama to get a blank check to raise our debt, while doing nothing about spending, with just 51 votes? Now in order for that to happen, all 100 Senators have to consent to it. Now there were an awful lot of Republican Senators who thought that was perfect, cause then they could all vote no, and go home and tell their constituents, “See, I voted no, I did the right thing.” But it only happens if they allow it to happen. And all I did was very simple, I said, listen, when I told Texans when I ran for office, that I’m going to fight with every ounce of strength I have to try to help pull this country back from the fiscal and economic cliff, I wasn’t lying to them, I meant it. So if your ask of me is will I consent to let Harry Reid to do this on 51 votes, the answer is no. I will vote no at every stage against it, because it’s irresponsible, because it’s wrong, because we’re bankrupting our children. And Republicans’ heads exploded, because it meant … Look, make no mistake about it. This was their desired outcome. An awful lot of Republicans wanted exactly what Barack Obama wanted, exactly what Nancy Pelosi wanted, exactly what Harry Reid wanted, which is to raise the debt ceiling, but they wanted to be able to tell what they view as their foolish, gullible constituents back home they didn’t do it, and they’re made because by refusing to consent to that they had to come out in the open and admit what they’re doing and nothing upsets them more.
In one respect I agree with Senator Cruz. Senate Republican Leaders did “want” the clean debt limit bill to pass the Senate and they wanted the political cover of voting no. Senator Cruz exposed this through his objection, forcing not just Senators McConnell […]