"Deficit Reduction", Ha Ha Ha

by hilzoy

From the WaPo:

"The Senate approved sweeping deficit-reduction legislation last night that would save about $35 billion over the next five years by cutting federal spending on prescription drugs, agriculture supports and student loans, while clamping down on fraud in the Medicaid program. (...)

The focus now shifts to the House, where the Budget Committee voted 21 to 16 yesterday to approve a more extensive bill saving nearly $54 billion through 2010 with cuts to Medicaid, food stamps, student loans, agriculture subsidies and child support enforcement. The House measure would allow states to impose premiums and co-payments on poor Medicaid recipients for the first time."

This is not deficit reduction. As I understand it, the budget reconciliation process usually considers changes to spending and taxes together. Oddly enough, though, this year the Republicans in Congress have decided to sever the two, considering them as two separate bills. This allows people to look at the spending bill and say: ooh, look, they're cutting the deficit!, without noticing that the tax bill is supposed to deliver $70 billion (over 5 years) in new tax cuts. Take the two bills together, though, and the Republicans in Congress are proposing not to cut the deficit, but to increase it.

Moreover, I truly cannot fathom the decision to save money on programs for the poor when there are other, better alternatives. In this respect, the House plan is especially odious: according to the Center for Budget and Policy Priorities, the House plan would deny food stamps to around 300,000 low income people, mostly working families; cut Medicaid; require people who are owed back benefits from SSI to wait an additional year for the benefits we already owe them, and so on.

If this were the only possible way to cut the deficit, I might support it. But, obviously, it isn't. Personally, I would like to see all of Bush's tax cuts rolled back. As a first step, however, there's always the CBPP's proposal to roll back two tax cuts that Bush didn't even ask for, that have not yet taken effect, and that benefit almost exclusively the wealthy (CBPP: "Some 97 percent of the tax cuts from these two measures will go to the 3.7 percent of households that have incomes of over $200,000 a year.") When these tax cuts are fully phased in, they will cost the country somewhere around $14-16 billion per year, which means that repealing these two tax cuts alone would save twice as much as the Senate's cuts in their entirety. And we could do much, much more, by repealing (for instance) the entire 2004 pork-laden corporate tax cut bill, rescinding our decision to repeal the estate tax, adding a small tax surcharge on income over, oh, a million dollars, and so on.

In addition, while cutting funding for the infamous "bridge to nowhere" would not save all that much money, it would have the wonderful side effect of making Sen. Ted Stevens resign, which would be a boon to the nation.

The Republicans are putting the budget more out of balance than ever this year, not "cutting the deficit" their idiotic fiscal policies created. Most of their few tiny gestures at cost-cutting cut benefits to the poor. At a time when real wages are falling, income inequality is increasing, the poor are doing worse than ever, and the rich are thriving, thanks in part to five years of coddling by the GOP, it makes no sense whatsoever for the Republicans to try to balance the budget by requiring sacrifice almost exclusively from those who can least afford it. But making policy sense does not seem to be one of their priorities.

Comments

[felixrayman]

At a time when real wages are falling, income inequality is increasing, the poor are doing worse than ever, and the rich are thriving, thanks in part to five years of coddling by the GOP, it makes no sense whatsoever for the Republicans to try to balance the budget by requiring sacrifice almost exclusively from those who can least afford it. But making policy sense does not seem to be one of their priorities.

You act surprised. What exactly do you think the GOP's priorities are, if not to act for the benefit of the wealthy at the expense of the poor? That is the core priority of the Republican party (most of the others have been discarded).

[hilzoy]

If I seem surprised, then appearances are misleading.

[jcricket]

When does the media get wind that it's being taken for a ride and start presenting information as you've laid it out. If you plan on increasing spending by more than you are reducing it, with no plans to cover the short-fall with new revenue, then you are increasing the deficit. There's no excuse for reporting this as a "deficit reduction". None.

Unless you believe the media's main function is to act as PR for the political party in charge.

[bob mcmanus]

My outrage breakers flipped long ago.

"If this were the only possible way to cut the deficit, I might support it."

I am not sure I can imagine a scenario in which cutting food stamps is the only possible choice. I think I can with very high certainty predict a contraction when raising taxes or borrowing would be economically disastrous. Of course, cutting spending would also be contractionary, Kash at angrybear is good at explaining the idiocy of Catonomics. This spending cut/borrowing/tax cut will also be contractionary. Maybe. :)
...
Re:what is "possible". Colorado(TABOR) provided one of the more interesting stories this week. The war, culture war, scandals etc are sideshows. What will cause Republicans to eat each other is governing and tax policy. They need to get Democrats in power to blame fast.

[CaseyL]

Not necessarily "the party in charge." Just the party that best looks out for corporate interests, which is the GOP.

If the Democrats were in charge, and if they were balancing the budget the same way they did last time (ie, raising taxes) you may rest assured "the media's main function" would be to give a lot of airtime to GOP spokespersons and commentators warning that the whole economy would collapse. Which, IIRC, is exactly what they did when Clinton's deficit reduction bill was being debated.

It's been said before, but it can't be said too often: The GOP is engaged in an asset-stripping operation.

[felixrayman]

When does the media get wind that it's being taken for a ride and start presenting information as you've laid it out.
...
Unless you believe the media's main function is to act as PR for the political party in charge.

The media has presented the information - read DeLong or Angry Bear or any of a dozen other great economics blogs. That's part of the media now, and that's where you will find commentary about economics by people who understand economics and have the ability to analyze the facts.

If you are talking about the corporate media, their main function is to serve the interests of the people who pay them. And if by media you mean partisan hacks such as the National Review, their main function is to further an ideology without regard to facts.

Your choice.

[dmbeaster]

Meanwhile, conservatives repeat the obviously wrong mantra that its Republicans who are more fiscally responsible, even thought the last thirty years of history has proven this wrong. Is it OK now to call this lying? Or is it just thich-headedness as opposed to deceit?

Charles will tell me next about how Republicans are responsible for the fiscal probity of the 90s. And shortly there will be another phony talking point about how: (1) the deficit is being reduced (utilizing some new crazy logic to sell the point); and (2) it is something other than Republicans that are responsible for the mess (i.e., 9/11, Enron, or as DeLay recently said, past wrongs By Dems which they seem unable to correct).

After all, all that matters is that the noise machine makes the right sounding noises.

[Fledermaus]

dmbester,

you forgot the all-important talking point (3) The Democrats would be worse.

[Deborah Gardner]

I just got a letter from the Child Support Program that tells me that I am required by Federal law to pay $25.00 annual fee back to the Child Support system. I am the custodial parent recieving the Child Suport. I'm having others who have gotten this letter to contact me, we must ban this unjustice. Here is the first paragraph in my letter.
IN COMPLIANCE WITH THE FEDERAL DEFICIT REDUCTION ACT, EFFECTIVE OCT 1, 2006, THE STATE IS CHARGING $25.00 ANNUAL FEE FOR ALL NON-WELFARE CASES IN WHICH AT LEAST $500.00 IN CHILDSUPPORT IS COLLECTED. OUR RECORDS INDICATE THAT THIS FEDERAL LAW APPLIES TO THE ABOVE REFERENCE CASE (ME) AND THE $25.00 FEE MUST BE PAID WITHIN 15 DAYS TO: STATE OF ALABAMA CHILD SUPPORT - ANNUALL FEE PAYMENT
P.O. BOX 30400 MONTGOMERY, AL 36030-4000
This is a crime in itself.