"Standstill Nation" as the New Abnormal? Tom Ferguson Exposes Truth Behind Gridlock.

Jun 20, 2011Tom Ferguson

Gridlock is not a reflection of 'the way things have always been'. It's the result of a GOP-conjured tide of money that emerged in the mid-80s and 90s, leaving us polarized and paralyzed.

Gridlock is not a reflection of 'the way things have always been'. It's the result of a GOP-conjured tide of money that emerged in the mid-80s and 90s, leaving us polarized and paralyzed.

On Sunday, the New York Times closed out its “Week in Review” section after a run of 76 years. With Republicans and most Democrats back singing the praises of deregulation, smaller government, and tax cuts less than three years after that old song brought the world to its knees, we should probably have expected a grateful “Invisible Hand” would drop by to wave goodbye.

And so it happened. Times correspondent Peter Baker celebrated the famous Hand’s magical ability to resolve not economic complexity, but political stalemate. “Mad at Beltway gridlock and can’t take it anymore?” asked the headline. To which Baker answered: “Paralysis (alas) is one way things are supposed to work.” He went on to explain that “for all the handwringing about how the system is broken, this is the system as it was designed and is now adapted for the digital age.” In support of this complacency, Baker enlisted Vice President Joe Biden, who “emerged last week to defend the system’s ability to get things done despite all appearances to the contrary. It may be maddening, it may be drawn out, but he argued, at the end of the day, Washington does what it has to do."

Thus Baker’s argument continued, leavened only by a few careful hedges noting that reality has not as yet conformed to this Panglossian script and that unemployed Americans might assess the government’s paralysis a little differently. At the very end, Baker cautiously put forward a suggestion first broached by Peter Orzag, formerly President Obama’s budget chief before he fled to Citigroup, that the Hand might, like so many other aging Americans, benefit from a prosthesis: legislation that would remorselessly chop government programs unless Congress acted to stop it.

Let’s try to clarify why Congress is actually gridlocked. The bottom line is, alas, a bottom line. It is not complicated. And it has nothing to do with any design for a digital age, as Baker proposes.

In the mid-1980s, a group of insurgent Republicans broke with the long established norms governing how the U.S. House of Representatives transacted business. Led by Newt Gingrich, it derided older Republican House leaders as timid, unimaginative, and too inclined to compromise with Democrats. Self-styled “revolutionaries” launched vigorous public attacks on Democrats as they trumpeted their own agenda of deregulation, budget cuts, lower taxes, and a baker’s dozen of social issues, from abortion to opposition to all forms of gun control.

Result? The House boiled over. Statistical measures of Congressional behavior show that party line votes jumped sharply.

Gingrich and his allies were painfully aware that transforming the GOP’s gains at the presidential level into a true “critical realignment” of the political system as a whole required breaking the Democratic lock on Congress. So they shattered all records for Congressional fundraising in their drive to get control of the House. Their success in this and their parallel campaign to rally major parts of the media to their standard are what polarized the system. The GOP insurgents emphasized fundraising, not just through the usual publicly reported vehicles like the national party committees, but also GOPAC, a political action committee that Gingrich had controlled since 1986, which operated mostly in secret.

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In 1992, in the midst of a recession, the Republicans lost the White House. But their dreams of a sweeping political realignment did not die. In fact, by clearing centrist Republicans out of their perches in the White House, the loss probably helped Gingrich and his allies.

Completely undaunted, Gingrich, Republican National Chair Haley Barbour, and National Republican Senatorial Committee Chair Phil Gramm orchestrated a vast national campaign to recapture Congress for the Republicans in the 1994 elections. With the economy stuck in a “jobless recovery” and Democratic fundraising sputtering, the Republicans won control of both houses of Congress.

The tidal wave of political money they conjured allowed Gingrich, Gramm, Barbour and Co., to brush aside older, less combative center-right Republican leaders and persist in their efforts to roll back the New Deal and remake American society in the image of free market fundamentalism. Once in power, the Republicans institutionalized sweeping rules changes in the House and the Republican caucus that vastly increased the leadership’s influence over House legislation. They also implemented a formal “pay to play” system that had both inside and outside components.

On the outside, DeLay and other GOP leaders, including Grover Norquist, who headed Americans for Tax Reform, mounted a vast campaign (the so-called “K Street Project”) to defund the Democrats directly by pressuring businesses to cut off donations and avoid retaining Democrats as lobbyists. Inside the House, Gingrich made fundraising for the party a requirement for choice committee assignments. Senate Republicans, led by Phil Gramm and other apostles of deregulation, emulated the House.

And so, alas, did the Democrats. Watching the Republicans restructure their national political committees into giant ATMs capable of financing broad national campaigns left the Democrats facing the same dilemma they had in the late seventies, as the GOP’s Golden Horde first formed up behind Ronald Reagan. Democrats could respond by mobilizing their older mass constituencies. Or they could emulate the Republicans and just chase money. That battle had been settled in favor of so-called “New Democrats” (see Thomas Ferguson and Joel Rogers, "Right Turn"). Dependent for many years on campaign money from leading sectors of big business where regulation kept recreating divisions – notably finance and telecommunications (Ferguson, "Golden Rule") – the Democrats reconfirmed their earlier decision to go for the gold.

They followed the Republicans and transformed both the national party committees and their Congressional delegations into cash machines, with leaders in each chamber, but especially the House, wielding substantially more power than at any time since the famous revolt that overthrew Speaker Cannon in 1910-11. As the Republicans moved further and further to the right, the Democrats did, too, constrained only by the need to preserve something of their mass base.

A feedback loop running between Congress and the mass media intensified the whole process: Congressional leaders of both parties now focused intently on creating sharper party profiles (“brands”) that would mobilize potential outside supporters and contributors. So they spent enormous amounts of time and money honing messages that were clear and simple enough to attract attention as they ricocheted out through the media to an increasingly jaded public. And they and the Republican leadership staged more and more votes not to move legislation, but to score points with some narrow slice of the public or signal important outside constituencies. For the same reasons, they made exemplary efforts to hold up bills by prolonging debate or, in the Senate, putting presidential nominations on hold.

Contrary to what popular pundits may say, there is nothing “normal” or constructive about a Congress dominated by centralized parties. We should not accept a Congress presided over by leaders with far more power than in recent decades, running the equivalent of hog calls for resources, trying to secure the widest possible audiences for their slogans and projecting their claims through a mass media that was more than happy to play along with right thinking spokespersons of both parties. The idea that putting government programs on an automatic chopping block is a step forward is equally outlandish. This is hardly government “doing what it has to do.” It may be what it is paid to do. But no one should confuse this with public policy that serves the interests of all Americans.

Thomas Ferguson is Professor of Political Science at the University of Massachusetts, Boston and Senior Fellow at the Roosevelt Institute. This essay is adapted from his “Legislators Never Bowl Alone: Big Money, Mass Media, and the Polarization of Congress,” presented at the Institute for New Economic Thinking’s Bretton Woods Conference.

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Republicans Remain Poor at History – But So Do American Citizens

Jun 17, 2011Harvey J. Kaye

story-book-200We could all use a brush up on some of the nation's most important historical moments.

story-book-200We could all use a brush up on some of the nation's most important historical moments.

In a recent article, New York Times writer Sam Dillon reports that the results of nationwide exams conducted as part of the National Assessment of Educational Progress show that "American students are less proficient in their nation's history than in any other subject." And there is, as Dillon notes, a developing consensus as to why this is so: "History advocates contend that students' poor showing on the tests underlines neglect shown to the subject by federal and state policy makers, especially since the 2002 No Child Left Behind act began requiring schools to raise scores in math and reading but in no other subject. The federal accountability law, the advocates say, has given schools and teachers an incentive to spend less time on history and other subjects."

That may well be so. But I want to suggest another possible cause for young people's poor knowledge of American history: kids are simply emulating conservative celebrities. And the kids are no fools. They know from the news that if you want to get ahead, if you want to be taken seriously, if you want to be a contender, if you want to be a candidate for President of the United States -- a rightwing candidate, that is -- you can't be good at history. Isn't that the lesson of the past few weeks? Sarah Palin couldn't explain what Paul Revere's ride was all about. Bachmann didn't know that Lexington and Concord -- the first battles of the American Revolution -- were fought in Massachusetts, not New Hampshire.

But while we can laugh all we want at Palin and Bachmann, the problem isn't that they don't have the facts straight about American history -- it's that too many of us don't know enough about it. And our ignorance can be politically debilitating. Consider...

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Two weeks ago, on the 67th anniversary of the D-Day Landings at Normandy, former U.S. Senator Rick Santorum, a Pennsylvania Republican, announced that he was entering the race for the presidency. Eager to harness the Greatest Generation to his cause and strike a blow against "Obamacare," Santorum stated: "Almost 60,000 average Americans had the courage to go out and charge those beaches on Normandy, to drop out of airplanes who knows where, and take on the battle for freedom... Those Americans risked everything so they could make [their own] decision on their health care plan."

Naturally, leftwing commentators mocked him for saying it. But the progressive punditocracy missed a great opportunity. Santorum wasn't just speaking stupidly; he was also speaking wrongly. Contrary to what he asserted, the GIs who stormed the beaches of Normandy essentially were fighting for the chance of pursuing freedoms and securing government-guaranteed national health care. They and their fellow Americans knew quite well that just six months earlier President Franklin Roosevelt, in his State of the Union Message of January 1944, had translated his original vision of the Four Freedoms -- freedom of speech, freedom of worship, freedom from want, freedom from fear -- into a proposal for a Second Bill of Rights. And among the rights he enumerated was "The right to adequate medical care." Moreover, the President himself knew that the vast majority of his fellow citizens supported his proposal. Polls conducted for the White House in 1943 by Princeton's Public Opinion Research office showed that 83 percent of the American people wanted Social Security to include health care, not just for veterans, but for all Americans.

To listen to the right, you'd think the very idea of national health care was the Trojan Horse of communism. And yet a bit of history teaches that the Greatest Generation and its greatest leader -- our foremost heroes of the twentieth century -- hoped to enact it. Un-American? Hardly.

I don't care if conservatives know enough about history. But I do care that we and our fellow citizens do. For starters, we have got to be able to point out when the Tea Party right gets history dead wrong. Moreover, we have got to remember who we are. And to do that we need to not only restore the study of history to its rightful place in the school curriculum, but also make sure that the history we teach enables students to think and act as citizens, not game show contestants. Responding to equally dismal reports of student ignorance of America's past, progressive columnist Max Lerner wrote in April 1943: "History belongs to the people. It must be taught as part of the people's struggle to build a free democracy on this continent. It must be taught as the prelude to what American democracy can do and be."

Harvey J. Kaye is the Ben & Joyce Rosenberg Professor of Democracy and Justice Studies at the University of Wisconsin-Green Bay and the author of Thomas Paine and the Promise of America. He is currently writing The Four Freedoms and the Promise of America: FDR, the Greatest Generation, and Us. Follow him on Twitter: www.twitter.com/HarveyJKaye

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How to Throw Away an Election

Jun 7, 2011Marshall Auerback

The relentless push for fiscal austerity is sinking the global economy -- and Barack Obama's reelection prospects.

Yes, it’s true: the earthquake and tsunami in Japan, the European debt crisis and rising gasoline prices have all contributed to a grim employment picture, which seems to be getting worse, not better. But that’s still no excuse for inaction on the increasingly dire employment situation, where policy makers (including the President) seem to have thrown up their collective hands and suggested, “There’s little more we can afford to do.”

The relentless push for fiscal austerity is sinking the global economy -- and Barack Obama's reelection prospects.

Yes, it’s true: the earthquake and tsunami in Japan, the European debt crisis and rising gasoline prices have all contributed to a grim employment picture, which seems to be getting worse, not better. But that’s still no excuse for inaction on the increasingly dire employment situation, where policy makers (including the President) seem to have thrown up their collective hands and suggested, “There’s little more we can afford to do.”

Nonsense. And that sort of policy defeatism should worry President Obama, particularly as we accelerate towards a debt ceiling budget deal that is virtually guaranteed to accelerate the prevailing negative trends now omnipresent in the global economy.

Consider the evidence: Goldman Sachs has a current activity index (CAI) for the U.S. which has gone from 4.3% in April to 1.2% in May. Last week Morgan Bank dropped their Q2 GDP growth forecast for the U.S. to 2.5%. This week ISI dropped their Q2 forecast to 2.0%. We have zero growth in US real disposable income over the last four months. That largely reflects the impact of oil, and a downward revision to personal income.

And May's jobs data were pretty dismal. The U.S. economy added only 54,000 jobs in May. That compares to the 220,000 or so jobs the economy had added in each of the last three months, and the unemployment rate up a tick to 9.1 percent.

The President’s advisers said Friday’s job report could be an aberration and should not distract from the president’s success in helping rescue the economy from the worst recession since the Great Depression. Some rescue! All of the contemporary data tells us that the current performance of the American economy is nowhere near sufficient to generate the jobs lost from the 2008 Great Recession. With the contribution from government now negative (and likely to intensify, given the negotiations on the debt ceiling) and the private sector saving ratio rising, we are increasingly dependent on the external sector for on-going growth. The fact is that with China introducing contractionary policies, the ongoing fiscal austerity insanity now enveloping all of Europe and Japan remaining in economic no-man’s land, it is hard to see the US emerging as an export superpower.

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The President hasn’t yet faced the prospect of a credible challenger coming from the GOP. But the policy response (even from self-identified progressives) remains problematic.

And it’s not just in the US. The slowdown seems to be getting serious all around the world. Greece, Ireland, Portugal and Spain all appear to be in the process of turning their economies into a modern day version of a Victorian debtor’s prison. Hopefully the euro zone and UK haven't yet reached the tipping point where austerity shifts from reducing deficits to adding to them (due to induced economic weakness), but it looks more likely to be the case. And hopefully Japan decides to go with an all out reconstruction plan without increasing taxes or otherwise 'paying for it’ through other forms of fiscal retrenchment, but that also appears unlikely, given the general tenor of policy making in Tokyo. We must also hope that China's second half weakness doesn't get out of hand.

And here in the US, hopefully neither the Congress, nor President Obama, achieve any serious near term deficit reduction. Doing so is hard to envisage, given that both sides are now negotiating on what to cut, rather than questioning the engagement in fiscal retrenchment in the midst of a self-evident economic slowdown.

It would be a refreshing change if the President explained that the only constraints we genuinely face are the limits of our productive capacity and available resources, including everyone who is willing and able to work, rather than focusing on misguided concepts like “fiscal sustainability” or “national solvency”. The President could deploy his considerable rhetorical skills and insist that we know that the we in the US can afford to defend ourselves, ensure taxes are low enough relative to spending to allow the private sector to employ anyone willing and able to work who doesn’t already have a good job, allow government to provide, maintain, and fund the public infrastructure we deem appropriate, including the military, legal system, Social Security system, transportation, and research and education, including the funding of private sector contractors for public purposes.

The Federal Reserve could pitch in by informing us all that QE and 0 rates reduce interest income for the economy, as indicated many times by Federal Reserve Chairman Bernanke, and therefore, as he indicated, further fiscal expansion is called for to sustain aggregate demand in order to ensure higher employment growth.

None of these hopes look to be in the cards, which could well leave the President in a highly vulnerable political position as we come into the 2012 Presidential elections, assuming (a big IF) the GOP can come up with a candidate who has a modicum of credibility.

Marshall Auerback is a Senior Fellow at the Roosevelt Institute, and a market analyst and commentator.

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The Well-funded Assault on the CFPB

Jun 3, 2011Bryce Covert

Republicans may claim that the Consumer Financial Protection Bureau has too much power, but the money and lobbying has piled up on the other side.

Republicans may claim that the Consumer Financial Protection Bureau has too much power, but the money and lobbying has piled up on the other side.

Rep. Spencer Bauchus may have called the Consumer Financial Protection Bureau "the most powerful agency ever created," but a new piece at The Nation by Ari Berman details the extensive power being marshaled on the other side. While the Republicans who are trying to handcuff its authority claim to be defending small community banks and businesses, the real money is coming from much deeper pockets:

Warren and the CFPB are up against what she estimates to be a $3 trillion consumer financial services industry, which views the bureau as a potentially grave threat to its prosperity. According to the Center for Responsive Politics, 156 groups -- the vast majority representing corporate interests -- lobbied the government about the CFPB in the second half of 2010 and the first quarter of 2011. The list ranged from JPMorgan Chase to McDonald's.

And it goes on further:

The Chamber [of Commerce] has an entire division devoted to fighting Dodd-Frank, the Center for Capital Markets Competitiveness, and a huge budget. In the first quarter of this year, the Chamber spent $17 million on federal lobbying, far more than any other group, with a dozen lobbyists focused on the CFPB alone. In 2009 the Chamber was anything but subtle in its attacks on the bureau. "We're fundamentally trying to kill this," said senior director Ryan McKee.

It's pretty clear why banks of all shapes and sizes would be lining up against this Bureau. For the first time in decades, the CFPB promises to be a watchdog on lenders that looks out for the consumer with some actual teeth. That will likely mean crackdowns on payday lenders, debt collectors, loan sharks, and others. But why would the Republicans be the first line of defense in this fight? After all, they've proposed bills to replace the single job of director with a five-member committee, make it easier to overturn and veto the new rules it writes, and prevent it from using its powers until it has a permanent director. (Meanwhile, they've threatened to block any nominees to that position, effectively kneecapping its authority if that bill were to pass.) All of this is likely to slow down the reforms and regulations that the agency has been tasked with creating.

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As I've pointed out before, the GOP's timing couldn't be worse for the middle class. A recent report showed that these days a single worker needs an income of $30,012 a year to cover basic expenses and save up for retirement and emergencies -- in other words, achieve financial stability -- which is about three times the national poverty level. A single worker with two young children needs $57,756 a year, and a family with two working parents and two young kids needs $67,920. But wages have actually been falling for the first time ever over the past decade, which lead to the median American family's earnings dropping to $47,127 in 2010 -- only enough for a single worker to meet financial stability. When Americans don't have enough income flowing in, they turn to debt to plug the holes. That's a big part of the reason that Americans carry $796.1 billion in revolving debt. With so many relying on credit products, you would think it would be imperative to make sure they're safe. As Elizabeth Warren herself has pointed out, we do more to ensure that consumers can't buy toasters that have a 1 in 5 chance of exploding than we do to ensure that consumers don't take out mortgages that have the same chance of putting a family on the street.

Yet Republicans stand in shoulder to shoulder opposition. As quoted in Berman's piece, Hazen Marshall, a former Republican staff director for the Senate Budget Committee, said earlier this year, "If the House Republicans had their way, they would just repeal the CFPB!" The answer to why they have taken this stance might lie in following the money that he traces so well.

And the fight won't be over even if the current Republican bills are struck down. "Everyone agrees the real fights are yet to come, once the CFPB goes live and begins tackling difficult issues like policing scams in the credit and mortgage markets, and cracking down on overdraft lending fees and shady prepaid credit cards," Berman reports. "'There's bound to be a fight about every single rule-making, supervision and enforcement action,' says [Lisa] Donner of AFR."

Buckle up, it's going to be a long fight. But it's one that's worth having.

Bryce Covert is Assistant Editor at New Deal 2.0.

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The Political Winners and Losers of a Debt Ceiling Showdown

May 19, 2011Bryce Covert

Assistant Editor Bryce Covert sat down with Roosevelt Institute Senior Fellow Bo Cutter, who was director of the National Economic Council and Deputy Assistant to the President from 1992-1996 in the Clinton White House. In the second of a two-part interview, he calculates how likely a default is, looks at the extremism on the Republican side preventing negotiations, and games out a winning strategy for the administration.

Bryce Covert: What are the odds of the debt ceiling being raised?

Assistant Editor Bryce Covert sat down with Roosevelt Institute Senior Fellow Bo Cutter, who was director of the National Economic Council and Deputy Assistant to the President from 1992-1996 in the Clinton White House. In the second of a two-part interview, he calculates how likely a default is, looks at the extremism on the Republican side preventing negotiations, and games out a winning strategy for the administration.

Bryce Covert: What are the odds of the debt ceiling being raised?

Bo Cutter: I would put the odds of a default at 15 or 20 percent. Sounds low, but it ought to be zero. It is so inconceivable to me that it wouldn't be raised. It's not like the shut down where there was a fairly large number of people who wanted one and there was another set of people -- I was in that other set of people -- who thought that if we were going to play those games, I'd rather have a shut down than a default. Unlike then when there were people who could figure out arguments for why we ought to have a shut down, no one can come up with a good argument for why we should have a default.

There are three kinds of players in this. There's the administration, which basically wants to do everything it possibly can to not have a default. Part of that is that they are responsible. There's a real sense of fiduciary responsibility for the country. So they're out there trying to avoid it. Group two is the set of people, a set of the Congressional Republicans, who fundamentally believe it doesn't matter, that there isn't an effect. I don't see how you change their minds other than have a real problem. Group three is a dangerous group. It's the other group of Congressional Republicans who believe that it would be a very bad thing to do, but they're going to push it for all they can and run some risks. For example, that's where Newt Gingrich was on Meet the Press and that's where a lot of them are. Some of them are there because they think that's the right way to negotiate and the problem is not as big as people think. Others are there because that's the politically convenient place to be. That's the dangerous group, and that's where the miscalculation can occur.

Bryce Covert: What were the circumstances you faced when dealing with this battle during the Clinton administration?

Bo Cutter: Remember that we had lots more time and in effect by being able to push it off and to run an extremely active communications campaign about how truly insane this was, we got the debt ceiling raised without having to give anything. Because in the negotiations our side was saying to their side, how much pain do you want to take? We can do this for a long time, and at the end of the day good things don't happen if there's a default. So you're not going to do it anyway, but between now and then we're going to beat you over the head every day on this issue. Do you really want to have this fight? They then decided, okay, we'll do a shut down and the mechanism we'll use will not be the debt thing because we've concluded that's the third rail. Rather, it'll be the budget.

The difficulty for them under those circumstances was having already been beat like a rug on the budget stuff. They were weakened. The shut down, as I said when it was getting close, is quite hard to sustain because the administration tends to speak with one voice while the Congress speaks with a hundred. There's a kind of cacophony on the one hand and a single voice on the other. If the single voice is saying every single day why are these crazies doing this to the American people, they get tired of it in a hurry.

Bryce Covert: What are the differences between now and then?

Bo Cutter: This time around you knew going into it, and the "it" is this whole set of fights over the budget, you knew they were going to be different. You knew that there's a much more extreme set of Congressional Republicans, incomparably more extreme, than during the Clinton administration. Second, the wiggle room around the default was much less and the budget issue hit first. So my theory was that President Obama should absolutely have forced them into a situation where they had to choose to close down the government. They should not have given a dime on that. I think there is no question that he would have won a shut down battle for all the above reasons.

If you win the shut down battle and then you go into the default battle, you've already won. These guys do not want that pain again. So if you had the shut down battle in mid-March you'd have had two to three months to have the debt ceiling fight. I personally felt at the time that he'd win the shut down battle and it would almost certainly mean reelection. I think he's going to be reelected anyway, but it would have been such a thorough and complete defeat and it would have ended any fight about default.

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So I think they chose the wrong path there. I think they did it because there is an inevitable tendency in Washington and in government to think that the current deal is the deal you have to get rather than thinking much more strategically and choosing the terrain on which you want to fight. I'd rather fight the shut down battle than fight the default battle.

Bryce Covert: Who are the key players then and now and are there any differences?

Bo Cutter: I think the administration side of it is every bit as capable as we were. Some of them are the same players, and the ones who aren't are pretty able people. I don't think there's a big difference on the Democratic side. On the Republican side, I think that they have a much, much more difficult caucus to manage than the Republicans then did because the extreme wing is so much more extreme. They believe that they won the shut down battle, they got $38 billion worth of cuts. So you've got this extreme group elected six months ago that thinks they won their first battle. The reasonable -- reasonable being a term you have to qualify in these circumstances -- Republican leaders have crazies on their hands that they have to manage. My own sense is that the leaders probably would have preferred a short, abrupt, losing shut down battle to this scenario. Because they knew they were going to be in a situation where their crazies were pushing them right off a cliff. I think the dynamics are much worse, but it isn't on the quality of the people on the Democratic side. It's the structure of the caucus on the Republican side.

Bryce Covert: If we go into default, who will end up being the political losers and winners?

Bo Cutter: It depends on who does what in the next two months. If the administration doesn't create the right kind of narrative, I think it's likely to be the one that's blamed. Although it's never all or nothing. If you were President Obama, this is such an awful set of circumstances it's hard to even imagine scenarios, but you would say to yourself that the Congressional approval level is in the low double digits, like 11. Mine is about 50%. So I have five times the approval rating and I can afford, if I had to, the blip to 40%, but they can't take the blip to zero. If they're absolutely pushing me right against the wall and there is no give and no reasonable proposal, if I'm President Obama I probably say I'm still better off by holding. But it's a real close call.

Gingrich basically stated what the Republican strategy is going to be. He said they're not going to go into default. The country would come down hard on all of the leadership. But he said what we can do is take a bite, raise the debt ceiling by $10 billion, it will last for a relatively small time, and the administration will have to give. Then we'll raise it by $60 billion. That's two weeks, so we'll come back two weeks later. And we'll just keep doing that over and over and over and force them into giving.

I really believe that it depends on what the administration does to prepare. There's a lot they can do, and there are actual proposals you can make. I think President Obama's strategy has to be a process strategy. It has to be to say we are not going to agree on policy. We can come to some really vague, really general framework about the general numbers. Obama has made a ten-year proposal for a $4 trillion reduction in debt total and therefore a substantial reduction in debt as a percentage of GDP. If you look at Congressman Ryan's proposal, in reality he proposes a lot less than that because there's a lot of fakery in his numbers, but you could dress it up and say that he proposes about that amount. Therefore he and Obama are in rough agreement that something like $4 trillion in debt reduction has to occur in the next ten years. Obama can say let's agree to that. Let's agree to a process by which every six months or so, if Congress hasn't enacted and the president hasn't signed legislation that actually makes that happen, there are automatic across the board cuts and there are automatic tax increases. We can have a battle about how much and who does what. But in other words, President Obama's proposal would be let us agree on a framework for debt and understand as grown ups that we are not in the next two or three months going to agree on fundamental policy differences. If I were him, I would put that out there and I would campaign on it every day. I think that's the only way they win it. I think otherwise they are caught in this bite by bite by bite and are running a real risk of miscalculation. That's my big worry, is that that the Republicans argue, well, we know that a default shouldn't occur but let's push a little harder. That side is running a big, big risk.

There is also governance point about this. What the hell right does the political leadership of any party have to impose these kinds of risks on the American people? I increasingly think they just forget whether you're for or against a particular Medicare policy or whatever, as a matter of governance and in a country that's supposed to consist of free government and free citizens, just what the hell right do they have to do that? This is a different game than a shut down. These are big damn risks.

 

Banner image courtesy of Shutterstock.com.

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5 Reasons Newt is a Non-Starter

May 12, 2011Lynn Parramore

How is Newt a no-go for the White House? Let me count the ways...

He's back! He's running! Like the eponymous amphibian who loses a tail and keeps on coming, the Georgia rascal is sliding back into the political game. If you have not yet seen the risible video of Newt's jowly announcement that he will once again seek the nation's highest office, then grab a coffee, sit back, and enjoy.

How is Newt a no-go for the White House? Let me count the ways...

He's back! He's running! Like the eponymous amphibian who loses a tail and keeps on coming, the Georgia rascal is sliding back into the political game. If you have not yet seen the risible video of Newt's jowly announcement that he will once again seek the nation's highest office, then grab a coffee, sit back, and enjoy.

Newt's candidacy is going nowhere, and will only serve to divert enormous amounts of corporate cash from his fellow Republicans. But it will brighten the days of progressive bloggers, who think him very entertaining and aren't overworried about his chances of winning, because he's got....

Too much nasty: Q. When does a pecadillo become a perverse pattern? A. When you have numerous affairs and then point the moral finger at a sitting president for his. And if you're trying to convert Evangelical Christians to your cause, piling it on as Newt has done with the famous dumping-the-wife-recovering-from-cancer hospital scene is no-no. His bitter intolerance for gays, Muslims, African Americans, poor people, immigrants, and others who do not look, think, and act like him is likewise problematic for assuring voters that the GOP has made it into the 21st century. Which brings me to Newt's second problem...

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Too much Old White Dude: If you want to run against a fit, handsome, young, mixed-race president, it's not helpful to be a chubby, aging, white guy. Potentially being the oldest in the field of GOP candidates is not a helpful distinction -- I mean, gravitas can work, but Newt is too prone to silly outbursts to pull this off. Looking like you're completely out of touch with the young and hip -- who can't remember what it was like before cell phones, much less what you were doing with your first Contract with America -- will not the White House win you. And as to how women react to you when you're on wife number three...well, let's just say it does not add to the enthusiasm.

Too much crazy: Newt is a bright, contrarian type of guy who enjoys thinking about cool stuff like physics. I'm down with that. But unfortunately his brain seems to misfire in ways that are hard to reconcile with political viability. If you're a guy who likes to write reviews on Amazon in which you display your penchant for deriving foreign policy ideas from spy thrillers, you may have a bit of explaining to do. But you're courting real trouble if you go around flapping  about Obama's "Kenyan, anti-colonial behavior" and comparing freedom to beach volleyballs (See this helpful compendium of the "11 Craziest Things Newt Ever Said").

Too many Newts: There have been many Newts, and unfortunately for his current incarnation, the Ghosts of Newts Past tend to haunt the politician in inconvenient ways. At one point, he was a Rockefeller Republican. Then he was an Environmentalist. Then he was a social conservative, a supply-side conservative, an Evangelist-courting-Roman Catholic, etc. etc.. An uncharitable view would suggest that he is Whatever Newt Has the Best Chances of Being Elected. And since he still doesn't really have any chance of actually being elected, perhaps he's never really found himself.

Too much Pay-to-Play: The number of ethics violations Newt racked up through unsavory money transactions as Speaker of the House is breathtaking. But the worst thing about Newt is what Roosevelt Institute Senior Fellow Tom Ferguson pointed out in a recent interview with New Deal 2.0: He can be credited as one of the architects of the current pay-to-pay system in Congress. You know, the one where you get a committee appointment bringing in the most cash. This crass, ruthless turn in American politics is among the most damaging to democracy and has done more to separate the will of the voters from the actions of the politicians they elect than perhaps anything else in the last fifty years. It's the revolting mentality that induces Newt's former buddy and fellow Georgia politician Ralph Reed to talk giddily about his need to "hump corporate accounts". Americans have a deep anger just now about the degree to which Big Business buys the political system, and Newt's coziness with that particular sector will open him up to all sorts of unpleasantness.

And that, in a nutshell, is why Newt will never be president.

Lynn Parramore is the editor of New Deal 2.0, Media Fellow at the Roosevelt Institute, co-founder of Recessionwire, and the author of Reading the Sphinx.

**Follow Lynn Parramore on Twitter at http://www.twitter.com/lynnparramore

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Why the White House Gave Donald Trump a Victory Lap

Apr 28, 2011Bo Cutter

Posting Obama's birth certificate is just one more way to expose the crazies on the other side.

Put me down as just a little bit cynical and as retaining high hopes that the "birther" controversy is not over.

Posting Obama's birth certificate is just one more way to expose the crazies on the other side.

Put me down as just a little bit cynical and as retaining high hopes that the "birther" controversy is not over.

To begin with, there isn't anything else funny in today's political environment, so I want to keep this around as long as possible. How can you not fall in love with the apparent fact that one half of all self-identified Republicans believe President Obama was born in some other country? Or that 25% of Republican voters say they will not vote for a Republican candidate who states that Obama was born in the United States? Or that not one of the current leading Republicans is willing to say clearly that he or she believes President Obama is a natural born American citizen? (A cynical man would believe that this last point is a direct consequence of the next to last point -- but not me. I take them at their word.) And how can you not love The Donald? "Today, I'm very proud of myself," the big guy said. I'm proud of him too, overcoming as he did all of the difficulties of being transported here from Alpha Centura by a random fold in the time-space continuum.

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But for President Obama, The Donald is the gift that keeps on giving. Every time he opens his mouth a million Americans move toward President Obama, every other Republican candidate is trapped a little bit more in the craziness, and the sheer emptiness of the current Republican platform becomes more apparent. You can believe one of the following two scenarios: (1) The White House, as part of its ongoing search for truth, released the certificate to help the American people; (2) Bill Daley, Chief of Staff, could not resist making life even more miserable for the other side. I know which way I go.

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team.

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President Obama's Budget Speech: Good but Not Transformative

Apr 15, 2011Bo Cutter

His vision is better than that of the right, but does it go far enough?

His vision is better than that of the right, but does it go far enough?

I drew four conclusions from Obama's speech about the budget on Wednesday. First, President Obama should have given this particular speech a long time ago -- it would have been vastly more valuable a year ago. What he did best of all in this speech was make quite clear three broad values: the importance of the public sector, the importance of progressiveness and basic fairness, and a clear understanding that there are limits to what even we can afford. His vision of America should be incomparably more attractive to Americans than the nihilistic view of the right.

Second, the actual budget implied by his speech (it was a set of broad guidelines, not a budget) is far preferable to that of Congressman Ryan, but even so is not the budget the nation needs and it is not going to happen anyway. There are no mechanisms, no proposals, no hints of how an actual dialogue might occur. We are stuck with two proposals staking out the ends of the spectrum, and nothing in the middle and certainly nothing that redefines that spectrum.

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Third, there is nothing transformative here. Long before he was president, I sat across a small restaurant breakfast table with then Senator Obama -- who told me directly that he intended to be a transformative president. I said that was easier said than done. He said he knew he would have to accept bigger risks and take new positions. He said that, especially in this era's gridlocked politics, a transformative president might be the only kind of president who could be successful. None of that is evident here.

Finally, maybe in this awful political climate this is just the way things are going to be. It is a good, if minimal, thing that both parties want to avoid a debt crisis -- and maybe the avoidance of catastrophe is all we can do. But we will have a more enfeebled public sector, way too little public investment, a bad tax system, way too little private sector investment, and low economic growth. We are where we are.

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team.

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Speech Recap: Values, maybe. Vision, no.

Apr 14, 2011Harvey J. Kaye

flag-150Harvey J. Kaye wants a bolder vision for America.

flag-150Harvey J. Kaye wants a bolder vision for America.

It was good to hear President Obama speak bluntly of how the Bush administration took the country into two wars but cut taxes; of how rich Americans have grown so much richer while working people have fallen behind; and of how the Republicans' budget plan would exacerbate American inequality and turn this country into something the majority of us definitely do not want.  It was also good to hear him state that he would not allow the right to realize its un-American schemes. And of course it was good to hear him talk of taxing the rich.

I applaud all of that. But I worry. For not only were the President's plans on deficit reduction too vague to make critical sense, but he also stated two times that "any serious plan to tackle our deficit will require us to put everything on the table..." Those last words stuck with me all day. Even more troubling was what the President did not address. I heard nothing, for example, about economic growth and development. Nothing about industrial renewal. And nothing about jobs, jobs, jobs. Plus, I heard nothing about the assaults on public workers' collective bargaining rights that Republicans are pursuing at the state level -- most notably here in Wisconsin -- under the guise of reducing state and local budget deficits.

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Late in the speech the President said: "So this is our vision for America -- this is my vision for America -- a vision where we live within our means while still investing in our future; where everyone makes sacrifices but no one bears all the burden; where we provide a basic measure of security for our citizens and we provide rising opportunity for our children." Sweet. But that's his vision? That's what liberalism has become?

We are in deep trouble, not just economically and fiscally. We are in deep trouble politically, as well -- and not simply because the Republicans have become a party of reactionaries. We are also in trouble because the Democrats have become a party of visionless politicians. Values, maybe. Vision, no. They seem to waver between deference and defense. Remember, Americans historically have made a great nation of themselves not by cautiously defending the status quo, but by dramatically advancing freedom, equality, and democracy -- especially in times of crisis. In his speech the President ignored that fact and that possibility. But that has been Obama's failing from the start. In contrast to Franklin Roosevelt, he has failed to engage, empower, and enable Americans to join in confronting the crisis and participate in the making of history.

Harvey J. Kaye is the Rosenberg Professor of Democracy and Justice Studies at the University of Wisconsin-Green Bay and the author of Thomas Paine and the Promise of America. He is currently writing The Four Freedoms and the Promise of America. Follow him on Twitter: www.twitter.com/HarveyJKaye

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Spitzer, Ferguson, Schmitt & Others React to Obama's Speech

Apr 13, 2011

2-face-obama-150How did Obama do today in his budget address? New Deal 2.0 friends and Rooseveltians weigh in.

2-face-obama-150How did Obama do today in his budget address? New Deal 2.0 friends and Rooseveltians weigh in.

"This administration's tendency has been to soar rhetorically on goals and then compromise heavily on details. Today we were offered few of the latter. The emphasis on reducing medical costs rather than coverage is exactly right. There was a brief allusion to allowing the government to bargain with Big Pharma over drug prices, but the savings figures mentioned strike me as way too low, raising some question about how far reaching the plan really is. One very interesting implication is the late June deadline for having Congress put the package over. That suggests that the administration is not worried about the nominal mid-May deadline for the debt ceiling; instead they are banking on not bumping up against the ultimate debt ceiling until sometime in mid-July, as many have anticipated. But that means the end of June will be tense indeed. Even a temporary default would be an overwhelming event with worldwide resonance. Another critical point: the exact balance between tax rises on the super rich and cuts; along with the "fail safe" mechanism that is supposed to be built in. If I heard him rightly, the idea is for more cuts in 2014 if things aren't going according to plan. That will give people who want more cuts and fewer tax rises a big incentive to hold out for more. And let's not forget that all through 2010 the White House kept saying it would not support an extension of the Bush tax cuts for the wealthy. Then right after the election, the President turned around and agreed with the Republicans to do exactly that. Let's hope this time the President means it."
~Thomas Ferguson is a Roosevelt Institute Senior Fellow and Professor of Political Science at U Mass, Boston

"The battle is now framed: a Republican agenda that balances the budget on the back of the poor vs. a Democratic agenda that brings meaning to the phrase 'shared sacrifice.' What remains to be seen is who will win the test of wills we are about to see play out in Washington D.C."
~Eliot Spitzer is a political commentator and former governor of New York

"It's often said that a budget is a measure of our values, and President Obama's speech did a great job of showing that there are values other than deficit reduction at stake here, like whether we provide the basic foundation of economic and personal security to the elderly, the ill, and poor families. But he also showed that long-term deficit reduction is nothing to be afraid of, that it can be achieved in a way that's compatible with economic recovery and our values. I have two worries, though. One is that the budget outline Obama proposed will be treated as just a bid, subject to negotiations wih other proposals, such as Rep. Paul Ryan's destructive and dishonest scheme. But as long as we remember that budgets are not just numbers, but values, it should be clear that one plan represents our country's best values and the Ryan plan represents the opposite, while reducing the deficit by much less. The midpoint between Obama and Ryan would be far worse than the status quo. Second, I wish the president, or some politician, would acknowledge that it's not just the very rich who will have to pay more taxes. All of us who benefitted from the healthy economy of the 1990s that Obama described, and the low tax rates of the Bush years, will have to contribute something more if we are to have any hope of sustaining a society governed by the values Obama described. The sooner we acknowledge that reality the better."
~Mark Schmitt is Director of the Fellows Program at the Roosevelt Institute

"Being honest about what's causing our deficit means being honest about taxes, and the serious damage the tax cuts for the super rich have had on our society (the President alluded to this but only briefly). It is a relief to see that the President included an increase in revenue in his four steps for reducing the deficit -- but he made it his last point and has shied away from speaking directly about the benefits that accrue to the nation as a whole from progressive taxation. My guess is that most Americans understand we are in a crisis and would support an equitable increase in taxes on the well-off (as was the case in the State of Oregon recently) if the case were put to them in clear terms. To date almost no one has had the courage to address this issue head on. I think the President would do well to lead with this argument. I also think he would do well to speak less about the deficit, and more about what type of society we want to live in. In other words, take a more Rooseveltian approach to the twin crises we face (the Great Recession and the deficit). I may be naive, but I still believe that most Americans are compassionate and would agree with FDR when he said: 'The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.'"
~David Woolner is a Senior Fellow at the Roosevelt Institute

"The speech exemplifies the policy disasters that arise from incoherent economics.  The President embraced and gave further credence to two of the most harmful economic myths -- that because governments are supposedly just like households, deficits signify excess and coming crises. He said: 'Now, at certain times – particularly during periods of war or recession – our nation has had to borrow money to pay for some of our priorities.  And as most families understand, a little credit card debt isn’t going to hurt if it’s temporary.' Governments with sovereign currencies are not like households and are not like Greece.  Unlike Greece, America has a sovereign currency.  Nations typically run deficits, e.g., large ones,like that run during the supposed golden age of the 1950s.  During the two decades of the "Great Moderation", nearly every developed nation ran a deficit.  The deficits did not cause inflation in either period.  When nations run budget surpluses, they soon fall into severe recessions. Severe recessions produce substantial increases in budget deficits -- due to automatic stabilizers.  The automatic stabilizers are counter-cyclical -- they reduce the length and severity of the recession.  Cutting governmental spending while a nation is suffering from a recession is lunacy.  It is a destabilizing policy.  The automatic stabilizers and stimulus are nothing like 'a little credit card debt.'  The stabilizers not only don't 'hurt', they make the recession hurt far less.  The Republican strategy of federal and state budget cuts is twice cursed.  First, it harms the economy, the recovery, and unemployment.  Second, by cutting, for example, useful education programs it harms our children and our future competitiveness."
~William K. Black teaches economics and law at UMKC and is a former regulator

"The President, like the Republican leadership, is choosing to ignore the costs and extent to which the irresponsible behavior of our largest financial institutions led to over borrowing and over lending in both public and private sectors. Now they are talking about cutting deficits without addressing or even acknowledging the fact that they have created a reality in which our fiscal future will always be tied to a new risk of diverting monies from key services for our citizens for the potential support of bank creditors. Have they heard about the austerity being forced on the Irish for this wrongheaded choice?"
~Joshua Rosner is Managing Director at independent research consultancy Graham Fisher & Co.

"The President appears to be drinking from the same Kool-Aid as Congressman Ryan. Just a different flavor."
~Marshall Auerback is a Roosevelt Institute Senior Fellow

"I didn't get the opportunity to catch the President's speech because I was on the phone with a General Electric worker who is being asked to give concessions to General Electric who paid nothing in taxes last year despite making $14 billion in profits. From what I can tell of skimming his speech it was full of the usual rhetoric about shared sacrifices. Perhaps the President should get on the phone with that same GE worker and find out the devastating effect shared sacrifices are having on his family and then take a look at the profits of GE."
~Mike Elk is a labor journalist with In These Times.

"The President mentioned Social Security as if there was something about the program that needed to be 'fixed.' Why? Despite the efforts of conservatives to suggest otherwise, the program is remarkably successful and in excellent fiscal shape, as the Trustees' Report shows. Some minor tweaks may be needed down the road, but there is no justification to tampering with the program now. Obama should draw a line in the sand on America's best-loved program and not be swept into the distortions generated by those who oppose Social Security for ideological reasons or by financial institutions who would like to get their hands on all that retirement money and charge fees for private accounts. When we talk about 'compromise', why is it that the only thing that really gets compromised is the future of ordinary, hard-working people? Let's face it, cutting Social Security while big corporations and billionaires do not pay their share is upside-down economics."
~Lynn Parramore is Editor of New Deal 2.0 and Media Fellow at the Roosevelt Institute

"President Obama's focus on 'winning the future' through an emphasis on better education, 21st century infrastructure, and a renewed commitment to affordable health care for all is right on target. It's what Millennials and rest of America need for a shared future. But the President can't forget to 'win the now' too. That means he must recommit to the recovery of the American economy and working class, who are still suffering terrifyingly high unemployment. Now is not the time to roll back spending on domestic priorities, simply to appease the rabid conservatives that dominate Congress."
~Zachary Kolodin is Director of the Future Preparedness Initiative at the Roosevelt Institute

"My little brother liked to play Monopoly and I wanted to do other things so I sought to lose as quickly as I could. I spent like crazy -- houses, hotels, railroads -- hoping that I would go bankrupt as quickly as possible. My brother played a more cautious game until he landed on one of my purchases and I wiped him out. President Obama's speech does a good job of pointing out that only investment -- in infrastructure, education and jobs -- can provide a prosperous future. He finally called the Republicans on their bluff: no one can claim to be serious about the deficit without acknowledging that Bush tax cuts are a major part of the problem. What President Obama didn't do is to point out how much of the current budget hysteria is manufactured. The Republicans created the current financial crisis by deregulating Wall Street, slashing taxes, multiplying loopholes for their cronies and starting unnecessary wars. They have made it impossible to restrain health care spending by fighting tooth and nail against every effort to rein in the insurance companies. Now, they plan to replace Medicare, which delivers more benefits with fewer administrative expenses than other part of the health care system, with a free market nightmare that invites insurance companies to bilk seniors the same way they are bilking the rest of us. Government is not the problem; slashing the foundation of effective government is. Stop the disinvestment in our children's future."
~June Carbone is the Edward A. Smith/Missouri Chair of Law, the Constitution and Society at the University of Missouri-Kansas City.

"The President missed a golden opportunity to explain why the wealthiest should be taxed at a higher rate -- they tend to hoard their savings instead of spending or investing it. Lowering taxes as per the Ryan 'plan' will lead to greater inequality and have no stimulative effect. This is a very basic Keynesian argument that far too many contemporary Democrats seem incapable of making."
~Frank Cocozzelli is a director of the Institute for Progressive Christianity

"In his address, Obama said we have to 'put everything on the table.' But when asked whether a carbon tax would be part of the mix in closing the deficit during the White House press call, the official said it was not. When asked why Obama was calling for more modest defense cuts than many analysts say is necessary, he replied that, as Commander-in-Chief, Obama had to be more cautious. Despite the doubling of defense spending since 9/11, Obama promised only to hold future increases to some figure beneath the rate of inflation. 'Winning the future' is definitely on the table, as is some vaguely articulated fiddling with Medicare, Medicaid and Social Security. Promising not to balance the budget on the backs of the neediest, the president pledged to control drug costs without imposing a burden on seniors or the poor, but it's unclear how that might happen."
~Joshua Holland writes for Alternet

"President Obama reaffirmed that America at its best is about our being connected to each other and that we can only build prosperity and security with a government that works to bring us together, not tear us apart. He stated what every American knows, that in the past decade the rich have gotten rich while the rest of us have been squeezed. And he made it clear that he wants to set our nation on a new course, that invests in a future of opportunity and hope, and rejects the idea that our best days are behind us. President Obama identifies the problem with the health care system; it's not that people are consuming too much for care, it's that we're paying too much for the care that we are consuming. Instead of telling people they have to pay more for less care, he's proposing that we pay less for better care."
~Richard Kirsch is a Senior Fellow at the Roosevelt Institute

"The speech was an impressive defense of the idea of social insurance, of the promises we make to ourselves as a society. That vision contrasts well with the Ryan plan, which was appropriately called out for both its dishonesty and its viciousness. I think the President is wrong that our recovery has hit a self-sustaining recovery firing on all engines, and poor economic conditions on the horizon could make his dismissal of short-term stimulus and the impact of short-term cuts look foolish in retrospect. It would have been wise for President Obama to emphasize that the path we are on brings us close to where we need to be. Ending the Bush tax cuts, getting more aggressive with health care costs already embedded in the health care bill, will get us far in where we need to go. Because if the proposal moves further to the right, will be far worse than if we did nothing at all. The emphasis on cutting discretionary spending as an ends is disappointing; a lack of discussion of a carbon tax and a financial system tax also takes partial solutions to two of our bigger problems off the table."
~Mike Konczal is a Fellow at the Roosevelt Institute

"In terms of American history, and accepting broad strokes as key to speechifying, I think the President's budget speech was fair enough, if characteristically ponderous. I've been tough before on Obama's use of history, but in this case, making appropriate respect for government as a fundamentally American value, and associating national greatness with the welfare state, links founding values to the New Deal in a pretty defensible way. There are all sorts of things to dissent from here (the founding, for example, was accomplished largely by taking on immense public debt), but this was liberal history in a nutshell -- banal but far from entirely wrong, and highly germane to the case the President wants to make."

~William Hogeland, "Founding Finance" columnist and author of The Whiskey Rebellion

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