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In Reject the Deal, Jeffrey Sachs argues we are on the verge of locking in Bush era maximum tax revenues of 18% of our gross domestic product, GDP, while our current government expenditures are 23%. Sachs suggests Democrats are about to commit the blunder of a century requiring savage cuts to our current government spending equal to 5% of current GDP, which will be cuts of approximately 22% of current government spending -- accomplishing the goals of the extreme right-wing of the Republicans Party of unraveling the New Deal and Great Society programs which had been beyond the reach of even Presidents Reagan and George Bush.

President Obama just unilaterally gave away the last chance in the forseeable future for Democrats to raise sufficient revenues to sustain Democratic social spending, perhaps for decades. Meaning we will now have no choice, ands no bargaining power to avoid giving in to truly massive and unprecidented cuts to social programs well beyond anything anyone has imaged, as in the largest unraveling of the New Deal and Great Society programs in history. ... The public has not been told that yesterday's agreement threatens the financing of crucial programs for education, job training, infrastructure, environment, energy, science and technology, health care, nutrition, and the poor for years to come.

Here are the simple facts. Government spending today is around 23 percent of Gross Domestic Product, including 13 percent for mandatory transfer programs (Social Security, Medicare, food stamps, veterans benefits, military retirement, and others), 2 percent for interest, 4.5 percent for the military, and 3.5 for civilian programs. Taxes are around 16 percent of GDP, but would probably produce around 17-18 percent of GDP in a more robust economy.

Allowing the Bush tax cuts to expire today would have raised tax collections by around 2.5 percent of GDP, to around 21 percent of GDP by the end of the decade, thereby allowing the government to pay its bills assuming that the useless wars are ended and the bloated Pentagon budget is brought under control. The Obama-Senate plan will instead keep taxes at around 18 percent of GDP. The CBO will soon "score" the new tax plan; Democrats will be shocked at what the White House and Senate have given away.

I need more time to research all the different points of view, but I can't see anything wrong with Sachs analysis. And, all I an find from Vice President Joe Biden's rationale is his assertion to Democratic Senators that this bill is better than going over the cliff. It appears this proposition needs substantially better analysis. I welcome different points of view here. Those favoring the bill should explain how we are going to get an additional 3% of revenues, and perhaps a 2% of GDP reduction of defense spending (about 44% of current defense spending), in order to preserve social spending.

The devastation predicted by Sachs seems vastly worse than "going off the cliff" and returning to the taxation level of the President Bill Clinton, the most successful progressive proven success model of our history. The CBO scoring of going off the cliff predicted two quarters of mild recession before roaring into 5% GDP growth by 2016, compared to the unimaginable levels of human suffering we are about to inflict on the next 10 to 50 years of Americans by unprecedented cuts to social programs. The sequester cuts were chump change compared for what we are in store for if this bill passes the house.

 


Whatever the precise numbers, the White House unilaterally and permanently gave away more than 2 percent of GDP in net revenues, all in the name of symbolically "taxing the rich" and "protecting the middle class."  ... Obama is now a lame duck even before being sworn in for his second term, and he will have brought the Democrats down with him.
 

I encourage, in fact, implore all of you to read the entire original as it may be one of the most important single posts you've read in this decade, or substantially longer. At the very least, it should raise our discussions evaluating the pros and cons of this deal to a significantly higher and more consequential level where we evaluate consequences in terms of the total amount of government spending on social programs for all Americans as percentanges of GDP over the next 10 to 50 years, instead of looking at a few one year extensions of benefits for a few million.

But, as I see it now, it appears as we we have a once in a life-time choice between the successful, progressive, and proven President Clinton era tax revenue model and the catastrophic and regressive President Bush era model. Why are Democrats pushing for the Bush model? If we do so what is our plan for other revenues to sustain social spending?

This seems tragic, sad, and bewildering to me. What am I missing? Can someone talk me down? ... or up? It's hard to know which direction is even the right one at this point.  

11:29 AM PT: If anyone needs additional clues as to the big picture of what is going on here please check out Laurence Lewis' Norquist: 'This is progress, making 84 percent of the Bush tax cuts permanent'  

Yes, this is 84% of President Bush plan instead of President Clinton's plans -- "Its a cookbook folks!" A cookbook for destroying the New Deal and Great Society programs. Where are you going to get the revenue to sustain them. Can someone explain to me how we are not about to permenently lock-in  the "starve the beast" plan originally articulated by President Reagan and his Karl Rove equivelent, Lee Atewater, but which neither Reagan, nor Bush had the power to accomplish?  


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Comment Preferences

  •  Dems answer to everything - make the rich pay more (6+ / 0-)

    Nobody seems to realize that they all accepted the Grover Norquist frame that taxes are bad.  Nobody wants to pay for the government they want.  86% of Bush Tax cuts were made permanent - remember those graphs about how bad the Bush tax cuts were - well, now we own all that going forward.  

    President Obama would have been a Republican in the 1980's.

    by Jacoby Jonze on Tue Jan 01, 2013 at 11:28:32 AM PST

    •  Grover Norquist has endorsed this bill. It is (2+ / 0-)
      Recommended by:
      Roadbed Guy, Sunspots

      beyond his wildest dreams, and he says gives Republicans 88% of what they wanted in the Bush tax cuts.

      He understands what many Democrats seem confused about -- the percentage of GDP coming to government tax revenue will determine the maximum level of government spending, unless debt increases.  And, the House controls the debt ceiling is controls by Boehner and House GOP.

      This bill is a disaster for Democrats and Americans and hands the reigns of power to John Boehner.

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 01, 2013 at 12:48:12 PM PST

      [ Parent ]

  •  I will look forward to the CBO scoring... (2+ / 0-)
    Recommended by:
    johnny wurster, guyeda

    ...my hope is that as the economy improves, the relative % of GDP that spending represents will decline (GDP will be higher, the spending will stay more or less the same but with inflation adjustments), and that the revenues will increase (because of increased GDP being taxes) to close the gap somewhat. My guess is that Sachs did his math and they do not appreciably come together.

    it fitfully blows, half conceals, half discloses

    by Addison on Tue Jan 01, 2013 at 11:30:23 AM PST

    •  CBO scoring already out - $4T over next decade... (4+ / 0-)
      Recommended by:
      happymisanthropy, tardis10, ferg, HoundDog

      President Obama would have been a Republican in the 1980's.

      by Jacoby Jonze on Tue Jan 01, 2013 at 11:33:36 AM PST

      [ Parent ]

      •  $4 trillion in tax cuts (2+ / 0-)
        Recommended by:
        tardis10, smiley7

        WOW!   The CBO analysis is that this vote will add nearly $ trillion to the deficit over the next 10 years.  Almost all of it tax cuts.

        I hope no House Democrat will vote for this given the CBO scoring - it will crush government revenues over the next decade.

        "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."

        by oregonj on Tue Jan 01, 2013 at 11:40:14 AM PST

        [ Parent ]

      •  I'd still want to see the %... (1+ / 0-)
        Recommended by:
        HoundDog

        ...to compare against Sachs' column. But yes, $3.6 trillion. It would be okay, except that we all know the Republicans will still pretend they care about the "debt" and not just taxes on the rich and cutting social spending. And their hypocrisy will drain everyone of energy, and we'll be in for 10 years of annual "debt ceiling" inspired social spending and entitlement cuts (as well as tax cuts for the rich and maybe even a new war or two, depending on who gets elected in 2016).

        it fitfully blows, half conceals, half discloses

        by Addison on Tue Jan 01, 2013 at 11:42:13 AM PST

        [ Parent ]

        •  (-$3.6 trillion in revenue, +$3.9 in debt) (0+ / 0-)

          it fitfully blows, half conceals, half discloses

          by Addison on Tue Jan 01, 2013 at 11:44:05 AM PST

          [ Parent ]

          •  And, will this not mean that Boehner will (1+ / 0-)
            Recommended by:
            smiley7

            demand $4 trillion in cuts to government spending to allow the debt ceiling to increase. What will we be able to do about it?  Perhaps, rally public support?  But this will be a grim, painful, and uphill battle, compared to going off the cliff, and then using possible tax cuts as bargaining chips to a better compromise.

            The means is the ends in the process of becoming. - Mahatma Gandhi

            by HoundDog on Tue Jan 01, 2013 at 12:08:09 PM PST

            [ Parent ]

        •  Bingo. John Boehner controls the debt ceiling, (1+ / 0-)
          Recommended by:
          smiley7

          what are we going to do about it?  He's made it clear.

          A dollar of reduction of government spending reduction for every dollar of debt-ceiling reduction.   And, no defense spending.

          Our deficit is currently $1.2 Trillion per year.  This is vastly worse than going over the cliff.

          The means is the ends in the process of becoming. - Mahatma Gandhi

          by HoundDog on Tue Jan 01, 2013 at 12:51:03 PM PST

          [ Parent ]

    •  Pardon my naivete,... (1+ / 0-)
      Recommended by:
      HoundDog

      ...but how does the GDP rise with sharp spending cuts?  We were slated to have two quarters of recession after going off the cliff, when the shortfall between revenue and spending would have been narrowed.  To make up for the reduced revenue under the new plan, I'm guessing we'd have to see steeper cuts than that scenario entailed.  And a deeper recession. And lowered GDP.

      •  Indeed. (1+ / 0-)
        Recommended by:
        HoundDog

        The cycle will (I think) naturally go up a bit as it has been throughout this slow-rolling debacle. So I think GDP will rise as it has been. But doubtless the current anemic growth is what we're in for, and we could still do much, much, much better for pennies of spending on the revenue dollar gained.

        it fitfully blows, half conceals, half discloses

        by Addison on Tue Jan 01, 2013 at 11:45:55 AM PST

        [ Parent ]

        •  Again, how does GDP rise as spending falls? (0+ / 0-)

          Or is the goal to widen the shortfall between spending and revenue?  Revenue will be lower than under the expiration of tax breaks.  Spending either must be lower as well, or the gap widens.  What am I missing?

          •  What is happening now? (1+ / 0-)
            Recommended by:
            HoundDog

            GDP is going up now. And, in any case, spending likely won't fall, it will grow more slowly. I'm a Keynesian, too, and I agree with you. The goal is to lock in the taxes so that the only thing that can budge in the fight against the Debt Dragon is social spending and entitlements.

            it fitfully blows, half conceals, half discloses

            by Addison on Tue Jan 01, 2013 at 11:53:24 AM PST

            [ Parent ]

            •  What's happening now (or fourth quarter 2012)... (1+ / 0-)
              Recommended by:
              HoundDog

              ...is before the new government spending cuts.  Those new cuts will be onerous, or the deficit will not be stabilized, much less reduced as the deficit hawks want.  So GDP would fall, not rise, in 2013.  That's implicit in the forecast of a recession if we had gone off the cliff.  That cliff jump's revenue increase is now halved in the new plan.  What increased spending measures will make up for that?  Or are we doing this in total divorce from any actual deficit reduction?

              I'm not picking on you.  I just don't understand the reasoning, if there is any, in expecting GDP to keep rising, unless the fabled Confidence Fairy is about to bestow untold non-governmental riches upon our economy from out of the ether.

              •  Excellent questions dance. I don't believe this (0+ / 0-)

                current "deal" includes any deficit reduction, and the GOP is not expected to have the upper hand in those discussion as we will not have any bargaining power after adopting 88% of the Bush tax cuts.

                If this deal only extended them to one of two year (equivalent to the one to several year extensions we are getting to unemployment and other tiny programs) I'd be okay with it.

                But, by making them permanent it seems all power goes not to the GOP.

                The means is the ends in the process of becoming. - Mahatma Gandhi

                by HoundDog on Tue Jan 01, 2013 at 01:52:51 PM PST

                [ Parent ]

          •  It doesn't (0+ / 0-)

            But the spending cuts are postponed.

            The idea behind the grand bargain is stimulus now, revenue increases and spending cuts later. If the stimulus is done right, then spending goes down some automatically, as people go back to work.

            Of course, it's all Kabuki to some extent because any future Congress can change things. But it is harmful in that we are all talking about long run elicits as though we can actually do good forecasts. CBO scoring is nonpartisan, but that just makes it the least bad methodology.

            We can safely abandon the doctrine of the eighties, namely that the rich were not working because they had too little money, the poor because they had too much. JK Galbraith, 1991

            by Urban Owl on Tue Jan 01, 2013 at 12:01:44 PM PST

            [ Parent ]

            •  There is no stimulus (0+ / 0-)

              There is only austerity in this deal.

              Payroll cuts and and the sequester begins (two months is meaningless.)

              There's no stimulus.

              •  Unemployment benefit extension? (1+ / 0-)
                Recommended by:
                gramofsam1

                Doesn't that have the highest multiplier because it all get spent?

                And I agree that a 2-month deal is meaningless at the macro scoring level, but not for the people who are looking at a personal cliff without UI checks.

                We can safely abandon the doctrine of the eighties, namely that the rich were not working because they had too little money, the poor because they had too much. JK Galbraith, 1991

                by Urban Owl on Tue Jan 01, 2013 at 12:54:34 PM PST

                [ Parent ]

            •  There is no stimulus in the current package. The (1+ / 0-)
              Recommended by:
              smiley7

              most reasonable expectation is that the cuts implied in this deal as massively greater than sequestration -- probably 400% higher an all concentrated on social programs.

              In the going off the cliff scenario, Howard Dean pointed out we Democrats have bargaining power with the 50% of the cuts scheduled for defense.  We trade some of that for debt ceiling extension which the GOP has said will require a dollar of cuts for every dollar of extension and we need $1.2 trillion per year.

              This bill will require vastly greater cuts to government spending than the sequestration cuts which we still then have bargaining power over.  We have no bargaining power after this deal goes through.

              The means is the ends in the process of becoming. - Mahatma Gandhi

              by HoundDog on Tue Jan 01, 2013 at 01:00:38 PM PST

              [ Parent ]

          •  My understanding from Howard Dean is that the (0+ / 0-)

            CBO scoring that shows the economy turning around to growth after the "going off the cliff" scenario is due to substantial improvement to the debt and deficit crisis increasing consumer and business confidence, investment, spending and then jobs. But it take until 2016 and longer.

            The means is the ends in the process of becoming. - Mahatma Gandhi

            by HoundDog on Tue Jan 01, 2013 at 01:49:14 PM PST

            [ Parent ]

      •  The CBO assumption is that the economy will thrive (0+ / 0-)

        as investors see renewed confidence and willingness to invest in our country because going off the cliff solves most of the debts crises putting the US in the strongest position of any country in the world.

        The means is the ends in the process of becoming. - Mahatma Gandhi

        by HoundDog on Tue Jan 01, 2013 at 12:09:46 PM PST

        [ Parent ]

        •  Quite the assumption,... (0+ / 0-)

          ...unless they mean that foreign investors should save our backsides.

          American investors are fleeing the equities markets, still, and it's not because they have too little confidence in the country (bond flows remain high) but rather that equity investors have too little confidence of any fairness in the stock markets, and corporations have only the incentive to invest abroad for cheaper labor.

          •  Perhaps, I haven't studied the CBO scoring of the (0+ / 0-)

            "off the cliff" scenario but only read Howard Dean say it is the most progressive deal possible.

            But, this deal will be a vastly worse austerity bomb -- requiring us to make substantially larger cuts with no bargaining power to resist GOP demands.

            Unless the President reverses himself of the platinum coinage plan or something totally out of the box that his own advisers have told him would be found unconstitutional if used to defy the House debt limit.

            The means is the ends in the process of becoming. - Mahatma Gandhi

            by HoundDog on Tue Jan 01, 2013 at 01:04:01 PM PST

            [ Parent ]

      •  The CBO assumes the sharp spending cut directly (1+ / 0-)
        Recommended by:
        smiley7

        reduce GDP by 2%, taking us just under the negative for two quarters, but the tremendous increase in government revenues from higher tax revenues, and the gradually reduced defense spending from the end of the wars balances the budget making our economy the most trusted in the world boosting business and consumer confidence, increasing investment, and preventing further cuts to governments revitalizing our economy in the longer-term, which also increases government revenues.

        The CBO doesn't apparently calculate secondary feedback loops but others might argue that by solving the current deficit-debt crisis the government will have greater latitude in stimulus and jobs programs.

        The means is the ends in the process of becoming. - Mahatma Gandhi

        by HoundDog on Tue Jan 01, 2013 at 12:55:57 PM PST

        [ Parent ]

  •  if the economy rebounds, then the (3+ / 0-)
    Recommended by:
    Urban Owl, HoundDog, guyeda

    revenues, which are linked to GDP, increase, and the spending, which isn't, decreases as a share of GDP.  

    so the question is how growth impacts that gap.  I don't know the answer to that, but I do know that its incomplete to state that a current 5% gap means we'll have to cut 5%.  if growth stays the same, and if we want to eliminate the deficit altogether, then it'd be correct, but both assertions are contestable.

    •  Good point, I can't solve hundred order non-linear (1+ / 0-)
      Recommended by:
      guyeda

      differential equations in my head either.

      And, there already are certain reductions in defense by winding down the wars.

      I don't think it is the exact percentage of 5% of GDP that is the main point, as much as if we lock in tax revenues at 18% (it is actually more like 16% Sachs is giving 2% benefit of doubt to the Republican tax cuts stimulate the economy argument I don't think there is much evidence for.)  we will need cut to government spending much, much greater than sequestration, and all to social spending not balanced with military budgets.

      But, the thing that makes it harder for people to get their minds around is the two-step nature of the thought process.

      This bill does not include the cuts to government implied by the 18% revenue cap.  We need to think think ahead two months, or decades to ask how plausible is it that the GOP once they have all the power will reverse their life-long opposition to government debt and let it keep going up without demanding cuts.   Something, that seems to have a near zero % chance of happening.

      President Obama has announced any further cuts to government spending must be matched by increases in revenue -- but how is he going to get that?  Numerous pundits --even Democratic-- point out he's backed down every time.  And, he now has given up his primary bargaining leverage of the expiration of the Bush tax cuts. So how is he going to influence the GOP to change their iron clad pledge not to raise any more revenues but take all of the deficit gap out of social spending?

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 01, 2013 at 01:13:34 PM PST

      [ Parent ]

  •  Thanks HoundDog for an informative diary (6+ / 0-)

    The reality is that spending is above historical norms and revenue is below historical norms and we need more revenues and less spending to bring them back towards a balance. The revenue can't all come from the top one or two percent, it needs to be much broader than that. And the spending reductions can't all come from defense, there is no political will to achieve that. However, I don't see the path to a more financially secure federal government, given the polarized Congress.

    "let's talk about that"

    by VClib on Tue Jan 01, 2013 at 11:34:49 AM PST

    •  Great comment VClib, No we cannot get enough (3+ / 0-)
      Recommended by:
      smiley7, VClib, guyeda

      taxes from the 1% to sustain current government spending.

      I know from previous columns that Sachs agrees, but thinks that if we go over the cliff and lock in tax rates on everyone, we will have tremendous leverage to negotiate more progressive ways to do it - such as closing loopholes on higher income folks, ending Caymen Island "stuff," and corporate taxes.

      But, if we pass this bill he thinks we have zero leverage and zero chance of getting the GOP to go along with this. We will have handed them the starve the beast accomplishment that has been their wet dream for 50 years. And, they will never give it up.

      Our only hope would be regaining control of the House, Senate and White House, which given gerrymandering, and loss of Democratic Party credibility and power, may take decades or not even be possible.

      I suspect after a decade of unimaginable suffering from lack of Medicare, food stamps, nutrition  etc. we may see a change in public sentiment with regard to taxation -- perhaps in 2030  or so.

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 01, 2013 at 12:19:24 PM PST

      [ Parent ]

    •  Spending is up? (0+ / 0-)

      We hear this quite often. I've also heard current spending is lower than it was during the Eisenhower administration. One of these can't be true.

      "Life is tough. It's even tougher if you're stupid." --John Wayne

      by Sonofasailor on Tue Jan 01, 2013 at 12:35:22 PM PST

      [ Parent ]

      •  A matter of transfer payments (3+ / 0-)
        Recommended by:
        Sparhawk, VClib, guyeda

        If one does not include Social Security, Medicare, Medicaid, etc., then Federal spending as share of GDP is lower today than in the 1950's.  However, ignoring these transfer payments does not reflect reality.  Also Military spendings as share of GDP was much higher during the Cold War.

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Tue Jan 01, 2013 at 01:02:56 PM PST

        [ Parent ]

    •  Even the top 10% (1+ / 0-)
      Recommended by:
      VClib

      would have been a lot better.

      Even over $250k would have been a lot better than over $400k. There should have been no compromise on that. But since we needed compromise, there should have been another expiration date attached to the whole thing, not more permanent tax cuts.

  •  There's even more to it than that. (5+ / 0-)
    Recommended by:
    VClib, HoundDog, gramofsam1, Sparhawk, guyeda

    And it has to do with the growth in the cost of government health care programs.  Specifically, the last Medicare Trustees Report for 2012concluded that, under the most FAVORABLE assumptions about cuts in the costs to health care under the ACA and otherwise, and if Congress continues the Doc Fix (which it just did), Medicare alone (not counting Medicaid) will grow to over 10% of GDP by the time our children need it:  

    Total Medicare expenditures were $549 billion in 2011. The Board projects that, under current law, expenditures will increase in future years at a somewhat faster pace than either aggregate workers’ earnings or the economy overall and that, as a percentage of GDP, they will increase from 3.7 percent in 2011 to 6.7 percent by 2086  (based on the Trustees’ intermediate set of assumptions). If lawmakers continue to override the statutory decreases in physician fees, and if the reduced price increases for other health services under Medicare are not sustained and do not take full effect in the long range, then Medicare spending would instead represent roughly 10.4 percent of GDP in 2086. Growth of this magnitude, if realized, would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the federal budget.  
    The simple fact is that if we want to sustain spending at the current projected levels, we are going to have to have significantly more tax revenue, and there's not nearly enough from the top 2% of the households to do that.    

    Our elected officials need to be honest with us.  If we all want the government to provide the services it does for the next generation, we all -- not just "the rich"  -- have to be willing to pay more in taxes to do that.  

    •  Medicare costs are below projections (0+ / 0-)

      We can safely abandon the doctrine of the eighties, namely that the rich were not working because they had too little money, the poor because they had too much. JK Galbraith, 1991

      by Urban Owl on Tue Jan 01, 2013 at 11:56:30 AM PST

      [ Parent ]

      •  Hmmm, what to believe (3+ / 0-)
        Recommended by:
        gramofsam1, Sparhawk, VClib

        the detailed, much-vetted Medicare Trustees Report, with detailed projections, signed  by, among others, three cabinet secretaries, and taking into account that the ACA might under the most favorable conditions slow the growht of health care spending, and accounting for that in a number of scenarios, or a chart by someone who is now at Citi saying only that the rate of growth might be slowing, but not saying where Medicare will be in the upcoming decades?  

        I'll wait to see what the Medicare Trustees Report for 2013 says.  

        •  One more source (0+ / 0-)

          When you first posted this in another thread, I tried to explain why the scary scenario of Medicare eating the budget might not be the only, or even the most probable one. This time, I thought more recent data on the trend in Medicare costs might be interesting. The trustees report is, like all government reports, subject to a process that forces a lag in the data reported, just nature of the beast. I apologize for not tracking down its original government source for you, it is indeed lazy to use Business Insider reporting on Peter Orszag's graphs. Even though he works for Citi, many of us think that Obama's former OMB Director Orszag is capable of producing an honest graph.

          As an alternative resource, may I suggest an independent analysis of policy based on facts.  The Urban Institute has one:
          April2012report

          And of course, if you want to hold the position that we have to raise everyone's taxes to provide Medicare in the future or else we have to cut Medicare benefits, you have lots of company. I disagree and think it is a debatable issue. Isn't that what DK is all about?

          We can safely abandon the doctrine of the eighties, namely that the rich were not working because they had too little money, the poor because they had too much. JK Galbraith, 1991

          by Urban Owl on Tue Jan 01, 2013 at 07:37:03 PM PST

          [ Parent ]

    •  Excellent point, coffeetalk. We are going to need (1+ / 0-)
      Recommended by:
      smiley7

      to do something about rising health cost, but this bill will do that in a savage way of ending programs, including most likely the ACA which will require increased spending on state Medicaid in addition to federal spending to manage the national level.  

      Ending corporate loopholes, can get us a sizable chunk, but I'm not an expert.

      Grover Norquist has endorsed this deal and says it accomplishes 88% of what Bush had hoped for.

      He also recognizes that once 88% of Bush tax cuts are locked in, it the deathk knell for social spending as the House controls the debt-ceiling.

      I'm increasingly convinced this is the largest Democratic blunder we will see in our lifetimes.

      How stunningly sad.

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 01, 2013 at 12:27:58 PM PST

      [ Parent ]

  •  Jobs matter, not the current deficits (1+ / 0-)
    Recommended by:
    Sonofasailor

    All the pearl clutching about the deficit is just adopting the Republican frame. The United States does not have a deficit crisis. The real emergency is JOBS NOW.

    Economists who disagree with Sachs:

    Dean Baker:
    Legacy for our children

    Krugman:

    Econ and politics of deficits

    We can safely abandon the doctrine of the eighties, namely that the rich were not working because they had too little money, the poor because they had too much. JK Galbraith, 1991

    by Urban Owl on Tue Jan 01, 2013 at 11:47:07 AM PST

    •  These are both great articles Urban Owl and I (0+ / 0-)

      might even write them up, but they in no way deal with the issues here.

      Except for Krugman suggesting $1 trillion of the current deficit could be solved if our economy were cranking at pre-recession levels, but this is only a fraction of the revenues we will need to sustain government spending at anywhere near current levels.

      These articles argue that the "deficit hawks" are overly wrought and ought to be more concerned about jobs, which I agree with.

      They do not address the non-sustainability of current government spending if we adopt what Grover Norquist says is 88% of his goal of Bush tax cuts -- which given GOP control of the debt ceiling will determine government spending cuts.

      If we didn't have the House control of the debt ceiling I would be comforted and be willing to finance the difference with debt, but that option is available to us and Boehner, et. al.. as promised that it will not be.

      I only bring up the deficit gap as evidence of how far below current spending are these revenue assumptions.

      And to show that this bill is a capitulation to Grover Norquists, John Boehner's vision.  

      We will have zero ability to create jobs or any stimulus in this scenario where we would if we go off the cliff and return to Clinton tax rates.

      The rabid right believe cutting taxes will automatically create jobs but the evidence does not support this fantasy under the competitive situation we now face from China and free trade agreements.

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 01, 2013 at 12:44:01 PM PST

      [ Parent ]

      •  Crank it up for 2014 (1+ / 0-)
        Recommended by:
        HoundDog

        Big picture is we HAVE to take more local and state elections as seriously as we do the National ones.

        The deficit/debt can be dealt with in future Congresses. No Congress can tie the hands of a future one. I do not think that worrying about whether this sets a precedent matters, future revenue bills that result in 20% or more of GDP are still just as possible today as yesterday.

        And I think that Sachs, who is wonderful in his field, is just wrong on this one. The long run deficit should not be our top priority right now.

        Sustainability depends on dealing with real structural issues, the largest one being climate change, with education, infrastructure, and dealing with multiple inequalities in our system. Yes we can do all this! I think Dean Baker makes it clearest; if you think of our challenges as existential threats like Pearl Harbor, then it's clear we can pull up our socks and get it done!

        But not if we stay mired in deficit talk.

        Thanks for your thoughtful response, BTW.

        We can safely abandon the doctrine of the eighties, namely that the rich were not working because they had too little money, the poor because they had too much. JK Galbraith, 1991

        by Urban Owl on Tue Jan 01, 2013 at 01:06:44 PM PST

        [ Parent ]

        •  I also appreciate your thoughtful response but (1+ / 0-)
          Recommended by:
          Sparhawk

          still do not understand your optimism, short of the hope that we take back the House in 2014.  

          I'd love this scenario, and if we can gain control of the House, Senate, and White House, yes, I agree we can fix this.

          And, if we can somehow convince the GOP not to extract painful cuts until we regain the House I'd feel the same way.

          But, it is not clear we an regain the House in 2014 given gerrymandering.  

          But, let's just talk about the next two years.  Do you not agree that given that the House completely control all budget initiations and the debt ceiling, and after this bill we have little bargaining leverage, (except for a small, but meaningful ability to trade the 50% cuts in sequestration that are going to defense that the GOP want to reallocate to social spending -- but this only makes our situation worse. )

          You understand that Boehner has said every dollar of debt ceiling extension will require Democrats to agree to an equivalent amount of spending reduction -- $1.2 trillion per year.   There isn't even enough total social spending to make this possible for very long.  the $1.2 trillion deficit gap is per year, not the 10 year totals as some of the other numbers such as the sequestration cuts are, Urban Owl.

          How does this not leave you limp with despair?  Maybe I need to get some of the same eggnog you might be drinking? (I mean this in the nicest possible way -- as humorous comic relief, not as a nasty jibe.)

          Please talk me through your thought process, and tell me what I am missing.

          The means is the ends in the process of becoming. - Mahatma Gandhi

          by HoundDog on Tue Jan 01, 2013 at 01:23:27 PM PST

          [ Parent ]

          •  Thought process, or what passes for one (0+ / 0-)

            Boehner's statements should not be taken any more seriously than Obama's. it's all positioning BS right now.

            It is entirely possible that your fears come true and Obama caves, but will the Senate go along with that? They, unlike Obama, will have to face voters again. And I am hoping that the filibuster reform happens, which matters.

            Okay, if Obama caves, we go back into recession and more people suffer. Bad. But it's not as though these things happen and nobody notices. Recession is not on the wish-list of the Republican financiers either. I don't know if the money people can rein in the crazy, but I do think they are going to try. And it does focus more people n 2014.

            Obama has choices IF he will use them. Clinton was prepared to use the 14th Amendment to ignore the stupid debt ceiling. Obama could and should do that and provoke the lawsuit, court case, etc. The Roberts court would then have to back Obama on the constitution or take the heat for a U.S. default. It's hard to see the Supremes doing that.

            And there is always the trillion dollar platinum coin, not likely, but then if it's that or default? Actually, I think we will go through a near-default so a bunch of bond traders can buy during the panic and then sell when it is resolved. But I do not think we will default, and the worst alternative will still not be the end of times, just one more F'n growth opportunity.

            I guess my bottom line optimism is that there is an upper bound on crazy, even in this Congress. I can be wrong, it HAS happened before more than once. And I will freely admit a strong bias toward optimism that is not related to facts, seems to be the default in my programming.

            We can safely abandon the doctrine of the eighties, namely that the rich were not working because they had too little money, the poor because they had too much. JK Galbraith, 1991

            by Urban Owl on Tue Jan 01, 2013 at 06:28:55 PM PST

            [ Parent ]

  •  I was amazed at how all sides worked like mad to (3+ / 0-)
    Recommended by:
    ferg, HoundDog, Mr Robert

    completely ignore what the CBO projected.  The 'Let's make a deal!'ers simply didn't want to here that short term pain could be turned around quickly for long term gain.

    •  Me too. I'm stunned that the entirely of (0+ / 0-)

      Vice President Biden's argument seems to be this is the best we can do other than go off the cliff.  But, this doesn't seem to be even remotely true, or even plausible from this line of thinking.  What am I missing.

      One after another, major Democrats seem to be lining up to drink this koolade?  What do they know that I can't see?

      Someone please explain it.  Otherwise, I will have to join those suggesting this bill looks like a disaster and as Grover Norquist says, and 88% endorsement of the George Bush economic vision for government and America.

      I prefer President Clinton plans and a level of government spending of at least 21% of GDP, if not the current 23%.  But, if taxes are at 16% to 18% and the House controls the debt ceiling I do not see anyway this is going to happen.

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 01, 2013 at 01:28:18 PM PST

      [ Parent ]

  •  Hear, hear! n/t (1+ / 0-)
    Recommended by:
    smiley7

    Moderation in most things.

    by billmosby on Tue Jan 01, 2013 at 12:28:09 PM PST

  •  Where's the discussion about why the Bush tax cuts (3+ / 0-)
    Recommended by:
    HoundDog, Mr Robert, a2nite

    had an expiration date?

    Can we talk about how the hypocrite deficit hawks in the Republican congress ducked their own pay as you go rule twice by making these budget busting tax cuts "temporary"?

    Making the bulk of these cuts permanent means they will now have to be paid for somehow.

    Can anyone tell me how they plan to do this? Let's hope it's a withdrawal from Iraq and Afghanistan and not another round of cuts to critical programs.

    "Life is tough. It's even tougher if you're stupid." --John Wayne

    by Sonofasailor on Tue Jan 01, 2013 at 12:46:09 PM PST

    •  Excellent point. But Sachs already include the (2+ / 0-)
      Recommended by:
      Sonofasailor, Mr Robert

      assumption of reduced spending on Iraq and Afghanistan -- something that might be optimistic because even though we've withdrawn our troops from Iraq we seem to be spending substantial amounts.  

      Sachs seems to think substantial cut to the military and improved tax receipts if the economy returns to full employment might close part of the gap.

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 01, 2013 at 01:31:16 PM PST

      [ Parent ]

    •  Everyone I knew knew the "expiration date" (1+ / 0-)
      Recommended by:
      Sonofasailor

      on the Bush Tax cuts was offered ironically - or maybe just for the amusement of those who wrote the bill.

      Because after the Mondale debacle of '84 there simply was no way they'd ever be allowed to go back to the Clinton era rates w/o being called the "biggest tax increase in the history of the Galaxy" or something similar - and we all know how much traction that frame would/could get!

  •  Last year of Pres Clinton Fed spend was 18% of GDP (1+ / 0-)
    Recommended by:
    HoundDog

    What would be so bad with going back to Clinton era taxes and spending?

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Tue Jan 01, 2013 at 12:56:19 PM PST

    •  From what I can gather from Sachs is that the (1+ / 0-)
      Recommended by:
      Mr Robert

      equivalent level as in the Clinton era would now be a government of about 21% of GDP, which will not be possible with the Bush tax cuts which will create about a 3% to 4% shortfall.

      But, at its essence I believe Sachs and certainly I am arguing in favor of the Clinton model instead of adopting the Bush model which is what this current bill seems to be doing.

      Grover Norquist sees it this way except he favors the Bush tax cuts as a way to eviscerating progressive Democratic spending programs in the Clinton era and current budget which is at 23% of GDP.

      Going back to 18% or less now, would be 5% of GDP, or about 22% cuts to current government spending -- where does it come from without devastating cuts to current social programs?

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Tue Jan 01, 2013 at 01:37:09 PM PST

      [ Parent ]

  •  excellent post (3+ / 0-)
    Recommended by:
    smiley7, HoundDog, Mr Robert

    thanks

  •  Thanks for the work HoundDog (1+ / 0-)
    Recommended by:
    Mr Robert

    "Lets show the rascals what Citizens United really means."

    by smiley7 on Tue Jan 01, 2013 at 01:54:22 PM PST

  •  Thank you (0+ / 0-)

    I consider this diary and what Jeffrey Sachs has to say about the consequence of implementing these tax cuts to be the most important thing that I have read since these negotiations started.

    It look to me like with a little help from Obama and the Democrats that Grover Norquist will achieve his goal of drowning our government in a bathtub.

    The only trouble with retirement is...I never get a day off!

    by Mr Robert on Tue Jan 01, 2013 at 05:25:43 PM PST

  •  The deficit is NOT our problem, disinvestment is (0+ / 0-)

    The idea that we are running deficits that are "unsustainable" and must cut spending misses the most important points about modern economic theory.  We are not in danger of default, now or at any point in the foreseeable future.  We are in danger of allowing inequality to continue to rise and smothering out any chance of a broad recovery if we cut spending.

    Wages must rise for the economy and for your household to realize any improvement.  This will not happen if we continue to use austerity to solve our problems.

    We should be running very large deficits right now.  The word deficit is actually the wrong syntax when talking about a nation with currency creating capacity.  It is really investment in our shared futures, without which we are going to continue to watch the middle class disappear and see the wealthy amass more of what WE work for.

    Right now, China is bouncing back from a very significant downturn.  They are doing so at record pace.  They are printing money and spending it on infrastructure.  This is a winner.  Wages are rising quickly.

    Right now, Europe is faltering, still unable to recover its footing after the same downturn that affected the US and China, but they are pursuing austerity instead of stimulus.  Wages are falling, unemployment rising.

    The facts are clear.  Austerity makes the economy shrink devastating all but the wealthy.  Done for long enough, the State must sell off its assets, bringing about a death spiral.  This is Greece in a nutshell.  They do not have a sovereign currency and cannot do much about it.  We do and can....and must.

    If we carry out the spending cuts the media is selling us, our children will know nothing but an impoverished America.  We must educate the people back to reality.  Please read a bit about economics.  God knows it is dry and frequently counter-intuitive but there is a right answer and wrong answer if you know the goal is utilitarian, to maximize quality of life improvement on the greatest number of lives.

    A blog called New Economic Perspectives is a great start.

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