Rich Barbieri, of CNN Money reminds us that 3 more fiscal cliffs loom and we should probably add that if our goal is to achieve deficit reduction in ways least damaging to our economy and the well being of our people, we should also be trying to boost jobs, stimulate our economy, and raise additional revenues.
In the next three months we have three major deadlines, two of them self-imposed: the debt ceiling, the delayed sequestration, and the need for a continuing budget resolution to fund next years ongoing budget in the absence of a traditional budget.
1. Debt Ceiling: (Deadline late February to early March, 2013) Treasury Secretary Tim Geithner officially informed us that we officially hit this ceiling in the last days of 2012, but that he can juggle the book buying us up to two months of additional time to authorize and extension.
Treasury Secretary Tim Geithner made it official: Federal borrowing has reached the $16.394 trillion debt ceiling. ... The Treasury Department, which runs the government's debt-issuance operation, can create about $200 billion of headroom by employing what it calls "extraordinary measures."
What's at stake: Last year, political brinksmanship over the debt limit led to the downgrade of the country's credit rating, roiled stock markets and raised questions about the country's willingness to pay all of its bills on time. It also wasted $1.3 billion because of the uncertainty it wrought on the complex task of federal borrowing.
2. The Delayed Sequester cuts: Deadline: The McConnell-Biden Bill delayed these by two months, so my presumption is these now hit on March 1 or 2, 2013.
The so-called sequester is a series of automatic cuts in federal spending that will reduce the budgets of most agencies and programs by 8% to 10%.
The cuts were born of the epic 2011 fight over the debt ceiling. The idea was to create a "trigger" so onerous and indiscriminate that both parties would have an incentive to devise a smarter way to reduce deficits. ... What's at stake: The spending cuts as laid out in 2011 would ripple out across thousands of federal programs and projects and, the White House budget office said in September, "would have a devastating impact on important defense and nondefense programs."
3. Continuing Budget Resolution: (Deadline: our existing resolution expires March 27, 2013.)
If we are really serious about deficit reduction, improving our economy and budget we need to add several items to help change the focus to a constructive one that institutes targeted solutions to the real underlying problems causing our deficits and anemic economy performance.
The federal government works on a fiscal year that starts every Oct. 1. Problem is it has been years since it actually enacted a real budget on time. ... There's a process for enacting a budget: Congressional committees are supposed to hold hearings. Experts and interested parties testify about proposals. Lawmakers deliberate over the right spending levels for each federal agency and then roll it all up into a budget.
... Instead, it usually passes short-term "continuing resolutions," ... Congress will have to pass yet another continuing resolution to avoid a temporary shutdown of some government functions, worker furloughs and a pullback in programs.
Yesterday, I reported This battle is about the size of government not deficits and debt says Robert Reich. Reich shows that about a third of our post-Bush deficit spike is due to economic distress causing reduced tax revenue, and increased safety net expenses such as extended unemployment. Please follow me believe the fleur de kos for more ideas.
Many others, such as Paul Krugman warn us of an "austerity bomb" additional cuts all hit our fragile economy at this time.
4. Economic and jobs crises cause 1/3 of deficit spike: I hope we do not need to call this the "jobs cliff" to get the media to give it equal coverage to these artificially created distractions to our more fundamental challenges. As I wrote in my post yesterday:
Reich recounts our recent history which show deficits have been dropping recently, if measured properly, as a percentage of gross domestic product (GDP is the value of all goods and services produced in the U.S.) In September of 2009 the deficit was 10.1% of GDP, and it has fallen to 7% by 2012.As our economy and employment improve - and tax revenues increase, and safety net spending such as unemployment declines our deficits are improving. President Obama's Infrastructure Bank stimulus could continue this direct important reduction of deficits while also contributing real value to the economy. We need to use the "bully pulpit" to chance the focus of these discussion.
After President Clinton handed President Bush an economy in surplus, Bush trashed it with tax cuts equal to 2% of GDP, two unfunded wars and a near doubling of total defense spending, which was then made worse by the Great Recession of 2009 when our economy and consequent tax revenues tanked. This recession also "boosted government spending on a stimulus program and on safety nets like unemployment insurance and food stamps."
5. Austerity Bomb: This may be a more important "cliff" to our real fundamental problems that I fear we may have to call the "austerity cliff" to get warranted media coverage. Unless we keep in mind that a substantial cause of the deficit has been reduced economic growth we are likely to make substantial errors doing more harm to both our economy and social programs than is necessary.
Insisting on setting off a voluntary "austerity" bomb on ourselves with such a fragile economy that is barely on the edge of recovery, and at a time when we still have an unprecedented number of people still without jobs this late in a "business cycle recovery."
Discussion Thought Starters
1) Grant President Obama's request for a clean debt-ceiling extension of the debt-already authorized by President Clinton.
2) Take out unwanted pork just added to the NDAA.
3) Let Medicare negotiate drug prices with pharmaceutical companies.
4) Substitute more modest package of immediate one-year targeted cuts this year and delay remaining 9 years of sequestration cuts.
5) Ask DOD to propose 10% selective cuts to military budget in 60 days, to replace across the board sequestration cuts.
6) Form Blue Ribbon Committee to Review $1.2 trillion/year "total defense budget" for 20% long-term cuts to begin in 1 year.
7) Temporarily offset Keynesian austerity bomb of reduced military expenses with short-term job and economic stimulus.
One concern about ramping this down too quickly is the reverse Keynesian effects, but this is why I propose that we find an additional $100 billion in this bloated defense budget which has been nearly doubled since 9/11 and "redeploy" these assets and expenditures to a more pressing "clear and present danger" to our national security -- our failing infrastructure.
We could use $50 billion of the additional permanent $100 billion cuts to military spending for a temporary jobs and economic stimulus of President Obama's infrastructure bank.
And, the remaining $50 billion in jobs stimulus with tax incentives for upgrading roads and bridges, as well accelerating our conversion to alternative energy, and starting planning our upgrading our electrical grid infrastructure with "Smart Grid" technology and High Voltage Direct Current long-line transmissions or other modern technologies which stimulate or fragile economy.
Sorry to make this post so long, but I needed to organize my thoughts for the day. By experience I know post this long seldom get more than a few comments, so please be patient as I break this up into about seven smaller posts throughout the day, for maximal impact.
I believe we need to hit the ground running and get twice as proactive as usual to influence these remaining "how many trillions will we cut form social spending" "cliff discussion" in the next 60 to 90 days.
Do you remember the "forced choice" questions we are taught to ask our young children? Rather than would you like vegetable with dinner, "would you like spinach or peas?" That's what the GOP negotiation plan is now. To make Democrats own social spending cuts by asking President Obama to spell out "How much of the trillion social spending cuts does he want in chained CPI versus how many years of raising Medicare eligibility?"
One major response we need to get on the table is the fact that supporting jobs amd economic stimulation will more effectively reduce deficits.