The GDP dropped because government spending dropped: your move, GOP

Economic growth for the Q4 GDP was down -0.1%. Why? Because government spending dropped. Steve Benen explains:

So why did we see slight contraction in the GDP? In large part because spending cuts — federal, state, and local — shaved more than a full percentage point off GDP growth. I realize the right doesn’t want to hear or believe this, but when Washington spends far less — in this case, the cuts focused on defense — it takes capital out of the economy and undermines growth. It is, as a practical matter, a form of austerity, which helps hit the brakes on the economy. This is Economics 101 and yet Republicans continue to insist that it is the only policy they really care about. It’s something to keep in mind as the Beltway’s preoccupation with debt reduction, not the recovery, continues unabated. It’s also a reminder that the automatic sequestration cuts may very well push the nation closer to a recession this year.

Jonathan Chait says there’s good news: “…the contraction is sort of a fluke — consumers and businesses are spending away, and a decline in government spending is entirely accountable for the contraction. (Defense spending dropped 22 percent over the quarter.)” But here’s the bad news:

“The budget “sequestration” will lop more than a trillion dollars of spending cuts out of the economy, creating similar effects as we saw this last quarter. The Obama administration had hoped the threat of these cuts, half of which come out of defense, would force Republicans to compromise on some kind of long-term deal that would eliminate all the short-term austerity and replace it with gradual, long-term deficit reduction. But that seems unlikely to happen. Obama wants the long-term plan to include a mix of higher revenue through tax reform with cuts to Medicare and Social Security. Republicans insist the deal must consist entirely of cuts to social programs, and any higher revenue is unacceptable. The GOP’s stated plan is to just implement the sequestration cuts.”

Brian Beutler notices a Democratic strategy is emerging, which involves chipping away at the sequester (and the deep cuts to social programs) with popular cuts to raise revenue, such as oil company subsidies:

Reid tipped his hand to his party’s subtler strategy. “There are many low-hanging pieces of fruit out there that Republicans have said they agreed on previously,” Reid added. “I’m not going to go into detail, but one of them, of course, is deal with oil companies.” That’s a tip of the hand. As the sequestration deadline approaches at the end of next month, Republicans will be be stuck with an absolutist line. Letting the sequester hit would be better than replacing it with even a penny of revenue; and their offer, from the last Congress, is to replace the entire sequester largely with deep cuts to social programs for the poor. Democrats will have a counteroffer. Perhaps the parties can’t agree on a complete sequester replacement. But they can pay it down for a few months with popular cuts and revenue raisers, including by eliminating tax subsidies for oil companies.


Meanwhile, rabid Fox ‘news’ viewers will continue to imagine members of the Republican Party are on their side because… guns? No gays? No abortion?

image: DailyKos

It’s Republicans, not Democrats, who would love to drown our Medicare in a bathtub (and Social Security and any other social or safety net program you can think of). Why? So wealthy people like the Romneys can write off $77,000 for dancing horses and so the GOP can funnel more of our tax dollars via subsidies and tax cuts to their buddies in defense and oil.

Poll: majority of Americans want taxes raised on the wealthy, Republicans continue to stall

Reuters: “Negotiators warned the showdown could drag on past Christmas. A Wall Street Journal-NBC News poll released late on Wednesday …held the potential to shake up the stalemate. Three-quarters of those surveyed, including 61 percent of Republicans, said they would accept raising taxes on the wealthy to avoid the so-called cliff, as Democratic President Barack Obama is demanding.

“With Republicans in Congress already divided, that rejection by their own supporters of the core demand of Republican House of Representatives Speaker John Boehner could further weaken his position.

“Both sides refused to give any ground in public, one day after what Boehner described as a “frank” conversation with President Barack Obama about the remaining hurdles to a deal.”


I’m quite sure the Republicans in Congress don’t give a damn what their base wants if it interferes with the happiness of their wealthy benefactors.

Also why isn’t there more discussion about cuts to defense spending — why are we now only discussing cuts to the safety net? And that goes for both Republicans and Democrats.

The best defense for a Monday

via theclearlydope

Ezra Klein: Mitt Romney’s budget plan is a fantasy and it will never happen

Ezra Klein dismantles the pure fantasy behind Romney’s fuzzy budget claims as logistically impossible (emphasis below is mine):

But Ryan’s budget includes more than $700 billion in Medicare cuts over the next decade, Romney’s budget won’t. And Romney promises that there will be no other changes to Social Security or Medicare for those over 55, which means neither program can be cut for the next 10 years. But once you add up Medicare, Social Security and defense and you’ve got more than half of the federal budget. So Romney is going to make the largest spending cuts in history while protecting or increasing spending on more than half of the budget.

The Center on Budget and Policy Priorities indulged this idea back in May. If Social Security and Medicare are spared from cuts, then to get federal spending under 20 percent of GDP while holding defense spending at 4 percent of GDP, “all other programs — including Medicaid, veterans’ benefits, education, environmental protection, transportation, and SSI — would have to be cut by an average of 40 percent in 2016 and 57 percent in 2022.”

Consider what the Romney campaign, then, is saying: If Romney is elected, then by his third year in office, every single federal program that is not Medicare, Social Security, or defense, will be cut, on average, by 40 percent. That means Medicaid, infrastructure, education, food safety, road safety, the postal service, basic research, foreign aid, housing subsidies, food stamps, the Census, Pell grants, the Patent and Trademark Office, the FDA — all of it has to be cut by, on average, 40 percent. If Romney tried to protect any particular priority, it would mean all the others have to be cut by more than 40 percent.

And don’t forget that Romney also wants to extend tax breaks for the one percent — meaning the ongoing lack of revenue has to be made up somehow as well. Taking more taxes from lower incomes or cutting programs and services which people who are not in the top one percent depend upon — just so the wealthy can continue to enjoy paying less federal tax on their incomes — how is that not income redistribution?

The federal budget in 2011 – click for larger:

See also: PDF slides script

The Republican fallacy of America’s “out of control spending”

Brian Beutler at TPM takes a look at what IS and IS NOT “the culprit of deficits and our supposedly out-of-control spending:”

In the wake of the Bush tax cuts, and the Great Recession, tax revenue has fallen through the floor to near-historic lows. As a percentage of GDP, it’s fallen 24 percent since 2001, and if you correct for inflation, the government is collecting nearly 20 percent less per person than it was a decade ago. At the same time, the population-adjusted costs of mandatory spending programs — driven by Medicare, including its new prescription drug benefit, and Medicaid — have increased by over 30 percent. And, of course, defense spending has skyrocketed. But if you isolate domestic discretionary programs, a decade later we’re spending no more on a per-person basis than we were back then.

The idea here is that since this money is largely devoted to education, health care, and other services that benefit broad swaths of the population, the amount of it should grow roughly with population size. This stands in contrast to defense spending, which is why the committee did not correct defense spending for population growth. We took the numbers and put them in a slightly different context, so you can see by what percentage spending and revenues have risen and fallen on a population adjusted basis over the last decade. Makes it pretty clear what is and is not the culprit of deficits and our supposedly out-of-control spending.

Besides the obvious suggestion of cutting a little something from defense (maybe? for once?), the next obvious suggestion would be to let the Bush tax cuts for the rich expire. Our government needed revenue when it was created and it still needs revenue today.

Besides, the rich have made out like bandits since 1980 with the bottom-to-top income redistribution and trickle up of Reaganomics and tax breaks and deregulation and shipping American jobs to China and India:

“The top 1 percent now gets almost a quarter of the nation’s total income — a larger share than at any time since the 1920s. The top 1 percent have also received about 40 percent of the benefits of the Bush tax cuts.” — Robert Reich

Bill Moyers explains how the average American has made out in the past 28 years this way:

“…from 1950 through 1980, the share of all income in America going to everyone but the rich increased from 64 percent to 65 percent. Because the nation’s economy was growing handsomely, the average income for 9 out of 10 Americans was growing, too – from $17,719 to $30,941. That’s a 75 percent increase in income in constant 2008 dollars.

But then it stopped. Since 1980 the economy has also continued to grow handsomely, but only a fraction at the top have benefited. The line flattens for the bottom 90% of Americans. Average income went from that $30,941 in 1980 to $31,244 in 2008. Think about that: the average income of Americans increased just $303 dollars in 28 years.

That’s wage repression.”

The Tea Party claims to be so worried about their children and grandchildren inheriting our debt. Where’s their fear of handing down a two-class system of the super-rich and the minimum-wage workers and unemployed to their grandchildren? And why doesn’t it bother these people that when Republicans say the country’s spending is “out of control,” they mean the spending on everything else but defense and funding more tax cuts for the wealthy?

U.S. Military Spending Versus Foreign Aid

Infographic via Good Politics (click any image below for larger version):

When Gallup asked Americans whether they favor or oppose spending cuts in various government programs, 59 percent, the majority, want government budget cuts in the area of foreign aid, while 57 percent oppose cuts in military and national defense.

The U.S. spends LESS on foreign aid than other countries and MORE on our military than other countries.  Maybe it’s time to re-evaluate? 


FY2011 Spending Bill — done. Next up: FY2012 Budget — Let the Class Wars begin!

Yesterday’s vote:

  • Passed the House (with Democratic help) — 179 Republicans joined 81 Democrats for easy final passage of 260-167.  Fifty-nine Republicans and 108 Democrats opposed it. [source]
  • Passed the Senate 81-19, easily surpassing the necessary 60-vote threshold. [source]
  • The President will sign today and our government is funded through September 30.

The numbers according to a CBO analysis:

  • Domestic discretionary appropriations will fall $38 billion from levels set at the beginning of the year. [source]
  • Because of several factors, the bill will only reduce direct spending by about $350 million.  [source]

The FY2012 Budget:

  • Paul Ryan (R-WI) 2012 budget plan: directs Congress to cut at least $5 trillion dollars of spending over the next decade by reforming Medicaid to become a block grant program, reconfiguring Medicare to be a voucher program, defunding health care reform, and reducing taxes [source] — (My note: he proposes reducing taxes for the wealthy).
  • Rep. Chris Van Hollen (D-MD) 2012 budget plan: freezes non-security discretionary spending for five years, cuts security spending by $89 billion over ten years, phases out funding for troops in Iraq and Afghanistan in 2015 and reduces farm subsidies by $20 billion over the next decade. [It] preserves Medicaid, Medicare and Social Security and repeals the Bush-era tax cuts for individuals making more than $200,000 per year. [source]
  • President Obama’s long term spending plan: proposes $4 trillion in deficit reduction over the next 12 years [with] a “balanced” approach as deficit reduction would be attained from a combination of spending cuts and tax increases …cutting non-security discretionary spending by $770 billion, reducing security spending by $400 billion and repealing Bush-era tax cuts for the “wealthiest Americans.” [It] aims to save $480 billion from Medicare and Medicaid. [source]

Some Departments have posted Contingency Plans for Teaparty Government Shutdown

In no particular order for the following departments (will update as I find them):

Dept. of Interiror (DOI) 8 April 2011:

Based on the developed plans, approximately 52,300 of the 68,900 Department of the Interior employees projected to be in pay status will be furloughed at the outset of a suspension of activities. [...] Approximately 9,500 employees will be designated as excepted or emergency personnel to complete shutdown activities and to protect life and property.  This number will decrease if the shutdown goes beyond two to three days as facilities are secured and other shutdown activities are completed.  In addition, a limited number of employees providing administrative support for essential functions, such as budget, IT, finance, and contracting, will be considered essential.  Some of these employees may be required on an intermittent basis after the initial shutdown activities are completed.

Dept. of Treasury 8 April 2011:

In total, the Treasury Department has approximately 127,000 employees. In the event of a lapse in appropriations, approximately 92,000 would be furloughed and 35,000 would remain on duty. Because the possible lapse comes at the height of the annual tax filing season, the majority of these employees would be excepted from furlough to handle essential tax filing and service functions of the IRS, with the remainder primarily working in Treasury programs that are funded from sources other than annual appropriations. Treasury will continue to revise its plans as circumstances warrant. Each Bureau under the Treasury has discrete functions. Continue reading →

Dept of Agriculture (USDA) — PDF documents (all agencies / bureaus have separate plans listed)

More departments after the cut: Continue reading

Always the GOP’s first choice when it comes to spending cuts

Josh Marshall:

Sen. Sessions (R-AL) gets the budget ball rolling by begging President Obama to start destroying Social Security so Republicans don’t have to. I’m listening to another guy on Fox now saying how Dems are obligated to axe Social Security because President Bush took such a hit for trying to axe it in 2005.

Why do they never go after defense / military spending? Why do people who collect Social Security continue to vote Republican?