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Wingnut Watch: Cain’s Latest Problem

Posted on by The Progressive Policy Institute

Herman CainAs the November 23 deadline for congressional action on a “supercommittee” package to reduce budget deficits by $1.2 trillion and avoid automatic domestic and defense cuts approaches, conservative activists have been steadily ramping up the pressure on supercommittee Republicans to hold a hard line against any tax increases. This missive from Heritage Action for America is pretty representative of the drumbeat:

Unfortunately, the “super committee” is veering off course and the odds are growing that massive tax hikes will be part of a final deal. Even worse, not all Republicans are willing to take massive tax hikes off the table. According to news reports, more than 100 House members–Republicans and Democrats alike–sent a letter to the “super committee” urging a “big, grand bargain–taking nothing off the table.” In Washington, that is code for a tax increase.

A few anti-supercommittee conservatives are willing to come right out and say that allowing across-the-board defense cuts to be enacted is an acceptable price to pay for avoiding tax increases. The most common rationalization is that these “sequesters” would not take effect until 2013, and a newly triumphant Republican president and Congress could fix the problem after the 2012 elections. Using the same kind of arguments, many activists have long claimed that a “grand bargain” that included major changes in federal retirement programs in exchange for tax increases would be unacceptable on grounds that Democrats would never keep their promises on spending in the future.

At an earlier point in the process, it appeared conservatives might allow some “wiggle room” for the supercommittee on taxes by considering the idea of a package that includes base-broadening “tax reforms” without raising actual rates on the wealthy or any major category of corporations. But the renewed popularity of sweeping, radical tax system overhauls, as reflected in the adoption of variations on the regressive “flat tax” idea by presidential candidates Herman Cain, Newt Gingrich and Rick Perry, has undermined what little support existed on the Right for revenue-raising elimination of “loopholes” under the general framework of the current tax code.

The same wingnuts who are having little trouble sticking to their no-compromise guns on deficit reduction are having a bit more trouble settling on a presidential candidate. A week ago, the big debate in Republican political circles was whether presidential polling front-runner Herman Cain would transform himself into a serious if unconventional candidate with a real organization and a consistent presence on the campaign trail, or instead would fade in the wake of either a comeback by Rick Perry or a sort of resigned acceptance, first by conservative elites and then by the rank-and-file, of Mitt Romney as the nominee. The betting line was not in Cain’s favor.

Then came Politico’s October 30 bombshell story revealing that the National Restaurant Association had settled two claims of sexual harassment against Cain during his presidency of the trade group in the last 1990s, and a couple of days of shifting stories from Cain and his campaign in reaction to the allegations.

Although the mainstream media has concluded from almost the very beginning that the Politico story means curtains for an already implausible Cain candidacy, it looks very different from Wingnut World. Though a few conservative opinion-leaders (mostly those thought to be friendly to Mitt Romney) have either kept their mouths shut or suggested Cain should come clean, the general reaction has been to defend him, with varying degrees of heat. The most common conservative media meme, one that Cain himself has encouraged, is to compare him to Supreme Court Justice Clarence Thomas as an outspoken African-American conservative who is being smeared by the “liberal media” and “the Left” generally, who are fearful that he will liberate his people from the “plantation” of subservience to Big Government and the Democratic Party.

Beyond the chattering classes, the very initial evidence is that rank-and-file conservatives are inclined to give Cain the presumption of innocence, and perhaps of innocence persecuted. Politico itself posted a headline today reading: “Iowa yawns at Herman Cain allegations.” The story attached to it had this very revealing passage:

Gregg Cummings, the Tea Party Patriots’ Iowa state coordinator, said among tea partiers the story of Cain’s sexual harassment allegations pales in comparison to the desire to have a conservative—“not Romney”—win the caucuses and the nomination.

“Hardly anybody is talking about it,” he said. “It’s not a big issue, in other words. I think the urgency of making sure that we get a conservative candidate to win the primaries is of greater concern to most of the tea party folks right now.”

More tangibly, the first poll taken entirely after the original Politico story broke, by Rasmussen in South Carolina, showed Cain with a ten-point lead over Mitt Romney and the rest of the field, his best showing to date in any South Carolina poll.

Sometimes damaging information about candidates just takes a while to build up steam in an array of media outlets and then penetrate the public’s consciousness. So Cain is hardly out of the woods, aside from the fact that more graphic details of his behavior, or indications of a cover-up, could soon emerge. But given the impulsive reaction in Wingnut World, it’s also possible, ironically, that this is exactly what the Cain campaign needed to distract attention from his lack of interest in world affairs, his waffling on abortion, or the details of his tax plan, and instead make him a martyr to the “constitutional conservative” cause that is still in search of a champion against Mitt Romney.

Photo credit: roberthuffstutter

It’s About (the) Time: Ending the Nonstop Campaign

Posted on by The Progressive Policy Institute

Somewhere in the last two decades, politicians began to believe that the way to win an electoral majority is not to prove that you can govern well, but to prove that you can campaign.

Today, politicians are caught in an ever-escalating, never-ending, 24-hour, 365-day campaign cycle dominated by the burden of raising enough money to wage a campaign creditably. For incumbents, the heft of a candidate’s war chest is what keeps potential challengers at bay—which means that even the safest members need the insurance of a sizeable sum of cash on hand. And for every candidate, last quarter’s results are just about the only proxy by which a candidate’s viability is judged.

The constant horserace over money (not ideas) has taken its toll on the quality of governance. For example, the Rasmussen report released a poll in July finding that 85 percent of Americans view members of Congress as “just out for their own careers.” Almost every poll finds Congress’s approval rating in the single digits.

Second, serious debate about any issue—e.g., the federal budget or taxes—is virtually impossible because there is no “safe period” in which an issue can’t be turned into a political football. Moreover, politicians simply have no time to devote to learning the arcana of policy. They are too busy attending fundraisers. As Republican freshman Richard Nugent said, “As soon as I got to Congress, people started asking me if I had started fund-raising,” Nugent said. “I was amazed at that. It seems to me that a person ought to get some results first before you start getting too focused on re-election. Otherwise, what on earth are the voters sending you to Washington to do?”

 

Supercommittee Puts GOP on Spot

Posted on by The Progressive Policy Institute

Is the supercommittee President Obama’s revenge?

After last summer’s showdown over raising the debt ceiling, Obama was roundly criticized for agreeing to a deficit-reduction deal that was all spending cuts and no tax hikes. Democrats, disconsolate over this seeming capitulation to House Republicans, saw it as the low-water mark of his presidency.

Yet the deal also created the bipartisan supercommittee, which was charged with finding at least $1.2 trillion (over 10 years) in additional cuts by Nov. 23. The supercommittee has a strong incentive to succeed, since its failure will trigger an automatic, equivalent cut in domestic and defense spending.

Now, as the supercommittee spars over dueling Democratic and Republican plans for meeting the target, Republicans are on the hot seat.

Democrats this week reportedly proposed a $3 trillion package over the next decade, including $1.2 trillion in revenue increases. Republicans came back with a smaller counteroffer of $2.2 trillion. The reason, of course, is that the GOP’s anti-tax fanaticism prevents it from matching the Democrats’ debt-reduction plan without proposing truly punishing cuts in federal spending.

The Republicans claim their package includes revenues ($640 billion worth) but much of it seems to come not from actual changes in the tax code, but from increased fees and co-pays in Medicare. The rest is supply side fairy dust—around $200 billion from the higher growth supposed to be generated by future tax reform.

The upshot is that Democrats now look like they are more serious about getting the nation’s debt under control, and in a way that spreads the pain of fiscal retrenchment more equitably. Republicans look like their top priority isn’t restoring fiscal discipline, but shielding the wealthy from higher taxes.

If they refuse to deal on taxes, they’ll likely be blamed for the supercommittee’s failure and subsequent trigger of automatic spending cuts. The GOP may not care about slashing domestic spending—even though it includes critical public investments in science and technology, infrastructure and education—but they do care about defense spending, which would take a whopping, half-trillion-dollar hit.

Of course, Republicans could offer a minimum bid of $1.2 trillion in spending cuts to avoid across-the-board cuts, and call it a day. Supercommittee Democrats, however, shouldn’t let them off the hook without substantial concessions on taxes. Democrats don’t want to trigger big domestic and defense spending cuts either, but it’s better to force the issue of GOP intransigence on taxes now than during the debt ceiling debate, when America stood on the brink of default.

Even if the supercommittee does its job and approves a bipartisan debt reduction plan by Thanksgiving, it’s by no means clear that Congress will pass it. Members of Congress hate nothing more than being “shut out of the process,” and many bridle at the idea of delegating power to 12 supercommittee members to craft a massive plan and present it for an up or down vote.

Complaining that he has “no stake” in the outcome, Democratic Rep. Henry Waxman added, “I find it an outrageous process, that 12 people could rewrite the laws of the United States and come up with ideas just setting there and getting into some mood that might influence them at the moment.”

Over on the right, there’s little love for the supercommmittee. Nothing is more predictable than that Tea Party zealots will rise in righteous condemnation of any plan that includes higher tax revenues, thus breaking the party of Lincoln’s solemn covenant with anti-tax gadfly Grover Norquist.

More favorable are congressional moderates, whose main concern is that the supercommittee won’t go far enough. Nearly 100 Members from both parties signed a letter urging the supercommittee to cut $4 trillion over the next decade, the amount most budget experts believe is necessary to stabilize the debt. For pain-averse lawmakers, the logic of “going big” and not having to keep repeating these excruciating political battles over spending and taxes is pretty compelling.

If the supercommittee fails, the economic and political consequences won’t be pretty. Fresh evidence that the nation’s political leaders are incapable of coming to grips with the debt crisis will no doubt cause the markets to nosedive, and could even lead ratings agencies like Standard & Poor to downgrade the nation’s credit again. This could cast a pall over the economy, just as it’s finally showing some signs of life.

Worst of all, it would deepen the public’s already explosive anger at Washington. A mere nine percent of the voters approve of the job Congress is doing, and 89 percent say they don’t trust the government to do the right thing. By going big on debt reduction, Congress could start earning back that trust.

Photo credit: DonkeyHotey

Weinstein on Overhauling the Federal Tax Code

Posted on by The Progressive Policy Institute

PPI Senior Fellow Paul Weinstein and Committee for a Responsible Federal Budget’s Ed Lorenzen argue for overhauling the federal tax code again after 25 years in The Atlantic:

Today marks the 25th anniversary of the Tax Reform Act of 1986, the last major overhaul of the federal tax code. Signed into law by Republican President Ronald Reagan and championed by Democrats such as Bill Bradley and Richard Gephardt, the enactment of the law was a remarkable bipartisan achievement. It dramatically lowered marginal rates with a top rate of 28 percent, removed millions of working poor off the tax rolls, and simplified the tax code by closing a myriad of tax loopholes.

Unfortunately, many of the loopholes that the 1986 reform eliminated have returned, with a few extra ones slipped in for added measure. Since the law’s enactment, more than 15,000 changes have been made resulting in a tax code that is several volumes longer than The Bible and requires 71,684 pages to spell out the rules. Because of this complexity, 80 percent of American households use a tax preparer or tax software to help them prepare and file their taxes.

But complexity is only part of the problem. The other is cost. Year-after-year, elected officials in Washington shovel more tax breaks into the trough (tax breaks now account for $1.1 trillion) causing both deficits and marginal tax rates to be higher than is necessary or optimal for the economy.

Despite the obvious need for tax reform, some in Washington are advocating that congressional Super Committee charged with finding a balanced deficit reduction package not tackle tax reform. They claim it’s too complicated, too hard, or too long-term.

Read the entire article.

Wingnut Watch: Flat Tax Fanatacism

Posted on by The Progressive Policy Institute

Plans to reduce the taxes of wealthy “job creators” remained on the minds of conservatives this last week, with Rick Perry harnessing the reboot of his floundering presidential campaign to a “flat tax” proposal that’s really an alternative maximum tax for people currently in the higher brackets. In an effort to get conservative voters to think about everything and anything other than immigration policy in considering him, Perry nestled his tax plan in a larger package that includes total suspension of federal regulations for a period of time, uninhibited exploitation of fossil fuel resources, and a balanced budget constitutional amendment that includes a permanent limitation on spending as a percentage of GDP (this last item is an item beloved of SC Sen.–and Wingnut Generalissimo–Jim DeMint, whose endorsement Perry would surely love to secure prior to next January’s Palmetto State primary).

Perry’s tax plan and the optional nature of its rates raise a lot of questions, but its shape-shifting features are politically convenient, particularly as compared to Herman Cain’s 9-9-9 proposal, with its unambiguously regressive thrust and its reliance on an unpopular national sales tax. With Newt Gingrich also hawking a flat tax scheme, the conquest of the Republican Party by cranky tax schemers is now very far advanced.

More generally, the GOP presidential contest is revolving around the broadly shared expectation that the campaign of Herman Cain, who now actually leads Mitt Romney in a plurality of national polls, and is attracting three and four times as much support as Rick Perry, will soon collapse. Cain added to that expectation last week with an unforced error of considerable magnitude: a rambling series of remarks in an interview by CNN’s Piers Morgan suggesting the candidate thinks of abortion as a private matter in which government should not interfere. By the time Cain realized his mistake and reiterated his position favoring a ban on all abortions without exception, a lot of damage had been done to his reputation for competence and ideological reliability, particularly among the social issues activists who exert disproportionate power in the Iowa Caucuses. Iowa social conservative kingmaker Bob Vander Plaats summed up the general impression by saying Cain was beginning to sound like the John Kerry of 2004 (not a compliment). It probably wasn’t a coincidence that Cain’s long streak of wowing conservative audiences at joint candidate events came to a decided end in Iowa over the weekend, when he was distinctly underwhelming in a speech to the annual banquet of Ralph Reed’s Faith and Freedom Coalition.

With Cain’s support levels in Iowa (and other states) already being called into question because of his lack of organization in the state and his low number of visits, it remains to be seen who would benefit from a theoretical Cain collapse. While many observers think the situation in Iowa is ripe for Mitt Romney to swoop in and score a knockout blow over a divided conservative opposition, he’s not exactly showing signs of doing so (he skipped the FFC event, for example, even though he had just made his first brief visit to Iowa since April). Perry is definitely plotting an Iowa comeback, beginning TV ads this week and spending time on such potentially productive activities as a pheasant-hunting jaunt with congressman Steve King, perhaps the only political figure with the power to absolve Perry from his heresies on immigration policy.

You’d think the potential vacuum on the Right would provide an opening for a comeback by Rep. Michele Bachmann, the winner of the August Iowa GOP Straw Poll. But Bachmann’s campaign is visibly struggling, and attracting media attention only for such negative developments as the mass resignation of her NH staff.

Rick Santorum continues to seek to outflank the field on social issues (Cain’s abortion gaffe was a major gift to him), and is totally devoted to an Iowa-centric campaign that will eventually take him to all 99 counties in that state. But the only also-run candidate showing forward momentum in polls in Iowa, or indeed in other early states, is none other than Newt Gingrich, whose strategy of using candidate debates to show off his policy chops and attack the moderators has lifted him ahead of Perry in most surveys. Gingrich and Cain recently accepted a Texas Tea Party invitation to hold a “Lincoln-Douglas”-style one-on-one debate in the Lone Star State next month. Texas is hardly a competitive state so long as Perry is running, and isn’t an early state, either, so this debate decision has reinforced suspicions that both Gingrich and Cain are “business plan candidates” who are in the race to promote their books and television careers rather than to secure the nomination.

But it is clear there will remain for the immediate future strong demand for a “true conservative” candidate who can keep Mitt Romney from running away with the nomination. Just yesterday Romney provoked fresh outrage from conservatives by refusing to take sides in the red-hot Ohio referendum on Gov. John Kasich’s legislation to cripple public-sector unions, SB 5. Romney was almost immediately forced to recant, but that step, of course, simply reinforced his reputation as a flip-flopper.

When you add it all up—Perry’s terrible mispositioning on immigration, Cain’s sloppy campaigning and unnecessary abortion gaffe, and Romney’s incurable tin ear for conservative sensibilities—this is a presidential candidate field with an abundant ability to take a bold step forward onto a garden rake. Like a football game decided by the “turnover margin,” the GOP nomination could ultimately go to the candidate who manages to go for a few crucial weeks at a time without coughing up the ball.

Photo Credit: Mays Business School

Another One Bites the Dust

Posted on by The Progressive Policy Institute

Unlike the dictators of Tunisia and Egypt, Muammar el-Qaddafi refused to go peaceably when the Arab spring uprisings migrated next door to Libya. Last week he paid for that defiance with his life; an outcome that should rattle other regional tyrants, especially Syria’s Basher al-Assad.

Qaddafi’s ouster was a triumph not only for Libya’s rebels, but also for NATO, which turned the tide of battle in their favor. It also vindicated President Obama’s decision to let Europe take the lead and limit U.S. forces to a supporting role in enforcing the U.N.-sanctioned “no fly zone” over Libya.

I was skeptical that NATO airpower alone would be sufficient to defang Qaddafi, and wanted the allies to arm the rebels. It turns out, however, that NATO—in a very liberal interpretation of its mandate to protect Libyan civilians—worked closely with the opposition in a combined air and ground offensive that methodically wore down regime forces.

With a little help from their friends, Libyans liberated themselves, and some are now waving French and U.S. flags in gratitude. What we’ve witnessed in Libya, in fact, could be a new model for collective security in which the United States no longer bears a disproportionate share of the risks and costs of intervention. “We’ve demonstrated what collective action can achieve in the 21st century,” Obama declared last week. “Without putting a single U.S. service member on the ground, we achieved our objectives, and our NATO mission will soon come to an end.”

Unfortunately, the new model probably isn’t applicable to Syria, where another ruthless dictator confronts a popular revolt.

Basher al-Assad is busy doing in Syria what NATO prevented Qaddafi’s forces from doing in Libya—slaughtering civilians. Even though his henchmen reportedly have killed between 3,000–5,000 civilians, courageous Syrians still take to the streets daily to challenge the regime.

The regime’s brutality has prompted thousands to defect from the Syrian army and join the opposition. Syria thus appears headed toward the same kind of armed insurrection that convulsed Libya. This time, however, there’s little chance that NATO will play deus ex machine to Syria’s rebels.

Western military intervention in Syria is unlikely for three main reasons. First, Syria is bigger and better armed than Libya, and lies in the Arab heartland rather than on its periphery. Second, while Libya’s erratic “Brother Leader” had few friends in the world, Assad has an important regional patron in Iran, whose Revolutionary Guard reportedly is helping him put down the protests. Third, Russia and China vehemently object to the principle of humanitarian intervention, presumably because they fear it could be invoked someday against them. Earlier this month they vetoed a U.N. Security Council resolution condemning Assad for the violent suppression of peaceful protests.

The political and humanitarian stakes in Syria are growing. Qaddafi’s fall and probable execution by vengeful rebels will likely reinforce Assad’s determination to bludgeon Syrian demonstrators into submission. If he succeeds in resurrecting what was among the grimmest police states in the region, Assad will have delivered the most serious check to date to the Arab spring’s revolutionary momentum. It will also bind Damascus more tightly to Iran, and boost morale among the radical rejectionists in Hezbollah and Hamas. Assad’s survival could also push Iraq, which is apprehensive about a Sunni takeover in Syria, closer to its Shia brethren in Tehran.

Having abetted Libya’s liberation, the United States and its European partners obviously have an interest in encouraging its Transitional National Council to set up an effective and representative central government. This won’t be easy in a relatively backward (despite its oil and gas riches) Arab state rent by tribal and regional divisions and, thanks to 42 years of despotic rule by Qaddafi, lacking in strong civic and national institutions.

The council’s weekend announcement that it is imposing Sharia law throughout Libya has provoked “I told you so” reactions from U.S. “realists” and other critics of NATO’s intervention. But as Obama said, Libya’s road to self-government will be long and winding, and thanks to NATO’s intervention, the West will have some influence over the course of events there.

What’s crucial now is for the U.S. and Europe to turn their attention to Syria’s incipient civil war. Even as Assad’s jets hammer unarmed civilians, there’s no chance of a U.N. sanctioned no fly, no drive zone there. But the West has other means at its disposal to buttress the rebellion, and thereby help sustain the momentum of Arab demands for freedom and justice.

Policy Brief: All of the Above: What to do about Housing-Now

Posted on by The Progressive Policy Institute

In the immediate aftermath of the financial crisis in 2008, housing was at the top of policymakers’ priorities. Congress saw a flurry of proposals to deal with the mounting wave of defaults and foreclosures, and the collapse of Fannie and Freddie led first to intensive federal intervention and then to one round of full-fledged debate on what the future of these agencies should be.

Today, with housing in at least as bad a shape as it was in 2008, housing is now the forgotten debate. The conversation over Fannie and Freddie has stalled, if not died altogether; the government’s efforts to stem foreclosures have been largely unsuccessful; and with a handful of bold exceptions, few policymakers are putting forward ideas to restore homeowner equity, cope with burgeoning inventory and spark new demand in the market.

But with the economy continuing to sputter, housing is a problem that policymakers can’t afford to ignore any longer.

While some may debate the chicken-and-egg issue of whether housing can lead the recovery or whether a recovery can stabilize housing, there’s no dispute that the health of the housing market and the broader economy are inextricably intertwined. Housing and its related industries account for roughly 19 percent of the American economy.1 Since the housing crash, housing—especially construction—has shed 2.9 million jobs2 since the start of the recession. Not coincidentally, the states with the highest unemployment rates—California, Nevada, Rhode Island, Michigan3—are among the states that have been hit hardest by the housing crisis. Moreover, Americans
have lost $7 trillion in equity,4 which is dampening consumer confidence as well as forcing many families to rethink their future plans and expectations of financial security.

Read the entire brief.

Senate Guts School Accountability

Posted on by The Progressive Policy Institute

The U.S. Senate is finally getting around to reauthorizing the controversial No Child Left Behind Act (NCLB), something that was supposed to happen in 2007. Unfortunately, instead of fixing NCLB’s evident flaws, there’s a bipartisan push to fatally weaken the law as a credible tool for educational accountability.

A bill to renew the bill (known again by its historic title, the Elementary and Secondary Education Act) crafted by Sens. Harkin (D-Iowa) and Enzi (R-Wyo.) is being widely panned by education reformers. As Michelle Rhee points out, “by removing meaningful evaluations, the country would be taking huge step backward in the effort to reform our schools.”

In a rare moment of bipartisanship, Congress passed NCLB in 2002. It was designed to tie federal support to education (mostly through the Title I program of aid to schools in low-income areas) to improvements in student performance. Its signal achievement was to require local school authorities to measure the academic achievements of all students, including racial and ethnic subgroups. This provision meant that schools could no longer hide their failure to educate all students behind averages.

But NCLB’s critics pointed to several glaring flaws. One was the requirement that 100 percent of public school students reach proficiency in reading and math by the 2013-2014 school year. Not only is this standard deemed unattainable, but it puts too much weight on standardized assessments of widely varying quality.

Another problem with NCLB is its requirement that schools have “highly qualified teachers”. That sounds innocuous, but in practice it has led schools to hire teachers based on their academic credentials rather than their actual ability to teach. An abundance of data has shown that one of the quickest ways to achieve student growth is through an effective teacher. A “highly qualified teacher” by NCLB definition is one that is simply “certified and proficient” in the subject matter taught—regardless of how well those credentials translate into student learning, achievement, or growth.

The Harkin-Enzi bill kills the “100 percent proficiency” target, but doesn’t replace it with a better yardstick. Instead, it vaguely charges states to strive for “continual growth.” The bill is thus a throwback to NCLB’s predecessor, 1994’s weak Improving America’s Schools Act (IASA). This toothless measure paved the way for such lax accountability standards as Tennessee’s goal to “improve mean performance level(s) across grades by [an] average of .05” for grade-levels three through eight—hardly a worthy goal for true reform.

Harkin’s original draft required the states to adopt teacher and principal evaluations which would focus on both in-class observations and student achievements. Unfortunately, it was watered down in a redraft on Monday.

After the rewrite all the meaningful elements—save perhaps the mandate that states enforce a college-readiness standard—went by the wayside. The weaker version of the bill closely tracks a letter sent to the senators by teacher and principal advocacy groups, including the National Education Association. The gist of their message to the Senate was, “We appreciate the great reform ideas you’re proposing here but just please don’t implement them.” Also, the new version is clearly intended to assuage the “federal overreach” fears of GOP local control advocates.

In short, the bill not only omits concrete accountability standards, it also disregards the policy prescription that effective teachers—effective in the sense that the teacher actually impacts the student—are the key to true education reform. This ESEA reauthorization does nothing to positively impact an education system that is consistently failing the future of this country. The redrafting effort headed by Sen. Enzi on Monday is a clear message to reform-minded advocacy groups that the letters they are sending urging the federal government to do more in the way of education standards—such as the ones published by EdWeek and EdTrust—are not as effective as those sent by the teachers’ unions. In other words, you can speak loudly but you better carry a larger voting contingency.

Wingnut Watch: A Fair Tax?

Posted on by The Progressive Policy Institute

One of the more exotic policy tendencies of Wingnut World is a history of strong and pervasive support for replacing income taxes with higher consumption taxes. Many conservatives support this step on grounds that it will promote savings and investment, which is another way of saying that they believe capital should not be taxed at all. Others like the idea of getting rid of the compliance costs and “bureaucracy” associated with income taxes, and still others are attracted to the “flat” nature of consumption taxes, which do not vary based on the taxpayer’s personal circumstances (whether it’s income, or the various characteristics that earn deductions and credits against income tax liability).

The so-called “Fair Tax”—the general term used for any number of schemes for shifting from federal income to consumption taxes—has been a hardy perennial for years among conservative activists and talk show hosts. Among the latter was Herman Cain, whose so-called 9-9-9 (replacing current federal income, capital gains and estate taxes with a 9 percent national sales tax, a 9 percent VAT on corporations, and a 9 percent income tax with no deductions or credits) plan is explicitly advertised as an intermediate step towards a “Fair Tax.” Like the “Fair Tax,” Cain’s plan seems to have great curb appeal for rank-and-file conservatives, but less so for opinion-leaders.

Cain’s recent surge in the polls as a presidential candidate has suddenly put 9-9-9 and the broader movement to get rid of progressive income taxes under a microscope. On the eve of Tuesday night’s candidates’ debate in Las Vegas, the Urban Institute/Brookings Tax Policy Center published an analysis of the distributional implications of Cain’s proposal that immediately became fodder for his rivals and for critics generally. Faced with claims that 9-9-9 would boost total taxes for most American households with annual income under $200,000, Cain was reduced to repetitive denials without much in the way of explanation. Even among conservatives who are not troubled morally or politically by the idea of making federal taxes massively more regressive, the argument that 9-9-9 would give Uncle Sam a new instrument for confiscating private dollars (the national sales tax) is getting some traction. One of 9-9-9’s designers, the ubiquitous Steven Moore, is already urging Cain to replace the sales tax proposal with a 9 percent payroll tax.

There is virtually no broad-based polling of 9-9-9 available (figuring out how to describe it in a survey question is a real challenge, particularly since Cain and his advisers are not always very precise). But a new HuffPo/Patch survey of activist leaders in early caucus and primary states (whom they call “Power Outsiders”) shows lukewarm support at best.

The timing of the intra-party assault on Cain’s signature domestic policy proposal is no coincidence. It is based on the belief that he is a flash-in-the-pan phenomenon whose lofty support levels represent a “parking place” for conservatives who don’t like Mitt Romney but haven’t been sold on any of his competitors, and find Cain interesting and refreshing, not to mention his usefulness as an all-purpose antidote to suspicions that conservative hatred of Obama is at least partially racial in origin.

Tuesday night’s debate represents a transition point from a six-week stretch of frequent debates, to the run-up to actual voting events. Earlier this week another important piece of the nominating contest puzzle fell into place when Iowa set a firm date of January 3 for its “First-in-the-Nation Caucus.” There remains a not-insignificant chance that New Hampshire will schedule its primary for early in December in order to avoid too-close proximity to Nevada Caucuses currently planned for January 14, though it’s more likely that Nevada will move a few days in order to let NH have its event on January 10. Any way you slice it, though, candidates have a relatively brief window of time to get their act together before voters in the early states begin to become distracted by the holidays, which will also make negative campaigning problematic on grounds that it conflicts with the “spirit of the season.”

With Mitt Romney presumed to have a commanding lead in two of the five January events (NH and Nevada), developments in Iowa, South Carolina and Florida are of particular interest at this juncture. New NBC/Marist polls in SC and FL show Cain and Romney basically tied with just under a third of the vote each, with Perry mired in the high single-digits. This state of affairs is close to where the most recent polling in Iowa has placed the race there as well. If, as the conventional wisdom suggests, Cain soon begins to lose support because of attacks on 9-9-9, his lack of policy sophistication generally, or simply the fading novelty of his candidacy, the big question is whether those votes go back to Rick Perry, are scattered among various candidates, or even go in significant numbers to Mitt Romney. In any event (barring a December NH primary), media coverage of the campaign will now focus ever-increasingly on Iowa, where the picture is complicated by the relative importance of the “ground game” and Romney’s decision so far not to seriously compete in the state. Cain’s organizational weakness in Iowa is perhaps best illustrated by the fact that his former state director (who quit because her candidate seemed to be ignoring the state) just signed up for a less elevated job with Rick Santorum. So in the place where the 2012 nominating contest formally begins in less than eleven weeks, the two front-runners in that state and nationally are not really running at all. Something’s got to give, and soon.

Photo Credit: Gage Skidmore

Policy Brief: HomeK Accounts: A Down Payment on Homeownership and Retirement

Posted on by The Progressive Policy Institute

Two years after the meltdown in the nation’s housing market, housing re- mains weak. Home prices fell to a new low in the first quarter of this year— confirming a feared “double-dip” in the market. Prices are now down nearly 33 percent from their high five years ago.

With housing and its related industries—construction, home retail, etc.— constituting almost 19 percent of the nation’s economy over the last 40 years,2 restoring the housing market will be essential to a sustained eco- nomic recovery. And key to this will be ensuring a robust market for first- time home sales.

Yet, even with home prices as low as they currently are, many potential homebuyers may face more—not fewer—obstacles in their path to home- ownership. In the aftermath of the crisis, credit is tighter, as are down pay- ment requirements. At the same time, the stresses of the economy have meant that potential homebuyers are in worse shape financially than they once were.

The creation of a new, tax-preferred mechanism for down payment sav- ings—a “HomeK”—could help first-time homebuyers navigate these new hurdles while also promoting more savings. And if structured as a carve-out from existing retirement planning mechanisms, not as a new type of ac- count, the HomeK would have the added benefit of promoting retirement savings and will not contribute to further tax code complexity.

Read the entire brief.

Will Marshall Talks CLASS in Politico’s Arena

Posted on by The Progressive Policy Institute

PPI President Will Marshall today discussed the CLASS Act in a post for Politico’s Arena.

“The Obama administration’s decision to jettison CLASS is no setback. On the contrary, it removes a fiscal time bomb that Congress unwisely embedded in the Accountable Care Act, and, following previous changes aimed at easing reporting burdens on small businesses, attests to the president’s willingness to keep streamlining and strengthening his reform blueprint.”

Read the full post here.

Marshall: Occupiers Not Counterweight

Posted on by The Progressive Policy Institute

PPI President Will Marshall provided commentary on the “Occupy Wall Street” movement in an article published today by The New Republic.

“For liberals, who have watched the Tea Party’s rise with a mixture of dread, incomprehension, and envy, the Occupy Wall Street protests seem Heaven-sent. Here at last are our ideological shock troops, come to put the undeserving rich in the dock and reclaim populism from government-bashing conservatives.

An elated Paul Krugman cheers on the anti-Wall Street demonstrators for scaring the bejesus out of the plutocracy that supposedly runs America. Nevermind if the protesters are “inept, incoherent and hopelessly quixotic,” Eugene Robinson tells us, what matters is that the people finally are rearing up to demand economic justice.”

Read the entire article here.

Defense & Deficits: How to Trim the Pentagon’s Budget-Carefully

Posted on by The Progressive Policy Institute

Getting America’s exploding deficits and debt under control isn’t just an economic and political imperative, it’s also vital for U.S. national security. America’s military strength and leading role in international affairs rest on the foundation of a dynamic, growing economy. To the extent that runaway public debt undermines prospects for growth and compromises America’s economic sovereignty, it also endangers American security.

Let’s be clear at the outset: defense spending is not driving the fiscal crisis. True, the wars in Iraq and Afghanistan have contributed to the debt, but that’s because President Bush, in a break with wartime precedent, declined to raise taxes to pay for them. The good news is that as the overseas deployments wind down, future military spending is set to naturally shrink.

The structural causes of America’s escalating national debt are the unsustainable cost growth of federal entitlements—Social Security, Medicare and Medicaid—and historically low tax revenues (which reflect both subpar economic growth and the Bush tax cuts). But it has become apparent that as America’s political leaders shirk tackling tax and entitlement reform, the burden of debt reduction threatens to fall disproportionately on domestic discretionary spending, including defense.

The first shoe has already dropped. On August 2, President Obama and Congressional Republicans struck a deal that would cut spending by $2.1 trillion over ten years in exchange for raising the debt ceiling. Among other cuts, the compromise takes an initial bite of $350 billion from defense spending. The deal also created a Joint Select Committee on Deficit Reduction or “supercommittee” to come up with an additional $1.2 to $1.5 trillion in federal savings by the end of the year.

If the committee fails, it will trigger a “sequester” that automatically cuts domestic and defense spending across the board. That could mean an additional $500 billion—if not more—cut from the military.

All told, defense spending could be reduced from $850 billion to $1 trillion over the next decade. Cuts of this magnitude are simply too large. They would jeopardize America’s ability to successfully conclude the wars in Afghanistan and Iraq, conduct global counterterrorism operations, and hedge against the rise of new threats—both state and non-state actors—to U.S. security and international order. Absent corresponding reductions in America’s global commitments, such large cuts portend exactly what Walter Lippman warned against—foreign policy “insolvency,” in the sense that America’s commitments far exceed its means.

Nor would deep cuts in national defense solve the country’s fiscal problems. America’s national debt now exceeds $14 trillion and is growing rapidly. Since 2004, it has zoomed from 40 percent to about 70 percent of gross domestic product (GDP), and is on course to exceed 100 percent in the coming decade. There is wide agreement among fiscal experts that policymakers need to cut at least $4 trillion over ten years just to stabilize the debt at 60 percent of GDP. So even if the new “supercommittee” succeeds in cutting $2.1 trillion, there’s still a long way to go.

Yet the Pentagon should not escape scrutiny, either. The fiscal task before the country is monumental, and President Obama has rightly called for “shared sacrifice” in crafting a bipartisan solution. This means everything—entitlements, tax revenues, domestic spending and defense—must be on the table.

The military must contribute its fair share to deficit reduction, but it must not be made to pay for America’s leaders’ inability to grapple with the country’s fundamental fiscal challenges. Beyond marginal adjustments, the basic level of defense spending should be set by America’s strategic needs, not by a game of fiscal chicken.

Moreover, how defense spending is cut matters almost as much as the cut’s size. Across-the-board caps or freezes—as proposed by some leading bipartisan groups—are convenient for political budget cutters, but they are a bad way to wring savings out of national defense. The fact is that not all Pentagon programs are created equally: To en- sure that reductions in the military’s budget don’t disrupt current missions or impair the U.S. mili- tary’s ability to sustain qualitative technological superiority over the long term, policy makers need to make strategic trade-offs among competing security priorities.

That’s because while keeping Americans safe is the federal government’s first responsibility, America’s military power also underpins its diplomacy and anchors strategic alliances in Europe, the Middle East and Asia. The military cements America’s position of world leadership, which rests on the United States’ will and capacity to defend liberal democratic values and strengthen global institutions for collective problem solving. I see no evidence that the American people are clamoring for a retreat from these responsibilities.

For all these reasons, heedless cuts in military spending have no place in a progressive strategy for restoring fiscal discipline. In this Policy Brief, I offer pragmatic answers to these questions:
The post-Cold War benchmark of three percent of GDP constitutes a floor beneath which defense spending should not be allowed to sink. This decade, a range of 3.0–3.5 of GDP is more realistic. This suggests that the military’s budget should be cut by no more than $600–650 billion—or about 10 percent—by 2021.

How much should the Pentagon contribute to defense spending reductions?
And how do policymakers realize these savings?

I answer those questions by examining defense spending in an historic and current budget context, break down Pentagon spending by category, distinguish between one-off war spending and on-going military missions, and contrast spending proposals from the political left, right and center. I conclude with a series of strategic guidelines for how much and where to trim the defense budget.

Based on this analysis, I believe military spending can safely be reduced over the next decade towards the “post-Cold War benchmark” achieved in the late 1990s: After a series of exhaustive strategic re- views, military spending slowly declined through- out the decade and eventually settled at around three percent of GDP by 1998. During peacetime and absent a major nation-state military competi- tor, this range was deemed sufficient to handle two regional conflicts while maintaining the U.S. military’s high-tech edge and global reach.

Of course, this formula cannot be applied mechanistically because the United States is not at peace and faces a different slate of threats than in the 1990s. Therefore, budgeteers must build in some leeway above three percent of GDP to accommo- date the following realities: America must con- clude the wars in Iraq and Afghanistan; maintain a vigorous, global counterterrorism campaign; assure its qualitative military superiority over po- tential rivals, such as China; continue to invest robustly in advanced technology; and be prepared for unanticipated contingencies.

That’s why the post-Cold War benchmark of three percent of GDP constitutes a floor beneath which defense spending should not be allowed to sink. This decade, a range of 3.0–3.5 of GDP is more realistic. This suggests that the military’s budget should be cut by no more than $600–650 billion— or about 10 percent—by 2021.

In achieving these savings, policymakers should be guided by five rules:
1. Don’t let fiscal politics trump U.S. strategy.
2. Cut over time.
3. Focus on personnel costs.
4. Avoid radical surgery to military procurement and research & development.
5. Set a floor beneath defense cuts.

Read the entire memo.

Nobel Prize Irrelevancy?

Posted on by The Progressive Policy Institute

For years when I was chief economics writer at BusinessWeek, I would write our post-Nobel piece. I was often one of the few people who would challenge the adulation of the prize winners, notably in this 2005 piece on the Nobel in game theory.

But today’s awards to Tom Sargent and Chris Sims simply leaves me stunned. Let me give you a brief excerpt:

“It is not an exaggeration to say that both Sargent’s and Sims’ methods are used daily … in all central banks that I know of in the developed world and at several finance departments too,” Nobel committee member Torsten Persson told the AP.

I’m not sure why this is supposed to be a good thing. None of the central banks foresaw the financial crisis, none of them foresaw the weakness of the recovery, and none of them had the right policy prescriptions. This lack of ability to predict big shocks and their aftermath is a central flaw of the Sargent-Sims approach. Sargent is well known for his work on rational expectations, which has a tough time with ‘irrational’ booms and busts. And Sims’s work on ‘vector autoregressions’ has a difficult time anticipating sudden shifts in regime, such as the shift from the Great Moderation to the today’s incredible volatility.

I would have much preferred to see the awards going to a growth economist, like Paul Romer; an expert in financial markets, like Reinhart and Rogoff; or an international economics expert. While I’m sure Sargent and Sims deserve their award, the timing makes the economics profession feel out of touch and irrelevant.

Crossposted from Innovation and Growth

Wingnut Watch: Lost in Wingnut World

Posted on by The Progressive Policy Institute

Bloomberg-Washington Post DebateAt a time when we are constantly being told that no one in America cares about anything other than the economy, one of Wingnut World’s most durable forums for people who intensely care about cultural issues was held this last weekend. The Value Voters Summit, sponsored by the Family Research Council, attracted every significant GOP presidential candidate other than Jon Hunstman. But as has often been the case, the controversial nature of the event’s sponsors and speakers overshadowed anything the candidates had to say.

Most notably, Robert Jeffress, a Southern Baptist minister from Dallas who was asked by conference sponsors to introduce Rick Perry (he’s a long-standing supporter of his governor and one was one of the pillars of Perry’s big prayer event back in August), made big waves by going out of his way to tell reports he regarded Mitt Romney’s LDS church as a “cult.” This is an old refrain for Jeffress, but casting the Republican presidential nominating contest as a war of religious identity in which Christians should follow Perry was sure to grab headlines. Moreover, one of the main speakers at the event was Bryan Fischer of the American Family Association (a major Value Voters Summit co-sponsor), who lived down to his reputation as a purveyor of all sorts of bigotry, mainly aimed at gays, Muslims and Mormons. Romney, who preceded Fischer at the podium, was driven to an indirect swipe at him for “crossing a line,” which of course just gave Fischer a new excuse to whine about being persecuted.

The whole series of events led some commentators to wonder if a sustained attack on Romney’s religion, with or without the complicity of Rick Perry, had been launched to stiffen resistance to the 2012 front-runner among white conservative evangelicals.

The presidential candidate who was most successful in cutting through all the distractions at the Value Voters Summit was Herman Cain, whose stock speech is still blowing the doors off in conservative gatherings. He got a lot of standing ovations, but perhaps the biggest greeted his assurance that he and other African-Americans had nothing to be angry about thanks to the opportunities they’d received as Americans.

On a more formal level, Ron Paul registered at the event by winning its Straw Poll by a comfortable margin. The ability of his supporters to routinely dominate straw polls (except for those like August event in Iowa that attracted many thousands of attendees, or the P5 straw poll in Florida where voters were delegates elected months earlier) simply by flooding the room has seriously eroded the news values of his wins.

As the presidential candidates prepared for another debate on Tuesday, polls continued to document an ongoing collapse in support for Rick Perry and a corresponding surge for Herman Cain—not just in national surveys, but in the states that play an early role in the nominating contest. In Iowa, where no public polls were released during September, and late August polls showed Perry romping into an immediate lead, two surveys from NBC-Marist and Public Policy Polling came out this week documenting Perry’s slide into fourth or fifth place, and Cain’s rise to a position rivaling Mitt Romney. Since the Iowa Caucuses require both grassroots support and a strong organization to bring it out on a cold winter night, Cain’s weak organization in the state makes actual success in the caucuses more problematic (conversely, Perry is thought to have a very good Iowa organization). Aside from the Perry-Cain dynamic, the new numbers from Iowa show how tempting it is becoming for Mitt Romney to leap into Iowa (which he’s largely avoided, no doubt because of the high cost he paid for losing Iowa in an upset in 2008) and pursue an early knockout with a run through Iowa, New Hampshire and Nevada, the first three stops on the primary trail.

When the candidates assembled in New Hampshire on October 11 for a Bloomberg/WaPo debate focused on the economy, most attention was devoted to Cain, who predictably drew criticism of his signature 9-9-9 tax proposal; Romney, who had emerged from the ashes of Perry’s early ascendency to regain front-runner status (a trend punctuated by an early endorsement from Chris Christie); and Rick Perry, who needed a gaffe-free debate and some renewed sense of attachment to the hard-core conservatives who had been abandoning him for Herman Cain. The general take is that Romney cruised (getting in an extended crowd-pleasing attack on China’s commercial policies and taking a shot at Perry’s indifference to the plight of the uninsured in Texas). Cain did well but opened himself to further trouble on the details of 9-9-9 (Santorum drew some blood pointing out that the plan’s new national sales tax would not be popular in NH). Perry made no mistakes, but made no gains; RedState’s Erick Erickson concluded he was “rapidly becoming the Fred Thompson of the campaign season,” a deadly comparison given Thompson’s high potential and quick fade in 2008.

Aside from the debate’s horse-race nature, it reinforced once again how far the entire field has drifted from what used to be considered the mainstream of political discourse. All the candidates agreed the housing and financial crises of 2008-2009 were entirely created by the federal government, not the financial sector, and most implied excessive lending to the poor and minorities was a big part of the problem. All the candidates appear to favor deliberate deflationary monetary policies. All the candidates who spoke on the topic rejected any budget compromise that involved either tax increases or defense cuts. Two candidate, Michele Bachmann and Newt Gingrich, told egregious lies about the relationship between “ObamaCare” and Medicare, pursuing the old “death panel” meme with renewed vigor. And to cap it all off, when Rick Perry was asked a direct question about income inequality, he didn’t seem to grasp the problem at all.

It looks like the eventual winner will have to bring a translator along when it’s time to debate the president. Many Americans don’t speak wingnut.