issue: Fiscal Policies

Framing the Fiscal Battle

Posted on by The Progressive Policy Institute

Republicans are convinced they have a mandate to cut government down to size. That’s hard to do when you only control one House of Congress, and harder still when your fiscal plans are fraught with internal contradictions.

It’s not even clear, for instance, what Republicans really want to accomplish. Senator-elect Kelly Ayotte, delivering the GOP’s weekly address Jan. 1, said that “Job one is to stop wasteful Washington spending.” At the same time, she said that “Congress must get serious about meaningful debt reduction.”

So which is it—cut public spending or cut public deficits? That’s a distinction with a difference, especially to investors worried about the basic soundness of the U.S. economy. To them, deficits are simply the arithmetic result of government spending too much, taxing too little or both, as is clearly the case today. Last month, Republicans struck a deal with President Obama on a tax cut package that will add $950 billion to the nation’s debts. Key GOP House leaders have made it clear they will oppose any tax hikes to solve the budget crisis, which they pretend is purely a matter of overspending.

Ayotte seemed closer to the mark in saying Republicans come to Washington to “make government smaller, not bigger.” In practice, however, that ideological goal may not be compatible with what the public seems to want. Independent voters especially have focused on narrowing the enormous deficits that force America to get deeper and deeper in hock to Chinese and other foreign lenders.

And if Republicans are serious about taking taxes off the table, they’ll have to make even deeper cuts in public spending—including Social Security, Medicare and Medicaid—to close our yawning budget gaps. It will be interesting to see which GOP bravos are willing to walk that plank. Thus far, House Republicans are proposing only cosmetic cuts, like trimming the House budget by $25 million. It’s a good idea for the House to discipline its own spending, but in a $3 trillion budget, that’s chump change.

Meanwhile, the GOP is planning to vitiate budget caps imposed by the previous Congress. Under the caps, any new spending or tax cuts would have to be offset by equivalent spending cuts or tax hikes. Republicans would eliminate the later requirement, so that tax cuts too would trigger deeper spending cuts. This of course is a formula for a deepening fiscal crisis and intensifying polarization between the two parties. And House Republicans will take a run at repealing Obamacare, which would certainly reduce federal spending but actually increase future budget gaps. In any event, it’s not happening

Some of the more fervid Tea Party types are even threatening to vote against raising the debt ceiling in March if Democrats don’t agree to new spending cuts. If they are serious, this could mean America would default on its debts for the first time in history. It would be, as Obama’s chief economic adviser, Austan Goolsbee, said yesterday, an act of political insanity, the equivalent of taking yourself hostage and threatening to shoot.

Finally, there’s the crucial question of timing. Incoming House Budget Committee Chairman Paul Ryan reportedly is planning a package or rescissions aimed at cutting about 21 percent from 2011 spending Congress approved last year. The aim is to return domestic spending to its 2008 level, before Obama took office.

The risk is that withdrawing a significant chunk of fiscal stimulus could abort an economic recovery that at last seems to be getting traction. There’s no question that Americans want to restore fiscal discipline in Washington, but what they want even more is for the economy to grow and unemployment to start falling.

Goolsbee hinted that Obama’s next budget also will contain some spending cuts. But the GOP’s ideological zeal to cut government gives Obama an opportunity to offer a more pragmatic approach that puts jobs growth first, while taking balanced and gradual steps to put the federal government on a fiscally sustainable course.

Progressives do need to get serious about getting federal spending under control. But by framing the coming fiscal battles as a choice between a more robust economy and a smaller government, they can speak directly to Americans’ number one priority and thereby regain the political initiative.

The Remarkable Inability of Americans to Support Their Deficit-Cutting Aspirations

Posted on by The Progressive Policy Institute

In the latest Washington Post-ABC poll, released today, contains a remarkable though not surprising finding. Americans may profess to be deeply concerned about the budget deficit. But when it comes to solutions, not a single one of the nine major proposals to cut the federal budget receives majority support.

The same disconnect jumps out from a Pew poll released last week. An impressive 93 percent agree that the federal deficit budget is a major problem, and 70 percent say it must be addressed now (the other 23 percent think it needs to be addressed when the economy gets better). Yet only two of 12 proposals to reduce the deficit received majority support.

Like St. Augustine asking for “chastity and continence, but not yet,” the American public knows that the current budget deficit of almost $14 trillion is downright sinful. But actually doing something about it, well, hold on a minute now buddy, you can’t raise my taxes or cut any of these important programs! Certainly not now!

In the Pew poll, the only two things that receive majority support are raising the Social Security contribution cap (64 percent) and freezing salaries for federal workers (59 percent). Obama’s already on top of the pay freeze.  He estimates it could save approximately $5 billion over two years, cutting the deficit to a much more manageable $13.995 trillion.

Reducing Social Security for high-income seniors wins the approval of 48 percent of respondents in the Pew poll, and 49 percent of respondents in the Post/ABC poll. Reducing defense spending gets 43 percent approval in the Pew poll and 44 percent approval in the Post/ABC poll. The most widely unpopular proposal was increasing the federal gasoline tax by 15 cents per gallon. Only 22 percent of respondents in the Pew poll and 21 percent of respondents in the Post poll approved.

Interestingly, Pew broke down the figures for Tea Party supporters, 84 percent of whom say that the federal deficit is a major problem that the country needs to address now. Yet, on seven of the 12 deficit reduction proposals, Tea Party supporters are less supportive the proposals than the general public. Again, that is LESS supportive! The only deficit reduction proposal with majority support among Tea Partiers is the aforementioned federal salary freeze (at 74 percent). And the only other to receive majority support is reducing Social Security for high-income seniors (by a narrow margin of 50-48 percent).

In a recent P-Fix post, Elbert Ventura noted that “Americans may profess to hate European-style states, but the disconnect between their hatred of taxes and love of benefits may well hasten the day of a European-style collapse.”

This is spot on. The disconnect is downright maddening. I want to shake some of these people, show them the federal ledger, and say: Here is the reality. If we want to make a dent in the deficit, we are going to have to make some choices that involve real tax increases and real cuts to benefit programs. There is no more free lunch. We can pretend that somewhere there is a $10 trillion line item labeled “waste” that politicians are conspiring to protect, or we can have an intelligent conversation about this. If we stay in a fantasy world, the inevitable reckoning is going to be a lot more painful.

Now, if only there were some political leader out there with the courage to say something like that. Because this is one of those issues where the public is simply not going to come around on its own. Sure, perhaps better economic times would make some respondents slightly more willing to see higher taxes or reduced benefits. But real sacrifice, real hard decisions? That’s going to take political leadership. Any takers?

Photo credit: mchmlbrk

Obama Doubles Down on High-Speed Rail Investments in California and Florida

Posted on by The Progressive Policy Institute

The Obama administration yesterday called the bluff of two newly elected Republican governors and regained control of its high-speed rail program. Confronted by Governor-elects Scott Walker of Wisconsin and John Kasich of Ohio, who vowed to kill the administration’s signature high-speed transportation initiative in their states when they take office next month, U.S. Transportation Secretary Ray LaHood preemptively yanked $1.195 billion not yet spent by the states.

This is good news and something we had urged. It shows resolve by the administration against politically motivated obstructionism. A backlash has been growing in Wisconsin against Walker’s anti-rail rhetoric. Now voters can mull over how he “saved” them money by destroying thousands of construction jobs that the proposed Milwaukee-Madison rail line would have created. Plus Wisconsin and Ohio may owe the federal government upwards of $25 million already spent on rail planning.

The administration said it would redirect the bulk of the freed funds to California and Florida, assuring that these truly transformative projects can move forward even if a Republican House blocks rail funds in the upcoming federal budget.

California will receive $624 million of the redirected funds, adding to the $3 billion previously awarded toward the construction of a 220-mph railway between Los Angeles and San Francisco. Combined with matching state funds from a voter-approved bond referendum, California now has $7 billion committed to the project.

Both outgoing Republican governor Arnold Schwarzenegger and incoming Democratic governor Jerry Brown are strong supporters of the rail project, despite California’s current budget woes. Last week, the California High Speed Rail Authority approved construction of the first leg of the line, a 65-mile stretch in the Central Valley running through Fresno. The redirected funds are likely to enable the authority to extend construction to Bakersfield.

Florida will get $342 million on top of the $2.05 billion previously allocated to build a high-speed train on a new right of way between Orlando and Tampa.

Incoming Republican governor Rick Scott initially opposed the line, but has softened his position, saying he is in favor of high-speed rail so long as Florida taxpayers don’t have to foot the bill. Yesterday’s allocation basically closes the funding gap. It strengthens LaHood’s prediction that the Florida project will break ground next year.

Of the remaining $230 million redirected by LaHood, the state of Washington will receive $162 million to rebuild trackage and signaling on an existing Amtrak route between Portland and Seattle. The other major recipient ($42 million) was Illinois, whose re-elected Democratic Governor Pat Quinn is an ardent rail advocate.

Focusing federal funds on a few core projects is a smart strategy as the administration realizes that additional rail allocations in a Republican-controlled House are far from certain. The redirected rail funds give the administration breathing room to keep the program afloat at least through the 2112 election cycle.

Rep. John Mica (R-Fla.), the likely chair the House Transportation and Infrastructure Committee in January, has been critical of rail projects – such as the now-rescinded Wisconsin and Ohio lines – where trains would only reach maximum speeds of 110 mph.

Mica has repeatedly said he favors speeds of over 150 mph and wants private partners to help fund the projects. Earlier this week, a consortium led by Central Japan Railway said it may offer $210 million in loans to help pay for the Tampa-Orlando line if its high-speed equipment was selected by the state.

Debt Commission Rises to the Occasion

Posted on by The Progressive Policy Institute

President Obama’s deficit commission fell short today of the 14 votes necessary to submit its debt reduction plan to Congress for a vote. Don’t believe for a moment, however, that the commission has failed. On the contrary, co-chairs Erskine Bowles and Alan Simpson have forged a bipartisan majority for a plan that creates the basic template for any credible effort to restore fiscal responsibility in Washington.

In pushing back against special interests and partisan polarizers, the commission has done this country a tremendous service. Whatever happens next, its members have been responsive to the solid majority of Americans who say they want to the two parties to work together to solve the nation’s toughest problems.

As the bipartisan duo of Bill Galston and David Frum noted in today’s Washington Post, a post-election Pew poll found that 55 percent of the public wants Republican leaders in Washington to work with President Obama “even if it means disappointing some groups of Republican supporters,” and even more want Obama to do the same. Independents, whose defection from Obama’s winning 2008 coalition largely accounted for the GOP’s midterm sweep, likewise express a strong preference for compromise.

To a surprising degree, that problem-solving spirit seems to have infected the deficit commission, which has been deliberating since February. Republicans don’t come any more conservative than Sen. Tom Coburn of Oklahoma, but even he is now drawing fire from anti-tax absolutists for daring to support the commission blueprint. GOP Senators Mike Crapo of Idaho and Judd Gregg of New Hampshire also endorsed the plan, while several Members from both parties in the more partisan House oppose the plan.

On the Democratic side, Sen. Dick Durbin of Illinois broke ranks with liberals to back the plan, while centrist Sen. Max Baucus of Montana raised eyebrows in opposing it. Sounding a parochial note, Baucus criticized the commission’s sensible plan to raise gas taxes by 15 percent, saying it would “paint a big red target on rural America.”

Mostly, however, reactions to the commission’s plan have divided along predictable lines, with support concentrated in the political center and opposition hardening as you move toward either end of the spectrum. Arch-conservatives decry its emphasis on cutting tax expenditures (though we’re proud that the commission adopts a long-standing PPI proposal for a “cut-and-invest” commission to go after these loopholes and subsidies), a trillion dollar drain on federal revenues. Nor are they mollified by its significant cuts in income and corporate tax rates, or its 3-to1 ratio of spending cuts to tax increases.

The left, meanwhile, is in full cry over the commission’s allegedly draconian cuts in Social Security benefits. In fact, the proposal boosts the minimum Social Security benefit for low earners, makes the benefit formula more progressive, and very gradually increases the retirement age to 69 (normal) and 64 (early) by 2075. Only today’s toddlers will be affected, and their average life expectancy probably will exceed 80 years by then. The lefty blogosphere and cable shows nonetheless have worked themselves into a hyperbolic lather about President’s Obama mean ole “catfood commission.”

This is ludicrous. The commission’s plan doesn’t actually solve America’s fiscal crisis, it merely slows spending growth to sustainable levels, and stabilizes the national debt at 60 percent of GDP by 2013. That ratio doesn’t return to 40 percent – where it was before the financial crisis hit – for 25 years. In truth the plan does not impose a pitiless austerity on America. Nor would it jeopardize economic recovery, since its changes won’t kick in until unemployment starts falling to normal levels.

Liberals are on firmer ground in arguing that the plan sets unrealistically severe limits on federal spending. It aims to get federal spending down (and revenues up) to 21 percent of GDP by 2035. Whether that is enough to meet the needs of a much grayer America, where over 20 percent of the population will be over 65, is open to doubt.

But the commission’s plan doesn’t have to be perfect. It only has to be plausible, and it more than meets that test. Although it won’t be guaranteed a vote in this Congress, there’s nothing to prevent its supporters from introducing it into the next Congress. Given the countless hours of negotiations that have shaped it, the extent to which it has absorbed the best ideas from previous fiscal reform blueprints, and its rare, bipartisan backing, the proposal could become the point of departure for next year’s debate.

That will be especially true if President Obama embraces the plan, or something very close to it. He has largely stood aloof from the commission’s deliberations, but he urgently needs to regain the political initiative after the midterm debacle. House Republicans no doubt will devise an alternative, likely drafted by Rep. Paul Ryan, a commission member who opposes its plan, that emphasizes spending cuts almost exclusively. It may also include a push to repeal Obamacare. In any case, the GOP approach won’t get much Democratic support, especially now that the ranks of moderate Democrats have been drastically thinned.

In short, President Obama has an opportunity to seize the pragmatic center in the coming debate about putting America on a fiscally sustainable course. And he can thank his Commission for dealing him a very strong hand.

In Defense of Obama’s Federal Pay Freeze

Posted on by The Progressive Policy Institute

Obama is getting a lot of flack for agreeing to a two-year wage freeze for federal employees.  “Why give away a negotiating chip?” ask the commentariat, “and with nothing in return!?”  Or as Kevin Drum put it:  “Obama has another two or three weeks to prove he’s not an idiot.”

Actually, there are three solid political reasons to freeze federal pay (even if the policy wisdom is debatable). First, it means he (not Republicans) get credit for something likely to be popular politically; Second, he shows he is capable of taking decisive action; Third, and most important, if he wants to negotiate successfully in the future, he’s going to need to rebuild his popularity.

In short: the pay freeze decision makes sense if you think of it not as a preemptive good-faith giveaway, but as a moment of leadership aimed at rebuilding public approval and all the bargaining power that goes with it.

Richard Neustadt’s classic Presidential Power offers this pithy aphorism: “Presidential power is the power to persuade.” By which he means not personal charm and clever argumentation, but a power that comes from public popularity and reputation. A president esteemed by the people and regarded as competent is in a significantly better negotiating position than one who isn’t. What Neustadt understood is that bargaining depends much more on public prestige than on the individual chips.

We just had an election in which big government was a starring villain, in which real concerns were expressed about runaway federal spending, and in which many swing voters lost faith in the Democrats. Obama is now preparing for a two-year battle in which he and the Republican leaders are both going to be appealing to the American public in a popularity contest that will determine who has to give in and how much.

Freezing federal pay for two years is a small move, but it’s a symbolic move. It signals that Obama understands that the public is unhappy with the size of government, and that he is doing something decisive about it.  It also shows he is acting as a leader.

By contrast, if Obama had ultimately frozen federal pay after Republicans had pressured him into doing so, you can be sure Republicans would be claiming all the credit, and would be spreading the narrative of Democratic capitulation.

The latest Gallup poll puts President Obama’s approval rating at 45 percent, and his disapproval rating at 47 percent, more or less where it has been since June. Not terrible, but not great, and right now about equivalent with John Boehner (41 percent favorable, 39 percent unfavorable) and Mitch McConnell (38 percent favorable, 36 percent unfavorable).

On the big issues ahead – well, basically taxes and deficit reduction are probably going to dominate the agenda – there are not only going to be two competing arguments, but two competing spokespeople making those arguments.

Republicans have demonstrated time and again that they are not interested in playing nice and engaging in the sort of polite bargaining chip negotiations that many commentators seem to want Obama to conduct. All indications are that they are not particularly interested in compromise, and are probably willing to do what it takes to pummel Obama and the Democrats into accepting complete tax cut extensions and massive federal spending cuts.

Essentially, this leaves Obama with two choices. One is to continue to operate in good faith, proposing reasonable fig leafs, and let Republicans continue to take the fig leafs and offer nothing in return because they don’t feel they have to. This makes Obama look weak and ineffectual, and also allows Republicans to claim equal credit for any popular compromises.

The other choice is to show some leadership and build back public support with issues designed to win back lost swing voters. Some on the left might call the federal pay freeze a milquetoast bipartisan compromise. But Obama can and should call it taking the initiative and a way to shift the narrative. He needs to say: “I’m listening to the American public, and I’m taking decisive and smart action to limit federal spending and getting the government’s fiscal house in order. I know you are concerned about our long-term future, and so am I. I get it. If Republicans want to put petty politics aside and work with me, I welcome their input and partnership. But if they’re more interested in posturing, then I’m going to take care of business without them.”

Choice one is doing the same thing over and hoping for a different result, which is one popular definition of insanity. Choice two is a gamble. It may not work. But right now it’s the best gamble he’s got.

Do Deficits Really Matter Most?

Posted on by The Progressive Policy Institute

As Bill Galston points out, there’s no longer much doubt that deficit reduction has become a very large public concern over the last year. It’s a separate question as to whether Americans are willing to support actual spending reductions or tax increases proposed by either party, and thus whether there is really a popular base for a deficit reduction compromise. But no one should argue any longer that the whole subject is just being cooked up by elites.

Still, the current extend-the-tax-cuts debate in Washington demonstrates pretty conclusively that deficit reduction is not, in fact, the preeminent value of either party in Congress. Both are pursuing a path guaranteed to increase long-term deficits and debt. And since the wealthy benefit disproportionately from an income tax rate reduction in the lower brackets (that’s how marginal tax rates work), even the Democratic approach elevates tax cuts for “all Americans” (to use the Republican battle cry) over deficit reduction.

Matt Yglesias sums up the ironic situation well:

[T]here’s no debate in Washington about whether rich people should get a permanent tax cut. Nor is there any debate in Washington about whether rich people’s tax cut should be financed by long-term borrowing. Nor is there any debate about whether rich people should get a bigger tax cut than middle class people. But we “can’t afford” unemployment insurance, we “can’t afford” to pay bank regulators competitive salaries.We have a bipartisan consensus that the short-term deficit should be made smaller and the long-term deficit should be made bigger even when all the economic logic points in the opposite direction.

Now Republicans, of course, dispute that we’re talking about “tax cuts” at all, and maintain that failing to extend the Bush tax cuts represents a tax increase, even though the reversion to earlier rates has been established in current law from the beginning, and even though the original rationale for the Bush tax cuts was to “rebate” unnecessary revenues when the federal budget was in surplus. But that’s just another way of saying that low tax rates, particularly for those “job creators” at the top, are an end in themselves for Republicans, crucial in every fiscal or economic circumstance, and thus far more important to them than deficits-and-debt.

This article is cross-posted at The Democratic Strategist

Photo credit: Dave Morris

How Two Republican Governors Are Giving High-Speed Rail an Unintentional Boost

Posted on by The Progressive Policy Institute

Talk about a blessing in disguise. Just as the Obama administration’s high-speed rail program was running out of congressionally-appropriated cash, Governor-elects Scott Walker of Wisconsin and John Kasich of Ohio have come chugging to the rescue.

By vowing to kill planned passenger train lines in their states, the newly elected Midwest Republicans have potentially freed $1.2 billion in federal rail money that can be used to build “true” high-speed routes elsewhere. The windfall represents more than the $1 billion that the White House has requested from Congress in next year’s budget. It gives the administration breathing space to keep the program going even if the Republican-led House blocks rail appropriations in 2011.

Since the Wisconsin and Ohio grants are of secondary importance to the national goal of getting a 150-mph-plus rail line up and running, the governors’ anti-train stance amounts to an unintended gift to the Obama administration

To be sure, benefiting high-speed rail was not the intent of Walker and Kasich. Both politicians have a history of hostility to public transit. Walker has opposed light rail, commuter rail and other transit initiatives in his current job as Milwaukee County Executive. Kasich, a former Ohio Congressman turned Fox News host, likes to say that the only kind of train he approves of is a freight train.

Both have called on Washington to divert the rail money to state highway projects. Ray LaHood, U.S. secretary of transportation, said this isn’t permitted under the law. LaHood told a rail conference last week that he plans to reallocate the money to other states and will bill Wisconsin and Ohio for federal funds already spent on the suspended rail lines.

Poor Choices for Rail Aid

The $810 million in Wisconsin money was to extend Amtrak’s existing Milwaukee-Chicago Hiawatha line to Madison, with a top speed of 79 mph in 2013, rising to 110 mph in 2015; Ohio’s $400 million was to build a Cleveland- Columbus-Cincinnati route operating at 79 mph maximum speeds over existing freight tracks. It received a $400 million grant.

The Obama administration funded these projects largely because they were “shovel ready” (a key criteria of the stimulus act that provided $8 billion in rail aid to states) and because they represented “regional balance” for the Midwest that Congressmen from both parties demand when money is allocated for highways.

As we have argued, spreading out federal funds to too many marginal projects is a mistake operationally and politically. Operationally, intercity passenger rail will succeed only if it provides an obvious and understandable margin of superiority over highway trip times. Politically, moderate-speed lines advertised as high-speed (or as “emerging high speed,” in Obama administration nomenclature) confuses the public and opens up the federal initiative to legitimate criticism.

Studies indicate that somewhat-faster service will not create the transformational transportation that will get Americans out of their cars and jumpstart regional economies. This was underscored by a recent study of high-speed rail compared to conventional rail commissioned by the U.S. Conference of Mayors.

Because the up-front costs of truly modern train lines are high, the administration needs to concentrate on finishing one or two routes with state-of-the-art equipment to prove that fast rail is an efficient and even profitable venture once construction is completed.

Florida Should be Centerpiece

The administration now has the opportunity to fund true high-speed rail by reallocating the Midwest money. It can fully fund the high-speed Tampa-Orlando line in Florida as well as help get a segment of California’s proposed 200-mph railway between San Francisco and Los Angeles into revenue service. There may even be money left over to accelerate “shovel-ready” projects in busy rail corridors with proven ridership in Illinois and Connecticut.

Newly elected California governor Jerry Brown (D) is a strong supporter of his state’s rail program – as is outgoing Republican governor Arnold Schwarzenegger. Both Illinois incumbent governor Pat Quinn (D) and  Connecticut governor-elect Dan Malloy (D) are also pro-train.

Florida’s Republican governor-elect, Rick Scott, initially opposed the Tampa-Orlando line (the current governor, Charlie Crist, supports the project). But Scott has recently relaxed his rhetoric and says he is in favor of high-speed rail so long as Florida taxpayers don’t pay for it.

What reportedly swayed Scott was $800 million in fresh federal funds for the project last month. Florida now has $2.05 billion to complete the $2.6 billion line, including the $1.25 billion in federal funds it received in January.

Public-Private Partnerships

By reallocating a portion of the Wisconsin-Ohio funds, the $550 million gap could be closed. Or better yet, Washington could encourage private companies to invest in the Florida line by using federal funds as an incentive. Already Siemens, the high-speed locomotive maker, has announced interest in bidding on the Florida project if government shares a portion of the operational risk.

Such a public-private partnership would appear to satisfy Scott’s objections and could go a long way to appease Rep. John Mica (R – Fla.), a fan of public-private rail partnerships who is expected to become chairman of the House Transportation and Infrastructure Committee in January.

All of this could leave Wisconsin’s and Ohio’s new chief executives on the wrong side of the tracks. Or as a transportation official told the Milwaukee Journal Sentinel last week, “Expanding passenger rail is a national priority. Just because Wisconsin says no doesn’t mean it’s going away.”

A Deficit of Common Sense

Posted on by The Progressive Policy Institute

‘Tis the season for deficit commissions. The past week has brought not one, not two, but three stabs at solving America’s looming fiscal crisis. And just yesterday, the Brookings Institution hosted a panel discussion on “The Politics of Entitlement Reform and the Budget Deficit,” featuring a murderers’ row of budget experts across the ideological spectrum. All the activity underscores just how much concerns about the deficit have taken over the Washington conversation.

But will all that hand-wringing lead to anything concrete and enduring? I have my doubts. The substantive merits and faults of the plans aside, what’s striking is, frankly, how unlikely any action seems to be.

Too pessimistic? Perhaps. But at the Brookings event, there was a subterranean motif that tempered any enthusiasm one might have for any ideas put forward. Isabel Sawhill, director of Brookings’ Budgeting and National Priorities project, at one point said, “The public is in denial about the scope of the problem.” Meanwhile, Eugene Steuerle of the Urban Institute sounded another note of consternation: “Both political parties are afraid to ask the middle class to do anything.”

There, neatly stated, are two fundamental problems that stand in the way of fiscal balance: a public in denial, a politics in retreat. Simply put, the American public simply has no idea how much the government that they like to have around costs. They may profess to hate big government, but ask about cuts to the entitlement programs – by far the largest contributors to our long-term deficit – and what do they say? Hands off! Even 62 percent of Tea Partiers say that Social Security and Medicare are worth the cost of the programs; the general public is even more supportive, at 76 percent.

Recent research by Cornell political scientist Suzanne Mettler underscores the disconnect between the kind of government Americans say they want and the government they actually use. In a recent paper that takes a look at Americans’ relationship with the “submerged state” – federal policies that incentivize and subsidize behavior by individuals – Mettler found that most Americans have little awareness of how the state affects their lives. Most alarming were the results of a survey of program beneficiaries who were asked if they had ever used a government program. Forty-four percent of those collecting Social Security retirement and survival benefits said no; 43 percent who had benefited from unemployment insurance said no; nearly 40 percent of Medicare said no. There’s more: 47 percent who took home earned income tax credit said no; 53 percent of those who took Pell Grants said no; and 60 percent who benefited from the home mortgage interest deduction said no.

So the governed don’t know. What about those who govern? Alas, our political elite seems to have lost all sense of responsibility at steering the ship of state to calmer waters. The fault lies mainly with the right. Yes, Nancy Pelosi’s declaration that Social Security and Medicare cuts are off-limits is easily caricatured as liberalism at its worst, but let’s face it – Pelosi faces a lot of opposition on her side on that front. There is a genuine debate going on under the big progressive tent about just how much entitlements should be touched, if at all, and it’s testimony to the vibrancy – and fractiousness – of progressivism.

Contrast that with the right, which has become an all-tax-cut, all-the-time movement. Grover Norquist, in whose image today’s Republican Party has been modeled, dismissed the Bowles-Simpson report, with his organization, Americans for Tax Reform, calling it “a plan to raise taxes cloaked in the veil of bipartisanship” – this in response to a plan that, by any objective measure, by far does more on the spending side than the revenue side. If their starting point is no revenue increases at all, then the right has all but written the obituary on any attempt to narrow the budget gap.

So there you have: a failure of government, a failure of the governed. Until the American public begins to accept responsibility for the current fiscal straits – and it begins by asking serious questions about what they’d like to see from government and how much they’re willing to pay for it – there really is little hope that we’ll see movement on the issue. Meanwhile, the only institution that can give them that nudge, our political class, isn’t up to the task.

When asked about the worst-case scenario that would finally force policy-makers’ hand to do something, Brookings’ Henry Aaron had a one-word response: “Greece.” Americans may profess to hate European-style states, but the disconnect between their hatred of taxes and love of benefits may well hasten the day of a European-style collapse.

Deficit Commission and Defense Spending: A Scorecard

Posted on by The Progressive Policy Institute

Fully half – $100 billion – of Deficit Commission Chairmen Erskine Bowles’ and Alan Simpson’s reduction proposals target that infamous five-sided building on the Potomac. In a paper containing at least something for everyone to hate, you can almost hear the battle lines being drawn from parochial quarters: weapons makers, veterans groups, and personnel contractors will all howl as their respective cash cows linger in the cross hairs for uncomfortably long periods.

When parsing Bowles’ and Simpson’s suggestions, it’s worth bearing in mind the authors’ guiding principle: “America cannot be great if we go broke.” In essence, the proposal channels the White House’s own National Security Strategy, “Our economy… serves as the wellspring of American power.”

That’s the bad news: both the Deficit Commission and administration are right, and the country is in a bad spot.  Here’s the worse news, as told in the introduction of the Deficit Commission’s Report: The Problem Is Real; the Solution Is Painful; There’s No Easy Way Out; Everything Must Be On the Table, and Washington Must Lead.

The Bowles/Simpson proposals do deserve serious consideration. They also must be placed in context — first, they are “illustrative” cuts, ones that are on the table and illustrate how the Commission might save $100 million in defense over five years. These cuts are on top of Secretary of Defense Bob Gates plan, announced over the summer, to wring $100 billion out of the Pentagon’s $700+ billion budget over five years, by reducing contractors, saving on personnel costs, and riding herd on and/or canceling over-budget and delayed programs. While many of Gates’ plans coincide with Bowles/Simpson (contractors and V-22 Osprey, for example), reconciling what to do with the savings is sure to cause a fight.  More on that below…

It’s most useful to evaluate the Bowles/Simpson illustrative cuts against three core criteria:

  1. Does a proposal fundamentally weaken the country’s ability to defend itself?
  2. If not, does a proposal fundamentally weaken the country’s core non-military national interests?
  3. If not, does the savings benefit to the country outweigh the parochial interest of the proposed cut?

With that in mind, on balance, most of the Commission’s proposals on Defense spending are quite sensible.  For readability’s sake, I’ll lump several of the proposals into larger categories.

First, a starting point:

A simple way to enforce budgetary discipline at the Pentagon starts with one basic policy adjustment: end the practice of supplemental budgeting. DoD has three budgets, not one: a baseline appropriation, plus two “supplemental” appropriations that are supposed to pay for the war, but do oh-so-much-more. I’ve written about the problem for Forbes.com, and you can see an excerpt here:

Having three budgets is like having three strikes in a baseball at-bat — you have the luxury to swing and miss twice. Projects that don’t make the baseline DoD budget (strike one!) can be considered in either of the additional supplementals (strike two! strike three!) before they’re “out.” Ending the supplementals would be like giving the batter just one strike. By combining all defense spending into one (larger) appropriation each year, the batter has just one swing — miss the first time, that’s it. The practice would force Congress to make hard choices that prioritize the war-fighter.

If we have just one budget, it would be much easier to implement many practices recommended in the Bowles/Simpson plan, such as “reducing procurement by 15 percent” and “reduce ‘other procurement’”.  Procurement is bloated with multiple, supplemental budgets.  Having just one a year forces appropriators to make hard choices.

Savings over five years: $28.5 billion, per Commission estimates.

Next, the low hanging fruit amongst the “illustrative” cuts:

Salary freezes for civilians and military, doubling cuts to contracting personnel and replacing some with civilians. These check all categories without question. The commission could perhaps go even further by advocating a freeze in combat pay as well — Yes, our military has performed heroically in difficult circumstances, but we’re talking about not increasing warzone pay, we’re not talking about eliminating it.  Reducing contractors is a no-brainer.

Troop reductions in Europe and Asia. Europe is the easier sell: Twenty years after the Cold War and with staging needs for Iraq and Afghanistan winding down, the American military does not need as extensive a footprint on the European continent.  The Commission proposes reducing American forces in Korea by 17,000 troops, which leave 11,500 by my math. That’s hardly a comforting thought, with an unstable and nuclear-minded North Korean regime in the midst of a power transition.  We would continue to maintain 32,000 in Japan, and it perhaps makes more sense to split reductions between the two countries, even though removing troops from Japan has been a local political hot potato of late.

Modernize TriCare: Let’s be honest: this isn’t a move to “modernize” defense health care, it’s an effort to bring the military’s health system’s co-pays and deductables in line with cost-structures of private insurers.  Does it seem like we’re giving our servicemembers the shaft?  Yes.  But are military health care costs, “are eating the Defense Department alive,” according to Secretary Gates. It’s unfortunate, but servicemembers’ premiums must rise to correct this problem.

Reduce base support, facilities maintenance, retail activities, and DoD schooling: With the exception of closing unused DoD schools, there’s no question these cuts will hurt.  But is reducing the deficit more important?  In these times, yes.

Savings over five years: $45.1 billion, per Commission estimates.

Slightly tougher to swallow:

Weapons Cuts: Not all platforms are created equal: certain are needed for modernization, others for replacement, and yet others to fill niche capabilities.

The Joint Strike Fighter (JSF) takes a beating from Bowles/Simpson, something followers of the program probably suspected.  After all, when procurement of the F-22 was ended last year at 187 planes, DoD proclaimed itself ready to buy 2,443 F-35 JSFs instead.  At the time, 2,443 JSFs seemed a preposterously and unrealistically large number.  It still does, which is why a revised purchase plan, mixing in refurbishments of cheaper F-16s and F-18s while cancelling the USMC’s version of the JSF outright, falls within my comfort level.

We’ve already purchased 288 V-22 Osprey, which is two-thirds of the planned buy, and enough to meet the lion’s share of mission requirements.  Along those lines, the Expeditionary Fighting Vehicle’s (EFV) capabilities are ably substituted by other technologies under development, allowing for EFV’s cancellation.

The Joint Light Tactical Vehicle, Ground Combat Vehicle, and Joint Tactical Radio would be delayed, not canceled, under the Bowles/Simpson plan, which seems reasonable as the Army’s tactical vehicle fleet received an unexpected influx of cash to procure IED-hardened MRAP vehicles for Iraq.

Reduce R&D: This might seem unwise (“Why do we want to cut R&D while we’re dropping weapons? Shouldn’t we invest in developing weapons even if we don’t end up producing them?”), but it’s not as big a deal as it originally seems.  Fact is, by combining the defense budgets and reducing certain weapons buys, R&D organically decreases as a natural function of those actions.

Knowing how Congress works, it’s highly unlikely that these planned weapons buys will be fully endorsed.  But they will likely be negotiated reductions, in order to maintain capability while sending a strong signal that there’s a changing culture of fiscal discipline.

Savings over five years: up to, but probably less than $30.45 billion, per Commission estimates.

Up in the Air:

Secretary of DefenseBob Gates came out with his own plan to trim $100billion from the Pentagon’s budget, which he intended to reinvest in DoD modernization plans. He was coyly getting out in front of Bowles-Simpson, who want to take Gates’ savings and apply them not to modernization, but rather to deficit reduction.

The trick is convincing the Secretary to follow through with these plans, knowing that the Pentagon won’t get to keep all the planned savings. The good news is this fight probably won’t happen, as Gates will likely leave his post before final decisions are made. Savings reinvestments is just one of the reasons the new Secretary’s views on deficit reduction will have to align with Obama’s.

You Can’t Touch This:

The only illustrative cut in the Bowles-Simpson plan that I whole-heartedly disagree with is the notion of canceling the Navy’s Future Maritime Prepositioning Force. These plans are currently under study, and if executed correctly, could end up saving money while allowing the Navy to project force more efficiently in an era of restrained budgets. There’s still work to be done here, and at $2.7 billion in potential savings, isn’t exactly a budget buster.

Photo credit: pingnews.com

The Strange Logic of Samuelson’s High-Speed Rail Critique

Posted on by The Progressive Policy Institute

Give Washington Post columnist Robert J. Samuelson credit – he’s a strong believer in recycling. Last year, he loudly derided the “mirage” of high-speed rail as “the triumph of fantasy over fact.” Yesterday, he denounced the “absurdity” of fast trains as “a triumph of politically expedient fiction over logic and evidence.” OK, he’s gotten a bit wordier, but you can see that once his mind is made up, it’s fixed in stone.

The same kind of thinking comes from nearly all critics of high-speed rail who bunker at the Heritage Foundation, Cato Institute, and other right-leaning groups – they have a curiously static view of transportation. To them, investing in future high-speed rail is an extravagant and illogical expenditure of public money because the lack of prior investment in high-speed rail has done little to change our travel patterns.

By that logic, America should never have built a transcontinental railroad. Consider that only a handful of wagon trains made it to California in 1862. Had Samuelson been writing then, he probably would have criticized President Lincoln’s proposal to spend taxpayer money on a steam railroad to San Francisco as a plan that “would subsidize a tiny group of travelers and do little else” – to borrow a phrase from yesterday’s column.

What’s missing from Samuelson’s worldview is that major advances in transportation drive economic growth. They have throughout human history. The joining of the Union Pacific and Central Pacific railroads in 1869 ushered in what economic historian Walt Rostow called the “takeoff period” of American industry.

Likewise, President Dwight Eisenhower did not justify interstate highways on the basis of established transportation patterns. U.S. railroads – not roads – carried the bulk of interstate freight, military personnel, and civilians during World War II. Instead, he warned that our national security in the Cold War 1950s depended on our ability to establish fast new highways to transport supplies throughout the country.

So when Samuelson denounces high-speed rail by citing today’s Amtrak ridership levels, he’s forgetting that rail traffic is far below what it would be if our passenger trains were remotely up to world standards. When we begin opening 200-mph railroads, a new level of traffic will appear very rapidly. It’s been dormant, waiting for a chance to move.

It is impossible to predict how much dormant traffic is waiting for a truly modernized rail system. Economic models don’t tell us, and Samuelson fails to even pose the question amid his attacks on high-speed rail as government “pork barrel.”

What’s remarkable (though not surprising, if one reads Cato’s Randal O’Toole and other rail critics) is Samuelson’s utter blindness to the fact that highways and airports require massive government “pork” to build and maintain. They don’t pay for themselves through fuel or ticket taxes, as their backers like to assert.

A Texas Department of Transportation study found that a new section of highway in Houston would generate only 16 percent of its total lifecycle cost from gas taxes. Texas DOT estimated a gas tax of $2.22 per gallon – nearly six times the present state and federal tax of 38.4 cents – reflected the actual cost of building and maintaining the highway.

Constructing 800 miles of high-speed rail in California is liable to cost more than $40 billion. Constructing and operating all 13 corridors proposed by the Obama administration could easily approach $200 billion. But these dramatic headline figures need context. The current transportation act allots $300 billion to highways – not for new construction since the interstate system is completed, but just for maintenance and rebuilding.

Huge costs loom as America’s highways reach the end of their productive life. Replacing the Tappan Zee Bridge in New York State is estimated to cost $17 billion. That figure is guaranteed to rise.

If interstate thoroughfares and vital bridges paid their way, private investors would be clamoring to commit funds to refinance them. They aren’t.

All modes of transporting people require subsidies. Amtrak’s direct subsidies of about $1.5 billion a year are transparent and highly publicized. Subsidies for cars and airlines are hidden in trust fund appropriations, user tax breaks, and local and state programs paid for by all taxpayers, including those who rarely drive and never fly.

In portraying himself as a hard-nosed realist free of the “fashionable make-believe” of rail advocates, Samuelson would do well to explain how he’d fix congestion, advance mobility, lessen pollution, and reduce our dependence on foreign oil by jettisoning an infrastructure program that directly addresses these issues.

photo credit: arbyreed

Fiscal Reform From the Radical Center

Posted on by The Progressive Policy Institute

It’s crazy, I know, but imagine that U.S. political leaders after the midterm election called a truce in the partisan tong wars to work out a compromise solution to the nation’s fiscal dilemmas. The result would probably look a lot like a new fiscal reform blueprint drawn up by two canny policy veterans, Bill Galston and Maya MacGuineas.

In The Future Is Now: A Balanced Plan to Stabilize Public Debt and Promote Economic Growth, Galston and MacGuineas map a radically centrist course to fiscal discipline that demands equal sacrifice from the left and the right, and that doesn’t impede economic recovery. Here’s hoping that President Obama’s deficit commission, which is groping for a politically feasible formula for fiscal restraint, will give this plan a close look.

Reducing America’s swollen deficits and debts is fast becoming an urgent national priority. Since President Obama took office, we’ve added three trillion dollars to the public debt, largely thanks to emergency spending to rescue the banking system and goose a faltering economy. But it’s the zooming growth of health care and retirement spending that really threatens to drown the federal government in debt. For decades, we’ve ignored warnings about the growing funding gaps in Medicare, Medicaid, and Social Security, but with the first wave of baby boomers now reaching retirement age, the future really is now.

We’ve dug ourselves more than a hole – it’s a canyon. So any talk now about balancing the federal budget is pure fantasy.  The best we can hope for is to arrest the runaway growth of public debt and bring it back down to a sustainable level.

The administration’s forecasts show public debt, 40 percent of GDP two years ago, rising to more than 100 percent in 2012. The Galston-MacGuineas plan would bring that down to 60 percent of economic output by the end of this decade. It also would slash annual budget deficits from a projected five-to-six percent to around one percent, ensuring that our debts don’t grow faster than the economy.

Inevitably, the plan envisions a 50-50 split between spending reductions and tax hikes. It’s hard to image any other way forward considering liberal resistance to spending cuts, especially for the big entitlements that are driving our long-term debt problem, and the conservative allergy to tax increases of any kind. The hacking and lifting, however, would be phased in gradually to give the economy room to breathe and recover.

More specifically, the plan would:

  • Make sizeable cuts in defense spending, and impose a war surtax should our current conflicts extend beyond mid-decade.
  • Freeze discretionary spending for three years, such that increases in spending in one area would have to be made up by cuts elsewhere.
  • Modernize Social Security by indexing the retirement age to longevity, and trimming benefits for affluent retirees in the future. It would also raise the minimum benefit, strengthening the program’s anti-poverty effect, cut the payroll tax and add a new, mandatory savings account.
  • Supplement the cost-containment features of President Obama’s comprehensive health plan, by raising Medicare premiums, reducing subsidies and adding tort reform.
  • Prune tax expenditures (which cost more than one trillion dollars a year) by 10 percent and limit their future growth. The proceeds would go to lower tax rates and deficit reduction.
  • Enact a carbon tax, both to “buy down” the payroll tax and cut deficits.

Many of these proposals, of course, are deemed politically radioactive now, even if they are familiar fixtures on the wish lists of serious fiscal hawks. So why should we expect a package stuffed with political non-starters to advance?

Because the habit of evading even modestly tough choices has allowed the debt problem to reach such ginormous proportions that it can’t be solved in any other way, say Galston and MacGuineas. And if it isn’t solved, it will slow down U.S. economic growth, transfer our wealth to overseas creditors, and limit the federal budget’s fiscal capacity to respond to future emergencies.

The big question is: what impact will the midterm election have on the politics of fiscal evasion? Republicans say cutting taxes is the way to shrink government, but showed little stomach for cutting spending when they were in office. Result: huge public debts. Some Democrats believe deficits should be closed mostly by tax hikes, but aren’t really willing to propose them. Result: huge public debts.

As the Galston-MacGuineas plan shows, solving our fiscal problems doesn’t have to be a political zero sum game. The question is whether our political leaders can rediscover the lost arts of compromise and risk-sharing to advance vital national goals.

Photo credit: Steve Rhodes

The President’s New Gamble

Posted on by The Progressive Policy Institute

President Obama’s call yesterday for $50 billion in new transportation spending is politically risky, given public worries about government spending and debt. But if linked to a strategic and sustained strategy for modernizing the nation’s infrastructure, it could signal the start of America’s economic comeback.

Even more important than the money, however, is an Obama initiative that didn’t get as much media play: a proposed National Infrastructure Bank. It is the key not only to leveraging business capital – U.S. companies are sitting on $2 trillion in potential “private stimulus” money – but also to making sure we invest that money wisely.

The president said he would ask the lame-duck Congress next month to approve the $50 billion measure, which would front-load money that otherwise would be spread over the life of a six-year surface transportation bill.  He left little doubt his immediate goal is to goose the pace of the agonizingly slow economic recovery.

“Nearly one in five construction workers is still unemployed and needs a job. And that makes absolutely no sense when so much of America needs rebuilding,” Obama told reporters at the White House on Memorial Day. Attempting to preempt Republican objections that infrastructure spending is simply stimulus is drag, Obama noted that “Investing in infrastructure is something members of both parties have always supported.”

Maybe so, but it’s worth noting that the word “infrastructure” appears nowhere in the GOP’s 48-page Pledge to America.  What’s more, Republicans are likely to over-interpret likely midterm gains as vindication of their attacks on Obama as a big spender, so good luck getting them to vote for infrastructure in the lame duck.

That’s a shame, because spending on infrastructure is both stimulus and investment.  It could get more Americans working now, but it is also essential to building our country’s long-term capacity to compete in fast growing global markets for high speed rail, civilian nuclear energy, clean cars, intelligent transport systems and renewable fuels.

The federal government, of course, is constrained by enormous deficits and a growing national debt. That’s why we need a National Infrastructure Bank, which would structure public-private deals to fund big capital projects that can generate real economic returns. As noted by an economic analysis the White House released yesterday:

“There is currently very little direct private investment in our nation’s highway and transit systems due to the current method of funding infrastructure, which lacks effective mechanism to attract and repay direct private investment in specific infrastructure projects. … A National Infrastructure Bank would also perform a rigorous analysis that would result in support for projects that yield the greatest returns to society and are most likely to deliver long-run economic benefits that justify the up-front investments.”

An infrastructure bank, along with new public seed capital and a third element of the Obama infrastructure initiative – merging the many stovepiped “modal” transportation funding streams so public dollars can be used strategically – begin at last to push the economic debate in a constructive direction.  The two great challenges America faces now are reviving our economic dynamism and shrinking a massive overhang of public debt. To meet them, the Obama administration needs to fashion an ambitious, “cut and invest” strategy aimed at slowing health care and entitlement spending generally, and using public dollars to leverage massive private investment in productivity-enhancing infrastructure.

That’s why President Obama should press ahead with his infrastructure plan, despite the political fallout from the midterm election. If Republicans want to frame the economic debate as a choice between more tax cuts and rebuilding the common foundations of American prosperity, so much the better. That’s one progressives can win.

Photo credit: Center for Neighborhood Technology

To Oppose or to Propose?

Posted on by The Progressive Policy Institute

France, 15 of September, 2010. The Pension Reform passes in the National Assembly after months of struggle. The obstruction instigated by the left parties leads to one of these cinema-like scenes when the right-oriented President of the Lower House (Bernard Accoyer) decides to suspend the debates, prompting call for his resignation by the Socialists – when not accusing the current government of fascism and a putsch.

The issue of reforming the pension system is in itself a subject of concern for all aging western democracies. France has an almost completely repartition-based system where working citizens contribute a percentage of their wages to the retirement pensions of the previous worker-generation. No need to explain that with the population pyramid, every developed country is facing nowadays, fewer young workers will have to pay for a “papy-boom” generation that is living longer and longer.

But what is also at issue here is the behavior of the opposition party, this vital nerve of every democracy, which faces the “to oppose or to propose” dilemma: How to make needed concessions without having them considered as surrender of principles?

After years of failed attempt at reforms, the French government has proposed extending the retirement contribution years and postponing the retirement age from 60 to 62  by 2018. Even if the Socialists officially accept lengthening the retirement contribution years, they fight against the loss of the symbolic legal age at which you can chose to quit work. The extreme left wing, for its part, is simply denying the reality of the age pyramid: They definitely want to “freeze the counters” up to 40 years of contribution, arguing that people deserve to experience healthy retirement years and that their departure would leave more work to the next generation.

The Socialist opposition clearly decided to apply the “opposing for opposing” strategy, which not only works against their interest, but also prevents any possibility of constructive democratic debates leading to a meaningful compromise.

Such an attitude makes the opposition seem unconstructive and static. At best, it only strengthens the extremes which seem to give voters a clearer choice – even if often extravagant. In the long haul, it weakens democracy not to have opposition parties willing and able to be serious partners in debate and deliberation.

Moreover, crying wolf at every proposition from the party in power turns the opposition into background noise citizens no longer bother to pay attention to. Consequently, it gives the governing party a freer hand in proposing and implementing policies — an opportunity the current French Government did not miss when passing bills against minorities without facing any reaction worthy of being called opposition.

Ultimately, it is up to the voters to reject opposition merely for the sake of opposition, and the extremism it builds. This is not always easy. Strong opposition can provide the appeal of moral clarity and righteous indignation. But it leads nowhere productive. Hard choices are ahead, but they only get harder when opposition parties take on a reflexive opposition stance and make compromise impossible.

Photo credit: marcovdz

A Smart Way to Finance High-Speed Rail: Restructuring the Highway Trust Fund into a results-driven transportation fund

Posted on by The Progressive Policy Institute

Since announcing an $8 billion “down payment” for high-speed rail development, the Obama administration has been silent about how to pay for a program as ambitious as the Interstate Highway System.

The interstates cost more than $250 billion in current dollars to build. A fast train network, based on systems being developed worldwide, most noticeably in China, could be equally expensive.

So far, Congress has come up with $2.5 billion in general fund appropriations for high-speed rail (HSR) in 2010, and the administration has asked for $1 billion a year for the 2011-14 budgets. Such allocations are hardly enough to begin detailed engineering for California’s HSR proposal between Los Angeles and San Francisco, let alone the nine other intercity corridors that the White House has envisioned.

On Labor Day, President Obama proposed a $50billion transportation infrastructure program that would include 4,000 miles of rehabbed and new railway track. The proposal calls for integrating HSR projects into the next surface transportation bill, a promising step that would ensure some level of federal commitment to the program over the five- or six-year life of the bill. But again, the president did not specify how he would finance HSR or the larger infrastructure program other than to say that his administration “is committed to working with Congress to fully pay for the plan.”

The president’s reticence raises a legitimate question: Can the nation afford HSR in a time of looming federal deficits?

The answer is yes – financing HSR is entirely feasible, but will only happen if the administration and its congressional allies take bold steps to rebalance our transportation priorities. Fortunately, there is both a funding source and a road map for moving from today’s scattershot federal transportation spending to a results-driven enterprise.

The funding source is the Highway Trust Fund, with approximate funds of $52 billion a year. Allocating a portion of highway funds for rail construction is an equitable way to wean drivers away from auto travel by providing them with a faster, safer, and more environmentally sound alternative.
Congress could easily allot $5 billion a year for HSR construction – without an increase in the gas tax – by cutting out earmarks and formula-based grants that now soak up billions of dollars, according to the General Accountability Office (GAO). Such fund reallocations could not only jumpstart HSR projects but serve as seed money for public-private partnerships to get the work done.

Already, international rail operators have expressed interest in competing for high-speed train contracts in the U.S. But these groups are waiting for the Obama administration to lay out a comprehensive financing plan before structuring bids. The use of a well-established and reliable source of transportation financing could make these deals happen.

Download the entire memo.

The Conservative Politics of Common Purpose

Posted on by The Progressive Policy Institute

The primary defeat of incumbent Alaska Sen. Lisa Murkowski (confirmed by her concession yesterday) by former judge Joe Miller is generally being interpreted as another scalp for the Tea Party Movement in its assault on Republicans deemed too moderate on this or that key issue. But there’s something going on a bit deeper, if you consider Alaska’s exceptional dependence on the federal government and the past political track record of politicians like Murkowski’s mentor, the late Ted Stevens, who aligned themselves with the anti-government GOP but emphasized their ability to “bring home the bacon” via appropriations.

In endorsing Miller on behalf of his Senate Conservatives Fund, Jim DeMint emphasized this dimension of Murkowski’s defeat:

Joe Miller’s victory should be a wake-up call to politicians who go to Washington to bring home the bacon. Voters are saying ‘We’re not willing to bankrupt the country to benefit ourselves.’

Now it wouldn’t be quite right to accept DeMint’s characterization of either Alaska voters’ motivations or Miller’s ideology at face value. After all, when Miller calls for abolishing the federal Department of Energy, he’s appealing to the rather selfish desire of Alaskans to control their “own” energy resources–whose value is a lot higher than any federal earmark– regardless of what it means nationally.

But it’s true that there’s an element of collective self-denial among those conservatives who are genuinely willing to take on federal spending categories that are popular among their constituents. Miller is just the latest of a number of Republican Senate candidates this year who have called for phasing out Social Security and Medicare. DeMint himself has long described these programs, along with public education, as having seduced middle-class Americans into socialist ways of thinking.

As Republican pols from Barry Goldwater to George W. Bush can tell you, going after Social Security and Medicare is really bad politics. And they’ve yet to come up with a gimmick, whether it’s “partial privatization” or grandfathering existing beneficiaries, to make major changes in these programs popular (I seriously doubt the very latest gimmick, “voucherizing” Medicare, will do any better once people understand the idea). Indeed, Republicans notably engaged in their own form of “Medagoguery” by attacking health care reform as a threat to Medicare benefits.

Yet the sudden Tea Party-driven return to fiscal hawkery among Republicans, particularly if it’s not accompanied by any willingness to consider tax increases or significant defense spending cuts, will drive the GOP again and again to “entitlement reform.” In Senate candidates like Rand Paul and Sharron Angle and now Joe Miller, we are seeing the return of a paleoconservative perspective in the GOP that embraces the destruction of the New Deal/Great Society era’s most important accomplishments not just as a matter of fiscal necessity but as a moral imperative.

You can respect this point of view even if you abhor its practical implications. But there’s little doubt it represents political folly of potentially massive dimensions. Certainly Democrats owe it to these brave conservatives to take them seriously in their desire to free middle-class seniors from the slavery of Social Security and Medicare, and draw as much attention to it as possible.

Photo credit: Steve Rhodes’ photostream

This item is cross-posted at The Democratic Strategist


Robert Gates, Progressive Conservative

Posted on by The Progressive Policy Institute

Secretary of Defense Robert GatesDefense Secretary Robert Gates makes an unlikely progressive hero. A holdover from the Bush administration, Gates is an ex-spy and button-down conservative who keeps a portrait of President Eisenhower behind his desk. Yet he’s also warned against the “militarization” of U.S. foreign policy, forced the armed services to adapt to untraditional modes of warfare, and axed major weapons programs.

Republicans like to posture as the scourge of big government, but they’ve long been AWOL in the battle to discipline the biggest, most bloated bureaucracy of them all: the Pentagon. Not so with Gates, who has taken Ike’s farewell warning about “the military-industrial complex” to heart.

Even as he’s presided over America’s wars, Gates has sought to restrain military spending. He has canceled dozens of non-essential programs, saving taxpayers over $300 billion, and has ordered his department to find another $100 billion in administrative savings over the next five years. Going where others have feared to tread, Gates has targeted soaring military health-care cuts. And he’s promised to thin the ranks of top military commanders, whose numbers have mushroomed all out of proportion to recent increases in troop strength.

All this has drawn predictable fire from conservative hawks, for whom any cut in defense spending apparently signals an ominous weakening of national will. However, they’ve found it hard to make the usual “soft on defense” charge stick to George W. Bush’s tough-minded former Pentagon chief.

Some liberals, apprehensive over the possibility of deep cuts in domestic and entitlement programs once unemployment rates fall, want Gates to go a lot further. But until the United States is in a position to withdraw most of its troops from the Middle East and Central Asia, that’s not likely to happen. As PPI’s Jim Arkedis has documented, the truly big driver of Pentagon costs is manpower. To get the kind of military spending reductions many doves would like to see would require major changes in U.S. foreign policy – not just nips and tucks in this weapons system or that, or administrative reforms. That’s hard to do in the middle of two wars and a global counterinsurgency campaign against Salafist extremists.

But as Gates recognizes, defense will have to make a substantial contribution to America’s coming fiscal retrenchment. He’s offering credible reforms that will promote efficiency and reduce needless redundancy and waste, and, frankly, provide the administration with political cover against the GOP’s ritual claims that Democrats want to eviscerate the nation’s defenses.

All that may not win Gates many cheers at the next netroots convention. But this is a clear instance in which Obama’s “post-partisan” penchant for reaching across political divides has served him, and the nation, well.