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Priorities and Katrina:

Andrew Samwick, late of President Bush's Council of Economic Advisors, asks the right questions about President Bush's speech last night:

Where to begin?

I'll start by noting for the benefit of the folks working on the President's speeches that the sentence, "It's going to cost whatever it costs," gives the audience no confidence in the next statement, "We're going to be wise about the money we spend."

I was a fan of cutting other government spending before Katrina, and I am a fan of it now. I hope that the President is right that "we can handle it." The President will have to sort that out with the Republican leadership on the Hill, who seem to believe (quite counterfactually) that there is no more fat to trim. Leave that aside for the moment, and let's ask the following question:

If we can handle it now, why weren't we handling it before?

He adds:

If we have decided that rebuilding New Orleans to the tune of $200 billion is a national objective (and I haven't seen nearly enough debate on that subject in the Capitol), then we ought to fund it by reducing our consumption of everything else. The simplest way to do that would be to impose an income tax surcharge that funds the rebuilding over a given period.

***

Taxes may be bad, but deficits are surely worse. What's the explanation for why future generations should have to pay for this one, too?

One can raise legitimate questions in principle about whether this is the type of activity for which it is appropriate to engage in deficit spending. I think a case can be made that this may be, because of the "lumpiness" and unexpected nature of the liability, that may be appropriate to smooth over a period of time (like fighting a war or investing in capital projects).

But a larger point implied here seems like a sound one to me--one problem with running chronic deficits during ordinary times or on ordinary pork-barrel spending is that it makes it more difficult to justify additional deficits in times where deficit spending is appropriate (arguably such as fighting a war or rebuilding one of the nation's most important cities and ports). To paraphrase Spinal Tap, if you are already on "10" for deficit spending what do you do when you need that extra "push over the cliff"?

In related news, it is reported that Senator Coburn has already proposed paying for at least some of it through cuts from the highway bill:

Mr. Coburn said it was a "ludicrous claim" House Majority Leader Tom DeLay made earlier this week that he hasn't seen ways to offset the spending with cuts elsewhere.

In his weekly briefing, Mr. DeLay said it was appropriate to borrow money to pay for hurricane relief, and that the billions of dollars in transportation earmarks should be maintained.

"My answer to those that want to offset the spending is sure, bring me the offsets, I will be glad to do it, but no one has been able to come up with any yet," he said.

Mr. Coburn said he would "be happy to have that debate with Mr. DeLay."

He said he has identified $74 billion in cutting room and that one place to start is the $315 million the highway bill spent for a bridge in Alaska that will reach a community of several dozen people, "who have a wonderful ferry system right now."

byrd (mail):
Someone here can probably phrase this better, but you'll get the idea:

Another problem with the theory of using deficit spending to pay for Katrina recovery is that we're already running a deficit much larger than the rebuilding price tag. Therefore, if we make cuts in spending that match the rebuilding, we're still deficit spending more than the recovery costs. So what, exactly, is the connection between this new spending and the cuts? We're deficit spending either way.

Fungibility of money and all that.
9.16.2005 7:14pm
Steve:
All those years ago when we were spending billions for the war in Iraq, all we saw was tax cuts and more tax cuts. But now that our national goal has shifted to rebuilding people's homes, a laudable goal but one that fails to directly benefit most of us, all of a sudden people have started to look serious and question whether we can really afford all this. It's interesting to see how this thought process works.
9.16.2005 7:52pm
DK:
Another issue with deficit financing for Katrina is that the feds owe mostly short-term debt (<1 year); we don't even sell 30 year bonds anymore. Rebuilding a city is a long-term project that (if the benefits exceed the costs) would pay off only a very long horizon. Rebuilding it with our existing government debt is similar to buying a house with credit cards instead of a 30-year mortgage.

Running this kind of short-term debt makes the US more vulnerable to any collapse in the dollar or increase in interest rates -- for truly long term projects we should be using long term debt.
9.16.2005 7:56pm
TomFromMD (mail):
If we were in the black, and the President suggested that this was worth a bit of red ink for a short while, I'd agree. But we already have nothing but red ink as far as the eye can see, and we're probably half way through the current business cycle already. At what point do we realize that we can't keep cutting taxes?

Here's a start: stop all tax cuts that are being phased in.

Congress is making me ill. Didn't the Republicans try to pass a balanced budget ammendment just 10 years ago? What the hell happened? I can see a bit of deficit spending in a recession, but this is sick.
9.16.2005 9:14pm
Andy Freeman (mail):
Have tax receipts actually gone down or are folks asserting that the previous tax rates would have collected more money? (Surprisingly, people do respond to tax law changes in ways that affect tax receipts.)

I'm still waiting for a Dem who claims to be concerned about the deficit to advocate specific spending cuts (outside the military) instead of arguing that their boondoggle deserves more money. If deficits really are a problem, surely there's some spending that we could do without, right?

No, you don't get points for going after pork in a Repub district unless you're also going after pork in Dem districts. (Some of the monuments to "sheets" Byrd would be a nice start.)
9.16.2005 9:59pm
Owen Hutchins (mail):


I'm still waiting for a Dem who claims to be concerned about the deficit to advocate specific spending cuts (outside the military) instead of arguing that their boondoggle deserves more money. If deficits really are a problem, surely there's some spending that we could do without, right?

Why should we advocate one position we do not support simply to make another position that we don't support work?
9.16.2005 10:57pm
TomFromMD (mail):
"Have tax receipts actually gone down or are folks asserting that the previous tax rates would have collected more money?"

The two aren't necessarially exclusive.
9.16.2005 11:07pm
Andy Freeman (mail):
> Why should we advocate one position we do not support simply to make another position that we don't support work?

In other words, you don't care about the deficit - you just want to raise tax rates.
9.16.2005 11:50pm
Andy Freeman (mail):
> The two aren't necessarially exclusive.

Didn't suggest that they were, but let's be clear - are you admitting that the federal govt is taking in more dollars than it was? (That admission doesn't stop you from arguing that increasing tax rates would increase tax receipts even more.) If so, the increase in the taxable economy had a greater effect than the decrease in tax rates.

Perhaps I misunderstood. Maybe you want increased tax rates even if that results in less taxes collected.
9.16.2005 11:55pm
John Jenkins (mail):
We do actually sell 30-year bonds again.

I don't know why we even bother to have this argument every time some big appropriation bill comes around (highway bill anyone?). They won't cut spending; they don't care about having a deficit. We can have a big knock-down drag out about cutting spending and taxes (conservative/libertarian) versus increasing taxes and spending (liberal/statist) or increasing taxes and cutting spending or even what is most likely to happen cutting taxes and increasing spending. All of it doesn't matter. It WILL NOT CHANGE. People just do not care.

[for the record, I think cutting taxes and spending makes the most sense, but I recognize it will never, ever happen.]
9.17.2005 12:29am
Owen Hutchins (mail):

> Why should we advocate one position we do not support simply to make another position that we don't support work?

In other words, you don't care about the deficit - you just want to raise tax rates.

We were told decreasing tax rates would increase revenues, yet that hasn't happened, and we are awash in red ink. You just want to be able to blame the failure of Republican policies on us. We aren't the ones cutting taxes and increasing spending at a phenominal rate.

And yes, the tax rates need to go back up, particularly those cuts that benefit the wealthiest, to pay the debt Republican policies have created. Or do you prefer to simply pass that along to the future?
9.17.2005 6:34am
syn4me (mail):
I'm all for cutting all the Federally funded fat pork like NPR, NEA, and highway pork.

Why is it so hard to grasp the concept that raising taxes leads to unemployment, poverty and more government spending(republican, democrat, independent and progressive Stalinist like Durbin) on worthless entitlement pork.
9.17.2005 8:55am
mh (mail):
Owen -

Tax receipts have, in fact, increased.

From CBO: "Receipts were almost 14 percent higher through the first 11 months of fiscal year 2005 than they were during the same period a year ago. Individual income tax receipts rose by $110 billion, or 15.3 percent, and receipts from social insurance taxes increased by $54 billion, or 8.1 percent. Receipts from corporate income taxes grew by $61 billion, or 42 percent."

... "The growth of those receipts also reflects tax-law changes enacted in 2002 and 2003."

http://www.cbo.gov/showdoc.cfm?index=6632&sequence=0

But what did Edward Bennett Williams say about the coach of his Redskins team? "I gave George Allen an unlimited budget, and he exceeded it."

There is no budget, regardless how big, that can't be overspent.
9.17.2005 10:22am
Anon7 (mail):
Republicans keep repeating the false mantra that the Bush tax cuts of 2001, 2002, and 2003 have caused federal tax revenues to increase. I notice that one poster misleadingly compared 2005 to 2004, misleading because 2004 was the pits for tax receipts.

Says the CBO at the tail end of 2003:

"Tax revenues have now fallen for three successive years, a phenomenon not experienced since the Great Depression. Since they peaked in 2000, taxes have fallen by $242 billion, or 12 percent."
9.17.2005 11:56am
Andy Freeman (mail):
> We aren't the ones cutting taxes and increasing spending at a phenominal rate.

However, given your proposals, it's unreasonable to suggest that you'd increase spending less.

Like I said, let's see your CUT SPENDING proposals, not just "they're spending lots of money". If your pork proposals don't include states with Dem senators, you're not serious.
9.17.2005 12:20pm
Andy Freeman (mail):
If you're going to argue that the other side is selecting data, it's poor form to not provide more complete data, say tax receipts for 96 on.
9.17.2005 12:22pm
Daren (mail):
Andy,

You are creating a real strawman for pork proposals. If you believe that a Republican majority in both House and Senate will allow only Republican earmarks to be cut you are fooling yourself. I would be more than willing to cut all of the pork, but you can't deal with the reality of a Republican controlled legislature that by common sense would make sure that they benifit more than Democrats in terms of earmarks. This isn't to defend Democrats who if the shoe was on the other foot would be profiting from their control, but the fact is that the Republicans control the legislature and have power CURRENTLY over the process.

As to spending cuts, we have seen some cutting of federal programs but most of that has only come from programs that affect the people hurt the most by Katrina. You have seen massive increases in the amount of corporate welfare and farm subsidiaries that benifit Republican interests. I personally think that those would be two places to start, and from reading a few lists by conservative authors, they even admit that corporate welfare has gotten exceedingly out of control.
9.17.2005 1:34pm
Niner:
What a shame that the only advocates for limited spending happen to be absolute lunatics.

(See Coburn's "death for abortionists" comment.)
9.17.2005 5:43pm
Penta:
Even lunatics have their occasional moments of brilliant clarity.
9.18.2005 1:14am
Andy Freeman (mail):
> You are creating a real strawman for pork proposals. If you believe that a Republican majority in both House and Senate will allow only Republican earmarks to be cut you are fooling yourself.

You're inventing strawmen. I never said that Repubs would only allow Repub earmarks to be cut.

You're claiming that Dems are more serious than Repubs about fiscal issues. I'm testing that claim by asking how they're different and in which direction.

For example, if we assume (as you do) that Repubs are going to protect Repub pork, one way for Dems to be different and better is to be willing to cut both Dem and Repub pork. Your resistance argues that Dems are no different, which means that they're not better.

Farm subsidies? Feel free to point to a Dem senator from a farm state who is against those that benefit agri biz in his state. Feel free to point to a Dem senate candidate in a farm state who campaigns that way. Until you do, Dems are just like Repubs on this issue. Again, unless they're different, they can't be better.
9.18.2005 3:56pm
YetAnotherRick (mail):
If my money is going to be spent to rebuild NO, I want that investment protected. That means the ability to withstand a category 5 hurricane. It may only take a few billion to do that, but it also means multi-year studies need to be undertaken even before actual protection is built. Restoration of wetlands is decades away, and is just one pieceof with the ongoing fight between Mother Nature, the Army Corps of Engineers, and a multitude of economic and environmental concerns. I don't think anyone from either party and any level of government has the courage to challenge the current enthusiasm for a new NO.
9.18.2005 11:44pm
eddie (mail):
No one seems to say how anything will be paid for. All of this theoretical gobbledygook is pure non-sense.

Raising taxes will only encourage more spending.

So the proposition being expound here is: more spending will stop more spending. And less taxes will create more revenue.
And we're concerned about the rational bases for judicial decisions?
9.19.2005 6:52pm