Economy

Are Romney And Obama Competing For The Austerity Prize?

Brian Beutler | May 25, 2012, 6:41AM

The American economy will sink back into recession if Congress fails to unwind a messy coil of austere fiscal policies that will trigger automatically at the beginning of the year.

Across the spectrum, experts are imploring political leaders not to be myopic and unyielding: delay the budget cuts until the economic recovery really takes hold, but be ready with a more considered course of deficit reduction when that moment arrives.

Yet Barack Obama and Mitt Romney, and their surrogates on Capitol Hill, are locked in a fight over which candidate and which party will more quickly and effectively reduce the deficit -- the opposite of what economists say we need.

The Obama administration and campaign trumpet data and articles showing that Obama's supposed spending binge is a right-wing fabrication. Paul Ryan -- the GOP's official spokesman on fiscal issues -- boasted that a Republican victory in November will give his party a mandate to turn his controversial spending-slashing budget into law.

"If we make the case effectively and win this November, then we will have the moral authority to enact the kind of fundamental reforms America has not seen since Ronald Reagan's first year," Ryan said.

At the same time, the parties are at pains to paint their rivals as the true merchants of austerity.

"Ryan also argued with a straight face on [Meet The Press] that the Ryan-Romney plan would avert the very European-style austerity on which it's modeled!" Obama strategist David Axelrod tweeted recently.

Resolving the tension between these two seemingly incompatible arguments -- more fiscally responsible, less austere -- turns out to be more difficult than adding up numbers on a ledger. But it provides an instructive look at what the candidates and parties stand for this election cycle.

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Topics: Barack Obama, Bush Tax Cuts, Center for American Progress, Douglas Holtz Eakin, Economy, Mitt Romney, Paul Ryan, Spending, Stimulus, Tax Cuts

Newt Gingrich

Former Directors Blast Gingrich's Plan To Eliminate Congressional Budget Office

Brian Beutler | November 9, 2011, 6:00AM

Newt Gingrich wants to swing into Washington like a wrecking ball and demolish the key barriers between the GOP and the end of universal health care. But his primary target isn't Obamacare itself. Rather it's a non-partisan agency most people outside the beltway have never heard of -- but that the D.C. establishment would arise and take arms to protect.

"If you are serious about real health reform, you must abolish the Congressional Budget Office because it lies," Gingrich said at a Saturday debate with embattled pizza entrepreneur Herman Cain. "Every hospital will tell you that if you get the family and patient involved, it is better and less expensive. The Congressional Budget Office refuses to see this as a savings. It wants more bureaucracy and less patient involvement."

In a technical sense, Gingrich is correct. The Congressional Budget Office will make it hard for Republicans to completely repeal Obamacare, even if they unify control of government in 2013. CBO is the agency that evaluates for lawmakers the impact their legislation is expected to have on the federal budget. And unfortunately for Republicans, the health care law was devised to score as a deficit reducer, particularly after its first 10 years of existence. By direct corollary, the CBO says repealing the whole thing would increase projected deficits. For political and (more importantly) procedural reasons, that would make a complete repeal almost impossible.

Some Republicans want to change the rules that make CBO's words so powerful. Gingrich, by contrast, wants to get rid of CBO altogether. In response, former CBO heads are leaping to its defense -- including a key conservative economist, influential among Republicans.

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Topics: Alice Rivlin, Barack Obama, Bill Clinton, CBO, Congressional Budget Office, Douglas Holtz Eakin, Health Care, Newt Gingrich, Obamacare

Stimulus

Republicans Falsely Claim Obama Advisers Burying Data 'Proving' Stimulus Is Hurting Economy

Brian Beutler | July 5, 2011, 2:51PM

Republicans are citing data from President Obama's Counsel of Economic Advisers to argue that the stimulus has cost the economy nearly 300,000 jobs in the past few months.

The claim originated Sunday at the conservative Weekly Standard and has quickly mushroomed into a talking point: It's been cited already by both Douglas Holtz-Eakin -- an influential Republican economist -- and House Speaker John Boehner. And it supposedly explains why the White House unveiled the report on the Friday before a holiday weekend.

There's just one problem: it's false.

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Topics: Barack Obama, Douglas Holtz Eakin, Economy, John Boehner, Mark Zandi, Moody's, Stimulus, White House

Debt

Republicans Find A Tax Cut They Don't Like -- One That Helps Obama

Brian Beutler | June 29, 2011, 5:50AM

Let's assume Democrats and Republicans team up in the next few weeks to pass a very GOP friendly debt reduction bill. And let's stipulate, too, that, as in Britain and elsewhere, the spending-cut magic doesn't do anything to help the unemployment crisis, leaving President Obama and the Democrats a huge political liability -- and national problem -- they won't be able to resolve by election time in November.

[TPM SLIDESHOW: Battle Over The Budget: Behind The Scenes At The White House]

This is why they're trying to squeeze something -- anything -- into the debt ceiling package that will provide near-term stimulus, to improve the jobs situation or at least counteract the austerity measures. Unfortunately, Republicans have foreclosed on the highest-impact ideas economists have recommended -- aid to states, infrastructure investment, and other direct spending projects.

So they've settled on a fourth- or fifth-best option: a plan to provide employees deeper, temporary relief from the payroll tax, and extend that relief to employers as well. It's not the most stimulative thing in the world -- but it is a tax cut for business owners, so at the very least it should have some buy-in on the right, no?

You might think so, but you'd be wrong.

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Topics: Debt, Debt Ceiling, Default, Douglas Holtz Eakin, Jon Kyl, Mark Zandi, Moody's, Spending

Tim Pawlenty

GOP Economists Slam Tim Pawlenty's Economic Plan: 'Impossible'

Benjy Sarlin | June 8, 2011, 10:58AM

After positioning himself as the candidate of tough choices, Tim Pawlenty drew widespread ridicule from experts across the political spectrum on Wednesday for his wildly optimistic economic plan.

Pawlenty unveiled his platform at a speech in Chicago, a combination of tax reforms and budget cuts that he said would yield an explosive economic recovery. The centerpiece of his proposal was setting a goal of 5% economic growth per year for a decade.

"Growing at 5% a year, rather than the current level of 1.8%, would net us millions of new jobs," he said. "Trillions of dollars in new wealth. Put us on a path to saving our entitlement programs. And balance the federal budget."

But a group of former CBO directors, who are chosen by Congress to analyze the budget from a nonpartisan perspective, are lambasting the number, saying it's completely out of line with any mainstream assessment of the American economy.

"The trend growth rate is not going to be 5% in the United States," Douglas Holtz-Eakin, director of the CBO under President Bush and a top GOP advisor, told TPM. "The market just doesn't support that. It just doesn't."

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Topics: 2012, Douglas Holtz Eakin, Medicare, Paul Ryan, Robert Reischauer, Rudolph Penner, Tim Pawlenty

Debt Ceiling

Top Republican Economist: Default Would Be An Economic Disaster

Benjy Sarlin | June 7, 2011, 4:08PM

Contradicting GOP lawmakers who have suggested a US default would not lead to economic disaster, a bipartisan group of budget officials warned on Tuesday that even a brief lapse in payments could trigger a crisis. Among them were Douglas Holtz-Eakin, former CBO director under President Bush and a frequently cited Republican economic advisor.

"It's a bad idea," Holtz-Eakin said at a panel discussion of former CBO heads in Washington. "Little defaults, big defaults; default's a bad idea period and there should be no one who believes otherwise."

Holtz-Eakin has supported the GOP's efforts to secure cuts in exchange for raising he debt ceiling, but made clear that at the end of the day it had to be raised. He cited numerous dangers from a default scenario, such as its effect on the bond market.

"The idea that somehow it's a pro-growth strategy to raise interest rates on a permanent basis in the United States is just crazy," he said. "We need to grow at this point more than anything else."

He added that the market would not be easily reassured even after a brief default, likening it to wrecking one's house and then asking for a second mortgage on the property.

CBO directors are chosen by Congress and tasked with providing a nonpartisan assessment of the budget.

Rudy Penner, CBO director under President Reagan, also slammed the suggestion that default was anything but dangerous.

"The dumbest thing to do would be to default even for one day right at this point," he said. "I don't see much good coming out of these notions that somehow if we got a big budget deal it would be OK not to pay interest for a few weeks or few days."

Penner added: "It's playing with matches around gasoline as far as I'm concerned and would be an incredibly stupid thing to do."

Robert Reischauer, CBO director under Presidents Bush Sr. and Clinton, said while he could envision a scenario in which a sudden plunge in the stock market shocked both parties into compromising on a deal, it was too unstable and dangerous an approach to trifle with.

"Do I advocate that? No," he said. "Do I think that's risky? Yes. But we're looking for adult behavior here and seeing none. "

Republicans lawmakers have raised eyebrows in the bond market in recent weeks by suggesting that defaulting on US debt as part of a partisan standoff may not have major consequences for the economy. Last week Moody's warned Congress that even approaching the August 2 deadline that the Treasury Department has set before defaulting on their payments would lead them to downgrade US bonds.

Note: This story has been updated.

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Topics: Congressional Budget Office, Debt, Debt Ceiling, Douglas Holtz Eakin