StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Bipartisan partisans

17 Feb 2010
Posted by Edmund L. Andrews

     I dropped by a forum of the Peterson-Pew Commission on Budget Reform yesterday, the  earnest  group of budget mavens that's been pushing  for a bipartisan deficit commission and is itself a dress rehearsal for such a commision.

     Unfortunately, as polite as the discussion was, the gridlock was obvious.  It didn't bode well for President Obama's plans to name a bipartisan commission on Thursday.

     Douglas Holtz-Eakin, the former CBO director who was John McCain's top economic adviser during the presidential campaign, sounded dispassionate until you listened to the nuances.  Without flatly rejecting the idea of tax increases to help close the deficit, Holtz-Eakin pointedly insisted that spending was the main problem and that "we cannot tax our way" out of this.

    This was a subtle re-framing of what he often said back when he was CBO director: that we couldn't simply "grow our way" out of the long-term budget mess.   Back then, Holtz-Eakin  would also say that the surpluses achieved under Clinton had been the result of multiple factors -- economic growth, but also  pay-go rules and tax increases (including the Social Security hikes that were still kicking in tons of extra cash at the time time).

     You could see where this was going.  For all the earnestness, Holtz-Eakin was already echoing Mitch McConnell's support' for a "bipartisan "spending commission.''   In other words: tax increases aren't really on the table.  And we shouldn't be surprised:      Holtz-Eakin has recently been tapped by prominent GOP types to start a Republican-oriented think tank to help counter Democratic-leaning shops like John Podesta's Center for American Progress.  

        As it happened, Podesta was on the stage as well. He was polite too, but he made a point in his opening remarks of blaming the deficits almost entirely on George W. Bush -- the tax cuts, the  two unfunded wars, the unfunded prescription drug program for Medicare.   It was pretty much a straight recital of White House talking points.

    Don't get me wrong. I agree that Bush and the Republican congress bear a huge responsibility  -- the bulk of the responsibility -- for today's deficits.   But if a bipartisan group of self-proclaimed budget wonks -- a practice commission, if you  will -- is already parroting party lines, just imagine how much harder the lines will be when the real commission tries to hash things out.








You agree with Podesta, but

You agree with Podesta, but chide him for "parroting party lines" for saying something that is true?

What kind of absurd standard is that? People shouldn't say true things if Democrats have been saying them?

Gee, I wonder why hacks and charlatans are able to stop progress in Washington.

Luckily such partisanship by

Luckily such partisanship by those budget wonks won't be a problem, since the proposed commission wouldn't consist of budget wonks; it would consist of members of Congress, who never draw partisan lines!

Sad . . .

These folks don't seem to understand that it will require both sides giving something up.

If Holtz-Eakin thinks that Democrats are going to allow Social Security and Medicare cuts to occur without taxes going up, he is crazy. If Podesta does not think that Republicans are going to let taxes go up without cuts in Social Secuirty and Medicare, he is loony tunes.

Meanwhile, both parties are going to allow us to get to the fiscal brink and another debt crisis. Just remember what happened when the debt got out of hand in Germany in the 20's and '30's. Hyperinflation followed and then came Hitler.

If people do not think that a revolution can happen in this country if the economy is destroyed by politicians playing partisan games with our lives, they are living in a fantasy world.

Maybe there should be some

Maybe there should be some sort of variation of an "application process" to determine who actually gets put on this commission -- and possible candidates would have to submit (or support), in writing, specific proposals that would reduce the deficit by a specific amount.

And if it ends up that makeup of this commission is not "bi-partisan" because members of one party can't come up with anything to bring to the table -- well, then so be it...

Greg Mankiw opines on what

Greg Mankiw opines on what Democrats are seeking and what conservatives should seek from a fiscal commission.

Spending cuts, tax increases and "bipartisans"

Before dismissing Holtz-Eakin's claim that "spending is the problem", look the graph of projected federal spending -- from 2020 onward it shoots upward to over 40% of GDP and then off the chart upward from there. How can taxes rise like that at all ... much less forever?

Gene Steuerle, who's as fair and balanced as anyone comes on this subject, says the fundamental problem is spending: "If spending is always growing faster than the economy, you never catch up”.

In 2008, before the recession hit, the official budget deficit was $455 billion -- but including accrued unfunded liabilities for promised entitlement spending it was over $3 trillion. What sort of tax increase would have covered that?

As to the Clinton surpluses, counting the accruing unfunded liabilities for entitlements the govt never came close to running a surplus during those years. It was all deficits using accrual accounting as the private sector uses. (The cash basis accounting used by the govt to keep accruing liabilities off the books would send anyone in the private sector straight to jail.)

Obviously, from where we are today a political solution to bring the budget into sustainable territory is going to require both tax increases and spending cuts.

But this solution will have to be a deal that increases taxes to maintain promised spending in the short run in exchange for cuts in future promised spending, that will stop it from increasing faster than the economy forever in the long run. (See: Social Security reworking of 1983, only writ a whole lot larger.)

It's arithmetic -- nothing else is possible.

The "bipartisan partisans" know this full well. But they disagree over where the final deal should set the spending line as a pct of GDP. The big-govt liberals think it should be as high as they can get and the small-govt conservatives think it should be as low as possible. They are staking out positions and presenting arguments accordingly.

But that's fine. It's called bargaining, taking negotiating positions. Even in a "bipartisan" working group, you never open by giving everything to the other side, hoping they'll be charitable and kind enough to give you something back. Ha, ha. It's bipartisan, not non-partisan.

And that's OK, it's good. All these people agree that the problem actually exists and must be solved through bipartisan negotitiation by a real deadline, or else. That's how solutions eventually are reached.

That's a whole heck of a lot better than view of the politicians, 98% of whom always see their big problem as winning the next election, always within two years and closing -- no matter how much bigger they must make current deficits and promises of yet more spending in the future to do so.

But have no doubt, the fundamental problem is stopping the currently projected unending rise in spending as a pct of GDP that's been created by these politicians.

Jim, There's a substantial


There's a substantial difference between staking out a position as a starting point for negotiations vs. promoting (explicitly or implicitly) myths that are the very obstacles to any solution. Holtz-Eakin and others whose ideal would be to solve the long-term fiscal imbalance problem entirely (or almost entirely) on the spending side (or on the non-Defense spending side) should acknowledge that some degree of tax increases will be necessary for any solution to be politically viable*, rather than enabling the myth among fellow conservatives that a spending-side-only solution is achievable. There is indeed a cost to publicly staking out a position that is utterly unrealistic: by perpetuating the aforementioned myth it makes it even harder to get that segment to eventually agree to a compromise solution.

As for the talking point that "the problem is all from the spending side, so the solution should be all from the spending side", as I've pointed out previously, that is a nonsensical, yet persistent and pervasive argument constantly put forth by those who oppose any tax increases as part of the solution to our long-term fiscal imbalance.

It is moronic on two levels. One is because it ignores the question of what is politically feasible. But even putting that aside, it is simply irrational. It's like saying that if I've started gaining weight because I've become less active, the best way to stop gaining weight must be to get back to being as active as I was before, as opposed to consuming fewer calories or some combination of the two.

Or, to highlight the irrationality even more clearly, it's like telling someone who now has financial difficulty because he just lost his job that the best approach to solving his financial problem must be for him to try to get back that specific job that he lost, as opposed to finding a different one (along with any other measures such as spending less in the meantime).

Just because a problem is created (or is projected to be created) by a change in X doesn't mean that the best solution must be to reverse (or prevent) that change in X. To think one implies the other is simply irrational, not to mention at odds with the common sense we apply every day in our own lives.

* Glad to see Greg Mankiw acknowledging the political reality. He writes:
if you are a conservative [on the fiscal commission]... You can try to stick to your no-tax-increase pledge. The problem is that doing so would require spending cuts larger than are politically realistic. If I were king, I bet I could find sufficient spending cuts. But I am not expecting to be anointed any time soon. If the fiscal commission is going to succeed, tax increases will have to be part of the deal.

Jim, Nice post. Just to add,


Nice post. Just to add, I actually think the commission should put options on the table, consistent with the policy preferences of different factions of the country. As an example...

Option 1: Balance is achieved via tax increases on the's what happens

Option 2: Balance is achieved through broad based tax increases (VAT could go in's what happens.

Option 3: Balance is achieved through cuts in spending

Option 4a, 4b, 4c...combinations of the above.

I think the commission would do a better job putting together a series of packages that make the tradeoffs and options clear as opposed to trying to get bipartisan agreement out the door.

Then you could take the recommendations to Congress and hold two votes. In the first vote, any member could vote on any option or amend any option. The top 2 options go to the second round and are voted against each other.

This makes nonaction a nonstarter and puts the debate on the question of how rather than the question of if.

Parenthetically, the target proposed by the administration is disturbing. 3% in a full employment low inflation economy is just a bad target.

Add yourself to the list.

Conflating Holtz-Eakin's observations with McConnell's posturing is absurd. At no point did Holtz-Eakin take revenues off the table. You just don't like the fact that he pointed out the obvious fact that spending promises far exceed our capacity to tax or grow our way out. Indeed we could just match taxes to unchecked spenidng, but not without harming growth. Why is that a problem? Is that not indisputable? But instead, you hop, skip, jump to paint him as a partisan with a band-aid and bailingwiring assertion. Get serious.

Re: Without flatly rejecting

Re: Without flatly rejecting the idea of tax increases to help close the deficit, Holtz-Eakin pointedly insisted that spending was the main problem and that "we cannot tax our way" out of this.

Holtz-Eakin is a repeat offender. Even as a panelist at a similar event of the Bipartisan Policy Center addressing this issue of our long-term fiscal imbalance, he refused to acknowledge that higher taxes must be part of the package for a solution to be politically viable. See Q&A starting at 1:47:05 of this video

Matt Yglesias just

Matt Yglesias just eviscerated this writer on his blog. I hope Mr. Andrews responds.

Matthew Yglesias writes: The

Matthew Yglesias writes:
The problem with Holtz-Eakin’s remarks, by contrast, is that like all mainstream American conservatives he’s not interested in reducing the deficit. Rather, he supports lower taxes and lower spending.

I have been very critical of Holtz-Eakin for refusing to acknowledge (even when asked directly) that a solution to our long-term fiscal imbalance must include tax increases to be politically viable (i.e., it is politically implausible that we would try to solve the problem entirely on the spending side, much less the non-Defense spending side as many conservatives think they would like), BUT Yglesias' criticism is invalid. At an event last year Holtz-Eakin said “The first thing we’ve got to stop doing is cutting taxes.” — He says it at 1:11:33 of this video

He does then refer in particular to tax expenditures, which he correctly describes as more like spending than like tax rate reductions, but his statement above seems all-encompassing with regard to tax cuts. It is curious that Holtz-Eakin rules out tax cuts and also to refuses to acknowledge that taxes will have to go up (as part of a politically viable solution), as if tax rates right now could be at some Goldilocksesque, "just right" point, but his statements are what they are.

Given his call to reduce projected spending while at least acknowledging that taxes shouldn’t (or can’t) be cut, logic would have it that he is advocating deficit reduction. Of course, one can assume he is deliberately misrepresenting his views in order to get spending low enough to enable tax cuts, but if that is Yglesias' basis for attributing that view and goal to Holtz-Eakin, he should acknowledge that Holtz-Eakin has said the opposite and should state explicitly that he (Yglesias) is making the assumption of deceit.

But it's clear who's making solutions impossible.

Holtz-Eakin knows perfectly well that taxes have to be increased. He's said it himself.


The country's "current fiscal policy is unsustainable, as even draconian restraint in the annual spending on defense and nondefense programs are insufficient to guarantee that the current level of taxation will be sufficient to cover promises to seniors in retirement and health programs."

and here:

Obama "should call on Congress to pass a comprehensive reform of our income and payroll tax systems that would generate revenue sufficient to fund its spending desires in a pro-growth and fair fashion."

But when it comes to walking the walk, he's all about politics, not doing what he himself has said is best for the country.

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