NDN Blog

Government Motors No More

The front pages of most news papers across the country today greeted readers with the words like "GM Stock Sale in High Gear" and "U.S. Taxpayers Recover Billions in Sale of G.M. Stock." There's not a lot more that needs to be said other than what's written, but the government's backing of GM has basically turned out to be an unmitigated success. More of the investment does need to be recouped for taxpayers, and the government will still own 26% of the company, but 1.4 million jobs saved and one of the largest US IPOs in history represent a great start. I'm sure those who opposed the government's actions have changed their tune as well.

"The government is firmly in the business of running companies using taxpayer dollars. Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multi-national corporation to economic viability?" -John Boehner, June 1, 2009. http://bit.ly/9Ru4mm

Bush Speechwriter Frum Pens Lessons for a Responsible Conservative Movement

In the most recent New York Times Sunday Magazine, former Bush speechwriter David Frum puts together five "positive and productive" lessons for conservatives to act "effectively and responsibly." A sample: 

Lesson 1: The danger of closed information systems. Well before the crash of 2008, the U.S. economy was sending ominous warning signals. Median incomes were stagnating. Home prices rose beyond their rental values. Consumer indebtedness was soaring. Instead, conservatives preferred to focus on positive signals — job numbers, for example — to describe the Bush economy as “the greatest story never told.”

Too often, conservatives dupe themselves. They wrap themselves in closed information systems based upon pretend information. In this closed information system, banks can collapse without injuring the rest of the economy, tax cuts always pay for themselves and Congressional earmarks cause the federal budget deficit. Even the market collapse has not shaken some conservatives out of their closed information system. It enfolded them more closely within it. This is how to understand the Glenn Beck phenomenon. Every day, Beck offers alternative knowledge — an alternative history of the United States and the world, an alternative system of economics, an alternative reality. As corporate profits soar, the closed information system insists that the free-enterprise system is under assault. As prices slump, we are warned of imminent hyperinflation. As black Americans are crushed under Depression-level unemployment, the administration’s policies are condemned by some conservatives as an outburst of Kenyan racial revenge against the white overlord....

Lesson 2: “The market” (the whole free-market system) must be distinguished from “the markets” (the trading markets for financial assets)....

Lesson 3: The economy is more important than the budget.... 

Lesson 4: Even from a conservative point of view, the welfare state is not all bad....

Lesson 5: Listen to the people — but beware of populism.... 

The irony of this piece appearing in The New York Times aside, it's a strong list. I'll just pray that it goes directly from Frum's lips to John Boehner's ears.

Monday: NDN Hosts Under Secretary of State Robert Hormats on Global Economic Challenges

On Monday, November 15, NDN will host Under Secretary of State for Economic, Energy, and Agricultural Affairs Robert Hormats for an important address on global economic challenges. Secretary Hormats’ address will follow the President's trip to India, Indonesia, South Korea, and Japan, where he is speaking to America’s economic interests in the world at the G20 and APEC Summits, as well as meeting with leaders of some of the world’s most important, fast-growing emerging economies. 


As new economic powerhouses arise across the world, the prosperity of Americans will increasingly depend on oursuccessful engagement with the changing economic order of the 21st century. Secretary Hormats and the State Department are central to these efforts to advance American economic interests as a key component of foreign policy. Secretary Hormats will be joined by Dr. Robert Shapiro, Chair of NDN's Globalization Initiative and former Under Secretary of Commerce for Economic Affairs.

Under Secretary of State Robert Hormats on Global Economic Challenges
Monday, November 15 - 12:30pm
NDN - 729 15th Street NW, First Floor
Washington, DC
RSVP  |  Webcast

I hope you will join us for this important discussion.

When Working on Deficit Reduction, Let's Actually Reduce the Deficit

The draft report from the Bowles/Simpson Deficit Commission has some good ideas in it, and it has some that are less good, and there's plenty of analysis on both to go around.

Instead of rehashing everything others have said, I'll focus on one aspect that needs to be left out of both this commission and future reports: "example" cuts. These cuts tend to have four main characteristics: they are spending cuts (show me a report with example tax increases), they focus on the federal government itself, they are in the discretionary budget, and they are arbitrary. They are problematic for a number of reasons:

  1. They don't actually reduce deficits in a meaningful way - The only example cuts that exceed one billion dollars in savings in 2015 are eliminating 250,000 contractors ($18.4 billion), cutting the federal workforce by 10 percent ($13.2 billion), and freezing federal non defense compensation for three years ($15.1 billion). (More on these in point 2.) The seven other points are ticky-tack. The meat of our structural deficit problems lies in growing defense and entitlement costs - namely Medicare, which means healthcare - and a shortage of revenue.
  2. They unnecessarily demonize the federal government and weaken it, a self reinforcing cycle - While there is valid disagreement about the appropriate role of the federal government, once a role is agreed upon, partisans of all stripes can agree that role should be properly supported and properly monitored for efficiency; no more, no less. Making the government more efficient is of course a good idea. Reducing the role of contractors is a great idea, but it bears pointing out that the role of contractors rose in part because of cuts to the actual federal workforce. Arbitrarily cutting staff and resources to set an example sets the wrong example - I'd prefer a government that sets an example of competently achieving the job its citizens have asked. When it doesn't, people lose faith in government, something I trust the public servants on the deficit commission want to avoid.
  3. They cheapen the hard decisions that need to be made to actually reduce the deficit - One of the example cuts is "reducing unnecessary printing expenses." It's hard to find anyone in the country who doesn't agree that unnecessary printing is unnecessary. Unfortunately, deficit reduction isn't that easy - try getting everyone to agree about unnecessary weapons systems, Medicare benefits, or taxes. That's why they're called hard choices. When we cheapen them, we allow others to advance ideas veiled as deficit reduction that don't actually reduce the deficit.

The beauty of this draft is that it does take a stab at hard choices, and its writers are to be commended for that. I look forward to an end product whose only examples are of meaningful deficit reduction.

NDN to Host Under Secretary of State Robert Hormats for Speech on Global Economic Challenges

Under Secretary of State for Economic, Energy, and Agricultural Affairs Robert Hormats will speak about global economic challenges on Monday, November 15at NDN. The speech will follow President Obama's ongoing trip to Asia. More details to come - click here to RSVP.

Colombia Agreement Seen as Strong Positive in South Florida Politics

In an America more connected to other regions of the world, economic integration is seen as a political plus. In yesterday's Wall Street Journal, Peter Wallsten writes:

Nationally, anxiety is rising over free trade. But the idea has become central in the race to represent a majority-Hispanic congressional district in South Florida, where the candidates are looking for a cultural connection to voters with family ties in Latin America.

The fight, waged largely over Spanish-language airwaves, is taking place in a Miami-area district that is home to one of the country's largest populations of Colombian-Americans. Support for the proposed U.S.-Colombia Trade Promotion Agreement is considered as much a point of ethnic pride as a boon for business.

Republican David Rivera recently aired a radio ad calling it "shameful" that Democrat Joe Garcia had raised money with the help of House Speaker Nancy Pelosi, who had "scorned us" by blocking the trade agreement's passage in 2008.

Mr. Garcia responded with a Spanish-language radio ad featuring a retired Colombian senator calling him a friend.

The sniping escalated last week, as Mr. Rivera appeared to claim an endorsement from the government of Colombia-only to have officials in Bogotá declare their neutrality in the race.

The skirmishes over the free-trade pact reflect one facet of Miami's complicated ethnic politics.

Republican-leaning Cuban-Americans are the biggest ethnic bloc in Florida's 25th Congressional District. But an influx of Democratic-leaning and independent Colombian-Americans over the past decade has helped transform the district, which now has a nearly equal number of Republican and Democratic voters.

Florida is home to 281,000 Hispanics of Colombian origin, the largest concentration in the country, according to the Pew Hispanic Center.

Both Mr. Rivera, a state House member, and Mr. Garcia, a former state utility commissioner and former Obama administration energy official, are Cuban-American and eager to reach out to local Colombians.

"There's no other issue where a Cuban-American elected official can show non-Cuban Hispanics that he somehow understands and relates to then, and that it's not all about Cuban issues," said Juan Zapata, a Colombian-American and Republican state legislator who lives in the district.

Full article here.

In 2008, NDN argued that President Bush introduced the Colombia FTA in a manner designed for failure precisely so it could be used as a political football to target the Colombian-American community in Florida. While the legacy of that political decision is still with us, it is also clear that the politics of the Colombia FTA aren't as cut and dry as Washington conventional wisdom might hold.

The GOP's Pledge Would Make Cuts that Hurt

Breaking down a Bloomberg article on the GOP's "Pledge" to cut spending but explode the deficit, TPM takes a look at exactly what would get cut:

1. Education

President Obama has requested over $70 billion for the Department of Education next year. A cut along the lines of what the Republicans propose would necessitate a $5 billion cut to the Pell Grant program, which assists low-income students with college tuition costs.

2. Health Care

This is where Republicans really want to do damage -- to Obama's health care reform law. But their discretionary spending cut alone would mean billions in fewer resources for the Department of Health and Human Services. Perhaps most troubling, the National Institutes of Health would take a $6 billion hit. The Centers for Disease Control would also take hundreds of millions of dollars in cuts. And the National Cancer Institute, where spending has risen by 10 percent in the past two years would see their funding cut.

3. Social Services

Congress would also have to cut money for Justice Assistance Grants -- a.k.a. state and local law enforcement. Without cuts, that's $2 billion. Republicans would take $400 million from local police forces alone.

4. Housing

Everyone knows America's infrastructure is crumbling. Part of the initial response by the Administration was an increase in funding for the Departments of Transportation, and Housing and Urban Development. Returning to 2006 levels would mean over $13 billion in lost revenue for projects under the purview of that department.

5. Revenue Collection

It's probably wrong to think that the public wouldn't support cutting funds for tax collectors. But if the government is going lean, it will probably have to lay off people who collect tax dollars, and conduct audits. That sounds great to your average frustrated tax payer. But Republicans talking about closing budget shortfalls will be working against themselves. In fact, without their help, the Treasury could lose just about as much money as it saves in non-defense, non-veteran non-senior, discretionary spending.

Sending kids to college, curing cancer, stopping disease, keeping local communities safe, and quality infrastructure are all things I'd imagine are overwhelmingly popular - not to mention necessary for the well-being of the country. No wonder the "Pledge" has a net negative rating.

The fact is that you can't get anywhere close to balancing the budget on spending cuts alone, especially out of the domestic discretionary budget. Maybe we should instead listen to NDN Board Member and Ask.com founder Garrett Gruener, who says we ought to let the Bush tax cuts for the top 2 percent expire. 

Austan Goolsbee is an Effective Communicator

Check out this video of Council of Economic Advisors Chair Dr. Austan Goolsbee explaining why extending the Bush tax cuts for the wealthy is a bad idea. 

I'm a big fan of visual representation, so I hope they keep using this white board.

Simon Quoted in FT on GOP "Pledge"

In today's Financial Times, Edward Luce contrasts the reality of British Prime Minister David Cameron's austerity plans with the GOP's "Pledge." He describes Cameron's plans as "medicine" and the GOP's "Pledge" as sugar, and quotes Simon Rosenberg:

In the build-up to the UK election in May, David Cameron’s Conservative party made little bones about the fact that Britain was heading into an “age of austerity”. In his “contract with voters” that Mr Cameron issued before polling day, he observed: “We know how unhappy you are and how doubtful you are that anyone will achieve anything or change anything.”

The contrast with the Pledge to America the Republicans issued last week as the basis for their midterm election campaign could not be sharper. One party offered the 21st century equivalent of “blood, sweat and tears” – admittedly watered down as polling day approached. The other parodied Pangloss’s hope that “all will be for the best in the best of all possible worlds”.

Nowhere in the Republican pledge was there acknowledgement of the painful decisions that all Americans must confront to avert disaster. Nor was there even a hint of admission that Republicans bore at least equal responsibility for the low regard in which all politicians are held in America, as they are in Britain. Instead of medicine, there was sugar...

In contrast, John Boehner, the Republican leader in the House of Representatives, flanked by the “Young Guns”, only one of whom is younger than Mr Cameron, promised to maintain all the tax cuts that George W. Bush instituted, never raise any taxes again in any shape or form, and do all this while restoring America’s budget to balance.

All of which might have been plausible were it to have spelt out the draconian spending cuts that would therefore be necessary to bring the budget back to surplus. But it declined to do so. Instead it ring-fenced more than three-quarters of the US federal budget – social security, Medicare and defence spending – and promised to impose caps on the remaining, “discretionary” portion of it.

In numerical terms, the $320bn the party has specified in spending cuts over the next decade is dwarfed by the $4,000bn in tax cuts that it promises – all on top of the current double digit budget deficit.

Simon Rosenberg of the NDN, formerly known as the New Democratic Network, says the idea that this would result in a budget surplus comes from the “Harry Potter school of economics”.

If implemented, the pledge would bring about a crisis in US sovereign creditworthiness. In the name of the founding fathers it would jeopardise the dollar. Which leads us to one of two conclusions. Either the Republican Party believes what it is saying, in which case it has no further useful intellectual contribution to make. Or else it thinks the US electorate is intellectually challenged and will mistake this fantasy for a plan.

The Economic Debate Continues: What Does the GOP Mean for Economic Policy?

Echoing comments he made yesterday at a National Journal forum on the Workforce of the Future, Washington Post business columnist Steven Pearlstein argues that the business community should fear the rising power of Senator Jim DeMint and his ilk far more than Democrats:

For all you in the business community who are rooting for a Republican victory in the November elections, a bit of unsolicited advice: Be careful what you wish for.

You're probably thinking that with Republicans in control of one or both houses of Congress, business will be back on top again, setting the agenda, rolling back the socialist tide and forcing an anti-business administration into a humiliating retreat.

In reality, what you'll get is political paralysis for the next two years, and quite possibly longer than that....

Here is the hard political reality: You can't expect to support and finance political candidates who preach that government is menacing and wasteful, that public employees are incompetent and corrupt, that taxes are always too high and destroy jobs, and then turn around and expect that the government will respond to your demands to hold down the cost of health care, or fund basic research, or provide good schools, efficient courts and reliable transportation systems.

The New York Times' David Leonhardt joins the ranks of those, including his conservative colleague Ross Douthat, who've examined the GOP's Deficit-cut Pledge and found it lacking.

Ezra Klein covers Congressional Budget Director Doug Elmendorf's testimony before the Senate Budget Committee, at which Elmendorf says the extension of the Bush tax cuts would hurt the economy and decrease incomes.

The new NBC/Wall Street Journal Poll has made a lot of new already - Simon talks about that here. One of the most interesting questions asked is how acceptable voters feel a potential outcome of the election would be. On the outcome

The Tea Party influences the Republican Party to become more conservative on fiscal issues.

50 percent find it acceptable, while 30 percent find it unacceptable. This result begs a number of questions - namely, what does "conservative on fiscal issues" mean? However, it is clear that there is still room to create a more complete understanding of the actual GOP and tea party positions on fiscal issues.

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