NDN Blog

As the debate over the future of the nation's economy continues, there are a few pieces worth taking a look at from this morning and over the weekend.

The New York Times editorial page did what a number of commentators have already done, disassembled the GOP's "Pledge to America:"

Extravagant promises and bluster are the stuff of campaign rhetoric, but the House Republicans' "Pledge to America" goes far beyond the norm...

THE BUDGET DEFICIT The Republicans' central claim is that they will be able to reduce the budget deficit, while cutting taxes deeply and making marginal cuts in spending. That pledge is impossible to keep. There is no chance of reducing the deficit without tax increases. The budget has been chronically short of revenue since the start of the Bush-era tax cuts, and more indiscriminate cutting will only dig the hole deeper.

Cutting the deficit will also require curbs on the government's biggest and most popular entitlement programs - Medicare, Medicaid and Social Security, collectively 40 percent of the budget. Ditto military spending, another 20 percent. Yet Republicans pledge to shield seniors, veterans and the troops from spending cuts.

In his weekly address, the President says the GOP's "Pledge" is an echo of a disastrous decade we can't afford to relive.

Also over the weekend, NDN Globalization Initiative Chair Dr. Robert Shapiro was prominently quoted in a Washington Post piece about foreign profits of U.S. based multinational corporations.

Congratulations to Ed Miliband, who defeated his brother David to lead the British Labour Party. Mr. Miliband faces a tall task in defeating a conservative austerity push led by Prime Minister David Cameron.

And, in addition to its ongoing trade spat with Japan and currency issues with the U.S. and much of the rest of the world, China has imposed a tariff on U.S. poultry.

NDN has long made two arguments 1) That the last 10 years were a lost decade for everyday Americans, the understanding of which is imperative to understanding the virulence of the great recession, and that 2) the inability of America's political leaders to create a plan that made globalization work for all Americans was the central source of volatility in the American electorate. The Atlantic's Ron Brownstein makes that case today: 

A Lost And Volatile Decade

AMERICANS FEEL THE GROUND BENEATH THEM CRACKING AS THE ECONOMY CONVULSES.

by Ronald Brownstein

Saturday, Sept. 25, 2010

During the transition from the agricultural era to the Industrial Age in the late 19th century, America suffered through a generation of political instability and volatility.

The political hallmarks were narrow congressional majorities and rapid shifts in control; repeated one-term presidents; and divided government, with the parties routinely splitting the White House and Congress. This turmoil (which lasted from about 1876 to 1896) was rooted in the widespread sense among Americans that neither party had convincing answers to the enormous challenges created by the shift from farm to factory.

Based on last week's release of the annual Census Bureau report on income and poverty, it appears that the U.S. is experiencing something similar again, as Americans uneasily navigate a globalized, information-based economy. Across a wide range of economic measures, the bureau report demonstrated, the past 10 years have been an utterly lost decade for many, if not most, Americans. And that helps explain why the U.S. continues to careen through so many sharp political reversals.

From 2000 through 2009, the Census Bureau found, the median income (measured in inflation-adjusted dollars) declined by 5 percent for white families, 8 percent for Hispanic families, and more than 11 percent for African-American families. That's almost unimaginable over an entire decade. From 1991 through 2000 (again in inflation-adjusted dollars) it had risen by 13 percent for whites, 19 percent for Hispanics, and 28 percent for African-Americans.

Similarly, the total number of Americans in poverty increased by nearly 12 million in the last decade, more than obliterating the 4.1 million reduction during the 1990s. Especially troubling is that the number of poor children jumped by 3.9 million -- again, more than erasing the 2.8 million decline during the 1990s.

The findings on access to health insurance tell the same story. During the 1990s, the share of Americans without health insurance fell slightly from 14.1 percent to 13.7 percent; in the following decade, it has spiked to 16.7 percent. More than one-fifth of the working-age population (people ages 18 to 64) are now uninsured, also up steadily since 2000. The number of Americans obtaining health insurance at work during the 1990s increased by nearly 30 million; in the last decade, that number fell by nearly 10 million. (The share of Americans receiving coverage through work declined every year of George W. Bush's presidency.)

The Great Recession has vastly compounded these problems. But they were all worsening before the economy collapsed: The median income was lower, and the poverty rate and the number of uninsured were already higher in 2007 than in 2000.

Read Brownstein's whole piece here.

By now, at least three important things should be clear to all observers that the GOP's "Pledge to America"

1) It would dramatically increase the deficit over the next decade - by around $4 trillion. Call this doubling down on the Boehner plan.

2) There are no new ideas in it.

3) Even lots of conservatives think it's a joke, which would be funny, except these people seek to lead the country.

The first point is probably the most important. The Republican Party has defined the problem as spiraling deficits, a problem only exacerbated by their stated agenda.

Here's what some others had to say about it:

Jon Stewart breaks down, with video evidence, the fact that this pledge is anything but new (watch at least until 3 minutes in):

The Washington Post Editorial Page says "The GOP's 'Pledge to America': Deficits can rest easy"

Paul Krugman writes that the Pledge basically says "Deficits are a terrible thing. Let's make them much bigger."

While the spending cuts in the Pledge are not very significant, the Center on Budget and Policy Priorities describes how the cuts, like the ones in the Boehner plan, would cut things Americans really want and need. Rep. Kevin McCarthy told Savannah Guthrie this morning on MSNBC that the cuts, while not detailed in the Pledge, are going to be "across the board." 

In The New Republic, Jonathan Chait writes that the Pledge is "Déjà Vu All Over Again," Jonathan Cohn writes that it is full of lies, especially in health care and deficit reduction, and Alexander Hart, like Ezra Klein, points out that the graphs in the pledge are lies. (When you make graphs, you have to start at zero.)

Ezra Klein describes most of the ways in which the Pledge is a "bad idea" and writes that the Democrats need a plan too. He highlights Rob Shapiro's carbon-payroll tax shift idea.

Andrew Sullivan, who is just waiting for a legitimate conservative agenda to emerge, describes "the GOP's Fiscal Fraudulence."

RedState Editor in Chief Erick Erickson calls the Pledge "dreck" and says it is "Perhaps the Most Ridiculous Thing to Come Out of Washington Since George McClellan."

And Andy Roth, Vice President of the very conservative Club for Growth writes, "I want to endorse it [the pledge], but it's so milquetoast that it proves to me that these guys just aren't ready to lead."

Andy's right, this is not a document produced by a group of people ready to lead the country.

I've read the GOP's "Pledge to America" and have one early thought: If the pledge actually reduced the deficit, its authors would have added up the numbers.

It's no surprise that they didn't do the math. After all, the numbers don't work out so well for Boehner and McConnell either.

Update: A reminder about the Boehner Plan:

NDN Board member and Ask.com founder Garrett Gruener appeared on MSNBC's Dylan Ratigan show today to discuss his Los Angeles Times op-ed on taxes (the freeze frame is not Garrett).

We obviously completely agree with Garrett's sentiments; everyday Americans have to do well for the whole economy to do well. His full LA Times op-ed can be found here.

NDN has long argued that the key issue in the upcoming election is having plan for the future of the economy. While much of that debate is happening at the national level and on cable news, all politics is local, and the next month and a half will see many candidates discuss their plans for the economy.

Candidate for Florida's 25th Congressional District Joe Garcia has produced such a plan. Like all such plans (the good ones anyway) it fuses important local issues, including expanding the Port of Miami, with national ones. Joe's plan is heavy on provisions that benefit small business including tax cuts, loans, and health care tax cuts; emphasizes worker skills by investing in community colleges and providing tuition tax breaks for higher education and professional training; promotes investment in renewable energy; and has provisions to slow foreclosures and keep people in their homes. It also weighs in on extending the tax cuts for everyday Americans (he's in favor), and strongly supports the Colombia Free Trade Agreement, an important economic boost for a regional economy so closely tied to Latin America.

Joe's plan is available here. If you've seen other such plans that are worth discussing, feel free to pass them along. In the next month and a half, it's important that candidates of both parties offer plans for America's economic future; I look forward to seeing more realistic plans from members of both parties.

NDN Advisory Board member Garrett Gruener published an op-ed in the Los Angeles Times this morning on the Bush tax cuts:

I'm rich; tax me more

Congress should let the Bush tax cuts expire for the wealthiest Americans and use the additional tax revenues that are generated to invest in infrastructure and research.

By Garrett Gruener

5:39 AM PDT, September 20, 2010

I'm a venture capitalist and an entrepreneur. Over the past three decades, I've made both good and bad investments. I've created successful companies and ones that didn't do so well. Overall, I'm proud that my investments have created jobs and led to some interesting innovations. And I've done well financially; I'm one of the fortunate few who are in the top echelon of American earners.

For nearly the last decade, I've paid income taxes at the lowest rates of my professional career. Before that, I paid at higher rates. And if you want the simple, honest truth, from my perspective as an entrepreneur, the fluctuation didn't affect what I did with my money. None of my investments has ever been motivated by the rate at which I would have to pay personal income tax.

As history demonstrates, modest changes in the tax rate for wealthy taxpayers don't make much of a difference if the goal is to build new companies, drive technological development and stimulate new industries. Almost a decade ago, President George W. Bush and his Republican colleagues in Congress pushed through a massive reduction in marginal tax rates, a reduction that benefitted the wealthy far more than other taxpayers.

We were told the cuts would accelerate business growth and create jobs. Instead, we got nearly a decade of anemic job growth, stagnating wages, declining incomes and high inequality.

The supply-side, trickle-down economic policies of the last decade benefitted people like me, but the wealth didn't trickle down. So while we did quite well, people who live from paycheck to paycheck didn't.

When inequality gets too far out of balance, as it did over the course of the last decade, the wealthy end up saving too much while members of the middle class can't afford to spend much unless they borrow excessively. Eventually, the economy stalls for lack of demand, and we see the kind of deflationary spiral we find ourselves in now. I believe it is no coincidence that the two highest peaks in American income inequality came in 1929 and 2008, and that the following years were marked by low economic activity and significant unemployment.

What American businesspeople know, and have known since Henry Ford insisted that his employees be able to afford to buy the cars they made, is that a thriving economy doesn't just need investors; it needs people who can buy the goods and services businesses create. For the overall economy to do well, everyday Americans have to do well.

Now that the Bush tax cuts are about to expire, Republicans are again arguing that taxes should remain low for the wealthy. The idea is that this will spur people like me to put more capital to work and start more ventures, which will create new jobs, power the economy and ultimately produce more tax revenues. It's a beguiling theory, but it's one that hasn't worked before and won't work now.

Instead, Congress should let the Bush tax cuts expire for the wealthiest Americans and use the additional tax revenues that are generated to invest in infrastructure and research. "Invest" is the right word. Putting money into infrastructure — such as roads, bridges, broadband, the smart grid and public transit — as well as carefully chosen research initiatives provides a foundation for future growth. As important, it puts funds in the hands of those who will spend them, generating demand that will pull us out of our economic crisis and toward a new cycle of growth.

No one particularly enjoys paying taxes, but one lesson we should have learned by now is that for the good of the country, we need to tax people like me more. At a minimum, we need to return to the tax rates of the Clinton era, when the economy performed far better. Simply taxing the wealthiest 2% of Americans at the same rates they were taxed before the Bush tax cuts could reduce the national deficit by $700 billion over the next 10 years. Remember, paying slightly more in personal income taxes won't change my investment choices at all, and I don't think a higher tax rate will change the investment decisions of most other high earners.

What will change my investment decisions is if I see an economy doing better, one in which there is demand for the goods and services my investments produce. I am far more likely to invest if I see a country laying the foundation for future growth. In order to get there, we first need to let the Bush-era tax cuts for the upper 2% lapse. It is time to tax me more.

Garrett Gruener is the founder of Ask.com, chief executive of Nanomix, the co-founder and director of the venture capital firm Alta Partners and a member of the advisory board at NDN, a center-left think tank in Washington.

Examining recently released census data, the Wall Street Journal today describes a “Lost Decade for Family Income,” in which median household income fell and poverty increased dramatically:

The [census] bureau's annual snapshot of American living standards also found that the fraction of Americans living in poverty rose sharply to 14.3% from 13.2% in 2008—the highest since 1994. Some 43.6 million Americans were living below the official poverty threshold, but the measure doesn't fully capture the panoply of government antipoverty measures.

The inflation-adjusted income of the median household—smack in the middle of the populace—fell 4.8% between 2000 and 2009, even worse than the 1970s, when median income rose 1.9% despite high unemployment and inflation. Between 2007 and 2009, incomes fell 4.2%. 

The income decline and poverty increase are not just about the recession. They are critical features of America’s lost decade. The article continues:

The bureau said that the drop in income in the recent recession, so far, wasn't much different from those recorded in the early 1990s and early 2000s recessions, and was actually smaller than the 6% drop recorded in the deep recession of the early 1980s.

But there is a difference this time: In the prior three recessions, incomes fell after years of upswing, then resumed growing once the downturn ended. The decline this time comes on top of a long period in which incomes stagnated even through the recovery of 2003 to 2007.

This additional, distressing evidence is part of what we at NDN described as "A Lost Decade for Everyday Americans" in a paper released in December of 2009. As we argue in that paper, it’s impossible to understand the economic condition of everyday Americans today or the virulence of the Great Recession without understanding the stagnating wages, declining median income, zero private sector job growth, and rising costs that hit American households over the last decade.

Additional important news on the economy this week:

• A report released by the Joint Economic Committee finds that worsening income inequality, in large part precipitated by policies of the Bush Administration, may have been a root cause of the Great Recession. It also finds that, under Bush, everyone’s economic situation got worse. Again, more evidence of the Lost Decade.

• Building on Lori Montgomery’s Washington Post coverage of Mitch McConnell’s plan to increase deficits by $4 trillion over the next decade, the Economist’s “Politics in America” blog takes down Mitch McConnell’s view of taxation.

• On the legislative strategy on the Bush tax cuts, Congressional leadership would do well to listen to The New Republic’s Jon Chait. It should also encourage its membership to read this poll, this poll, this poll or this poll. And then there are this poll and this poll, too. (They all say similar things: the politics of this issue are good for the majority.)

• The Senate passed a bill to cut taxes and provide loans for small businesses. 

• Ben Smith at POLITICO explores how TARP, despite the reality of its success, is politically unpopular. Foreign Policy blogger and Tufts University professor Dan Drezner writes that TARP is an exception rule that good policy leads to good politics, mainly because people don't know how good TARP actually was. Let me suggest a slightly different interpretation than ignorance. TARP wasn’t bad policy in a narrow sense – policymakers placed a large, successful bet on the future prosperity of the financial industry that saved the country from a depression – but it was incomplete policy and bad politics to everyday Americans in that, on taking dramatic action to halt and repair the damage on the financial side, we started and stopped at TARP. With almost a quarter of outstanding mortgages still underwater and the financial standing of millions of households still in disastrous shape from the meltdown of the housing and financial markets, the American people might have liked to have seen a commensurate bet placed on their futures. (Hence the refrain, “Where’s my bailout?”)

• And, Chinese currency and economic issues are back, having never really gone away.

Today’s poll from The New York Times tells the story of a country focused solely on frustration over the bad economy. Jobs and the economy, added together, are the top concern of 60% of Americans. (No other issue comes close to those figures, including the budget deficit, which sits at 3 percent.)

Additionally, the poll write-up reinforces the notion that we have discussed at NDN, neither party is where it wants to be right now:

The findings suggest that there are opportunities and vulnerabilities for both parties as they proceed into the final seven weeks of the campaign.

A case for Republicans: Voters are remarkably open to change, even if they are not sure where Republicans will lead them. Most Americans, including one-third of those in the coalition that elected Mr. Obama, now say he does not have a clear plan to solve the nation’s problems or create jobs. Democrats remain highly vulnerable on the economy.

A case for Democrats: They are seen as having better ideas for solving the country’s problems. The public steadfastly supports the president’s proposal to let tax cuts expire for the wealthiest Americans. And far more people still blame Wall Street and the Bush administration than blame Mr. Obama for the country’s economic problems.

Voters have a darker view of Congressional Republicans than of Democrats, with 63 percent disapproving of Democrats and 73 percent disapproving of Republicans. But with less than two months remaining until Election Day, there are few signs that Democrats have made gains persuading Americans that they should keep control of Congress.

So, while neither party is where it wants to be right now, there is good in this than bad for the President and his party. The American people are still far more with him than the alternative, they just angry and frustrated, and rightfully so. It’s also inarguable that the President’s ideas have been far better then the opposition's, and the truth is borne out in the polling.

Additionally:

The president’s overall job approval rating is 45 percent, with 47 percent disapproving. On the economy, his rating is worse, with 41 percent approving and 51 percent disapproving. When asked whether Mr. Obama has a clear plan for solving the nation’s problems, 57 percent responded that he did not, yet twice as many give him more credit than Republicans for having a plan.

The good news for the Democrats right now is that they have the ability to increase their standing with the American people, and the path is very clear: they must convince the country they have a plan for the economy. The President has a strong case to make about what his administration done over the last two years, and that it’s all been part of a plan to fix an economy with serious problems that have been playing out for the last decade. The next month and a half are all about making the American people believe that he has a plan for the future and his opponents have one that just doesn’t work.

For the Republicans, they have to step up if they really want to take advantage of this poor economy, which means they too have to offer a serious economic plan for the country. It's something the American people don't think they've done yet. 

A few weeks ago, NDN put together an analysis of House Minority Leader John Boehner's plan to increase the deficit by $4 trillion over the next decade. Today in the Washington Post, Lori Montgomery breaks down Senate Minority Leaders Mitch McConnell's plan to do the same:

Even as they hammer Democrats for running up record budget deficits, Senate Republicans are rolling out a plan to permanently extend an array of expiring tax breaks that would deprive the Treasury of more than $4 trillion over the next decade, nearly doubling projected deficits over that period unless dramatic spending cuts are made.

The measure, introduced by Senate Minority Leader Mitch McConnell (R-Ky.) this week, would permanently extend the George W. Bush-era income tax cuts that benefit virtually every U.S. taxpayer, rein in the alternative minimum tax and limit the estate tax to estates worth more than $5 million for individuals or $10 million for couples.

Aides to McConnell said they have yet to receive a cost estimate for the measure. But the nonpartisan Congressional Budget Office recently forecast that a similar, slightly more expensive package that includes a full repeal of the estate tax would force the nation to borrow an additional $3.9 trillion over the next decade and increase interest payments on the national debt by $950 billion. That's more than four times the projected deficit impact of President Obama's health-care overhaul and stimulus package combined.

And how does he propose to pay for these cuts? Well, he doesn't:

Asked how McConnell would cover the cost of his proposal, the Tax Hike Prevention Act, aides noted that he has backed a bipartisan plan to freeze spending that would save an estimated $300 billion over the next decade - a drop in the bucket compared with his $4 trillion-plus plan.

For the rest of the cash, McConnell has said he will turn to the same place as Obama: a presidentially appointed, bipartisan deficit commission that is due to issue its report in December.

"This is not going to be your typical commission that's going to issue a report, sit on the shelf and gather dust," McConnell said last month on NBC's "Meet the Press." "We'll wait for their report. And I intend, if it's a responsible report that I can support, to encourage my members to support it."

Let's remember that McConnell opposed the President's deficit commission, and John Boehner mocked the President's spending freeze. Now, these represent Republican leadership's only strategies to cut deficits. So, here's the state of play: Boehner and McConnell now own plans to increase the deficit by $4 trillion over the next decade. The President owns a commission that they opposed designed to cut deficits. In what way are Boehner and McConnell actually for fiscal balance, and on what grounds can they ever criticize the President on this issue?