The Change We Need

Good points from Scott Lemieux on the significance of Obama’s opening bid:

It makes it clear that Obama is willing to maximize his leverage by letting the Bush tax cuts expire. This isn’t the proposal of someone who’s particularly interested in making a deal to avoid “going over the cliff.” And after the Bush tax cuts have expired Obama’s hand is much stronger.

It makes it more likely that the terrible deal he offered in 2011 was based on the idea that any “grand bargain” would help his re-election, rather than an inherent commitment to the underlying principles. This deal has the right priorities — significant new revenue, needed stimulus spending, and to the extent that “entitlements” are cut this is done correctly: Social Security not touched, unspecified Medicare cuts that can be progressive because they don’t necessarily entail cuts to services.


  1. Obama’s opening salvo – billions in taxes More stimulus spending and NO spending cuts…courageous and brilliant!

  2. Democrats aren’t the ones demanding spending cuts. If Republicans want spending cuts, they should put some forward. It’s their move.

  3. but you’re ok with billions in new taxes and stimulus spending? can you answer: there is not enough tax revenue to cover this spending – how do we pay for it? print it?

    • Over the last 12 years, non-military, non-medicare spending has not changed in any significant way. The President already addressed non-service spending on Medicare in the ACA, and the military spending does get cut by going over the cliff. The truth is though, we don’t have a spending problem, we have a revenue problem, that did change in the last 12 years. Frankly, if we get more long term revenue and more short term stimulus, and we have to print now, that’s probably good for the economy, which has a demand problem, not a supply problem. So yes, if we have to print, print.

    • Jon Geeting says:

      Ideally we’d print it, but clearly there’s no problem with borrowing it either. Look at the yields on 10 and 20 year Treasuries. Borrowing costs are cheap, inflation is low, and we have tons of idle capacity in the economy. More borrowing is exactly what we need to get back to full employment.

  4. Rich, who do you tax and how much do you tax them?>

    • The President proposes raising the 33% and 35% brackets to 35% and 39.6%, which raises $866 billion in the next decade. I’m fine with that, though I’d consider a revert to the Clinton era rates more broadly, which would bring us another trillion onto that. I’d then cut the trillion the Pentagon offered and the House GOP turned down for the next decade, and probably more, and finally take the ACA and expand on it to save even more. Other than that, I’d borrow and print.

  5. The whole “borrow and print because its cheap” strikes me as a 25-cent solution to a one dollar problem.

    There are a whole host of issues with assumptions in this debate. Perhaps the worst is that–apparently–bad things never happen and low interest rates will stay with us forever. For a person in his 20s or early 30s, that may make sense, since its all you have known. You don’t have to be very old to remember a much different reality. Even recent history has told us this can change awful fast.

    I suppose much depends on what you want to use borrowed money for. More and more of the budget goes to finance fairly inelastic requirements: health care costs, retirement/social security/pension costs, and wages for civil servants. Which means any kind of unforeseen shock leaves us with an inflexible structure of things we have to (at least politically) pay for and a smaller and smaller spectrum of things that could be relatively easily cut. sad recipe there.

    • Jon Geeting says:

      The only current problem is the austerity crisis in January. That’s what the agreement in the lame duck or, preferably, shortly after January 1 needs to deal with.

      The question was how we should pay for the spending we’ve already committed to, and the new stimulus in the President’s opening offer. Given high unemployment, low inflation, and negative borrowing costs it obviously does not make sense to pay for it out of current wage taxes.

      Over the long term, we need to let the Bush tax cuts expire on income below 250K, end the employer health care and mortgage interest deductions, and we need to bring American health care prices in line with the average for rich developed countries.

      But there is no need to address those things now with another new law promising to do them. What would that do? Current law already says the medium term deficit is supposed to shrink. Why would a new agreement do a better job of sticking?

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