It seems clear now that the President is not going to adopt the best strategy for passing the debt limit, by simply demanding a clean bill and letting Jamie Dimon and Lloyd Blankfein do the work of forcing Congress to act. He’ll allow the hostage-taking event to occur, he’ll let the hostage walk to school alone up the alley while the Republicans lay in wait. In the end, the debt limit will pass, but only after a round of hysteria and possibly an open rule designed to throw a dozen ideas into the mix, so the negotiation can bargain down to a few.
One of those possibilities may be McCaskill-Corker, which is basically a spending cap.
McCaskill was asked back in February if she wanted this bill to be included with a vote on the debt limit. She said no then, and she said no today. But her co-endorsers were more open to the idea. Lieberman said that his fellow moderate senators had met on Tuesday, and convinced him that “something like this has a chance.”
“We were talking about the debt ceiling,” said Lieberman, “and it was quite significant — everyone in the room said they were not prepared to vote for a, quote, ‘clean’ debt ceiling extension. In other words, they wanted something to happen that would give them and their constituents some kind of confidence that while we were increasing the debt ceiling we were actually doing something to lower the debt.”
So what is McCaskill-Corker? It would mandate that spending, within ten years, go from 24.7% of GDP to 20.6% of GDP. Instead of looking at what society needs, and advancing programs designed to fulfill those needs, and then determining how to pay for them, then, this bill would artificially limit spending to an arbitrary number that is less than the 22% level of spending under Ronald Reagan. And instead of picking and choosing what programs to save under that cap, McCaskill-Corker forces OMB to make the decision of making “evenly distributed, simultaneous cuts throughout the federal budget.” This would include mandatory spending like Medicaid, Medicare and Social Security.
James Homey of CBPP eviscerated this idea at the time.
The cuts in Social Security, Medicare, Medicaid, and other programs would grow much larger in subsequent decades. For one thing, the 20.6 percent cap would phase in gradually and would not be fully in effect until 2023 and thereafter. For another, Social Security, Medicare, and Medicaid costs are projected to rise substantially in future decades due to the aging of the population and rising health care costs and, thus, would have to be cut by increasingly severe amounts to meet the Corker-McCaskill level.
Policymakers could avoid across-the-board cuts by making specific cuts in specific programs to meet the Corker-McCaskill cap before a sequester would occur. But to do so, they almost certainly would have to enact the kind of radical policies for Medicare and Medicaid that are included in House Budget Committee Chairman Paul Ryan’s sweeping budget plan. Those policies include replacing traditional Medicare with a voucher for purchasing private insurance, converting Medicaid to a block grant, and eliminating most or all of health reform’s provisions that extend coverage to an estimated 34 million more Americans, including the Medicaid expansion and subsidies to make insurance affordable for working families. Indeed, even the cuts in the Ryan plan — which also includes very sharp reductions in non-security discretionary spending, one-third of which would be eliminated by 2021 — would not be quite deep enough in some years to meet the Corker-McCaskill cap. The Ryan plan produces total federal spending of 20 ¾ percent of GDP in 2030.
McCaskill-Corker, then, is the Ryan budget without the fingerprints. Note that they arrived at this spending cap number by looking at historical averages over three decades, none of which included the baby boom generation in retirement.
If you want to know about the impact of spending caps, just travel to Colorado. When California was considering a spending cap in 2009, we wrote about Colorado’s experience at Calitics:
We don’t have to guess about the impact of spending caps. In 1992, Colorado instituted a spending cap as part of TABOR, and within a few years spending on education, health care, and practically all other measures of government dropped from the middle of the pack relative to other states to almost dead last in every category. Considering that California ALREADY ranks near the bottom in these categories, the result would be even more disastrous. The California Budget Project estimates that the cap would force the state to reduce expenditures $16 billion dollars below the Governor’s baseline spending projections by 2010, $17 billion by 2011 and $21 billion by 2012.
Eventually, Colorado voters suspended their spending cap because the state would otherwise not have been able to survive. This is the forward-thinking idea Claire McCaskill wants to bring to the federal government.
Another possibility is the “fail-safe” trigger that Barack Obama mentioned in his budget speech, which like McCaskill-Corker would reduce spending automatically if the budget didn’t reach certain targets. This has been tried and failed in Washington, with Gramm-Rudman-Hollings.
Reagan’s fail-safe was designed to automatically trigger sharp cuts in government spending if massive deficits continued to spin out of control. But politicians couldn’t keep their hands off the fail-safe, adjusting it when precious programs were threatened, and ultimately they killed the provision. The cuts were “too enormous to be politically tolerable,” said Rudolph Penner, who at the time was head of the nonpartisan Congressional Budget Office.
A fight in Congress produced a landmark piece of legislation called the Gramm-Rudman-Hollings Act that required automatic cuts if the government didn’t reduce spending enough. It had prominent opponents, including then-Speaker Tip O’Neill (D-Mass.), who denounced it as “a gimmick” and “a disgraceful measure to subvert the Constitution.” [...]
But the fail-safe proposal was attractive to other Democrats, and it passed in 1985. It was eliminated a few years later when the economy went south and necessary cuts were bigger than anticipated.
This is precisely the problem with spending caps of these types, they don’t allow for contingencies. If another financial shock or a recession occurred, could government spend to get out of it? The White House says they would adjust the trigger to accommodate this, but absolutely nobody knows how that would work.
This is another reason why Harry Reid was wrong to inexplicably allow the debt limit vote to get past last December, when the Democrats had large majorities. He said he wanted Republican “skin in the game” on the debt. That might result in an unworkable, unthinkable spending cap being put in place.




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Thanks David.
I certainly remember prop 1A. Karen Bass didn’t help things when she took the republican stance, after the election, and stated that we voted down taxes. We voted no because of the spending cap.
If they impose that type of spending cap on the federal level, it would be devastating.
Here is a good article from the California Progress Report. It’s written by Daniel Marans from Social Security Works. He explains (also has PDF links) how horrible the Bowles/ Simpson plan is.
http://www.californiaprogressreport.com/site/node/8879
These are the sort of ‘Democrats’ we’re supposed to elect more of so the president can pursue his agenda? Eek.
Barry: “Republicans, make me do it.”
AND THE KILLIN’ GOEZ ON AND ON AND…
Citizen David Dayen:
The politics of all of this boils down to a game of chicken at every stage. First of all, since we learned that Obama doesn’t hafta give ANYthing away in the coming debt limit kabuki, we keep the pressure up at the state and local level and make it clear that if he caves on anything he will lose 15-20% of his base and won’t get re-elected…PERIOD! If he does cave then we mobilize around his budget sellout and against the wars (plural), run favorite son and protest candidates in enough states that could threaten his first ballot nomination. At the same time we continue to organize at the state level, pack the state conventions and give the evil spawn of Richard Daley a dose of deja vu in Charlotte. At some point here we hafta start crankin’ up the pressure on the crack between the the old dyin’ oilagarchs and the banksters. Jobs and the wars become the pivot point upon which the banksters are pressured to force Obama up against the Kochs and the military.
A third party split-off BEFORE the Charlotte convention only loses our leverage and ensures a final victory for the oil cowboys and a terrible and very noisy end to cpaitalism.
KEEP THE FAITH AND PASS THE AMMUNITION, THERE ARE MORE OF US THAN THERE ARE OF THEM!!!
Come on all you 80% D defenders of Obama. Jump in here in explain how this eleventy dimensional chess is worth supporting. Cause you know, Democrats always believed that in the battle to lower deficits (when it’s worth it to lower deficits) ALWAYS chooses cutting spending rather than taxing the rich, right??
Come on folks, WAKE THE FUCK UP!
This is NOT your parents Democratic Party anymore.
If you continue to support THIS Democratic Party, then you know what, you DESERVE the shit that’s gonna hit the fan. That’s just being real, all the evidence in the world is out there that this Democratic Party in DC is all but batshit crazy Republican, and if you support that, if you knowingly support that with all of the evidence out there, then you deserve what you get IMO.
Not the 20% of Democrats that have woken up though. They should get a taxpayer funded move to any country of their choice since the rest of you have deemed party comes over policy and the Democratic Party must be supported no matter the policy.
Getting so fucking fed up with this shit. HOW MUCH EVIDENCE DO YOU NEED FOR CHIRSSAKES!
nm
my bad
read it wrong.
Dumbass me.
And people scorched Palin for stupidity. Obama is DUMB. Entirely, repellently self-serving, as well, but dumb, on top of that.
OT – I am now a “Card-carrying Member of the Professional Left”
Emptywheel has a fresh cross-post available: Former Army Intelligence Analyst: “Army security is like a Band-Aid on a sunken chest wound”
As usual the Democrats have allowed the debate to be on the GOP idea of smaller government using GOP themes and solutions – ignoring the left – indeed, ignoring their past leaders like FDR and their stated objective of helping the non-rich and corporate.
OMB projects under current law (the end of the Bush Tax cuts) total revenues would supposedly exceed 19% of GDP after 2015, rising to 20% by 2021 – in a world where we spend 23% of GDP. While the fix is partly getting to a single payer health system with a prospective annual budget – the Vermont option 3 being discussed this year and I hope passed by Vermont – the other part of the fix is higher taxes on the rich and just getting corporations to pay US taxes.
As a percentage of GDP taxes were 8% of GDP from 1993 to 1996 and 9.6% of GDP from 1997 to 2000 as corporations paid real taxes. The GOP want to keep taxes at 8% of GDP which is the average (prior to Clinton’s enforcement of the IRS Code the highest was during World War II at 9.4% in 1944).
The claim that the rich turn over assets more at lower tax rates generating a bit more tax revenue ignores the fact the greater revenue being discussed occurs at Stock Market peaks – there is no proof that low tax rates produce capital gains tax that the Federal gov would otherwise lose.
A low tax rate on realized capital gains is “unfair”, but the solution is to tax unrealized gains, giving a credit usable when realized, so that the affluent investors do not sit on unrealized gains, hoping that an estate tax removal means they never pay a tax on their investment gains. A low tax that collects billions, as advocated by the WSJ, is a poor substitute for a proper taxation system that collects trillions.
It is time to end “The More you make the Less You Pay” world of today, where for the 400 U.S. taxpayers with the highest adjusted gross income, the effective federal income tax rate—what they actually pay—fell from almost 30% in 1995 to just under 17% in 2007, according to the IRS.
Yes the rich pay more today under the lower Bush tax rates – but that is because they take a much larger part of the nations total income, so the lower rate applied to a much larger number gives a slightly larger amount of dollars paid in taxes – this is not the definition of fairness or of good taxation or long term funding of the gov.
We must reject the GOP demand that both individual income taxes and overall federal taxes remain a constant percentage of GDP—8% and 18%, respectively— regardless of top tax rates on salaries, small business and investors. It makes a mockery of the idea of a progressive taxation system.
But doesn’t a spending cap interfere with the “invisible free hand of the market”?
Somewhat on topic, and in honor of traditional Tax Day: David Cay Johnston’s article on 9 Things the Rich Don’t Want You to Know about Taxes.
Looks like something to bookmark, email around, post hither and yon, and mail in its entirety to any non-internet using friends and family. (Hey, give the US Post Office some business!)
http://www.wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html
Tidbit: I had no idea Bush had made information on taxes of the top 400 a state secret!! From Johnston’s article
What’s with that????
Guess that must have been part of BushBoy’s support for Republican class warfare, the Great War on the Ninety-Eight Percent. Or is it the 99%?