The Talk: The Cut, Cap, and Balance Gang

Please enjoy ChrossTalk’s new weekly column:

The Talk: The Cut, Cap and Balance Gang
July 22, 2012

Chip Lebovitz: Welcome back from Costa Rica Ross, have you kept up with the tangled mess that is the debt ceiling debate?

Ross Freiman-Mendel: Good to be back Chip: the venue changed, but it’s all a jungle. The debt ceiling is a truly global issue. I don’t support an increase, but since that view is unacceptable to reasonable people, I support Cut, Cap and Balance.

Chip Lebovitz: While I’m sure the foreign policy implications of a failure to raise the debt ceiling are ominous, the Cut, Cap and Balance Act (CCB) going through Congress is equally portentous. CCB is a radical attempt to balance the budget on the backs of entitlements like Medicare and Social Security and would cap discretionary spending at 18% of the previous years’ GDP. The last time the U.S spent that little on discretionary spending was in the 1960’s, and I think that this Center for American Progress info-graphic shows that times have been a-changin’ quite significantly since then.

Ross Freiman-Mendel: You’re characterizing radical change as if it’s a devastating consequence, rather than a necessary one. To me it’s a simple logic issue: this government has consistently demonstrated its profound ability to live outside of its means, evidenced by the previous 74 times the ceiling has been raised since 1962. Congress is kicking the can hard — this time it obstinately is going nowhere down the road. What would you have Congress do?

Chip Lebovitz: Change is absolutely necessary; however, unlike the supporters of CCB, when the unemployment rate is above 9 percent, I would prefer my deficit reduction plan not cost the American economy 700,000 jobs next fiscal year alone. Let’s focus on a large-scale plan with at least some hints of bipartisan appeal like the Gang of Six’s newly released $3.7 trillion option.

Ross Freiman-Mendel: Yes Chip, we’re all familiar with the success of trillions in “stimulus:” I’m a particular fan of those soothsayers who predicted the job situation had we not acted. But to your point, I don’t support the Gang of Six’s plan, which at this point is a 5-page outline. Should we really allow Max Baucus to write more law?

Chip Lebovitz: The Gang of Six’s plan is a 5-page outline at this moment –- the actual legislation will be longer and more detailed. It’s a bit of schadenfreude that you would immediately beeline to the superficial details of the plan. Two popular recent conservative rallying cries have been in favor of shorter bills (Herman Cain and the three page-bill plan) and against longer ones (Obamacare). The Gang of Six’s plan isn’t perfect, but I absolutely support a plan that can stabilize the nation’s public debt by 2014 without shredding entitlements and non-defense discretionary spending.

Ross Freiman-Mendel: Short is good when discussing the 2700-page health care bill that added a new entitlement without review by a single Congressman. However, the lack of detail affords Senate committee chairman too much discretion in crafting the actual law. Unfortunately the Gang of Six’s plan is a $3 trillion-tax hike, if you consider the projections used. Has it ever occurred to you why the President so willingly embraced the plan?

Chip Lebovitz: Thiessen’s logic in that article is a bit skewed. Letting the Bush tax cuts expire, the meat of Thiessen’s “tax hike,” isn’t even a tax increase according to anti-tax berserker Grover Norquist, head of Americans for Tax Reform and purveyor of a no tax increase pledge that is sacrosanct among Republicans. The only valid point Thiessen even makes isn’t even on taxes – it’s about authorizing individual Senate committees to make cuts under a relatively broad framework. I agree that we have no clue what the committees will cut, but that’s just a small but manageable flaw in the Gang of Six’s proposal.

Ross Freiman-Mendel: “We have no idea” is more than just a “flaw.” Do you honestly believe a vague 5-page outline can deliver a definitive solution? According to former acting CBO director Donald Marron, the plan raises $2 trillion in revenues under the status quo — rather than predict the future, let’s deal with reality.

Chip Lebovitz: Now your arguments are verging on circuitous, but to put it a different way, there is a reason that the president is willing to support a short-term increase if it is paired with a grander plan. Passing a short-term increase allows the Senate more time to transform the 5-page outline to a full fleshed out bill. Let’s look toward the positives of this plan. The fact is that it actually does deal with reality, stabilizing our debt in the most realistically passable fashion by cutting $3.7 trillion for the deficit and roughly $2.2 trillion in spending.

Ross Freiman-Mendel: Chip, the President has consistently called for tax increases, and that’s why he supports this plan. Respectfully, the actual product does nothing to stabilize the debt, because, as Jack Kenny of The New American explains, the Gang of Six’s plan is more a wish list that calls on committees to find savings rather than actually produce them.

Chip Lebovitz: The Gang of Six’s plan may currently lack detail but the President supports this plan because it’s the most promising one on the table that could be passed and do something about the deficit. The proper path forward on the deficit must mix spending cuts and revenue increases.

‪Ross Freiman-Mendel: I’m sure my fellow conservatives in the House would agree — “must” is such a strong word. Washington has a spending problem, and we ought to starve the beast.

Enjoy the column? Then please feel free to send feedback to We’d love to hear from you.

Don’t forget to subscribe to the blog in the top right corner of this page and follow us on Twitter and Facebook.


9 responses to “The Talk: The Cut, Cap, and Balance Gang

  1. It’s telling that defenders of the status quo always rely on Armageddon scenarios to convince the constituencies…. if you can’t engage the public on the merits of your position, you can always terrorize them into submission.

    The fact is that the failure to raise the debt ceiling, at least on a short term basis, would involve no Armageddon at all. Grandmas would, in fact, receive their social security checks. The Prez, on the other hand, would have no cogent plan or constructive solution to default to.

  2. Concerned Citizen

    So we’re taking the debt-ceiling hostage now to consolidate our finances and avoid a fiscal crisis down the road. But if we don’t raise the debt-ceiling we get… a fiscal crisis. So we’re trading the possibility of a fiscal crisis down the road for a certain fiscal crisis now. Conservative fiscal policy at its finest!

    In all seriousness, the debt-ceiling isn’t something to screw around with. No, Jennie, there will not be Armageddon and grandma might just get her social security check. But the government would be approximately $130 billion short. It would have to cut somewhere. So while grandma got her check, our troops might not get theirs. Or maybe we’d see an epidemic of E. coli brought on because there was no money left for food safety. Or maybe poor people couldn’t eat. Please, stop making this into some abstract “Government must live within it’s means!” discussion. The time will come to have that discussion in a reasonable and responsible way. That time isn’t right now, not when there’s so little between America and catastrophic default.

    …And the worst part of that was that I didn’t even mention the demand that a failure to raise the debt-ceiling would suck out of the economy (almost certainly plunging the US back into recession) and the downgrading of US debt (yes, it would happen even if we prioritized interest payments and it would raise interest costs). In fact, it’s almost certain that failing to raise the debt-ceiling would make our fiscal situation worse! Go figure

  3. Absent the ability to deliver on his promise to keep the unemployment rate at or under 8%, the Prez defaulted to “jobs saved,” a metric that is unmeasurable and therefore amazingly convenient. By analogy, you are perpetuating the fiscal debacle called the “present,” by talking about a fiscal crisis you will save us from, another metric you can’t possibly measure.

    When someone is sick, they take their medicine now. Delaying the medicine lets the infection not only fester, but grow. I’m mature enuf to face the music…how bout you? Concerned too.

  4. Concerned Citizen

    Well, it seems that you’ve turned this discussion from the debt-ceiling debate in particular to a full-throated (if poorly spelled) assault on Keynesian theory in general. But I’m more than happy to go there, too.

    Yes, our president and his economic team made a bad decision by promising the unemployment rate would remain below 8%. However, that was because no one knew how bad the crisis was when they made that prediction. The crisis proved to be far worse than anyone expected. I do challenge your assertion that “jobs saved” is somehow unmeasurable. Mark Zandi, chief economist at the independent organization Moody’s, has done analyses that give a clear range of “jobs saved.” And please stop citing the stimulus as proof that stimulus in general doesn’t work. There was, in fact, no true stimulus. And before you get twisted about Obama’s monstrously socialist-Islamist-Kenyan stimulus package designed to destroy America, remember that there are 3 levels of American government. Yes, federal spending increased dramatically (as it should during recessions). But this spending barely offset the lower spending from states and local governments, constrained by arcane balanced budget rules that prevented them from running counter-cyclical fiscal policy. The stimulus needed to be at least twice, maybe even three times as big to fill the hole that the recession created.

    Finally, for the love of God, stop painting yourself as the responsible adult in the room who’s ready to “face the music.” Conservatives aren’t the adults in the room forcing liberals to “take their medicine.” You must know that it is much more complex than that. This country does indeed have a “disease”; it’s the jobs crisis. Corporations are swimming in cash but are refusing to spend it because consumers aren’t buying anything. We cannot, and will not, address the debt crisis until Americans are back to work. The one thing the government can do right now is stimulate demand in the economy. If the government pays workers, they’ll buy things, companies will see rising demand, and they’ll add workers. This is not about me, as a liberal, being unwilling to accept some budgetary pain. I do accept the fact that America must make some cuts to ease its long term debt burden. It’s about making these cuts in a smart, responsible way. But not this way, with the economy still depressed and a gun to the American government’s head in the form of the debt ceiling. A “grand bargain” that stimulates demand in the short term while decreasing spending and raising revenue in the long term continues to be the best option, though we have run out of time to craft such a plan before doomsday, August 2nd.

    I am glad that you share my concern about the current situation, Jennie. The question is, with an economy that recently shed 15 million jobs, how concerned are you?

  5. Speaking as a person who has, in fact, created jobs, I can tell you this: when, as you put it, “the government pays workers,” they are in fact collecting tax dollars from one group of people and using that revenue to “pay” others. The government doesn’t create jobs as much as it transfers wealth. The people who work for the government may have more money to spend since they have received wages, but the taxpayers who paid them have less to spend.

    Unless you create something totally new, ie. entrepreneurial activity, you’re just favoring one group at the expense of another. Facebook, Google, etc created jobs, something beyond just make work. If you really want to create lots of government jobs, say to build roads, why not have your workers build roads using spoons instead of shovels? That will keep them going for a good long while 🙂

    I think you should run for president. I’m pretty sure I could rail against you indefinitely!

  6. Concerned Citizen

    Ok, clearly you have no idea how government finances work, so I’ll try to explain it as briefly and as simply as possible. Right now, the economy is depressed; as such, the government must borrow to finance its spending. Before you get started on a tirade about how Obama is responsible for all of the reckless government spending, I’ll head you off. It isn’t Obama’s fault. Our current fiscal situation is mostly due to the financial crisis and reckless policies of the past administration. Unfunded tax cuts and wars are the primary policies responsible for our deteriorating finances. Revenue, as a percentage of GDP, hasn’t been as low as it is right now since the 1960’s. That was before we had Social Security, Medicare, and Medicaid. So, basically, the government isn’t taking in enough tax revenue. Therefore, the government must run a deficit.

    Now, for the government to stimulate demand, it must spend money. That means that the government must borrow more. “But wait!” you say. “The government will have to raise taxes later to pay off that new debt.” This is absolutely true. However, the point you seem to miss is that the government can borrow to stimulate demand *in the short term* and then pay off its creditors *in the long term*. Stimulus is, by its very definition, temporary. When the economy returns to full employment, the government can cut its spending and the private sector will be there to pick up the slack. So what we need is short term stimulus and long term fiscal discipline. This is, in fact, exactly what I advocated in my last post! Funny how that works.

    The correct way to think about our current situation is as a lot of deficits. Yes, we have a fiscal deficit. But the rate of interest on that deficit is low (historically low, actually). The far more pressing deficit is the jobs deficit. We lost 15 million jobs in the Great Recession. Those people are still out of work. They’re suffering. And if we don’t act soon, their skills will deteriorate and we might never be able to send them back to work in anything above low skill jobs. We have ample time and ample resources to commit to lowering unemployment in the short term AND consolidate our fiscal deficit in the long term. Actually, the best thing America could do to solve its debt problem would be to get the economy growing again. And the best way to do that is the government to borrow and spend in the short term. As a bonus, we also have a crushing infrastructure deficit. So we could tackle the jobs deficit and infrastructure deficit in one go round, if only conservatives on Capitol Hill would let us.

    I know it may be tough to understand that the government can spend money in the short term to save money in the long term. But that’s actually called investing. If you’ve actually created jobs in the past, as you claim, I’d have expected you to have at least a slight grasp of that particular concept.

  7. Concerned, you have far too much time on your hands, as witnessed by the length of your posts. It makes sense though… you practice what you preach. Economy of language? Nope… you float the bloat, obscuring in rhetoric, indicating there is a “solution” in there somewhere.

    Here’s my simple advice to you: get a job! (Woops… not likely, in your economic scenario).

    In addition to “jobs saved,” that nebulous metric, your ilk default to blaming it all on previous administration(s). It’s about the past and the future because you have no viable solution for the present.

  8. Concerned Citizen

    Ah, yes, Jennie, I have far too much time on my hands. These issues concerning the global economy are so simple! It only takes a few sentences to save the world. “Less government!” “Lower taxes!” And you’re done. Except that you’ve just reinforced your own paranoid delusions about the role of government. And if someone makes an effort to, you know, actually explain a situation within a coherent ideological framework, you resort to ad hominem attacks (that means attacks on me, personally, in case you weren’t sure). Notice how you haven’t actually presented any legitimate arguments that run counter to mine. Your last post began with assertions that have nothing to do with the economy (stupid and irrelevant), followed by your equating my writing style with my macroeconomic framework (sensible!). And, so long as we’re giving constructive writing criticism, “you float the boat” doesn’t make any sense. Good try though! Words are hard. You then take what seems to be a jab at me, but are again foiled by your own lack of command of the English language (“Woops” isn’t a word. You sounded it out, so you’re making some progress, though). Finally, your last paragraph is, alas, devoid of substance as always, not attempting to substantively contradict anything I say.

    I have only one more thing to say: stop pretending you know anything about economic policy. You are probably some self-satisfied “entrepeneuse” who, in middle-age, has managed to build a business that employs three college students. Quite the achievement! But that doesn’t allow you to make judgments about macroeconomics. Maybe you do have some sort of framework for analyzing economic policy; if so, you’ve so far been unable to show it. Whereas I have taken your ideas seriously (or as seriously as I can), you haven’t even attempted to counter with, you know, serious ideas of your own. And when you did, with your little “more spending means more taxes” analysis above, you got it totally wrong (as I explained in my last post). Now, don’t take this as a personal insult. You’re probably too busy selling friendship bracelets or luxury dog collars or whatever you do for a living to pay attention to macroeconomic policy. And I bet the economics department at “Podunk University” wasn’t the strongest. So I don’t begrudge your ignorance. I do take exception, however, with people of your ilk (the correct usage of that word, for the record) pretending that, because they have hired someone once in their life, they now know everything about economics. That’s ignorant, and it’s wrong. If you don’t know how to defend your ideas in a serious discussion, Jennie, perhaps you should reexamine those ideas. Otherwise, please don’t enter the discussion at all.

  9. You have me totally convinced. Thanks for your compelling arguments and failure to employ ad hominem (I get it… most likely you didn’t bother, because I’m female and you took “hominem” literally).
    I accept your advice, and hereby end my involvement in the discussion.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s