Economy

Republicans' Radical Plans for Budget Could Threaten the Economic Security of Millions

Newly emboldened Republicans plan to use arcane House procedural rules for a scorched-earth assault against government spending.

Through new budget rules that are expected to pass on a party-line vote in the House this week, and an upcoming battle over raising the government's “debt ceiling,” the new Republican leadership is preparing to codify a discredited far-right economic agenda into law, forcing deep cuts to public spending at precisely the moment when the economy needs that spending to build momentum.

If the GOP wins the very public fights to come over the next year, it'll deliver a grievous dose of anti-stimulus to our painfully ailing economy. What's more, after a campaign season of fear-mongering about the federal government's budget picture and shrill calls for greater transparency in Congress, if they have their way, the Tea Party Republicans in the House will institute rules that would allow them to run up massive piles of new debt, with at best limited public debate. 

It'll be up to us to make sure President Obama and Senate Dems don't cave before the onslaught to come.

Ryan's Rule

At the beginning of each new session of Congress, the majority party sets procedural rules that guide how legislation is to be crafted. Buried in the House's arcane rules is a measure that the non-partisan Center for Budget and Policy Priorities (CBPP) calls, “a stunning and unprecedented provision” that would give the Chair of the House Budget Committee – widely expected to be Wisconsin Rep. Paul Ryan, the GOP's top economic ideologue – previously unheard of power to dictate the terms of the House budgeting process.

The rule stems from the Dems' failure to pass a budget resolution in last year's lame duck session of Congress. Absent that resolutionthe rule empowers Ryan to publish spending and revenue limits that would “be considered as the completion of congressional action on a concurrent resolution on the budget for fiscal year 2011.” In other words, whatever Ryan cooks up, will have the same effect as a resolution passed by the entire House of Representatives.

CBPP notes the rule change “has immediate, far-reaching implications”:

It means that by voting to adopt the proposed new rules on January 5, a vote on which party discipline will be strictly enforced, the House could effectively be adopting a budget resolution and limits for appropriations bills that it has never even seen, much less debated and had an opportunity to amend. (There is no requirement for Representative Ryan to make his proposed spending and revenue limits available to Members or the public before the vote on the new rules.)

This would, among other things, facilitate the implementation of incoming Speaker John Boehner's radical proposal to cut non-security discretionary funding for fiscal year 2011 by $101 billion (or 21.7 percent) below the level appropriated for 2010, as adjusted for inflation without any consideration or vote on that proposal.

Ryan is a dedicated Ayn Rand fan and draws inspiration for his policy prescriptions from the Right's favorite fiction writer. “The reason I got involved in public service, by and large, if I had to credit one thinker, one person, it would be Ayn Rand,” he said at a D.C. event honoring the author. On another occasion, he proclaimed, “Rand makes the best case for the morality of democratic capitalism.”

Boehner's proposal to cut discretionary spending by $100 billion – more than a fifth -- to 2008 levels, fits into that "philosophical framework." As Bloomberg reported, such deep cuts would “lead to dramatic reductions in social services across the board” and require “slash[ing] spending for education, cancer research and aid to local police and firefighters.” It truly is radical at a time when the government is still acting as a “buyer of the last resort,” and propping up state and local budgets devastated by the recession.

But as Paul Krugman notes, cuts that deep wouldn't only effect services that are popular with Democrats and liberals; some of the programs with the broadest bipartisan support would also necessarily end up on the chopping block. Krugman concludes this means “it’s not going to happen,” and it is true that if there are 218 votes to pass the rules, there might well be 218 votes to waive them. But with the Tea Partiers baying for the blood of apostate “RINOs” (Republicans In Name Only) it's more than just possible they will take a scorched-earth approach to governing.

Whatever the case, the Senate will not be bound by the House's rules, meaning the likely outcome of Ryan's coronation as King of the Budget Process is it will be all but impossible for the two chambers to agree on a budget outline.

So get ready for some tempestuous fights and even more gridlock this year than we saw in the 111th Congress.

Deficit-As-You-Go Rules

When Democrats controlled the House, it operated under a set of sensible, centrist rules known as Pay-As-You-Go, which required that increases in “mandatory” spending be offset either by hiking taxes or cutting costs elsewhere in the budget. It was a mechanism to keep deficits in check, which conservatives often claim is something they care about.

But the Right also believes in magic. Republicans argue, bizarrely, that maintaining current spending levels and cutting taxes doesn't, in fact, increase the deficit. In their mythology, only spending more while keeping taxes low can add red ink to the budget.

It's voodoo economics, and the new House leadership is poised to codify it in the law by replacing Pay-As-You-Go with a rule they're calling Cut-As-You-Go, which would require new spending to be balanced by cuts elsewhere, but would exempt Congress from the requirement to offset the cost of new tax cuts.

That's not all. As CBPP notes, “increases in mandatory spending could be offset only by reductions in other mandatory spending, not by any measure to raise revenues such as by closing unproductivespecial-interest tax loopholes.”

For example, the House would be barred from … [extending a provision] that enables many minimum-wage families to receive a full, rather than a partial, Child Tax Credit by closing wasteful tax breaks for multinational corporations that shelter profits overseas.... Yet the same new rules would enable the House to expand tax loopholes for multinational corporations and wealthy investors without paying for those tax breaks at all, because any tax cut, no matter how costly or ill-advised, could now be deficit financed.

More Voodoo Math

But that's not the end of the disastrously wishful thinking plaguing the proposed rules. They also allow the new Chair of the Budget Committee to simply ignore the fiscal impact of making the Bush budget cuts permanent, extending the “temporary” reduction in the estate tax or passing a major new set of tax cuts for the wealthiest Americans.

In a final kick to the head of fiscal reality, the budget committee can also just ignore the impact of repealing the Democrats' health-care reforms. As I've written before, we don't have a deficit crisis; we face a problem of unsustainable health-care costs. If we paid the same for health care as any of the three dozen or so countries with longer average life expectancies than the U.S., we'd be looking at budget surpluses rather than shortfalls.

Obama's health-care reformsmay be controversial, but whatever one's views on them, the Congressional Budget Office projects they'll shave $100 billion off of the deficit over the next 10 years, and another trillion dollars during the following decade. Last week, Talking Points Memo reported that the GOP has hired some veteran K Street lobbyists to help “unravel” the health-care reform bill, and under the new rules, Paul Ryan can just wish away the budgetary impact of those moves.

In 2004, journalist Ron Suskind famously quoted a Bush aide saying, “When we act, we create our own reality.” That view is up for a vote in the new GOP-controlled House of Representatives this week, and objective reality is going to go down in flames.

Senate Republicans' Next Hostage: The Debt Ceiling

The debt ceiling is technically a limit on how much long-term public debt the federal government can hold. It's only “technically” a limit because it's routinely raised to accommodate whatever legislation Congress deems necessary; it was raised seven times during the Bush years without much debate (but with broad bipartisan support).

But nothing will be routine in this Congress, and GOP leaders are promising to mount what Senator Jim Demint, R-South Carolina, called “a big showdown” over the debt limit. That would amount to Republicans threatening to send the United States government into default on part of its debt unless the Democrats accede to their policy demands.

Senate Majority leader Mitch McConnell, R-Kentucky, vowed to hold firm on the debt ceiling just hours after the midterm election results came in, promising to block an increase unless there are “strings attached.” DeMint signaled what he thought were appropriate strings, and it looked a lot like the entire agenda of the Republican Right. “I won't [vote to raise the debt ceiling],” he said, unless the increase is “combined with some path to balancing our budget, returning to 2008 spending levels [and] repealing Obamacare.” No mention of bombing Iran or requiring Obama to produce a birth certificate, but there's time yet.

And on "Meet the Press," his colleague Lindsey Graham pledged not to vote for the increase “until I see a plan in place that will deal with our long-term debt obligations starting with Social Security, a real bipartisan effort to make sure that Social Security stays solvent, adjusting the age, looking at means-tests for benefits." In the real world, Social Security has run surpluses in 26 of the past 27 years – subsidizing the rest of the budget – and won't cause a penny to be added to the debt for another two decades, at least.

Austin Goolsbee, chair of Obama's council of economic advisers, said the Republicans' obstruction was ruled by “insanity,” and that failing to raise the ceiling would end in “catastrophe.” "It pains me that we would even be talking about this," he said. "This is not a game… If we hit the debt ceiling, that's essentially defaulting on our obligations, which is totally unprecedented in American history.” The impact, he added, “would be a worse financial economic crisis than anything we saw in 2008."

The sum total of these policies, should they come to pass, would be disastrous to our fragile recovery, as well as to the economic security of millions of American families.

What remains to be seen is whether the Democrats can finally exact a political price on their opponents for their incoherent fiscal policies; whether they can make them pay for pushing measures that increase the deficit, cut popular programs and shovel more of our national wealth to the nation's highest earners.