March didn’t come in like a lion – there were no monster storms anywhere – but then it didn’t come in like a lamb either. The month opened with just another Friday – the stock markets didn’t crash, or soar, they just edged up a bit. There was that minor report – the data now show the biggest monthly income drop in twenty years – mostly due to the payroll tax cut expiring. That hit Wal-Mart and K-Mart and other low-end retailers hard, because that hit what Leona Helmsley called the Little People hard. The payroll tax applies to the Little People, you see – it doesn’t apply to anything you make over about a hundred thousand dollars. If you make that kind of money you pretty quickly just stop paying the tax, which funds Social Security and such.
That makes sense. Those are the programs for the Little People, not the good people, as you hear said when someone like Mitt Romney talks about the forty-seven percent who have no sense of personal responsibility, or when Paul Ryan talks about the Makers and the Takers. You hear that sort of thing every day on Fox News too. Let the Little People pay for that stuff, and really, if you make the kind of money that makes you a good person, you’re certainly not shopping at Wal-Mart. It’s too bad their odd customer-base suddenly didn’t have much money to spend anymore, but that’s a special circumstance – overall corporate profits are at record highs and they’re sitting on an aggregate two or three billion dollars in excess cash. Of course they have no reason to invest that idle cash in plants or equipment or new-product development – wages have been stagnant for two decades and now they’re dropping, so no one’s buying much of anything. That’s okay. Massive piles of cold cash are comforting, and they grow larger with clever trading of clever new financial instruments. This is also a supply-sider’s dream. Labor is dirt cheap when everyone’s so desperate for a job, and the government is afraid to regulate anything you do, because you might just move the whole operation to Paraguay, so unit-cost is incredibly low and profit-margin amazingly high – and there are always customers out there somewhere. Even the Little People need a new something or other now and then, and if they don’t have the money to buy it they’ll put whatever it is on credit, making the credit card companies show their own record profits. Everyone wins, so the month opened with no bad news for these folks.
This might explain why the markets had no particular reaction to the big story of the day:
President Obama acknowledged Friday that deep federal budget cuts are here with no end in sight – an outcome that he warned would harm the economy but said he lacked the power to stop.
A final attempt to find common ground with congressional leaders at a White House meeting proved fruitless. The president continued to press for higher taxes as part of a deal, and Republicans continued to refuse – clearing the way for $85 billion in cuts this fiscal year and $1.2 trillion over the next decade.
So here we go:
The reductions, which Obama formally ordered late Friday, are likely to remain in place for the foreseeable future. There had been speculation that they might be adjusted later this month, when lawmakers must agree on a new deal to fund the government or risk a shutdown. But Obama made clear Friday that he would seek to avoid a shutdown even if that means allowing the across-the-board cuts, known as the sequester, to continue.
The failure to reach a deal to turn off the sequester after years of clashes over spending and taxes will usher in an era of deeper austerity in the United States. To date, the country has resisted the sharp pullback in federal spending that has occurred in much of Europe.
Yeah, austerity has been a disaster in Europe – see all the wonky details here – but we’re going there too, because there’s a basic disagreement:
For Obama, the failure to reach a deal is a setback. He has spent years arguing that efforts to tame the nation’s debt should involve a balance of spending cuts and tax revenues. As things stand now, the onset of the sequester means that balance tilts heavily toward cuts.
Polls show Obama has broad support among Americans for his approach to taxes and spending. Over coming weeks, senior administration officials said, he will highlight people and localities hurt by the sequester, with the intention of creating pressure to force Republicans to concede. But the president said that could take months.
“It’s happening because of a choice that Republicans in Congress have made,” Obama said in the White House briefing room after the meeting with congressional leaders broke up. “They’ve allowed these cuts to happen because they refuse to budge on closing a single wasteful loophole to help reduce the deficit.”
The GOP is able to say it defied the president, avoiding his demand for new tax revenue.
So there you have it, with this odd detail:
Asked why he doesn’t just sit down with congressional leaders until a sequestration deal is reached, President Obama said Friday that he can’t lock lawmakers in a room.
“I am not a dictator, I’m the President,” Obama said. “So, ultimately, if Mitch McConnell or John Boehner say, we need to go to catch a plane, I can’t have Secret Service block the doorway.”
Obama added: “I know that this has been some of the conventional wisdom that’s been floating around Washington that somehow, even though most people agree that I’m being reasonable, that most people agree I’m presenting a fair deal. The fact that they don’t take it means that I should somehow, you know, do a Jedi mind-meld with these folks and convince them to do what’s right. Well, you know, they’re elected. We have a constitutional system of government.”
Much has been said about how it’s the Vulcan Mind Meld and the Jedi Mind Trick – and one should never confuse Star Trek with Star Wars – but that was fluff. The larger point was that no one has such powers to cloud the minds of men and all that. Don’t confuse science fiction with real life. And more generally, in our constitutional system of government the president cannot just do anything he wants – ask Richard Nixon. People do have odd ideas about the presidency. Why don’t you be a real leader and just fix this right now? That’s like asking why you don’t just break the law right now.
Slate’s David Weigel covers a bit of that:
The default position of the punditocracy is that the president must lead. The lazy pundit invokes Harry Truman’s desk ornament, “The Buck Stops Here,” as a totem of great wisdom. Brendan Nyhan, who isn’t lazy, calls this “the Green Lantern Theory of the Presidency,” after the D.C. Comics superhero and his ring that runs on willpower. Bob Woodward offered a sterling example of the theory this week, when he suggested that the president’s willingness to obey the Budget Control Act (the law that mandates sequestration) was “madness.”
“Can you imagine Ronald Reagan sitting there saying, ‘Oh, by the way, I can’t do this because of some budget document?'” asked Woodward. “Under the Constitution, the president is commander in chief and employs the force.”
Indeed he is, but when the president does it, it’s not always legal. The president can only spend what Congress appropriates. Prior Congresses, just as aggressive as this Republican-run House, have used that power to cut off money, like the Nixon-era Democrats did when they stanched the budget for the Vietnam War.
John Boehner’s Republicans just aren’t that good at it yet. They’re still working out the details, which they need to do soon:
After Friday, when the sequestration becomes a real thing, Republicans will get another, harder choice… At the end of March, they need to pass a new appropriations bill to fund the government. They can pass an omnibus bill, combining all the spending plans they need. That would put the onus on Congress to define how the money gets spent. Alternatively, they can pass a continuing resolution, spending numbers based on the Budget Control Act. That would keep the onus on the White House; that’s the plan most likely to rise to the top.
They could tell Obama to make all the decisions, because Congress doesn’t really matter, or something. It’s an odd muddle. But this particular sequester is now the law, passed by Congress – that’s their job not his – and they won’t back down. Obama has to administer it, or break the law. What question was that question being asked in the news conference? Just make everyone do the right thing? Obama was right to offer a wry reply. Think, people!
As the New York Times details, Obama had no choice here:
Speaker John A. Boehner, the man who spent significant portions of the last Congress shuttling to and from the White House for fiscal talks with President Obama that ultimately failed twice to produce a grand bargain, has come around to the idea that the best negotiations are no negotiations.
As the president and Congressional Democrats have tried to force Mr. Boehner back to the table for talks to head off the automatic budget cuts set to take effect on Friday, Mr. Boehner has instead dug in deeper, refusing to even discuss an increase in revenue and insisting in his typical colorful language that it was time for the Senate to produce a measure aimed at the cuts.
“The revenue issue is now closed,” Mr. Boehner said Thursday, before the House left town for the weekend without acting on the cuts and a Senate attempt to avert them died. Mr. Boehner said the dispute with Democrats amounted to a question of “how much more money do we want to steal from the American people to fund more government.”
“I’m for no more,” he said.
Boehner’s choice of words was unfortunate. Stealing? Beverly Mann runs with that:
So Ronald Reagan was a thief? Who knew? And so, it’s now clear, was every president beginning with Abraham Lincoln. Until George W. Bush, that is. Teddy Roosevelt? Yes. Calvin Coolidge? Uh-huh. Harry Truman? I guess that’s what they meant by “hell” that he was giving ‘em. They each stole from the American people via income taxes to fund the federal government.
But since FDR was the one who initiated the stealing to pay for such specifics as Social Security, the Tennessee Valley Authority and other New Deal programs, we’ll start with him. He also stole–a lot–from American people to pay for WWII.
Dwight Eisenhower, JFK, LBJ, Richard Nixon, Gerald Ford, and Jimmy Carter perpetuated this theft – big time. Of course, Nixon, who assured the country that he was not a crook, did turn out to be one after all, so in retrospect, his theft from the American people was just in character. And we knew all along that Dwight Eisenhower was the perpetrator of the theft from Americans that established a Soviet-style interstate highway system…
There’s much more of this, but the general point is that if taxes are stealing, government itself – where everyone chips in for the common good – cannot be legitimate. It is, in itself, no more than a criminal enterprise. Boehner couldn’t have meant that, or if he did, he chose the wrong career. Perhaps he just can’t think clearly, and Mann thinks Obama should say this:
Since when is it theft of Americans to institute tax increases that a majority of Americans who voted in the recent election actually specifically voted for? And he should point out that what Boehner really thinks the crime is that public prefers that the federal government continue to fund Medicare and other social safety-net programs, as well as myriad other services, agencies and perks of being an American; the National Institutes of Health, the National Parks Service, FEMA, and the EPA come quickly to mind, but of course there are many others.
That may be being too picky. Boehner chose the wrong word, or chose the wrong metaphor, or he’s a sloppy thinker. It doesn’t matter. He will not negotiate on anything ever again. That’s it. The item goes on about how his party is now cheering him as a hero – they’re happy with him too.
Kevin Drum adds this:
I’m not surprised about this. After all, Republicans are fine with the domestic cuts, and probably figure the inevitable horror stories won’t be bad enough to do them any lasting damage. They can tough it out. And while cutting every single agency by the same amount is dumb, it’s only for seven months. They’re allowed to re-juggle the cuts during the upcoming budget cycle.
As for the defense cuts, they’re probably counting on putting that money back into the budget somehow. There are enough Democrats who will go along with this to make that possible.
So here’s what they get: A bunch of cuts to domestic programs. A short-term hit to the Pentagon. No tax hikes. And lots of chaos over the next few months, which will make voters even more disgusted with Washington than usual. What’s not to like? This is Republican heaven, assuming their political read of the situation turns out to be correct. And it might.
Steve M at No More Mister Nice Blog sees that too:
Regarding that bit about “the inevitable horror stories”: Yes, some people will feel the pain immediately, but for most Americans, the pain will come as a ripple effect — unemployment inching higher, the economy becoming more and more sluggish or even going into reverse. And since the pain of the cuts won’t be instantaneously shocking to many people, Republicans can probably count on the fact that when it really hits, most Americans won’t even connect it to the sequester. We’ll be three or four crises further along by then; we won’t still be talking about the sequester, and most Americans won’t even remember what it was.
Republicans will just say that any uptick in unemployment or reversal of the recovery is the fault of “the Obama economy.” Or excessive spending — remember that after this, Republicans will still say government spending is “out of control.” (It’s always “out of control” when Democrats are in charge.) Or maybe they’ll blame a downturn on those job-killing Obama tax increases on the rich. They love that one. (The mainstream press, of course, will blame “Washington.”)
It’ll just be one more thing Republicans did and hung around Obama’s neck.
They think they’ll be fine, as that New York Times item indicates:
Republican aides say privately that Mr. Boehner sees no need to negotiate; Republicans are in a good place, they argue, because they want spending cuts and those cuts are happening.
The Washington Post’s Greg Sargent isn’t so sure:
See the problem here? House Republicans are cheering the sequester as a good thing – or at least, as a better thing than compromising to avert it – even though the committee in charge of expanding their majority is on record acknowledging that they will damage the economy. It’s another indication of just how muddled the GOP’s messaging on the sequester has become.
Think about it:
Some conservatives who favor the sequester have argued that if it doesn’t result in any significant damage, it will undercut the Democratic case that spending cuts are bad for the economy. It’s true that this poses a danger for Dems. But it gives rise to a question: What if Republicans dig in and the sequestration grinds on for months – and it does result in job losses and more economic damage? Will Republicans acknowledge that cutting government spending does hurt the economy?
They’d have to:
After all, this is a case in which Republicans themselves are on record embracing these cuts as the right thing to do to save the country from fiscal and economic ruin. They can’t turn around and dismiss these as “fake” cuts (as some conservatives have done to avoid giving Dems credit for the $1.5 trillion in cuts they agreed to in 2011).
The contours of the argument are drawn: Democrats say these cuts will damage the economy, a position backed up by the nonpartisan Congressional Budget Office, which has estimated that they could cost us as many as 750,000 jobs by the end of the year. Democrats maintain that replacing the sequester with only spending cuts should be a nonstarter, because that would also damage the economy, not to mention hurt a lot of people who rely on the government programs that would be downsized. As Obama put it in a presser just now, framing the stakes in the battle to come: “every time we get a piece of economic news, we’ll know that news could have been better if not for Congress’ failure to act.”
Meanwhile, Republicans are embracing these cuts as the better option than replacing them with a cuts/revenues compromise – even as some of them are predicting the cuts will damage the economy.
Which is it? Are we talking about these cuts as a wonderful thing or a horrible disaster, or did they just tell us to expect a glorious disaster that will hurt us all and make everything perfect? Sargent says only this:
If this drags on for months and results in serious damage to the economy, Republicans will own it.
This is madness, and the Atlantic’s Derek Thompson reminds us of how this all started:
If you ask 100 budget experts how to cut spending, zero of them will say: “Take a guillotine to each agency, regardless of its resources or purpose.” And yet that’s exactly what sequester does. In the next few days and weeks, it might have little impact. But over time it will wreak havoc with military contracts and devastate the most important parts of government spending in infrastructure and research.
The sequester wasn’t designed to be a good law. It was designed to be such a bad law that Congress would feel compelled to replace it with another one. But that’s the second crazy thing about the sequester: It’s forcing Congress to take painful action where painful action isn’t even needed yet.
No, we didn’t have to do this, although Matthew Yglesias welcomes the Defense cuts and says the rest isn’t all that bad:
So then you look at the domestic side. Your basic transfer payments to poor people are spared, your transfer payments to the elderly are basically spared, and then everything else gets cut willy-nilly. That leads to some real policy harms. Valuable research grants are going to not happen. We’ll see some real bottlenecks at regulatory agencies. But obviously there’s some waste and fat in this domestic discretionary spending.
Long story short, if you’re a defense dove like me and have a non-utopian view of the domestic discretionary budget, then this looks like we’re mostly talking about harmless spending cuts. It is very true that the current moment is not an optimal time to cut wasteful government spending. Given the high unemployment rate, the low and stable inflation rate, the low cost of federal borrowing… I would say that 2013 is an excellent time for the federal government to waste some money on make-work military contracting gigs. But in the grand scheme of things, wasting resources on low-value programs is not a great idea, and there’s more to life than timing.
Steve M is having none of that:
What Yglesias says in the lead-up to that statement is absolutely correct: we should be doing far more to put money in ordinary people’s pockets. I don’t care what it is: I’d take “make-work military contracting gigs” or a huge infrastructure repair program or any other way you could make it happen. Whatever will inspire people go to the mall next weekend. Whatever will flow money through the rest of the economy.
If military contractors are laying people off, retailers in regions where military items are made will suffer. If federal workers are experiencing one-day-a-week furloughs, their ability to spend drops 20 percent – and on and on. And, of course, this happens in an economy where most people barely have an economic cushion – I bet Yglesias has one – so how far will some of these people sink, even if the cuts are temporary?
This seems like a not-horrible idea if you’re in an ivory tower miles above the earth where most people live. Unfortunately, Matt, most people don’t get to watch from there.
For them, March came in like a lion, a rather ravenous one. They’re the Little People that Leona Helmsley was talking about. Yes, there was no monster storm, and the markets were just fine, moving steadily higher, but the Great Sequestration began, with Obama being all reasonable and realistic, but pointing out that meant he couldn’t do much, and with John Boehner declaring that he’d never be reasonable and realistic ever again, as it was better to be heroic. That was storm enough.