Matt Yglesias

Are Obama’s Budget Proposals Too Reasonable?

Thinking about the fine whine Ben Nelson, Even Bayh, and others are currently enjoying over the dastardly idea of returning the marginal tax rate on the richest two percent of the population to where it was back when Bill Clinton was destroying the economy, I’m growing concerned that the Obama administration may have made a mistake by putting forward such a reasonable budget proposal.

I can see why they did it. The key administration players—Larry Summers, Peter Orszag, Tim Geithner, Jason Furman, etc.—are nothing if not reasonable, moderate people. But the key legislative players aren’t reasonable, moderate people they’re “reasonable” “Senate moderates.” A “Senate moderate” is someone who takes his party’s proposals, objects to them, waters them down a bit, and then congratulates himself on a job well done. Which is great if his party’s proposals are unduly immoderate. But it’s big-time trouble if his party puts a reasonable, moderate agenda on the table.

After all, you don’t maintain the painstakingly achieved Nelson/Bayh “Senate moderate” brand by clapping politely. You need to bitch and moan and be quoted in inside-baseball only media outlets that none of your constituents pay attention to, and hold conferences and have meetings at the White House where people hold your hands. You need to be praised by the opposition party, and extract your pound of flesh from the proposal. Then when it looks like it might go down to defeat, you can vote for the somewhat-watered-down version and be the hero who saved the day and nobody will mention that you saved the day from yourself.

But you really do need to do that stuff. You can’t just say “well, this is a reasonable proposal so I’ll back it.” Then your moderate license gets taken away.

But I think that means that proposals need to deliberately overshoot the mark. Say Obama had proposed a top marginal tax rate of 43 percent. Well Evan Bayh couldn’t stand for that! He might propose some reasonable alternative like letting the Bush tax cuts expire so that post-recession rates will be back where they were in the 1990s. How reasonable! How moderate! How judicious!

Evan Bayh & Ben Nelson Join Overclass Revolt Against Obama’s Tax Plans

Are you one of the 95 percent of Americans whose taxes would be cut under Barack Obama’s budget? Does the thought of that tax cut being paid for by tax increases on the wealthiest 2 percent of the population strike terror into your heart? If so, you’re in look, because it’s not just Republicans who are eager to spare you from this nightmare moderate Democrats such as Evan Bayh and Ben Nelson want to keep the rich as rich as possible too:

As for the tax increases on high-income earners called for in Obama’s plan, [Evan] Bayh said, “I do think that before we raise revenue, we first should look to see if there are ways we can cut back on spending.” [...] “I have major concerns about trying to raise taxes in the midst of a downturn of the economy,” said [Ben] Nelson, the conservative Nebraska Democrat. “On the one hand, you’re trying to stimulate the economy. On the other hand, you’re trying to keep money from going into taxpayers’ pockets. It’s very difficult to make that logic work.”

It’s particularly depressing here that Nelson seems to have gotten 100 percent of his information about Obama’s tax plans from Fox News and zero percent from participating in the extensive on- and off-the-record briefings for members of congress, congressional staff, and media that the administration has organized. But once again, nobody is raising taxes in the midst of a downturn.

Meanwhile, the median household income in Indiana is $42,000 a year. Families making that much would not see tax increases under Obama’s plan. Families making double the Indiana median household income would not see tax increases under Obama’s plan. Families making double that would not see tax increases under Obama’s plan. Only families making almost six times the median household income of Indiana would see increases; increases that would essentially take us back to the rates that prevailed during the more prosperous 1990s. But never fear, if you’re dramatically richer than most Indianans and sociopathically unconcerned with the well-being of your fellow citizens, then Evan Bayh is fighting for you.

Nelson: Hair-Splitting in Defense of Bad Policy is No Vice

On MSNBC earlier this morning, Senator Ben Nelson (D-Nebraska) was asked to explain his perverse decision to cut state aid money from the stimulus package and explained, “they’re not cuts. These are adjustments downward.”

But whatever you call them, the point remains that Nelson and Susan Collins (R-Maine) took a look at a huge bill, and zeroed-in with laser-like efficiency on one of its least-controversial and most highly-stimulative provisions, deciding that that was a good place for “adjustments downward.” And while doing this, Nelson and Collins left in place the least-stimulative elements of the House package and added new non-stimulative stuff like an AMT patch extension and a tax break for people who buy homes. Consequently, as CAP’s Will Straw explains, the Senate “centrists” managed to come up with a bill that creates fewer jobs while increasing the deficit by a greater amount:

The Senate compromise recovery and reinvestment legislation provides for 12 to 15 percent fewer jobs created or saved than the House-passed Recovery and Reinvestment Act despite costing slightly more. The House-passed legislation creates or saves between 430,000 and 538,000 more jobs than the Senate compromise.

The Senate bill would be a good deal better than no bill, but a good deal worse than the House bill. The conference committee definitely needs to undo some of the damage.

Nelson, Collins Slash Education Funding in Stimulus While Touting Stimulus’ Boost to Education

I’m really shocked by the extent to which the architects of the Senate cuts to the recovery package aren’t being made to offer any kind of justification for their actions. And in the absence of pressure, they certainly aren’t doing it of their own accord. I wanted to see, for example, what Ben Nelson (D-NE) had to say for himself, and what he had to say was this, with his partner in crime Susan Collins (R-ME) chiming in:

“This bipartisan agreement delivers the help millions of Americans need in this time of economic turmoil,” said Senator Nelson. “It fuels two powerful engines: major tax cuts for the middle class, and targeted investments in American infrastructure and job growth. It also pares back $110 billion of spending that didn’t belong in the bill. We’ve trimmed the fat, fried the bacon, and milked the sacred cows. What remains will fund education, an energy Smart Grid, tax credits for homebuyers and other critical infrastructure.”

“This deal represents a victory for the American people,” said Senator Collins. “We came together to tackle the most immediate problem facing the nation. This package cuts $110 billion in unnecessary expenditures. These are not minor adjustments, but major changes. It contains robust spending on infrastructure to create jobs, $87 billion in assistance for states, and assistance to schools, especially for special education and Pell grants. This bill is not perfect, but it represents a bipartisan, effective and targeted approach to the crisis facing our country.”

Would you ever in a million years have guessed from this rhetoric that the primary change Collins and Nelson made was to implement big reductions in aid to states and, especially, in funding for education? I think not. In their rhetoric, Collins and Nelson preserved vital education funding and state assistance while eliminating various metaphorical animal products. Meanwhile, actual changes Collins and Nelson made include:

• Elimination of $25 billion in flexible funding for state governments.
• Cut $7.5 billion in funding for “state incentive grants” to help states make progress toward NCLB goals.
• Eliminated $19.5 billion in construction aid for schools and colleges.
• Reduced new aid for the Head Start early childhood program by $1 billion.

Nowhere in their statement do Nelson and Collins make any effort to justify these decisions. Indeed, they don’t even seem prepared to admit that they made these decisions. And some of them seem like really crazy decisions. Many stimulus skeptics such as Arnold Kling have been calling attention to the difficulty involved in dealing with sectoral shifts in the economy. One such shift is that we’ve seen a lot of job losses in the building trades industry. Funding school construction would directly target those idle resources and put them to work—something you’d like to do with stimulus but that’s often hard to execute. And if we don’t do school construction in the stimulus, we’ll still need to do school construction at some point. But instead of doing it now when it would help the economy, we’ll be doing it at some future point when construction projects are more expensive to undertake.

What “Belongs” In the Stimulus?

I saw Senator Ben Nelson (”D”-Nebraska) on teevee earlier today objecting to the fact that the economic recovery plan contains money for things like Pell Grants and other programs Democrats like that, he said, were worthy in their own terms but didn’t “belong in the stimulus plan.” David Brooks offers similar concerns in today’s New York Times column, complaining about “big increases for Pell Grants, alternative energy subsidies and health and entitlement spending” and arguing:

The best course is to return to the original Summers parameters — temporary, targeted and timely — thus making the stimulus cleaner and faster.

Strip out the permanent government programs. Many of them are worthy, but we can have that debate another day.

A few points in response to the Brooks/Nelson objections. One is that this sort of thing really does need to be kept in perspective. The stimulus bill is huge. It’s huge because the macroeconomic situation requires a huge stimulus. The stimulus bill is also multi-faceted. And it needs to be multifaceted because it’s so huge. Targeted tax cuts can be good stimulus, but you can’t do $850 billion of well-targeted tax cuts. Infrastructure can be good stimulus, but you can’t do $850 billion of good infrastructure projects. Long story short, the grab-bag character of the stimulus is a feature rather than a bug. Now, boring down into the bag you can find some specific spending provisions that probably are mistakes. Elsewhere in the piece Brooks singles out Head Start expansion as not such a hot idea. And my understanding is that he’s basically right—it would be better to target early childhood spending on Community Development Block Grants to allow child care services to keep running, and on construction of new facilities for early childhood programs. The existence of these kind of problems are good reason to hope that the Senate version of the bill is improved on these fronts. It’s also a good reason to push the future conference committee to fix these problems. But this is a pretty piece of the overall puzzle. The existence of a handful of sub-optimal provisions in an enormous program does not justify the kind of irresponsibility shown by the House members who voted against the overall package. The House version of the stimulus isn’t perfect, but it’s way better than doing nothing and way better than Jim DeMint’s Dr. Evil stimulus.

Second, with a lot of this stuff whether or not it really “belongs in the stimulus” seems irrelevant to me. If you have a program that actually is worthy, then funding it will make the country better, whether or not it truly “belongs” in the stimulus. If you have a program that’s worthy, and that doesn’t really belong in the stimulus, and you have a Republican who doesn’t think the program is worthy, and he’d be willing to vote for the stimulus if you stripped that program from the bill, then it seems to me that you have a decent case for dropping a worthy program. But if you’re Ben Nelson and you think the program is worthy, then why not just support the worthy program? It’s true that doing so doesn’t fit a perfectly pristine notion of how the legislative process should work, but anytime the process is working in favor of worthy programs rather than crappy ones, that’s a lot better than the normal functioning of the legislative process.

Meanwhile, as Matt Corley observes, there’s a decent case to be made that some of the stuff Nelson objects to—including higher NIH funding and money for Pell Grants—actually are a good use of stimulus funds.