Matt Yglesias

Kent Conrad’s Budget

The contrast between the volume of huffing and puffing Kent Conrad did when presented with the CBO analysis of Barack Obama’s budget and the changes he actually made when writing his proposal is a pretty telling Washington story. It’s not that Conrad didn’t change anything substantive (he did) or that he’s crazy to worry about long-term deficits (he’s not) or that there’s anything uniquely villainous about Conrad’s affection for the occasional budget gimmick (happens all the time), but someone who was genuinely alarmed by the fact that the CBO scored Obama’s plans as leading to large deficits in the final years of his ten year budget would not have “solved” this problem by abandoning Obama’s ten-year budget window switching to a five-year window. Similarly, re-inserting the “let’s pretend will use the AMT to raise taxes on the upper-middle class and then not actually do that” approach to budgeting, though now a time-honored trick of the Bush years, is not an actual deficit reduction measure.

Long story short, Senator Conrad cares about the deficit and is taking some action to make it smaller. But he also cares a great deal about being seen as a deficit hawk, the kind of guy who’s not afraid to take an axe to the president’s proposals. And in this instance the administration rather smartly eschewed a lot of this kind of pain free “virtual” deficit reduction, thus making it possible for interested Senators to deploy favored accounting patches on their own initiative and take credit for more reduction than they actually produced.

Meanwhile, a smart observer observed to me earlier that we’re at risk of missing the forest for the trees in terms of the growth projection. CBO has these big deficits because they’re foreseeing relatively slow economic growth. But that relatively slow growth is bad for many reasons that have nothing to do with the deficit. That slow growth may come about or it may not. But either way, it would make more sense for congress to think about avoiding the slow-growth scenario and not just about mitigating the budgetary consequences of slow growth.

By Request: Conference Committees

JoeJoeJoe asks:

It was common in the Bush years for the Senate Dems to get to pass a lot of bipartisan happy horseshit in Senate bills only to see the final bills stripped of any more moderate provisions by the House GOP during reconciliation.

What effect do you think the reconciliation process will have on bills in Congress? Do you think the Senate will pass more conservative bills on just about ever subject, only to see the bills move left in the reconciliation process with the House? A lot has been said about the cloture hurdle in the Senate but isn’t the level of compromise that Speaker Pelosi will accept in reconciliation another boundary in the process?

Confusingly, the parliamentary procedure at issue here isn’t “reconciliation” (which has to do with the budget) but the conference committee to settle House-Senate differences. And it’s true that this is an important subject that shouldn’t be overlooked. The extent to which this actually winds up making a difference, however, depends on the extent to which Senate Democrats genuinely want to play hardball. The Senate GOP leadership in the Bush years was dominated by hard-core conservatives who recognized the practical need to get moderate Republicans and a few Democrats to vote for bills in order to pass them. So given the opportunity to score wins through hardball procedural tactics, they took them. Typically this would mean passing a more moderate version of a bill in the senate, then stacking the conference committee with only far-right senators, then basically reporting out the House bill and cramming it down the senate’s throat.

I don’t think it’s right to see guys like Harry Reid and Kent Conrad and Max Baucus in that same light. They’ll push moderate bills because they favor moderate legislation. That will, I think, put a real limit on their desire to use conference committee chicanery to push things further left. It’s important to recall that the parties are fundamentally not symmetrical. Moderate Republicans are a smallish group whose votes matter but who don’t have real intraparty clout. Moderate Democrats aren’t like that at all. You would never in a million years, for example, see a GOP equivalent of the Gillibrand appointment.

The Strong Dollar

Pete Davis reports from yesterday’s Senate Budget Committee hearing:

Budget Committee Chair Kent Conrad (D-ND) and Ranking Republican Judd Gregg (R-NH) commiserated that they were almost alone among their colleagues in their concern for the long-run credit worthiness of the United States. He also expressed concern for maintaining the value of the Dollar. Conrad drew attention to the “wall of debt” that Americans face in his opening statement and detailed the economic challenges we face, not only in reviving credit markets and in overcoming recession, but in getting control of the massive debts we’re incurring once the economy starts growing again.

Concern for the long-term creditworthiness of the United States is well-taken. But though I’m open to correction on this point, worrying about “maintaining the value of the dollar” seems misguided to me. Beyond the short-term problem of the recession what we need over the long-run is structural adjustment of the international flow of goods and capital. We need to export more and import less. A weaker dollar isn’t, strictly speaking, a necessary condition of that re-balancing process but it’s the most likely way for it to come about.

Language can get a little misleading here. A “strong” dollar sounds like a good thing and a “weak” dollar like a bad one. But it’s perfectly normal for trade deficits to wax and wane and for the relative value of currencies to rise and fall as part of that adjustment process.