How to Deal With the Sequester? Another Sequester!

Posted on September 25, 2012 by billmanzi

A Politico story (that didn’t seem to catch any attention) wrote about how Congress may deal with the sequester that has come about due to the failure of the so called Super Committee established by Congress after the last debt ceiling debacle.

The Super-Committee was formed as a result of a vote of Congress, and this Committee was charged with finding deficit reduction equal to $1.2 trillion over ten years. A failure to agree would trigger sequestration (cuts)equal to that $1.2 trillion, with half coming from defense, and half from non-defense. ***** What are the asterisks for? Well Congress actually mandated $492 billion from each side, with $216 billion coming from “reduced interest payments” as a result of the sequester. Even where Congress was trying to create enough pain to force a deal they just could not do so without gimmicks.

Of course the sequester was sold to the public as a way to “force” Congress to make a deal on deficit reduction. The public was shown the cuts, and told that neither side would be willing to “endure the pain” that cuts of these size would produce to each parties favored constituencies. That would force a deal. Guess what? The Super-Committee (so called)failed to reach agreement on even $1 in deficit reduction, so here comes the pain. FY 2013, under this scenario, will need $109 billion in cuts.

With Republicans screaming bloody murder about the defense cuts (that they voted for via the sequester) Congress is struggling to:

1) Find a way to do away with the sequester cuts without any deficit reduction plan.

2) Make it appear that they are not doing item 1.

How do you do that? One of the ways would be through another “sequester”, but one that does not kick in until Congress has had “more time” to do:

1) A deficit reduction deal
2) A tax reform deal.
3) Some combination of 1 and 2

What happens if they fail? SEQUESTER! And this sequester will impose “real pain” and be so tough that it will “force a deal”. Must be the re-run season. Some of the funniest comments in the Politico story come from Congressional Democrats. Lets take a look at some of them. From Kent Conrad:

“There would be consequences for failure to achieve the results,” said Sen. Kent Conrad (D-N.D.), the Budget Committee chairman and a proponent of the latest plan.

From Mark Begich:

“Everyone is trying to figure out how to not have to be the person to make the decision,” said Sen. Mark Begich (D-Alaska).

Not all of the funny lines came from Democrats: How about this note from Republican Rep. Kevin Brady.

Added Rep. Kevin Brady (R-Texas), a senior member of the Ways and Means Committee: “Watching how this has worked with the Budget Control Act, how it’s unfolding, I think there’s more skepticism about those procedural issues.”

Well said Rep. Brady! You are skeptical of process. Can’t imagine why. How about Republican Mike Crapo:

Republican Sen. Mike Crapo of Idaho, a senior member of the Finance Committee, said he has “always advocated” an approach that would impose a cap on discretionary spending, place controls on the growth of entitlements and propose a “structure” for tax reform that would be enforced by a mechanism written into law.
“Let the details of that be put together by the germane committees,” he said. “But it has to be something that’s solid enough that it has to be done.”

Enforced by a mechanism “written into the law”, sort of, well almost like, a sequester. But lets call it something else.

It really would be funny if it were not so serious. Sequester 2, coming to a theater near you!

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Compromise Still a Dirty Word, or Learn Your Arithmetic

Posted on September 24, 2012 by billmanzi

Since the Simpson-Bowles Commission issued its report there has been much call from many in the media (see Scott Lehigh and David Brooks) for the serious minded to get on board and support the Commission’s findings, which call for entitlement reform, spending cuts, tax reform, and additional revenue. The revenue would be derived via the reform methodology, by eliminating loopholes and tax expenditures, thereby broadening the overall tax base. It uses the same methodology for corporate taxes, eliminating corporate loopholes but also lowering the corporate tax rate. Roughly speaking the Commission utilized three dollars in cuts to one dollar of revenues.

So if you achieve tax simplification, entitlement reform, deficit reduction ($4 trillion over a decade) where does the argument come in? Well Republican House members who were on Simpson-Bowles all voted against the final report, although Republican senators, including Tom Coburn, voted in favor.The Republicans just could not stomach the increase in revenue. But the report drew scorn from the left as well, with Nancy Pelosi and Paul Krugman attacking the findings. They just could not stomach the changes in entitlement programs.

So that brings us to independent Maine Senate candidate Angus King, who has come out in favor of Simpson-Bowles. King, a former Governor, has delighted in tormenting both parties, and his independent status has allowed him the freedom to speak out on budgetary issues. He has even refused to say who he would caucus with if elected. Angus King’s advocacy of Simpson-Bowles has drawn the ire of Grover Norquist, who has attacked this support of Simpson-Bowles by King in the way you would expect. With lies. Lets look at what Grover Norquist said in his press release.

According to the Simpson-Bowles co-chair report, the revenue target of their proposal is to “cap revenue at or below 21 percent of GDP.” This figure is significantly higher than the historical tax revenue burden of around 18.5 percent of GDP.If the Simpson-Bowles tax revenue target was in place for ten years, it would raise $5 trillion in additional revenue, or taxes, paid by American taxpayers and businesses.

Now the reality is that the Commission advocated a ten year revenue increase of $1 trillion, with a ceiling on federal revenues of 21% of GDP. (It is currently at about 24.5%) The Commission did not advocate raising revenues to that number, but rather placing a ceiling on federal spending that does not exist today. So Norquist simply twists a number, and creates an illusion. Or a lie. What else did Grover say?

“Angus King is absolutely correct that people aren’t going to be happy about the Simpson-Bowles Plan and that’s because the plan is a $5 trillion tax increase,” said Grover Norquist, president of Americans for Tax Reform. “His support for the Simpson-Bowles Plan demonstrates that when it comes to taxes, King stands with Democrats like Harry Reid and Nancy Pelosi.”

Norquist conveniently forgets that Nancy Pelosi came out against this plan, and opposes the entitlement reforms to this very day. Another illusion. Or lie.

Erskine Bowles talks in the below videos about the need for fiscal reform, and about what the drivers of our debt are. Listen to him, because his math is unassailable.

The Democrat in this race, Cynthia Dill, said this in response to Simpson-Bowles.

America also is not a corporation; America is a nation, founded on an idea, rooted in constitutional principles. We cannot view everything through the financial bottom line. We are not electing a CEO for America; we are electing a president.

This response is on her web site, and in my opinion, is, along with Republican fiscal positions, the reason we are in this problem. The bottom line does matter, especially over the long term. If there is spending that makes sense then we must eventually tax for it. If we cannot tax for it then you must borrow for it, or cut it. There is simply no way, in the long run, to avoid that iron law of math.

King is likely to win this race. The dynamic of having him in Washington should be quite entertaining. But the response from left and right to Simpson-Bowles shows why it has been so difficult to achieve a deal on the budget.

The Bowles letter to the Portland Press Herald is here.

http://www.msnbc.msn.com/id/32545640

Visit NBCNews.com for breaking news, world news, and news about the economy

Posted in National News | 1 Comment

Rocky Marciano Honored

Posted on September 23, 2012 by billmanzi

Rocky Marciano was honored today with a 22 foot statue unveiled in the City of Champions, Brockton, Massachusetts. A big crowd, with many boxing luminaries, celebrated the statue and the achievements of the only heavyweight champion to retire undefeated. A nice day for Brockton, and a great day to remember the Rock! It might take Marciano a while to catch you, but when he did the result was always the same. You went down. Congratulations to Jose Sulaiman of the WBC and the Marciano family for making this day possible.

http://www.necn.com/common/thePlatform/web_45/swf/flvPlayer.swf

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Pension Reform?

Posted on September 22, 2012 by billmanzi

Professor Edward Glaeser, who writes on a regular basis for the Boston Globe, penned an article on public pensions a couple of months back. It raised some very interesting concepts, which included a call for additional centralization (getting rid of the local control over investment decisions) but calling for additional local flexibility in the types of pensions that could be offered to public employees.

On local control over investments Professor Glaeser decries the balkanized nature of the way we invest our pension money.

The same tension exists in public-sector pensions, which present a particularly precarious balance of state and local control. Since 1945, the terms of public-sector pensions — for instance, how large a pension a teacher can expect after a certain number of years of service — are determined by state law, and a state commission determines how much communities must set aside for pensions. But localities can run their own investment funds, as long as their returns aren’t too low. This is a bizarre set-up, since local investment boards are unlikely to out-invest the state system.

Good investments require expertise, and there is no advantage from having little laboratories of financial engineering. Using data provided by the state pension authority, Harvard graduate student James Mahon has found that since 1986, the systems outside of the main state fund have, on average, earned lower returns during every five-year period. This doesn’t mean that the local systems are boobs — some earn lower returns because they take on less risk — but the sheer number of funds is illogical.

The State legislature has recently changed the law, which now forces local systems to meet minimum return thresholds in order to remain “independent”. This change forced the Methuen Retirement System into the State system, where local money is now invested by the Commonwealth. That law, and the trigger that forced Methuen in, was deeply unpopular with both the Retirement Board members and the staff. I can only imagine the type of political firestorm that the Glaeser suggestion would have if all local boards were forced to turn over their investment portfolios to the State. But political unpopularity due to turf issues is not a good reason to dismiss the suggestion out of hand. Beyond the point that Professor Glaeser makes on better investment returns from the State other factors, such as duplication of costs, would tend to support consolidation. (Do we need to pay for separate staff for all these distinct localities?) Glaeser does not comment on how his suggestion might deal with local systems that have outperformed the state, but you can rest assured that question would be asked by those in opposition.

The second part of the Glaeser column dealt with the ability of the locals to modify the type of pension offered.

The core dollar amount that localities now contribute to worker’s pensions should be preserved, and there should also be a strict lower bound on the generosity of the traditional defined-benefit plan. Our public workers need that cushion, because they are not in Social Security. Above that base, though, local communities should be free to offer different deals, such as allowing workers to take 401(k)-style defined-contribution plans, instead of defined-benefit plans. This experimentation may help us explore lower-cost options that deliver more of what workers actually want: to be paid now, not in the distant future.

Another proposal that would likely cause a pretty big firestorm of opposition from public employees. Glaeser recognizes the inherent financial problems with our current pension obligations, and how we have funded them. From a financial perspective there is no question that his suggestion makes fiscal sense for localities. From a political perspective this is another slog, with deep opposition from public sector unions very likely. Glaeser does not go into deep detail on the pension problems we face, but he does not have to. They are steep, and will require additional painful reform at some point. For now it is possible to defer those decisions, but the day of reckoning is coming. Not a bad question for some of the upcoming debates! Candidates beware.

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Independents in the Senate Race!

Posted on September 21, 2012 by billmanzi

There has been a flurry of polling activity in the U.S. Senate race, with most showing a movement to Elizabeth Warren, but all showing a still tight race. My polling house preference is Suffolk, and David Paleologos. So as I mentioned in a debate posting below the all important independent voter will ultimately determine who wins this race. What does Paleologos find? Independents favor Scott Brown in this survey by a 55% to 34% margin. Simply put that margin is not enough for Brown, who must widen it to get to the type of margins he racked up over Martha Coakley within that subset.

Another factor, which many Democrats hoped Elizabeth Warren would accentuate during the debate, is the drop in crossover support for Scott Brown. Suffolk has found that Brown took a 5 point drop from Barack Obama voters, from 24% down to 19%. Elizabeth Warren moved to further separate Brown from these voters during the debate, highlighting the impacts of Brown’s support for the Republican leadership, and specifically highlighting the potential for Senator James Inhofe to become the chair of the environmental oversight committee in the U.S. Senate. Scott Brown will have an uphill fight, and you can expect more in the way of Elizabeth Warren linking Scott Brown to Mitt Romney and the Republican Party in future debates. She is hoping that the next Suffolk poll shows further erosion in “crossover” support for Scott Brown.

http://www.c-spanvideo.org/videoLibrary/assets/swf/CSPANPlayer.swf?pid=304706-3

9_17_2012_tables Suffolk Senate

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Any Party Switchers Out There?

Posted on September 21, 2012 by billmanzi

Any Democrats think that Scott Brown won last nights debate, or any Republicans think that Elizabeth Warren won the debate? Just curious about whether there are any folks looking at this from outside a totally partisan prism. My question does not include those party folks that have announced support for the “other team”. Don’t expect much response here, but it was worth asking. (I think).

http://CBSBOS.images.worldnow.com/interface/js/WNVideo.js?rnd=609749;hostDomain=video.boston.cbslocal.com;playerWidth=320;playerHeight=240;isShowIcon=true;clipId=7749109;flvUri=;partnerclipid=;adTag=News;advertisingZone=CBS.BOSTON%252Fworldnowplayer;enableAds=true;landingPage=;islandingPageoverride=false;playerType=STANDARD_EMBEDDEDscript;controlsType=fixed

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Lets Get Ready to Rumble Round One

Posted on September 21, 2012 by billmanzi

Elizabeth Warren and Scott Brown held the first in a series of debates last night and it didn’t take long for Scott Brown to come out swinging on the “character issue”, hitting Warren right off the bat on the so called “native American” subject. Brown’s initial thrust managed, in my opinion, to knock Warren off stride a bit, and more importantly utilized valuable time that could have been used to discuss issues, which of course came later.

Eventually Elizabeth Warren managed to get the discussion to where she wanted it to be, on those issues facing the Commonwealth and the Country. Issues raised included Warren focusing in like a laser on specific votes taken by Senator Brown, including voting against equal pay for equal work for women, the support of Senator Brown for tax breaks for oil companies, and his vote against Elena Kagan for the Supreme Court. Brown continually returned to the charge that Elizabeth Warren wanted to raise taxes, and he continually defended the votes he has taken in that context. I do believe that the closest comparison might be the tact that Bill Weld took against John Kerry in those debates for U.S. Senate. An exclusive focus on the tax issue, and other hot button Republican issues, did not work very well for Weld, and I do believe that the tax equity issue, rather than the generic issue of being against “tax increases”, is what is resonating with people in Massachusetts.

Did either Senator Brown or Elizabeth Warren manage to achieve their debate goals? Did either candidate “win”? In light of the obvious initial edge in Party registration for Democrats Scott Brown should have a clear goal. Win over independent voters. I think both sides appealed to the Party faithful, but what about independents? The Romney drag is starting to weigh down Republicans nationwide, especially in races like this. Independents appear to be turned off to the Republican message, and although Scott Brown is fleeing as quickly as he can from the Romney campaign it is a rocky road for him. Let us, in the next post, look at some of the Suffolk poll cross tabs that may answer the ever important question on independents.

Who do you think won?

http://CBSBOS.images.worldnow.com/interface/js/WNVideo.js?rnd=447033;hostDomain=video.boston.cbslocal.com;playerWidth=320;playerHeight=240;isShowIcon=true;clipId=7749122;flvUri=;partnerclipid=;adTag=News;advertisingZone=CBS.BOSTON%252Fworldnowplayer;enableAds=true;landingPage=;islandingPageoverride=false;playerType=STANDARD_EMBEDDEDscript;controlsType=fixed

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Nevins Library Annual Book Sale

Posted on September 20, 2012 by billmanzi

From the Nevins Library Web site!

Friends of the Nevins Library Annual Book Sale begins with a paid Preview Night on Friday, September 21st 5:00PM to 8:00PM.  Cost is $20.00 per person.  On Saturday, September 22nd, the event runs from 9:00AM to 5:00PM and continues on Sunday, September 23rd from Noon to 4:00PM.  On Monday, September 24th, we will hold “Bargain Day” from 9:00AM to 9:00PM in which a bag is purchased for $8.00 and filled to the brim.  So don’t miss out on our exciting event!

Posted in Methuen | Tagged | 1 Comment

Why Romney Can't Make the Bold Move

Posted on September 19, 2012 by billmanzi

Scott Lehigh wrote a great column today, trying to give Mitt Romney some advice that might help bring oxygen to a campaign turning blue. Lehigh made the common sense suggestion that Romney immediately call for the adoption of Simpson-Bowles in a move to capture the political center and show that he had the guts to make proposals that would not sit well with the base.

The best way to bounce back is with a big, bold move, one that burnishes Romney’s image as someone serious about solving the nation’s budgetary problems, while letting him seize the political center.

That move? Endorsing the recommendations of the Simpson-Bowles deficit commission. Doing so wouldn’t just steal a march on President Obama. It would establish Romney as someone courageous enough to tell hard truths about what will be required to address our fiscal problems.

Lets face it, if Romney had that type of courage or political sense he might not be in the mess he is in today. The Lehigh advice has been given on the other side of the spectrum by David Brooks, who suggested that President Obama make a bold move to the center by endorsing that very same Simpson-Bowles framework.

Personally, I wish Obama would use this convention to embrace Bowles-Simpson. That would lay the foundation for decades of prosperity. It would galvanize a new center-left majority.

So the columnists of reason urge both candidates to adopt Simpson-Bowles. Why not? Let’s take a look at Mitt.

Romney and his team have determined, rightly or wrongly, that this will be a base election. And we know that the Republican base will not tolerate “tax increases”, even when coupled with real spending reductions. (Simpson-Bowles has about $3 in cuts to every dollar in revenue increases, a far cry from the $10 in cuts to $1 in revenues that EVERY Republican Presidential candidate indicated they would turn down). Paul Ryan, a member of the Simpson-Bowles Commission, actually joined every Republican House member of the Commission in voting against the final report. If the Republicans are deficit hawks, as they claim, then they must have an even more serious deficit reduction plan than Simpson-Bowles???? Well, when you just take a cursory look at the numbers you see that the Romney/Ryan plan (Ryan/Romney???) actually would add trillions to the deficit, and would do so to not only extend the Bush tax cuts, but to reduce marginal tax rates even beyond the Bush rates. How would they pay? They will get back to us on that.

All of that still doesn’t answer the Lehigh question. But the truth is that any policy that places deficit reduction in front of further tax cuts must be jettisoned by Romney and the Republicans. The central dogma of today’s Republican Party is that tax cuts come first, and deficit reduction is simply a tool to try to attract that independent voter who might actually care about our fiscal future. I have not given citations for the above paragraph, but they will come in future posts. Some validation of this view comes from the long held position of the Wall Street Journal editorial board, who have long argued that Republicans ought to stay away from advocating deficit reduction, as they would not be able to finance the necessary tax cuts called for by the Journal under a system where such cuts needed to be “scored” for their impact on the federal deficit. Dick Cheney’s observation that “deficits don’t matter”, often reported as an offhanded aside, is actually reflective of this view. Nope, Mitt Romney won’t be taking the advice of Scott Lehigh anytime soon. He will rise or fall on the tax cuts that, if enacted, would blow an even bigger hole in our budget than exists today.

 

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The Blog is Back

Posted on September 19, 2012 by billmanzi

The billmanzi.com blog, retired while I took a hiatus to run for Senate, is back. (Obviously much sooner than I would have preferred.) We will be back to talking with local, state, and national figures, and hopefully will have other folks posting here as well. We will hopefully bring you some great video and audio clips as well. The foibles of Mitt Romney should be enough to keep me busy for the next month, but there is an exciting First Essex Senate race, and a lively 14th Essex State Representative race as well. Not to mention the Elizabeth Warren and Scott Brown race. All I can say is look out below. I am back.

Posted in Methuen | 4 Comments