The “Gang of Six” senators has released an outline of budget reforms that would supposedly reduce deficits by $3.7 trillion over 10 years. Revenues would rise by at least $1 trillion, while spending would be theoretically trimmed by various procedural mechanisms. The plan promises to “strengthen the safety net,” “maintain investments,” and “maintain the basic structure” of Medicare and Medicaid, which doesn’t sound very reform-minded to me.
Many of the laws covering today’s workforce were written more than seven decades ago during the New Deal. Collective bargaining and the unemployment insurance system, for example, were both established in 1935. Since then, the U.S. labor force and industrial structure have vastly changed, which creates an opportunity to update the laws to better suit the modern economy.
Senate Minority Leader Mitch McConnell has offered the president a way to raise the debt ceiling by $2.5 trillion without having to cut spending. The WaPo reports that “McConnell’s strategy makes no provision for spending cuts to be enacted.”
President Obama’s former head of the Council of Economic Advisers has taken to the pages of the New York Times to warn us against pursuing “fiscal austerity just now,” particularly not spending cuts.
The Wall Street Journal provides a page of charts today illustrating the remarkable weakness of the current U.S. economic recovery. A twin story in the paper provides comments on the recovery from two of the nation’s top macroeconomists:
Despite ongoing federal deficits of more than $1 trillion a year, many liberals are calling for more government spending to “create jobs.” At the same time, liberals are opposing budget cuts because that would supposedly hurt the economic recovery. And then there is the perennial problem of Democrats and Republicans defending spending on their particular favored programs.
As we close in on congressional votes to increase the federal debt limit, negotiators are coming up with all kinds of ideas to hike taxes. (Suspiciously, they haven’t revealed very many spending cut ideas so far).
In the Washington Post Friday, Ezra Klein partly confirmed what I fear the Republican strategy is for the debt-limit bill—get to the $2 trillion in cuts promised through accounting gimmicks. As I have also noted, Klein says that there is about $1 trillion in budget “savings” ($1.4 trillion with interest) to be found simply in the inflated Congressional Budget Office baseline for Iraq and Afghanistan. Klein says, “I’m told that a big chunk of these savings were included in the debt-ceiling deal” that Rep. Eric Cantor (R-VA) and Sen. Jon Kyl (D-AZ) are negotiating with the Democrats.
With the nation's unemployment rate still above 9 percent and a steady stream of worrisome labor news (the latest statistic: 429,000 new unemployment claims last week), federal policymakers are facing pressure to do something about joblessness. The giant 2009 stimulus bill was supposed to cut unemployment to less than 7 percent by now — but that clearly hasn't worked as planned.