Correction: The section of this article relating to pay-go legislation was incorrect. It has been corrected. My apologies for the error. – Ian
Yesterdays events, where House Republicans all voted against the stimulus bill, after getting a couple key concessions should tell us a lot about Republican strategy for the next elections.
The larger picture includes not just Republicans but Blue Dogs, who only allowed the stimulus bill to pass after Obama told them he would follow pay-go rules going forward, meaning that all new expenditures and tax cuts must be matched either by cuts in spending or raised taxes. Obama has also indicated he intends to deal with entitlement reform, which means changes to Medicare and Social Security to make them more financially viable (for the record, Social Security will be fully solvent for at least 30 years, and anyone who tells you it’s in a crisis is lying to you. Medicare, on the other hand, has real problems.)
Given these three facts, here’s what I think Republican strategists are thinking:
The House Republicans voted against the stimulus because they don’t want the Kerry problem of having voted for something they then have to oppose in an election. (Remember Kerry’s problems with having voted for the Iraq war?) The calculus is simple: if Democrats manage to get the economy going again, Republicans are sunk anyway. A good economy means Democratic wins in 2010 and 2012, barring some sort of foreign policy fiasco like the hostage crisis.
In the Senate, a few moderate Republicans will vote for the stimulus bill, allowing it to pass, after having wrung out as many concessions as possible to weaken it and make it less likely to work. The majority will vote against it. Republicans will be able to say that as a party, they were against the stimulus bill. Whether that’s popular now or not is irrelevant, there isn’t another election for 2 years.
Next up will be pay-go legislation, as payoff for the Blue Dogs. That will likely cripple the ability to do another stimulus bill next year, meaning that if this stimulus bill isn’t enough by itself (and odds are pretty decent it won’t be), the government’s hands will be tied. Another really large stimulus will not be possible. (Correction: pay-go legislation was already passed, but it didn’t include emergency measures. Obama indicated to the Blue Dogs that once this emergency measure was done he’d start following pay-go more carefully. My apologies for the error).
Then comes "entitlement reform". Unless this is done by increasing payroll taxes on the wealthy (ie. removing the cap at which one stops paying more payroll taxes) this will mean either reduced benefits, or more likely that people will not be able to get their benefits until they are older than 67 (corrected age from 65 – Ian). Medicare, which is in real trouble, may have to be slashed significantly to make it "long term viable". (The real way to make medicare long term viable, for the record, is to make it universal. Increased taxes would be more than offset by companies and individuals no longer having to pay insurance premiums).
Republicans will, again, mostly vote against it. Sure, they favor entitlement reform, but it’s a third rail. Why not let Democrats hurt old folks. Old folks who, well, vote religiously?
At this point, with the government’s hands tied when it comes to doing more stimulus and with unpopular entitlement reform having been passed mostly by Democrats, the future looks pretty bright for the Republicans. The economy will probably suck in 2010 and 2012 and the most important voting block, old folks, will be angry with Democrats.
The future’s gonna be so bright, Republicans will have to wear shades at night.
Related posts:
- Rahm Cutting Deals To “Go Easy” On Republicans in 2010 Who Vote For Supplemental?
- Blue Dogs and Republicans Agree: No Health Care Vote Before Recess
- Signs Of The End Times: David Brooks Making Sense
- Florida State Senator Al Lawson, 2010 Primary Challenger to Blue Dog Alan Boyd
- Red State Targets Vulnerable Democrats in Conservative Districts over IMF
Spotlight
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About Firedoglake
Advanced search
To paraphrase John McCain,
John Boehner would rather lose an economy than lose an election.
Party First. Great.
ding.
this is my nightmare. on the up side, i suck at making political predictions.
I’ve got a gut feeling that increased medicare taxes will come before 2012. If that also produces universal health care it will be well worth it.
Clarify. For SS full retirement age is already 67: http://www.ssa.gov/retirement/1960.html
…though we can start getting them at 62.
To quote John McCain:
They’ve got us right where they want us.
I’m trembling.
The GOP is not the loyal opposition, it is just the opposition
The only problem with this scenario is Republicans will say, “We can fix this! With tax cuts!” And the electorate simply won’t believe them. They’ve got larger brand problems that supercede simply being able to blame Democrats on the Bush recession.
BTW, Medicare payroll tax doesn’t have an income limit – FICA is no longer assessed after something like $100k in earned income, after that the 1.65% for Medicare is still assessed.
Those years in which I hit the FICA limit the increase to my paycheck (typically sometime in October) was budgeted for retirement savings (I’d bump my 401k contribution by 6%). Contributing that 6.2% (of income over the FICA limit) to social insurance wouldn’t have been as good for me personally, but it wouldn’t have caused an immediate change in my budget, and ultimately would be worthwhile.
All the GOP has to do is stall while the corporate propaganda media builds the story of Obama’s failure to a crescendo (regardless, I might add, whether Obama actually fails or succeeds). Two years from now all of the responsibility and blame for the continuing suckage of the economy will have been offloaded onto Obama and the Democrats, again by a concerted propaganda effort of the corporate-owned media. And I might add by the complete haplnessness of Democratic party strategists.
don’t forget, bush got the hostage crisis for reagan he can get one for palin as well
man, to think it was reagan’s “arms for hostages” that probably put bin laden in business
it is amazing how much damage one family can visit on this country, and we sit and watch them do it again and again
During the campaign there were several polls that showed a public disdain for the Washington gridlock and rancor. I think the dems are trying to avoid this label. As the rethugs play their games they may enhance the image that they are the rancorous ones. I am listening to the WH press briefing and it was said that Rep Cantor’s office issued an e-mail that the WH and Gibbs were threatening the rethugs. They are working their respective asses off to drag DC into the gutter so they can have the homefield advantage.
I expect Obama to keep any agreement on paygo no more than he kept his word on FISA, but this time I’m positive about it.
The Social Security surplus is the last pot of money for American elites to loot, so they’ll do it, all as a bipartisan necessary response to emergency, of course. I think the subsequent social unrest will end this phase of American constitutional government. I’d rather have smart coherent policies taking us into the future than stupid reactionary ones that lead to change painful to the poorest. I’m not optimistic.
Obama’s economic plans look like they will provide only limited, temporary relief. They are insufficient to turn things around. Obama’s approach also remains piecemeal when a comprehensive plan is needed. Obama continues to duck bank nationalization which would give the clearest indication that the government was serious about tackling the country’s economic and financial problems.
I don’t see Obama succeeding. As a result, voters will have an ongoing Hobson’s choice. Support Democrats who do less than what’s needed or vote for Republicans who are batshit crazy.
What would you add to the stimulous bill?
They are smoking crack (or blowing Jeff Gannon). Headlines like this – or much worse, will be streaming out over the next decade in the aftermath of the criminal enterprise that previously inhabited our house:
Halliburton offers to pay $559M bribery settlement
CFA Institute Financial NewsBrief | 01/28/2009
Halliburton, a defense contractor and oil-service company once headed by former U.S. Vice President Dick Cheney, said it is willing pay a $559 million settlement to end to a bribery investigation under the Foreign Corrupt Practices Act. If the settlement is approved by the U.S. government, Halliburton will pay $382 million to the Justice Department and $177 million in “disgorgement” to the Securities and Exchange Commission. Financial Week (27 Jan.)
http://www.smartbrief.com/news…..098DCFEC02
Geithner doesn’t seem to think he has a new boss. Why am I not surprised.
a recipe for right wing populism – for example blaming it all on immigrants or some other type of scape goating. but again, that’s my nightmare scenario and fortunately i suck at political calculation.
Just what effect would this have on the economy should it happen in the near future? Would it allow for stimulus? Could you “pay – go”? What economic advantages remain?
http://news.bbc.co.uk/2/hi/bus…..857005.stm
because he’s taking direction from summers?
just a guess.
The Social Security “surpluses” don’t exist. They have always been looted. Surpluses are turned over to the Treasury and spent exactly the same way your income taxes are.
The difference is that the Treasury gives Social Security IOUs for the money. These represent nothing more than a commitment of the government to fund any shortfalls in Social Security in the period 2017-2040. That commitment would have been there even if there had never been a single dollar collected as a “surplus”.
That’s the bad news. The good news is that if you subtract out these IOUs from the national debt it goes from $10 trillion down to $6 trillion.
if what i’m reading (primarily from the financial times) is correct, we (the west in general and the usa in particular) are getting our ass handed to us at davos.
Geithner thinks he is still working for Wall St., same as he thought when he was NYFed prez.
Oh, and just like Paulson thought he was still working for Goldman Sachs when he became TreasSec.
Deservedly so, but that will have a half life of what, about a couple of days?
I thought cspan was going to broadcast some of it. Do you know anything about that?
that’s what i was trying to say (obviously not well) by saying geithner was taking direction from summers (based on when summers was treas. sec.).
The Chicago School of Economic Phrenology and its subsidiary London School of Economic Eugenics are faced with a credibility gap – of enormous proportions, being exposed at Davos.
Davos will get no play in American MSM. It’s all about Kaley Anthony and why the Republican minority is right to block the stimulus plan.
Ian thanks for calling out the gaming.
Re: Davos
http://news.bbc.co.uk/2/hi/bus…..857651.stm
There is too much conventional wisdom in this. Consider these alternatives:
First of all, the stimulus package, when passed, rolls out a lot of healthcare information infrastructure items (reading the bill is helpful in understanding what and how).
Second, foreign policy is the big question mark. Dramatic reduction in threats outside of Afghanistan can permit at least budgeting cuts in the out years. Putting all of the Bush adventures in the budget will permit cutting military expenditures later as will any success in rejiggering military acquisition and recovery of money obtained through fraud; expect to see one or another subsidiary of Halliburton to show up in court soon (at least one case is already going forward).
Third, healthcare reform is entitlement reform. There are a lot of potential cost reductions there if done right, even with universal coverage.
I’ve stopped second-guessing until the legislation is on the table. There is going to be a lot of bobbing and weaving going on in the next six months.
He has also pledged tax reform that helps the middle class and closes loopholes. But right now is not the time to roll that out. It can wait until there is some economic recovery and a boost to his political capital.
All of these can affect what pay-go looks like. And all he has committed to do is submit pay-go budgets to the Congress. Watch for Republicans to complain about some cuts to spending in their pet areas.
I’m less worried about Obama than the Democrats in Congress; the Blue Dogs among them are driving his compromises at the moment.
don’t know, haven’t been watching any cspan. but someone (southerndragon, t-bear or someone else in the am) had a link to a webcast. i haven’t listened though. i get links to all financial times reports from gillian tett via email (tett seems like a decent reporter to me, but if anyone has any better suggestions at the ft, would love to hear them).
here are a couple recent ones:
Wen blames crisis on policy mistakes
Putin to set out ‘new economic order’
Re the stimulus, I would increase its size and shift more of it toward direct spending. I would funnel the money through states and the federal government. I would include public universities in this mix as well. What tax cuts there were I would direct primarily to those making less than $80,000 either as individuals or as families, since these are more likely to spend what they get.
I would also try to use the stimulus to start moving toward a new industrial policy, one based on alternative energy sources, new mass transit, nationwide highspeed internet, a renewed auto industry (not just making better cars but moving into mass transit), and a complete revamp of healthcare and shift to single payer universal coverage.
And as I have said in other comments, the stimulus is only one part of that comprehensive plan to address (fast becoming my mantra): distressed homeowners, insolvent banks, frozen credit, and an unregulated, piratical financial system.
Or, put generically, there is only Wall St. to run the economy. While searching for a FRB governor yesterday whom my luncheon partner mentioned who I had never heard of (Kevin Warsh, a Morgan Stanley alum), I also discovered that Bill Dudley, former chief economist of Goldman Sachs, was just named NYFed Prez by Stephen Friedman, formerly of Goldman Sachs. And those are only the tip of the iceberg I’m sure. There really is no difference between the regulators, the (laughingly-referred-to-as) regulated, and any other part of the government.
Read my 35. Wall St. is everywhere in the financial control of the economy. No sensible policies can possibly come from that structure.
Excellent analysis, Mr. Welsh. If I may ask, do your comments (along with those of other like-minded individuals) ever make their way into the halls of congress? (This would presuppose that members of congress can actually read, of course.)
I’m from California and would very much like to see this sort of thinking passed in front of Senators Boxer and Feinstein. Does that ever happen, and if so, how?
Thanks. So it’s BBC that’s running it live, though seems to be over for the day.
That’s a scary thought, but the facts are what they are.
cool. do you happen to know of any podcasts from davos?
If I weren’t so lazy, I’d do a little more research and do a diary on this. *g*
It’s Party Time in Davos (ca 9:40 pm).
Yep. Hope they’re having fun. /s
Check BBC/Business and look for Davos links, there have been video reports as well.
yeah, i’d heard about dudley. but not surprised – robert rubin and gerald corrigan are two big previous examples of same that come to mind. wonder if it’s always been that way or if a new development.
thanks. will look this weekend. i’m already days behind my normal podcast listening…
Not sure. I know there’s always been a lot of back & forth. It seems worse now, but perhaps that’s just because we’re looking more closely.
And even if it is no less cozy than it’s been since Clinton, that actually proves the point that such insestuous behavior you get bad policy.
They’ve got larger brand problems that supercede simply being able to blame Democrats on the Bush recession.
I think there’s an upside And a downside to this.
It’s good, if we need to be correct.
It’s bad, if all our lives are going down the drain.
And, yet, I agree with you.
Here is Stiglitz video from Davos (link above)
http://news.bbc.co.uk/2/hi/bus…..859177.stm
He left a loophole: he only promised PAYGO for NON-Emergency legislation. I would imagine that if we still need more stimulation next year, it will sure as heck be another emergency, just as all the war spending so far has been pushed thru in supplementals.
Obama on MSNBC just now blasting Wall St. bonuses. Is this the equivalent of a sternly worded letter? Also indicated that he had Geitner call CITI to nix their airplane deal.
some of the names are on my still woefully incomplete timeline.
Righto. Always loved it when my son’s teachers shook their fingers at him or at me.
My fun fact about that is that bank stocks are selling off on Obama’s “tough” talk. Now if Wall St were intelligent that stocks would rally based on the fact that someone is trying to prevent incompetent bank executives from stealing from the company.
thanks if possible i’d prefer no video – just audio i can down load, put on a play list and stream through my stereo speakers.
Wow. That’s quite a labor. I’ve bookmarked it.
oh jfc. the tarp legislation could have been written to prevent the issue of bonuses. and whitehouse today at the senate budget hearing explained why the way they stopped the citi plane was unworkable in the long run (it requires someone finding out about it and then finding the right person to make the case and persuade the executives to change their plans – very inefficient and in the mean time people get pissed off and learn to distrust the system).
still work in progress, i have more to add and lots more still to read before adding. sometimes i just seem to loose motivation for a bit, then i go back to it.
You don’t think it’s a good expenditure of the prez time to be tracking down corp pork? /s
There is a book that traces your quest back to the beginnings of the 20th century, exquisitely researched and documented by a leading investigative reporter. The book by Tom Hanahoe is America Rules, U.S. Foreign Policy, Globalization and Corporate U.S.A. ISBN 0-86322-309-5 from Brandon (Press).
I highly commend the book and the quality of its information.
What I don’t understand is why there are not any class action stockholder lawsuits against the boards and corp officers that allowed this to happen
I bought this book in 2007 but haven’t read it yet. I’ll move it up on my list. Thanks.
Lawsuits based on what?
hahaha!
thank you – that looks great and hadn’t heard of it before now. however, i just make a book order from amazon (yeah, i know so shoot me) earlier this week so it will have to wait for a bit but it’s on my list.
I agree fully. There is Goldman New York with offices on Wall Street and the Fed branch and there is Goldman Washingtion DC, also know as the Treasury.
As for Davos, that has always seemed to me a waterspot where the in people go to commune together on their inness. It just isn’t a place where real economics goes on. It’s an excuse for a vacation and to feel cool.
Heh. amazon earning & revenue exceeded expecations. Probably solely owing to my purchases.
Consider if you will, the geography of Davos, its remoteness, the weather, and the season all supporting the security of the attendees. There are other considerations besides jealousy of not being invited (I wasn’t either). ;-)
re davos, i think this year may be somewhat different. at least from the reporting. not that real economics goes on, more that connections are made and conventional wisdom established and bestowed as if a great gift to the reporters who will bring it to the masses. maybe some fractures within the elite this year?
my heart though is with the world social forum
Ian,
I wonder…What would happen if the netroots did an “all out” demanding more “infrastructure stimulus” in the senate version of the bill stating that we agree with the Repugs and the Blue Dogs? A total flooding of phone & faxes for the cause of a bigger stimulus in terms of infrastructure investment.
What would that do to the “game”?
Failure to exercise fiduciary responsibility
Davos has squat to do with security. They could meet in Guantanamo or on Diego Garcia if that were the principal consideration. They meet there because it is expensive, cool, and trendy. They go there to see and be seen. You are likely to find more depth in a single ply of Saran wrap.
And selise, I think I would have been more impressed if the people of Davos had been talking about a couple of years ago what they are talking about there now. It doesn’t take a great deal of insight from any of them now to see the world economy is circling the drain. It would have been a lot more useful if they had done something to prevent this happening.
Sorry to burst your bubble, but they have already looted it. The bill is coming due in three years.
So no one likes the stimulus and we’re convinced Obama and the Democrats are going down to defeat in four years. What are we going to do about it?
can not disagree in the slightest. my only reason for saying this year is different is that there appears (to me at least) to be some unusual fault lines.
That is an astoundingly ignorant statement, I certainly expected more from you.
Yes – it’s the only pot left. Exactly. Everything else requires stiffing someone who matters – either the mil-ind complex (reducing the military budget) or the health complex (going to some sort of sensible universal healthcare.)
This is a good hand for the GOP to play – not only can they not lose, but they actually got the Dems to put in tax-breaks before they all voted against it. In my dream world, Republicans are finally realizing that government can’t ’stimulate’ anything, they can only take money from productive people/businesses, and give it to whoever they deem worthy (usually the unproductive) – but alas, it most likely is only political chess.
The GOP has lined itself up correctly for the future, this ’stimulus’ package is going to fail spectacularly, and GOP is going to be able to rail against waste, debt, inflation, and government intervention for years to come. The enormous irony will be lost on the American people, who can hardly remember what happened yesterday, and the GOP’s credibility will start to dramatically improve. Social Security and Medicare will only compound the coming depression as all ponzi schemes eventually fail – the hope being that the GOP takes the opportunity to severely slash Medicare spending, and make Social Security optional. There’s a lot to be happy about as a conservative or libertarian, we might be able to help rebuild after this massive government implodes.
I’ve read the bill. The key infrastructure improvements for universal healthcare, other than records, are not in there.
Sometimes. FDL does get clipped on occasion, I’m told. How seriously we get taken… that’s a whole other matter.
hey t-bear, if you are going to accuse ignorance, imo there ought to be some effort to enlighten. how about it – you willing?
Very impressive selise. Bookmarked it.
Oppose the stimulus – it’s easy, as democrats, oppose government intervention into the markets, and try and focus on saving money overseas and reforming entitlements.
I honestly don’t think Obama cares that much about what we think. If he wants to do that, it might work. If he doesn’t, at this point his poll #’s are high enough that we don’t matter much.
Er, no, I’m not convinced he’ll lose. This is just a possible scenario. This is what I think the Republicans plan is. There are ways Obama can defeat it.
oh shoot. now i better get to work on it… *g*
Made some errors on pay-go. I’ve corrected in the text. My apologies to everyone.
Could you post a link so that we can get ahead of this? Or do a diary with a link. Thx
It’s not so clear now how the Bush family might be involved. If you remember in 1980 GHWBush was going to be Veep and they had a vested interest in destroying Carter. Today we know JEB isn’t going to run for senate or prez, so how much would they invest in controlling political outcomes this time around?
How much Regulating does the Fed actually do? I thought it was mostly up to the SEC, FDIC and perhaps one or two other regulators to do that sort of thing.
Consider they got politicians to actually change the laws, one has to wonder what was it they did which really was illegal.
Rewrite the laws to make virtually everything legal and then what is there to prosecute. Something about negligence with regard to fiduciary responsibility perhaps?
Of course all their stockholders and partners wanted as much profit as possible, so how much could they really criticize their ‘leaders’ who did whatever was required to get them in position to take that big spin of the wheel?
I think, all in all, you simply have to admit that the separation of private equity firms from banking (or insurance or any firm operating for the public) is important and significant and that the degree of freedom firms have within those realms is going to be different. And, on top of that, the markets have to be safe for both kinds of investors with transparency and oversight from federal government regulators.
How to achieve that last item has always been tricky. Freedom for some investors and highly regulated for others doesn’t lead to an obvious middle-ground which both can play on.
Al Gore said we need a ‘lock box’, but the Supreme Court said, “No, let’s let Dubya play with all the money and do whatever he wants.”
At least the public told W to take a hike.
Maybe some day we can get back to more sound budgeting.
That scenario is almost stupid enough to where I think the Dems will have to fall for it (if that isn’t what is really in there hearts already). Are you sure it can’t be made more stupid? Maybe you’ve overlooked something.