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Austerity 2013

via Washington Post Wonkblog

…after this week’s fiscal cliff deal, the United States is now on pace to engage in about as much fiscal consolidation in 2013 as many European nations have been doing in recent years – and more than countries like Britain and Spain. – U.S. now on pace for European levels of austerity in 2013

FROM FISCAL scheme to austerity, it’s what shouldn’t be happening if our politicians had learned anything from what happened in Europe.

Tax increases, like cessation of the payroll tax holiday that President Obama, Democrats and Republicans supported in the Fiscal Cliff bill, drains resources from the middle class, the very people who keep the economy chugging. When it’s weak out there, nothing is dumber.

The graphic above is based on trends, not predictions, as Brad Plumer writes on Wonkblog at the Washington Post.

Now, there are a couple of ways to interpret this chart. One could argue that the United States is now in a better position to begin shrinking its deficits than Europe was, because our economy is doing better – and we did more stimulus to begin with. (We also have a central bank that’s doing more aggressive monetary easing.) Or one could say this just proves Europe isn’t doing all that much austerity in the first place. Or one could argue that the U.S. is about to repeat Europe’s mistake of premature austerity.

Either way, Congress is starting to tighten fiscal policy this year. There’s not going to be a big fiscal-cliff-induced recession, fortunately, but there will likely be a partial drag. JP Morgan’s Michael Feroli estimates that the tax hikes and spending cuts that have survived the cliff deal will shave at least 1 percentage point off U.S. economic growth in 2013…

David Dayen, through a tweet, said it first.

What progressives do on the austerity craze about to kick in, which includes President Obama’s entitlement giveaway, could be the whole ballgame for what type of Democratic Party will be alive after the Obama era.

Indeed, November 6 was not just a great night for the president; the liberal wing of the Democratic Party also scored impressive victories, sweeping Elizabeth Warren into the senate, Sherrod Brown to a significant reelection, and even Alan Grayson back to Congress.

This sets up, of course, Democrats’ own version of intra-party chaos, and it goes far beyond the typical grumbling and chest-thumping about Obama’s negotiating skills or scoring political points. This is about bedrock principles. “Soul of the party” kind of stuff.

Soul of the party kind of stuff, indeed.

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14 Responses to Austerity 2013

  1. T-Steel January 3, 2013 at 8:03 am #

    Our elected leaders lack so much vision, fortitude, and courage. Personally speaking, I faced two life altering moments, my own fiscal cliffs, that if I would have gone the way of President Obama and Congress, my family and I would have been on the street and maybe worse. But ObamCon (Obama and Congress – my new moniker) stayed up late and to the last minute to…. drain more dollars from a large segment of America??

    ObamCon did not say and believe “ENOUGH, LET’S FIX THIS THE RIGHT WAY”. All they did was cater to slobbering and loud segments for cool points. Segments that really are themselves. Chuck Todd was 100% on point yesterday when he basically said the current face of American politics is “say something, lose a segments, scramble to get it back, lose another segment, then don’t do much more”.

    This is PRECISELY why I voted against Obama and Romney in November. Actually it really wasn’t about them. I voted against the Democratic and Republican Party. So now both parties will have civil wars (Republicans already in one and Democrats approaching). And where does that leave us? Manning broken stations in a sinking ship.

    I said I have accepted Austerity 2013 simply because it is the lay of the land. Doesn’t mean I’m throwing in the towel. But from a personal point of view, I’m digging in to reject the current stream of poison coming from ObamCon and do my part locally to spark rejection of ObamCon and put out something better. Since this wonderful blog has majority Democrats from all different flavors, I just have to ask:

    Why even bother supporting them? And wouldn’t it be better, as have been suggested at times here, to have a Democratic Tea Party movement? Or is it only about winning elections even if that elected Democrat is essentially weak?

  2. ladywalker68 January 3, 2013 at 9:27 am #

    Hey, Taylor-I need your help in interpreting where this fits in the the “Fiscal Cliff” aka, the sequester stuff?
    http://www.huffingtonpost.com/2013/01/03/defense-bill-obama_n_2399939.html

    I mean, $633 Billion sounds like a LOT of money to me. Will chained CPI and other cuts in Social Security be used to pay for this????

    • Taylor Marsh January 3, 2013 at 10:52 am #

      Sequester is “dead,” because nobody in Washington likes it. What takes its place on the spending cut side is what matters now. Entitlement cuts Obama & Dems want, though not progressives, are allegedly to “pay down the debt.” Ha!

      The NDAA is what Obama signed. Defense gets way too much money that isn’t scrutinized nearly enough. Visualize golf courses…

      • ladywalker68 January 3, 2013 at 12:39 pm #

        Yes. I will be visualizing the golf courses as I eat cat food in my old age.

        Maybe you can answer one more question for me…

        Do you know when the changes to eligibility age changed for SS “full” retirement age. Silly me. I thought it was 65. Now today I learned that for anyone born between 1943 and 1954 it is 66 and for anyone born in 1960 or later, it is 67.

        When was this gem of a change slipped in and how did I miss it?

  3. ladywalker68 January 3, 2013 at 9:34 am #

    Adding: Austerity: For you and me, but not for the military!

  4. PeggySue January 3, 2013 at 11:30 am #

    The payoff for me was the dazzling [if not gagging] article yesterday in the NYT on the wondrous austerity success story in . . .

    Latvia!

    Latvia where the emigration rate has been 5-10%, unemployment tips in at 14+-17% and extreme poverty is at 30%. If this is success, God help us!

    How this passes for journalism is beyond me. We have the propaganda machine rolling out with all gears greased. The poison pill is good for you, we’re told. Close your eyes and swallow. You’ll feel so-o-o much better.

    We’ll be dead and won’t even know it. It’s freaking unbelievable!

    Plus I love the notion that this meme is being sold as ‘shared sacrifice.’ The people at the top of the pyramid may need to pull back from that 3rd house or the yacht they were eyeballing. The rest? We get to fight over our favorite brand of cat food.

    This is why I did not vote for Obama and his gift-wrapped con game.

  5. Cujo359 January 3, 2013 at 2:49 pm #

    Forget progressives. What the 2012 election proved is that we’re not willing to vote for what we want. If you want to see a vision of what our future is like, read what conservatives and libertarians have to say. What progressives want doesn’t matter, because in the end you only get what you’re willing to demand, and progressives collectively won’t demand anything.

  6. DaGoat January 3, 2013 at 4:46 pm #

    This is really pretty misleading. Brad Plummer characterizes the expiration of the temporary payroll tax cut as an austerity measure. Arguing that the expiration of a temporary tax cut that was never intended to be permanent actually represents a tax increase sounds a lot like well, the GOP.

    The “austerity” also includes cuts from the sequestration which may or may not occur. My bet is on the not, or at least not in it’s current form, since the point of the sequestration was to make cuts so unpalatable that the government would find a way to avoid them The numbers are cooked to fit the argument Plummer was trying to make. It’s pointless to have a discussion if we can’t agree on the ground rules.

    • Cujo359 January 3, 2013 at 6:03 pm #

      “Brad Plummer characterizes the expiration of the temporary payroll tax cut as an austerity measure.”

      In this context, it’s an austerity measure. It takes money out of the economy, which is the most basic definition of austerity that has any meaning here. Ditto the other things you’re complaining about.

    • ogenec January 5, 2013 at 11:28 am #

      Da Goat, I agree. And thank you for explaining the issues so clearly and succinctly.

  7. ladywalker68 January 3, 2013 at 5:36 pm #

    Ok. So I was able to answer my own question! I found this gem, a Social Security Bulletin from Oct. 1986:
    http://www.ssa.gov/policy/docs/ssb/v49n10/v49n10p5.pdf

    Back in 1983 (of course it had to be during the Regan Administration), when I could care less, there were “Social Security Amendments” described in the link I provided above. Refer to pages 6 and 7 of this document.

    The most interesting part about the 1983 amendments to SS:

    “The retirement age for workers reaching age 62 in the years 2000 through 2005 will be increased 2 months per year from age 65 to age 66 . The retirement age will then stay at at 66 for individuals reaching age 62 from 2006 through 2016. For those workers who reach 62 after 2016, the retirement age will again be increased 2 months per year until it reaches age 67 for all workers who reach age 62 after 2021.”

    I am glad I know this now, because it wasn’t obvious to me until I just checked the information recently.

    Of course, as the Grand Bargaining proceeds, I hope the 1983 amendments are brought to light so that everyone knows we already have a phased increase in the retirement age on the books!

    • ogenec January 5, 2013 at 11:53 am #

      You do realize that this was the result of the hard-fought compromise between Reagan and Tip O’Neill, right? This wasn’t just Reagan’s doing. In 1982, Social Security was on the verge of financial collapse. They appointed a blue ribbon commission, chaired by Alan Greenspan, to recommend solutions. The solutions included the gradual increase in the full retirement age that you mentioned, and they were agreed to by Reagan and O’Neill and signed into law into 1983.

      Liberals are especially fond of statements like “Social Security is not the problem; it does not contribute to the deficit.” And that’s true, at least for a few more years. But they never say why. The incremental, modest increase in the retirement age is why. So it’s ironic that, when a similar approach is recommended with respect to Medicare and Medicaid (modest increases in full eligibility, phased in over time, with accompanying tax increases, all as recommended by the Simpson Bowles Commission), progressives declaim that approach as unacceptable “austerity.”

      In short, the argument that SS is not a problem is THE best argument for the “Grand Bargain.”

      • jinbaltimore January 6, 2013 at 9:48 am #

        “In short, the argument that SS is not a problem is THE best argument for the Grand Bargain.”

        There are NO good arguments for the Grand Bargain.

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