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July 21, 2011

Obama Calls Emergency Huddle With Democrats?


BULLETIN: WH meeting today at 5:30 with top 2 dem leaders from senate/house

Drew has a theory about this, which I especially like because none of my own effort went into fashioning it. He thinks this indicates trouble for Obama and the Democrats:

There was talk that Boehner and Obama were walking on a deal that was cuts and debt ceiling increase now and maybe some tax reform next year but no promise of increase in tax revenues.

There were reports Dems weren't happy (I sent a link earlier, not sure where it is)

Now there seems to be an unscheduled meeting with the Democratic leadership from the Hill.

I'm guessing (and that's all it is) is that Obama is either telling them the rumors about the Boehner deal weren't true or he's trying to get them to sign on.

Either way, seems to be some trouble in Democratic paradise.

Are they blinking, then? Not sure.

It's possible Obama has realized his best political play is divergent from Congressional Democrats' best play. The Congressional Democrats want no spending cuts, especially not on entitlements, because they're in safe seats and all their base cares about is expanding the welfare state at any cost.

But that will lead to an imploding economy -- not something the egotist Obama wants. Not because he cares about the American people, but no one gets reelected for presiding over a depression.

Two Good Posts From Karl: I've had these open in tabs forever. Figure it's time to post them.

Successful debt deals lean heavily on the "cuts" side of things.

You know what results in catastrophe? A "balanced" mix of cuts and increased taxes -- Obama's preferred plan is the one that always results in calamity.

[T]he real fight — both now or in a possible crisis — is over the mix of spending cuts and tax hikes. A look at other countries’ crises is rather eye-opening on this key point. Canada reduced government debt from 68% of GDP in 1994 to 29% of GDP in 2008. There were six to seven dollars in budget cuts for every dollar of tax hikes — and these were real cuts in spending, not reductions in spending growth, and not the imaginary spending cuts Democrats have offered Republicans in past decades. By 2000, Canada was cutting personal and corporate taxes, as well as capital gans taxes. (Read the linked story for another example, set by New Zealand in the 1980s.) During the same period, Sweden reduced public debt from 78% of GDP to 47% of GDP by cutting public spending from 71% of GDP in 1993 to 52% in 2008—that is, by almost one-fifth of GDP. During the period Sweden cut taxes four times and abolished wealth taxes, inheritance and gift taxes. Finland similarly cut spending and taxes as part of its fiscal consolidation.

Indeed, a study of fiscal consolidations in 21 countries of the Organization for Economic Cooperation and Development over 37 years concludes that failed attempts to close budget gaps relied 53% on tax increases and 47%, while successful consolidations averaged 85% spending cuts and 15% tax increases.

And here's Karl amplifying my point that it is not a "compromise" for Obama to accept entitlement reform. He ran on that issue, promising to do just that.

January, 2009: Just after he was inaugurated. Here he is recapitulating past promises.

President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare “bargain” with the American people, saying that the nation’s long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.

That discussion will begin next month, Obama said, when he convenes a “fiscal responsibility summit” before delivering his first budget to Congress. He said his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.

“What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further,” he said. “We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.”

And he said he'd prefer to get moving on this within the first two years of his presidency, and definitely within his first term.


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posted by Ace at 06:09 PM

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