Sequester Insanity

It is doubtful that Congress and the White House will reach a budget agreement in time to avoid the deep mandatory cuts, known as the "sequester", from going into effect at the end of next week.  The consequences, according to many economists, could be disastrous for the already anemic American economy. 

Conventional wisdom currently is that the sequester deadline will pass and then Washington will come up with some sort of compromise solution.  Perhaps just in time for the next self-inflicted crisis, the threat of a federal government shutdown on March 27 if Congress does not approve funding. 

At the heart of this crisis is the debate over how to reduce the annual deficits that Washington continues to rack up. The national debt is currently $16.5 trillion, or about $50,000 for each citizen.

On Tuesday, Erskine Bowles and former Wyoming Senator Alan Simpson released their new deficit reduction plan, which they say splits the difference between President Barack Obama and House Republicans. Their plan would reduce the deficit by $2.4 trillion dollars over the next decade.

Bowles worked in the Clinton administration, and Simpson was a highly respected Republican Senator.  They served as co-chairmen of the White House's 2010 deficit-reduction panel, which put together a bipartisan package of tax and spending changes that was rejected by both the administration and Congressional Republicans.

The Bowles-Simpson plan includes $600 billion in cuts from Medicare and Medicaid, $600 billion in new tax revenue from ending or reducing deductions and breaks, and $1.2 trillion in cuts to discretionary spending, along with cuts in cost-of-living increases for Social Security, the farm program and civilian and defense retirement programs.  Bowles-Simpson 2.0, as it is being called, sharply reduced tax revenues from their original plan, perhaps in an effort to win over some Republicans.

In the current deficit debate, the White House favors a $1.5 trillion package that includes smaller cuts in social programs, investments in education, new technologies and infrastructure, and additional revenues achieved by closing tax loopholes.   Republicans say they will propose a $4 trillion package of cuts that they claim will result in a balanced budget in 10 years, although they have not provided details.  But Republicans have ruled out any further tax revenues. 

Meanwhile, some economists question making deep cuts in federal spending at a time when the nation's economic recovery is so weak.  They point to failed austerity measures in European countries, like England, which slipped back into another recession.

A compromise like the Bowles-Simpson plan seems appropriate for the country to avoid further calamity.  "Our plan is not perfect, but it can serve, we believe, as a mark for a bipartisan deal," Mr. Bowles told reporters Tuesday morning.  However, it is unlikely that the plan will receive any traction in Washington.

So, at the end of next week, the sequester is likely to go into effect.  It calls for $85 billion in across the board cuts, and gives the government little discretion in how to enact them.  The president called it a "meat cleaver" approach, warning that national security and vital services will be reduced, resulting in furloughs for border patrol agents, first responders, teachers and air traffic controllers. 

With Congress on a break, no negotiations are underway.  Instead, Congressional leaders are pointing fingers and playing the blame game.  On Tuesday, House Speaker John Boehner said, "Words alone won't avert it. Replacing the president's sequester will require a plan to cut spending that will put us on the path to a budget that is balanced in 10 years.  To keep these first responders on the job, what other spending is the president willing to cut?"

No wonder a recent Quinnipiac poll showed that 72% of American registered voters disapprove of the way Congressional Republicans are doing their job.  And now Republicans are ready to bring the country to its knees rather than compromise on a more balanced budget deal to avert the latest Washington manufactured crisis.  This is insanity.
  

Obama's Path

President Barack Obama accepted the nomination of the Democratic Party with a humble, values-oriented appeal to the voters who elected him in 2008.  At one point he quoted President Abraham Lincoln, "While I’m proud of what we’ve achieved together, I’m far more mindful of my own failings, knowing exactly what Lincoln meant when he said, 'I have been driven to my knees many times by the overwhelming conviction that I had no place else to go.'

Expectations soared when the president was elected four years ago on a campaign filled with the promise of "hope and change."   To those who may be disappointed in his first term, the president said, "Hope has been tested – by the cost of war; by one of the worst economic crises in history; and by political gridlock that’s left us wondering whether it’s still possible to tackle the challenges of our time."

Saying it wouldn't be easy, the president said this election was a choice between two visions,  "Our problems can be solved. Our challenges can be met. The path we offer may be harder, but it leads to a better place. And I’m asking you to choose that future."  President Obama said his opponents wouldn’t tell you their plan, except cut taxes and roll back regulations.  “Have a surplus? Try a tax cut. Deficit too high? Try another.”  The president joked, “Feel a cold coming on? Take two tax cuts, roll back some regulations, and call us in the morning!”  He concluded, "We’ve been there, we’ve tried that, and we’re not going back. We’re moving forward."

The president highlighted his record of adding jobs, bailing out the auto industry, investing in education, energy, dealing with the environment, national security, and taking on the deficit.  He pointed out that his opponents have no foreign policy experience.  "After all, you don’t call Russia our number one enemy – and not al Qaeda – unless you’re still stuck in a Cold War time warp." the president said. " You might not be ready for diplomacy with Beijing if you can’t visit the Olympics without insulting our closest ally."

The president offered an alternative, "In a world of new threats and new challenges, you can choose leadership that has been tested and proven. Four years ago, I promised to end the war in Iraq. We did. I promised to refocus on the terrorists who actually attacked us on 9/11. We have. We’ve blunted the Taliban’s momentum in Afghanistan, and in 2014, our longest war will be over. A new tower rises above the New York skyline, al Qaeda is on the path to defeat, and Osama bin Laden is dead."   The president then thanked the U.S. military for their service in his address, a glaring oversight by Romney last week.

President Obama said he will never turn Medicare into a voucher, referring to Rep. Paul Ryan's plan.  He said he will not turn Social Security over to Wall Street.  He also said, "I refuse to ask middle class families to give up their deductions for owning a home or raising their kids just to pay for another millionaire’s tax cut."  The president reaffirmed his position on raising taxes on the wealthy.  And, answering a Republican theme, he said, "We don’t think government can solve all our problems. But we don’t think that government is the source of all our problems – any more than are welfare recipients, or corporations, or unions, or immigrants, or gays, or any other group we’re told to blame for our troubles."

President Obama's speech set out a sharp contrast with his opponents.  He humbly asked for American's support,  "If you believe in a country where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same rules, then I need you to vote this November."

President Obama followed powerful speeches by Vice President Joe Biden and Senator John Kerry, who was defeated in his 2004 run for President by President George W. Bush. 

The vice president spoke to the middle class and to those families who are struggling.  He identified and connected with them by relating his and President Obama's family history.  He then attacked Mitt Romney for opposing President Obama's rescue of the automobile industry.  Romney said they should be allowed to go bankrupt.  

Biden then rallied the house with his oft repeated line, "Osama bin-Laden is dead and General Motors is alive!"  He excoriated the Republican ticket on Medicare.  Saying the opposition didn't tell their audience that;  "The plan that they have already put on paper would cut for benefits for more than 30 million seniors."  He continued, "it would cause it to go bankrupt by 2016."  

On the deficit, the vice president said of the Republicans, "They didn’t tell you they rejected every plan put forward by us, or the Simpson-Bowles commission to reduce the debt."  He then jabbed Romney's talk of a "jobs tour", saying, "With his support for outsourcing it’s going to have to be a foreign trip."

He emphatically insisted "America is not in decline," and that it has never been a good bet to bet against the American people!"  In a very emotional moment, he recognized the "incredible debt we owe" the American military dead and wounded.  "We must never forget their sacrifice!"

Earlier, Senator Kerry was brutal in his criticism of Mitt Romney.  On foreign policy, he said, "He has all these neo-con advisors who know all the wrong things about foreign policy. He would rely on them--after all, he's the great outsourcer." Then he added, "This is not the time to outsource the job of commander in chief."

Playing off the "Are you better off?" riff that is used by Republicans, Kerry said, "Ask Osama bin Laden if he is better off now than he was four years ago," to a rousing ovation.  In response to Republican criticism that President Obama has let Israel down, the senator noted that Israeli Prime Minister Netanyahu has said of the U.S. under Mr. Obama's leadership, "our security cooperation is unprecedented."

Finally, in a stinging shot at Mitt Romney's failure to mention American troops in his acceptance speech, Kerry said, "No nominee for president should ever fail in the midst of a war to pay tribute to our troops overseas.'

The Democratic Convention was authentic, warm and stirring, thanks to memorable speeches by First Lady Michelle Obama, Mayor Julian Castro and President Bill Clinton.   It overshadowed last week's Republican Convention, which was short on specifics and solutions.  But will it be enough to help President Obama overcome a sluggish economy and high unemployment?   Will voters take the president at his word, "America, I never said this journey would be easy, and I won’t promise that now. Yes, our path is harder – but it leads to a better place."