Steve Klingaman

Steve Klingaman
Location
Minneapolis, Minnesota,
Birthday
January 01
Title
Consultant/Writer
Bio
Steve Klingaman is a nonprofit development consultant and nonfiction writer specializing in personal finance and public policy. His music reviews can be found at minor7th.com.

Editor’s Pick
FEBRUARY 17, 2011 8:28AM

More Bad Strategy in Obama’s Budget

Rate: 9 Flag

 Obama Budget

serious-entertainment.com 

Sometimes in punditry the first cut is not the deepest; it is instead the most superficial.  Much of the first round of punditry on Obama’s budget misses the point in surprising ways. What I find most disturbing is not how he is “selling out the left” again.  I like Obama just fine as long as I remember that he is a centrist president. What disturbs me is that he continues to do things that indicate he doesn’t understand how strategic negotiation works. 

            He’s made a show of cutting some programs he holds dear.  That includes a 50 percent reduction in home heating subsidies.  The strategy presumably is:

1)    Constituents on his side will pile on and “save” the subsidy while demonstrating just how punitive and disruptive these safety-net cuts can be.

2)    He has demonstrated that he is willing to cut programs he really cares about and so lays down the gauntlet for the Republicans to cut some things they care about.

So what happens? Everybody on both sides piles on and George Will defends him.  I, for one, would hate to be defended by George Will.

            The elephant-sized problem is that such cuts represent little, tiny, micro-pennies on the dollars in the budgetary scheme of things.  They are grains of sand.  Why waste our time?  It seems that President Obama believes that in strategic negotiations you have to put something you really care about on the line up front to demonstrate good faith.  No!  You save the things you really care about for last.

            Strategy means paying attention to the few things that matter the most.  In budget terms, that means entitlements and defense.  As an opening gambit, rather than leaving these things off the table, he should have made a move to offer very small cuts in the big three: Medicare, Medicaid and defense.  A cut of .000001 percent in Medicare pays for all the subsidized heating you could ever need.  I am not saying that such a tiny cut in entitlements would suffice.  But had he offered a cut of 1 to 1.5 percent in each of the Big Three categories, then we would be on our way.  He could have offered up the little-known Department of Defense health care plan that covers retired officers outside of the V.A. or Champus, costs its enrollees $400 a year and taxpayers tens of billions a year. 

            Then, after the punditry universe pilloried him, it would be up to the Republicans to say how much more they would cut from the programs that people really, really like.  True, real compromise comes from behind closed doors.  But like the James brothers, who robbed banks “because that’s where the money is,” we have to go to entitlements to get to the real action.

            Pell grants? Get real.  Block grants for social work? Whatever. It is said that no Democrat can ever cut defense or he will be savaged for being weak on defense.  I say, go straight at ‘em.  I’d go for a two percent cut in defense, just as a debating stance, because I’d want them to come at me on something where they want what government provides but refuse to pay for it.  A new Rockefeller Foundation study reveals that 66 percent of Republicans want the government to fund better roads. But when asked to pay for it through higher gas taxes, support vaporizes.  In fact, support plummets the second any funding mechanism is proposed.  That’s the conversation I want to have.

            And if I am going to have a fight with the Republicans, and have them risk shutting down the government, for which they very well might be blamed, I would put some taxes on the table.  Salon’s Joan Walsh in “What story does Obama's budget tell Americans?” discusses Robert Reich’s proposal to increase taxes on the very rich back to levels from another era.  Heck, yeah, let’s propose a two-year temporary clawback tax of an escalating range of basis points on those making $500,000 year and up.  The number of points may be three or four percentage points on incomes of $500,000, seven or eight for incomes of $5 million and up, and so on.  We don’t have to even get near the rates Reich endorses.  If the Republicans want to eviscerate the middle class while defending the uber-rich that’s fine with me, let's let them take their best shot. 

            The secret to the upcoming battle is to stand up for the middle class while demonstrating that you can make hard choices.  Heating subsidies—give me a break.  It’s not that they are so sacred given our present dysfunction, it’s that you should let Republicans cut them.  Our system may be so broke that draconian cuts must ultimately send very poor people to the church house door so we can prove anew for the current generation of liberscrewyoutarians that the church doors will not open in sufficient measure to care for those most at-risk in our society.  We may have to actually revisit the 19th Century in the Republican Wayback Machine so people can get a taste of the vigorous, laissez-faire, die-in-the-poorhouse dog-eat-dog society they seem to miss so badly.

            But if we are going to go that ugly place, the very least we can do is cut, in modest measure, in the areas where we really are hemorrhaging cash.  And let the Republicans pile on.  And then, if the voters realize that their barbarians at the gate have gone too far, maybe we can move the pendulum ever so slightly to the center.  There will be blood. There will be brinksmanship.  There will be pain.  But if you can’t stand for the middle class, and yes, even save a little shred of safety net for those who are most at-risk, then you aren’t standing anywhere at all.

 

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Shut down the government, please! Let the GOP demonstrate that they lack the maturity to govern.
After two years you don't understand President Obama's strategy? Ask yourself a question, when was the last time you were this passionate about a budget. By putting in just a single controversial cut everybody is talking about the budget and the Democrats can cut it out and declare victory. Every big bill has the same thing. Understand yet?
If we shut down the government, we could be attacked by foreign powers.
I think you are absolutely correct about the 1-2 per cent where it matters, but to be fair, I think he he is also trying to force the Republicans to take some of the heat too.
Correct and rated. . . .

During FY10, which ended 30 September 2010, the federal government collected, in total, about $2.3 trillion. It spent almost this exact amount on all non-discretionary spending alone. Then, it went on to spend another $1.5 trillion on discretionary spending. This will likely be the scenario for FY11, the current budget year.

This point of view leaves the spectrum of possible options to balance the recently proposed FY12 budget somewhere between cutting all discretionary spending (while cutting no mandated spending) and cutting 65% of all mandated spending (while cutting no discretionary spending). Neither one of these extremes is practical or politically realizable.

However, any realistic point between them means just exactly what you suggest in your post, entitlement programs must be cut. . . . significantly.

The problem only gets worse and harder to solve the longer the delay in making these cuts. Only the naïve believe that the budget will be balanced during FY12. On the other hand, only the obtuse fail to understand that balancing the budget as soon as possible has now become critical to recovering this nation’s fiscal welfare.
Ocular's right. Besides, it was Willie Sutton who said "because that's where the money is."
The poor don't vote. They don't have lobbyists. Obama proposes cuts in heating fuel subsidies for the poor, can claim he's serious about cutting the federal budget, and he doesn't lose votes or offend the constituencies who fund his campaign - military-industrial contractors, Wall Street, CEOs of transnational corporations.
You speak of strategy, but it's important to keep in mind that other things are for more important to Obama in this strategy than anything so mundane as deficits, entitlements and budgets. Those are show dogs intended to keep the public distracted from the real game. What's that game? Getting elected.

Some will recall George HW Bush in a rare moment of absolute truth admitting that he would do ANYTHING to get elected. As evidence that wasn't hyperbole, he loosed Lee Atwater on the distracted and disinterested public. When the specter of Willie Horton flashed before them, they were no longer disinterested.

What does this have to do with Obama's budget? Just this. The machinations about how much to cut what are meaningful only as the bear upon the real goal -- getting re-elected.

Does Obama think it wise to cut heating bennies for the poor? Of course not. Does bringing up the subject expose the Republicans to a charge of being Simon LeGree's? Of course it does,and that's the real aim, not the pitiful savings gained in this charade.

Obama is playing a very risky game, one I suspect is predicated on the assumption that he can't count on young voters and minorities to turn out in the massive numbers they did in 2008, when they were compelled by the thrill of being part of an historic election. Assuming that's so, he will have to make up that deficit by enticing millions more Independents who didn't vote for him last time to vote for him this time.

To do that, he will have to move Right and hope enough Progressives hang with him despite their disappointment that the Revolution was postponed, and resign themselves to voting because he is the only viable alternative.

To that, I can only say good luck -- and the 2010 slaughter does not bode well for that strategy.
Fair points critiquing Obama's approach Steve but I'm willing to cut him a little more slack.

As I see it, the main problem is undertaxation. The overall tax burden in the U.S. is about 28%. In countries with comparable economies, the range is 35-50%. And considering that the U.S. spends as much on its military as the next 17-20 countries COMBINED, the gap between the U.S and its comparables is even more pronounced than the raw figures imply.

Not that this is in any way politically saleable. Look at eruptions of rage at a small measure like letting Bush's temporary tax cuts lapse only on those earning more than $250 K.

There's no way the budget can get close to balanced by cutting spending. Not even close. And there'll be stiff demands on the public purse as the boomers retire and suffer failing health.

Frankly, the budget is becoming another global warming issue. Impossible to seriously discuss because it's too easy rabble rousing against the obvious solution. Those Gen Ys and Zs are are going to have a hell of a time addressing the bag of shit they'll inherit.
@ Ocular,

I may be a little dense but I'm not sure if you're defending or indicting Obama. What's the point of getting everyone excited about the budget if the end game is to win one little battle - that you probably would have one anyway - while losing the war?
'progressives' like to instruct obama on what he should be doing, as though he were a good-hearted fool. it saves them having to face reality, and actually do something, beyond whine.

but try this hypothesis: he's smart, he's politically sophisticated way past any 'progressive' blogger, and is doing just what he wants, within the limits of the system which he supports. it fits the facts, dunnit?
"What disturbs me is that he continues to do things that indicate he doesn’t understand how strategic negotiation works. "

He's been doing this for so long now, I don't think it can be put down to inexperience any more. I think this is Obama's strategy. It seems to me that the reason Obama concedes so much at the start of negotiations is that he wants a result that Republicans will be happy with, because he thinks bipartisanship is more important than pushing Democratic policies. Of course, the Republicans will scream that he's a communo-fascist anyway. But he doesn't seem to mind that. If anything, it just makes him think he didn't concede enough.
Thanks for comments...a few responses come to mind; first, Ocular & Paust, well, we'll see, won't we? As I read your comment you are suggesting that Obama's recommendations on line item cuts while leaving all the big pots of money untouched is good strategy. I say no because the Republicans would make all those line item cuts anyway and could care less about the constituencies served because it's ideological on the one hand and on the other they want categorical cuts. Time will tell. "Understand yet?"

Anyway, Paust, thanks for the correction on the source of the banks quote.

UncleCri is closer to where I stand saying the big enchilada is non-discretionary spending, so if you want to cut you have to go where the money is. This thing is so hugely weighted toward those nondiscretionary categories that to ignore them is just posturing.

Tom, as to reelection and playing that as a long game, yes, you raise a good point. That doesn't obviate the fact that we must have a budget and we risk a government shutdown if we go anywhere near sticking to democratic ideals of fairness. Will any president do ANYTHING to get elected? It's a delicate balance, to be sure. I agree, though, that Obama can count on the left no matter what he does because they realize how poorly they will fare under Republican control of all three branches of government.

Abrawang (& Loomis), I don't feel like I am being so hard on Obama. I write about issues & policy. I'm not a shill for any politician. I also feel obliged to hold one's own side to account. I didn't like the way Obama strategized health care reform and look what we have--a rearguard action, constitutional challenges, and moves afoot to defund the measure. Mostly because of the model he chose to push and the upfront deals he made that so seriously weakened the model he did chose.

I don't like the way he's dealing with the budget either, so why no say so, and why? The bigger issue you raise is taxes. I think Obama should take the issue up again as Robert Reich advises, but I wouldn't go nearly as far as Reich. If the Republicans go too far on line item spending Obama should call for a temporary surtax on the top one per cent of earners, followed by a reinstatement of a revised configuration of the old Bush top one percent tax in 2012 or 2013. If he wants to play hardball with student loans as a chip, fine, but not without putting Medicare, Medical, and defense on the table. In addition, I would suggest a tax on social security benefits for the top 2 % of earners. Revolutionary? Yes. But then again, if you listen to the Republicans...

If the situation is all that dire, why leave so many golden calves untouched in Round One--and that's all this is.

Loomis, "progressives" in quotes. What does that mean? I in no way treat Obama like a fool, unlike the way you address your correspondents in comments. I just say I don't view these "strategic" moves as effective. I would argue has had a few strategic success, though more than that he got lucky in the lame duck session, and that was partially due to the growth in the number of short-timers brought on by the shellacking.

As to Obama's political smarts, we all know he was a genius at getting elected. As to governing, the jury is out. He has endured a huge number of setbacks, lost control of the nation's narrative since August 2009 and he has capitulated on the revenue side of our budget problems while losing the battle on the importance of stimulus.

Or should we just let you be the judge of who's what?
I think part of the problem Obama faces is that he and the Democrats are starting to realize that the Republicans, and the Tea Partiers, are actually RIGHT in part. And that fact has something to do with how they lost the Senate.

They could easily have preempted this little problem. The budget was balanced under Clinton, and it was under Republican leadership the deficit spiraled back out of control. (With bipartisan support, of course). And one could argue that the Republicans lost more seats to the Tea Party than the Democrats did.

The Democrats could have made a bigger stink about bailing out Corporate America, and we are all going to have to tighten our belts somehow as a result, and taken the initiative in the discussion which has plainly been inevitable for a long time.

But what we have here, is an age-old political trick. Any talk of cutting government spending brings this out. Cut government? Pick some favorite, and threaten to cut it. Education is the traditional area in California.

If you pick the right area, you signal to one group that you're serious about cutting costs, while you signal to quite another group that if you don't back your alternate proposal (typically, a tax or disguised tax), you're going to be in deep trouble.

But nobody EVER talks about cutting and refocusing the government workforce in the way a private business does. No -- they cut the money that goes out either directly to the people who need it, or directly in support of them.

Now, the numbers do not add up to enough, with that approach, though the Federal Government IS a huge percentage of our total economy and our total workforce. There are well over 2 million civilian federal employees. That doesn't count contractors or postal workers. Add in those two groups and I'd eyeball it at 3 million.

Now, there have been cutbacks here and there, and depending on how you slice the numbers, we're probably not at our historic peak, especially on a per capita basis.

But still, government employment doesn't have the same sort of pressure for cost-cutting that private industry has, especially at the federal level. If they spend too much money, they won't go under.

But cutting government employment in the way a private industry would, say by 10% (saving us 17 billion dollars a year) would result in some serious backlash from those 2-3 million employees.

But I'm not taking either party seriously in their cost -containment unless they set serious targets for reducing the federal payroll, with an emphasis on improving efficiency while trying to preserve services.

The courage to attack that, and the courage to tackle the defense budget will signal to me that someone is serious about tackling the problem rather than playing to the crowds.

Of course, that doesn't mean I'll agree with their choices. Aside from agreeing on the problem statement, I find the Tea Party seems intent on doing more harm than good.

But if we don't get serious about the deficit, we're going to have even bigger problems down the road. There's an easy way to erase large debts, that hasn't been used recently, but is still very much in the cards.

Hyperinflation.

The problem with this solution is it also wipes out your and my savings, fixed retirement income, etc.