Credit: thecambridgeroom.wordpress.com
Think you pretty well know the rules by which Congress works to pass legislation? I thought I did, but I learned on an NPR pod-cast this week that the Republicans adopted three new ones following their sweep of the House in 2010. These informal changes are holding as firmly as though they were embedded in the Constitution itself and they virtually doom legislative compromise, that fundamental principle which the founders tried to build into the process. The three rules are:
1. The majority of the majority. Under this rule no piece of legislation may be brought to the floor of the House for a vote unless it is pre-approved by a majority of the majority, i.e., more than half of the Republicans in the house. This constitutes a tyranny of the majority, negating the government separation-of-powers mechanism. It effectively eliminates any possibility that a few Republicans might compromise and vote with Democrats on any issue not liked by, well, the majority of Republicans.
2. Any increase in the debt ceiling must be matched by an equal decrease in spending. This rule is, in my opinion, disingenuous if not dishonest because the national-debt ceiling is nothing more than a legislative publicity stunt. Raising the ceiling does nothing to spend more money in itself but rather brings public recognition that government spending has reached a previously-established arbitrary threshold. Now if that’s all it did, I wouldn’t have a problem with it, given the fiscal mess amassed before the Obama administration took office in 2009, but the problem is that this rule has been wielded like a weapon that has unnecessarily undermined both national and international confidence in the ability of our government to function.
English: Grover Norquist at a political conference in Orlando, Florida. (Photo credit: Wikipedia)
3. No new taxes. This of course is the Grover Norquist /Tea Party mantra that has been a major obstacle to pulling the nation out of the worst recession since the Great Depression, and it sure doesn’t help that it has thus far prevented correcting the George W. Bush tax cuts. Those not only didn’t work to improve the economy, they made recovery from the Great Recession that much harder. Now, thanks to this attitude on taxes, the GOP majority is acting like restoring the tax rates for the top 2% to their previous Clinton-era level is some kind of sin. I cannot escape the impression that they want the economy to fail in order to discredit the Democratic administration.
I for one am glad to see President Obama holding firm on negotiations over the financial cliff and if it takes going over it to bring the electorate into the picture, it’s fine with me. As far as I can see, nothing else than a ground swell of voter indignation is going to change this behavior by the fiscal branch of Congress and restore the concept of legislative cooperation to its rightful status.
Still Skeptical After All These Years 
Just a quick question. Is #2 solely related to the deal passed (whose name escapes me) that is to lead to the automatic cuts being referred to as the “fiscal cliff”? Or did the debt ceiling/cutting spending link come from somewhere else?
I notice there have been several signatories to Grover Norquist;s pledge who are now recanting, saying that tax increases aren’t just necessary but “inevitable”, I recall one Congressman saying. A bit of daylight at the end of the tunnel, perhaps? (Preferably NOT the 4:15 express freight coming the other way!)
LikeLike
I read those as probing the water’s a bit, but what is more important than the minor overtures are the reactions to them. Ultimately this battle will be won or lost at a grassroots level.
LikeLike
No, John, I believe #2. is simply part of the dogma they’ve adopted. The mantra is, “too much spending, too much spending”, but the complaint is all about what Congress has already spent! It’s like an over-weight glutton begging for his grocery allowance to be cut for next week because he ate too much last week. It ain’t his fault, the problem belongs to his credit card company. 🙄
LikeLike
Jim,
Forget Norquist now. As a conservative I have been writing for at least two years that revenues must go up while spending goes down, a combined approach to deficit reduction and ultimately elimination. The debate is now turning to the ratio of tax increases to spending cuts to achieve the goal of deficit reduction. We’ll see how that turns out now.
But debt ceiling issues are a far different matter. Congress has the Constitutional responsibility to approve borrowing money, period, not the Executive Branch. However it is achieved, authorization to borrow money, stick to the Constitution and force Congress to do so.
It is seemingly impossible for Congress to meet that responsibility, bill by bill, in legislation. Thus Congress itself has decided to use the bigger stick of debt ceilings. For sure I would much prefer a bill by bill approach as far more rational, but……. Just imagine if you can, a popular bill going through Congress but one that would require deficit spending to achieve. Should such a bill be approved, legislatively and as deficit spending in later years go up be repassed or reapproved by Congress, year by year?
Try getting a defense authorization bill through Congress with a caveat saying $100 Billion in deficit spending would be authorized within such a bill. Then listen to the screams if the proposed bill cut a particular defense program out of the larger authorization bill because it would cause a deficit. As well consider if the factory producing items for that program was in Joplin. I wonder how Billy Long would react to such a bill! Think about the Congressman from New London, CT, where submarines are designed and built!!!
Finally, and for sure most important, over the last 52 years our DEBT has gone UP 3X faster than our national increase in the production of goods and services. Botton line is we have sustained our “way of life” in America through huge debt accumulation, not step by step increases in production of “stuff” that sells around the world. Step back and consider ways to prevent the continuation of such a march to the inevitable cliff of fiscal ruin or at least a lack of continuing increase in our American standard of living, in fact a decrease in such standards until things get back to an economic equilibrium where supply and demand are satisfied without borrowing tons of money each year.
THAT is the greatest challenge faced by America in our history in my view. As well it is a huge challenge for any democracy as well. Today 53% of Americans still demand more than we can produce to pay for the “more”. How long can that last, economically?
Anson
LikeLike
This is an interesting post, but I would like to add a few words about the cost of money – interest rates. The structure of our economy is determined largely by the number of dollars available for consumption vs the number of dollars available for production. If you assume that there is a lot of untapped innovation and a lot of untapped production capability, then growth will come out of consumption dollars providing return on investment that justifies bringing new production online. In other words, economic growth depends on increasing our ability to buy stuff and make stuff at the same time, and as any chemist can tell you, increasing the rarest ingredient will do the most to increase economic activity.
What does this have to do with your post?
We talk about increases in debt as if increases in spending are the only thing going on, but every increase in borrowing is also an increase in lending. If you want to understand the relationship between impulse to borrow and spend vs impulse to save and lend out, you only need look at interest rates. When there are a bunch of borrowers getting more and more desperate to borrow money, interest rates go through the roof and when a bunch of lenders are getting more and more desperate to get any sort of return on their investment at all, then interest rates and lending standards drop through the floor. That is simple supply and demand.
The capital surplus has several interesting effects. First note that there is a distinction between capital dollar surplus and physical capital surplus. Sometimes increases to the capital dollar supply result in new factories, but other times, these increases merely go into asset price inflation and reduce the return on dollar invested. When you have significant asset inflation, you see:
* Supply and demand for capital assets is less efficient because price increases can cause feedback loops, increasing demand, rather than decreasing it, as you see on the consumer side
* Supply and demand abnormalities can happen on a national scale, with the US capital trend driving a strong dollar and causing trade imbalance. (Similar to interest rates, an import demand driven trade imbalance would be associated with a weak dollar, not a strong dollar.)
* Stock vs bond correlations disrupt. Before 1980, investment books all said that bonds go up when stocks go down. Bonds and stocks started going up and down together as quantity of capital dollars dwarfed distribution of capital dollars in relative importance.
* A “shark culture” develops. Lesson number one in developing a peaceful society is, “Don’t feed the sharks!” When you give out billions of dollars in unbid contracts to a Halliburton, you do more than suffer the loss of any waste present in those billions of dollars. You also create a large and powerful group dedicated to doing whatever it takes to keep the spigot flowing. When the economy is driven primarily by the ability to impress consumers, then you have a good environment for healthy innovation. When decreasing the ratio of wages paid to services produced or using leverage of some sort to broker large revenue increases without corresponding large quality increases start to become the primary tools for corporate growth, then further corporate growth will come at the expense of innovators and the overall economy.
I disagree with your statement that Americans are demanding more than we can produce. In actuality, we consume a tiny fraction of what we can produce. Consider that Agriculture went from half our economy to under 1% over 150 years. If our economic system had not provided incentives for that change, we would still be largely rural. Incentives for economic growth come from the simultaneous existence of untapped supply and untapped demand dollars. Demand dollars in turn, come from a combination of wages and financial activities. When wages divided by revenues goes up or down, this must be balanced by either changes to financial activities or changes to growth. Inflation and deflation factor into both wages and revenues, so at the very most can buffer a little bit.
The Wages to revenues ratio has dropped steadily from 1970 and if the average person today were making the same wages based on value creation, someone earning $50k would instead be making 80k-90k a year, which would translate into growth. Not just growth before inflation… Those are inflation-adjusted numbers looking at reward for value creation in units of value created.
The sad truth is, if reward for value creation goes down, then ultimately value creation must also follow it because value creation has no reason to exist without consumption. If you add up the wages across the entire nation to get revenue potential, then this is another way of saying that shrinking revenue opportunities and increasing investment dollars merely go into low interest rates and the prices of assets going up, rather than growth.
This is why FDR, facing the same near zero interest rates we face today, was able to growth the economy more in 12 years than all the republican presidents of the last century combined (48 years) by taking a tip from chemists and providing the scarcer ingredient for economic growth. Obviously I am talking about inflation adjusted terms.
A tripling of the economy in a dozen years, like we saw under FDR, would reduce the deficit, which already shrunk from 10% of the economy in Obama’s first year to 7% of the economy in 2012, to a much more manageable level.
LikeLike
Thank you for this article. We need to remember that compromise does not always mean just meeting in the middle. I am reminded of the story of the two children arguing over pie. One says “I want the whole pie.” The other says, “No, we should split it 50/50”. The mother comes in and says, “You need to learn to compromise. Here. You take 3/4 and you take 1/4”.
To understand what is happening in congress, it is helpful to follow the money. In particular, it is interesting to note that the big debt standoff in 2011 was the first budget negotiation that happened after the Citizen’s United court case that finished in December 2010. It was also after a tea party election wave, so it is hard to separate the two effects, but the expected effect of citizen’s united is the “Walmart effect”. Walmart suppliers have to do things that are bad for their long term growth because they make such a large percentage of their revenues from Walmart, and after all, you can’t even have a long term without a short term. The more Walmart suppliers piss off their other customers, the better it is for Walmart, so in many areas, a supplier has to make a choice of either supplying Walmart or supplying everybody else. Similarly, many Republican suppliers are in the situation of either supporting their campaign financiers or supporting the general public, and the larger the block of people who dislike the congressman, the more they depend on their contributors, so citizen’s united could be the major driving force if you assume that elites sometimes care more about increasing dependency among their donees than they do always winning elections.
In any case, the solution is the same and that is, effective use of independent media to get truth and perspective out there.
LikeLike
I suggest that you read Ruth Marcus’s column in today’s (12/5) Washington Post. She does a very good job of explaining why the Bush tax cuts passed and who did not vote for them and why (like John McCain who claimed they favored the rich too much). She also explains why it is BS that increasing the tax rate on the top 2 percent wiil cost jobs.
LikeLike
@ All,
Donvphilly has found an excellent article on the subject, to which for convenience I am providing a link below. The Bush tax cuts occurred before I began to blog politically and given all that has transpired in the last two years I’m wondering how many others like me might be unaware of the original premise for them. Thanks bundles, Donvphilly!
http://www.washingtonpost.com/opinions/ruth-marcus-the-shifting-line-on-tax-cuts/2012/12/04/e50bd63e-3e46-11e2-ae43-cf491b837f7b_story.html
LikeLike
Yes, this is an interesting blog and comments thereto, good comments.
First, regarding the infamous Bush Cuts. That was and remains the traditional manner to get out of a relatively mild recession, cut taxes for while and then……. Keynesian “pump priming” with huge increases in Government Purchases was created for the disaster of the Great Depression and of course Keynes himself never said where the money to prime the pump should come for. He just said “do it”. As well AFTER the depression was over, I am sure Keynes would say repay the debt incurred over time.
I wonder how Dems would have voted in say 2005, after the dot.com recession, a mild one, was over. Would THEY have said, THEN, to return to higher taxes. I sure did NOT hear such a call THEN while Dems were desperately trying to regain controll of the House.
Today, I in fact have no big concern over rescinding all the Bush Cuts and returning to Clinton era taxes for all, except……… And we all know those reasons, short term reasons, today!!
As for the above “interest rate” arguments, I disagree. If I borrown $100 dollars, I am expected to repay the entire $100 plus the “cost of money plus a profit to the lender”. At today’s intertest rates that would be repayment of about $102, a trivial addition to the total repayment required unless is “goes on” for decades and is compounded over all those decades. Then we are talking about REAL money in interest alone.
We are in such a pickle today that rescinding the Bush Cuts, all of them, alone is merely a drop in the larger bucket of debt and repayment of same. And guess what, printing money (increasing M-2) ONLY, over time, does ONE thing. It increases PRICES, period. Keynes and classical economists AGREE on that point as well. They just argue over the amount to time it takes to reach equilibrium higher prices alone. THAT alone is one reason that prices have gone up 685% over the last 52 years, increasing the money supply most of the time over those intervening 52 years.
Bottom line for me is all the arguments over the current fiscal cliff are merely short term arguments. We have a much larger long term problem that is getting closer and closer to becoming a really short term problem as well. Yet as the “real” cliff, not this “thing” we currently call the “fiscal cliff”, gets closer and closer, well look at the non-solutions being offered, trivial non-solutions to regain real growth in the production of goods and services in America that can and will SELL all over the world. The operative word of course is “sell” and to do so, well PRICES count, a lot.
Anson
LikeLike