Can Democrats Get an Unemployment Extension Deal Without Throwing John Maynard Keynes Under a Bus?

by Sheri Rivlin and Allan Rivlin on June 28, 2010

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)
Right now a Bill to extend unemployment benefits another six months is being held hostage in the Senate due to an ideological struggle between followers of the last century’s greatest economist, John Maynard Keynes, and those who believe it’s a good idea to obsess about balanced budgets during a major global economic downturn.

Still there is more to the Republican side of the debate than just Hooverism, and given the way the congressional pay-as-you-go (“pay-go”) rules work, Democrats can, and should, put aside the ideological battle and the potential campaign issue, and identify some tax increases and budget cuts we can support to bring the budget closer to balance once the economy starts moving forward. Extending unemployment benefits is necessary both for the economic simulative effect and because it is a lifeline that is needed by millions of individuals and families who have lost jobs through no fault of their own. These families can’t eat the ideological battle or the campaign issue. They would rather have the cash.

Speaker Pelosi understands that moving good policy is more important than maintaining good political arguments. “Pelosi told HuffPost… that to meet the demands of deficit hawks, Democrats might agree to offset the cost of the spending.”

Sure Spending Cuts Would be Bad Now, But What About 2015?

The real challenge in the Democratic economic message in this election year is the need to explain that we are for balanced budgets, we are just not for them now. While the Republicans play to the public’s growing concern about the deficit, and hammer away at Obama’s red ink, our position is that the current deficits are a purposeful response to a global economic downturn. But when the crisis is over, we agree that we will need to make difficult choices in order to address the long term structural deficit. We point out that President Clinton managed to balance the budget while President Bush squandered it away, and, well you have heard the talking points, but they are complicated and may not be working all that well.

The argument is right on the merits, but it is easily characterized as a promise to do the difficult things in the future – like a drunk promising to sober up by next Sunday. To make the promise more credible, Obama created a Deficit Commission to suggest specific ways to address the long term structural federal deficit but its report is due in December, just after the November election. It would add a meaningful degree of credibility if we were able to identify and commit to enough spending cuts in future years to offset this $33 billion budget item.

But the pay-go scoring rules allow averaging spending and revenue over five budget years to calculate the overall effect on the budget deficit. This means the Republican stance amounts to a challenge to Democrats to identify a combination of spending cuts and tax increases, as far off as fiscal Year 2015, that add up to the $33 billion Democrats want to spend on the current “emergency” extension of benefits. Senate Minority Leader, Mitch McConnell (R-KY) has already made a partisan tinged suggestion to do just that by cutting pay for federal workers. We should counter with our own partisan tinged suggestions of cuts in oil and gas subsidies, agribusiness subsidies, and perhaps scrap or delay a weapons system or two. Then we can get a deal done by working out the details.

Previous post:

Next post: