Terrance Heath

What The GOP Really Wanted

Filed By Terrance Heath | December 19, 2011 12:00 PM | comments

Filed in: Politics
Tags: government, John Boehner, Obama tax deal, tax

The sausage is nearly made. The deal is almost done. Shutdown has been averted. Again. For now. The process wasn’t pretty, and progressives are GOP-Republican-elephant.jpgjustifiably disappointed that Democrats gave up on the millionaire’s surtax -- which had overwhelming public support, even among the wealthy -- in exchange for keeping the payroll tax break for middle- and working-class families. Oh, and avoiding a shutdown.  Not that they’ll get any credit for it, as Boehner’s already claiming its not really a concession. “[T]hey didn’t give anything up because they never had it,” he says.

But there’s another side of to this story. For all Boehner’s smugness, a lot of things Republicans really wanted haven’t made it into the deal. Not yet, anyway.

It’s a story that’s getting traction in a couple of places. Accounting Today has a piece noting that the worst of what the House GOP passed this week hasn’t made it in to this deal so far. And over at the Huffington Post, Michael McCauliff has a post featuring “Nine Poison Pills” from the GOP’s payroll tax extension bill.

Here are a few of the things the GOP wanted but hasn’t gotten, yet. Some items died in the Senate, but some are still up for grabs until the deal is finally sealed by the end of the week.

These items went down with the House GOP’s payroll tax cut extension bill when it died in the Senate:

  • Extending a pay freeze for federal workers.
  • Cuts in federal workforce
  • Means testing of retirement benefits
  • Accelerated approval of the Keystone XL pipeline

I blogged about the first two items last week, both are job-killer and deficit busters. The pay freeze for federal workers amounts to an 8.3 percent wage reduction for all federal workers over five years.

As Andrew Fieldhouse points out, the GOP proposal doesn’t spare federal workers whose jobs survive the bloodbath. It would freeze federal workers pay through 2015, extending a two-year freeze another three years. According to the CBO, that’s an 8.3 percent wage reduction for all federal workers over five years. Imagine losing almost 10 percent of your annual income. You’d almost certainly feel that. As Paul Krugman explained, for “cash-constrained” 99 percent of us, spending is limited by our current income. If we have less, we spend less. If we spend less, there’s less demand for the goods and services we used to purchase. (Read the Robert Reich excerpt above for the rest of that story.)

As for cutting hundreds of thousands of federal jobs, you’d think it hardly bears repeating that adding even more people to the ranks of the unemployed is an economic loser. But apparently, it does.

So the GOP’s proposal would not only cut 280,000 jobs, but effectively impede job creation and imperil existing jobs, making it more likely that even more jobs would wind up on the chopping bloc -- including many in the private sector. It seems such basic economics that it’s a shame that it has to be said (though Ezra Klein already did): unemployed public workers are bad for the economy.

All that said, the (perhaps temporary) retention of public-sector jobs was one of the great successes of the stimulus. The worst thing for an unemployed person is another unemployed person. It means more competition for job openings, lower wages and less job security. The idea that it would somehow have been more “fair” for the public sector to shed jobs in 2008 and 2009 is one of these intuitions that cuts against the economic logic of the situation: More unemployed public workers would’ve meant more competition for unemployed private workers seeking jobs, lower tax revenue for states, worse services and more idle resources. It would’ve been bad on every level — and with 9 percent unemployment, it would still be bad today. And yet there’s a substantial number of voters and commentators who seem to abstractly favor the idea, despite the fact that it will, in practice, make most of our problems worse rather than better.

... Like Mitt Romney said, “Fight for every job! Because every job is a paycheck and paychecks fuel Americans dreams. Without a paycheck, you can’t take care of your family. Without a paycheck you can’t buy school books for your kids, keep a car on the road or help an aging parent make ends meet.” Not only is every job a paycheck, but every paycheck is another job supported by the goods and services that paycheck purchases.

What happens when a public sector jobs are lost? Fewer people have money to spend on goods and services. So, business have fewer reasons to hire and more reason to let workers go, because demand plummets.

...Not only that, but the long term impact of a layoff in this recession is $745 billion in lost earnings for American workers, and a permanent reduction in earning power even for those who eventually find new jobs. African Americans and Latinos are hardest hit, of course, as tens of thousands who have only recently entered the middle class leave the jobs that helped propel them there, most never to return.

And if you think it’s going to save money or lower the deficit, think again.

Andrew Fieldhouse, in the EPI post quoted above, details what Brad Plumer summed up in the title of of his piece for the Washington Post: Smaller government isn't always cheaper -- just “privatized,” thus making it more expensive.

In a different vein, if the federal government does slice down its workforce, it's likely to carry out more tasks via private contractor. For a long time, this was thought to save money, on the notion that workers in the private sector make less than government workers with inflated salaries. But this assumption turns out to be awry. In September, a study from the Project on Government Oversight found that private contractors tend to make 83 percent more, on average, then federal employees get paid to do comparable tasks.

In any case, there's not really a hard-and-fast rule here. It's possible that some government offices or positions are largely bloat and could be hacked away with little harm done. Conversely, other agencies could function better with more workers (the IRS could better crack down on tax evasion, for instance). But big, blunt cuts to the federal workforce aren't always guaranteed to save money in the long run.

How many times have we -- not including conservatives -- learned this lesson? This example probably won’t win over any conservatives, but the IRS got the go ahead to start outsourcing debt collections in 2005, only stop its private debt collection program in 2009. Why? Well,from the beginning there were concerns that the private firms were overstepping their bounds. But the real reason? It was too expensive.

Progressives declared victory when the Obama administration decided to delay he Keystone XL pipeline -- a well-financed, right-wing backed boondoggle that would pipe the dirtiest oil on the planet from Canada though the U.S., without creating many U.S. jobs or enhancing our energy security (because most of the oil will be shipped overseas).

So far, the Keystone pipeline is not on the table, but until the final vote it seems like a lot of things about this deal are still up in the air, and Keystone is one of them. Republicans are now saying they will fight for the Keystone pipeline. We may yet have to hold President Obama to his week-old promise to veto any effort to tie Keystone to the payroll tax cut.

There’s more, of course. McCaulliff lists a few more “poison pills” in his HuffPo piece. Like:

  • Slashing unemployment benefits
  • Allowing states to bar people from receiving unemployment unless they submit to drug testing
  • Requiring the unemployed to be enrolled in GED or training programs.
  • Stop the EPA from regulating incinerators
  • Stripping $8 billion in preventative care funding out of the Affordable Care Act

Averting disaster is always a hard sell when it comes to messaging. People tend to care more about what you made happen than what you stopped from happening. That said, this may be one of those times when keeping conservatives from doing their worst is at least some kind of victory.

(imgsrc)


Recent Entries Filed under Politics:

Leave a comment

We want to know your opinion on this issue! While arguing about an opinion or idea is encouraged, personal attacks will not be tolerated. Please be respectful of others.

The editorial team will delete a comment that is off-topic, abusive, exceptionally incoherent, includes a slur or is soliciting and/or advertising. Repeated violations of the policy will result in revocation of your user account. Please keep in mind that this is our online home; ill-mannered house guests will be shown the door.