Thursday, June 17, 2010

Attacking the wrong deficit problem...

After some political polling showing the swelling deficit to be the biggest fear preying on voter's minds, politicians are becoming very sensitive to avoiding charges of increasing the deficit.  This is bad news for issues near and dear to farmer hearts however. Republicans also want to go to great lengths not to give Pres. Obama any more wins than they can help, too.

Because we like to bury our budget entries in larger bills to avoid scrutiny - and to be fair, because that seems to be the only kind that ever get passed - some expenses may very well not get funded.

The biodiesel credit is one that seems to be in greatest danger.
President Barack Obama's plea for more stimulus spending as insurance against a double-dip recession hit a roadblock in the Senate on Wednesday, the victim of election-year anxiety over huge federal deficits.
A dozen Democrats joined Republicans on a key 52-45 test vote rejecting an Obama-endorsed, $140 billion package of unemployment benefits, aid to states, business and family tax breaks and Medicare payments for doctors because it would swell the federal debt by $80 billion.
The swing toward frugality runs counter to the advice of economists who support the bill's funding for additional jobless benefits and help to states to avoid layoffs of public service jobs. They fear that the economy could slip back into recession just as it's emerging from the biggest economic downturn since the Great Depression. [More]
I think the idea of hitting a "deficit wall" could become a common description of the fate of such legislation.  It also does not bode well for the ticking time bomb known as the estate tax, I would say.
The House on Tuesday voted 247-170 to advance legislation providing tax breaks to small businesses to the Senate. At least 5 Republicans supported the bill's passage. 
The tax portion of the bill is expected to be combined with loan incentives for small businesses before it travels to the Senate. The upper chamber is expected to take up the legislation after it passes the so-called tax extenders bill. 
The small business bill is expected to attract several amendments in the Senate, including a fix for the estate tax.
During the House debate on the bill, Republicans blasted it for increasing taxes. They also deemed the loan portion of the bill as "TARP-like" because it grants the Treasury secretary temporary authority to make capital investments in small banks to increase the availability of credit to small businesses.  [More]
While the bipartisan appeal of farm subsidies of all kinds hasn't necessarily lessened, for some reason we are seeing more willingness from BOTH left and right to drop them in favor of other pet budget items.  I was struck by two strikingly similar views from Jonah Goldberg, an arch conservative and Kevin Drum, a progressive over ethanol subsidies.
On the other hand, the bulk of Goldberg's column is about the idiocy of ethanol subsidies, so I'll hold down the snark. Strange bedfellows and all that. In fact, what he really ought to be asking is this: given that liberals, conservatives, and libertarians all agree almost unanimously that ethanol subsidies are completely indefensible, how is it that they exist anyway? So here's my proposal: let's make getting rid of ethanol subsidies a destruction test for the whole concept of bipartisanship and the American system of government. If, in the end, left and right can't even work together well enough to get Congress to eliminate ethanol subsidies that we all hate, let's just pack up, rewrite the constitution to turn ourselves into a parliamentary democracy, and be done with it. [More]
The greatest danger for farmers is not that subsidies won't get funded, however. For us and the rest of the nation, it will be from the wretched timing of people suddenly getting deficit fever. Reducing federal spending at the same time as state budgets are collapsing is exactly what we don't need right now.  But human nature is such that we respond to this perceived threat when things are looking bad, and run up huge debts without caring when the economy is booming.

It is hard to keep in mind that high unemployment is the bigger issue until you lose your own job, but economists are virtually unanimous about the difference between short-term deficits caused by shrinking government revenues and our long-term structural debt problem.  Meanwhile the financial markets show no sign of worrying about the US debt as much as many citizens.

The clear chance to control at least the House is a powerful enticement to do the wrong thing, I'm  afraid.  It would also mean being more in charge of the legislative process might not be as much fun as enjoying the luxury of mere opposition.

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