CBO chief calls Obama’s slight tax increases “class warfare”

Early her Administration In the midst of the Affordable Care Act and the rise of the tea party movement, President Barack Obama turned to austerity measures, culminating in a series of bilateral talks aimed at cutting spending and raising revenue. “Washington must live within its means,” Obama declared in 2011 and called for a broad proposal to cut trillions of dollars from the federal deficit over the next 10 years.

The proposal, which included hundreds of billions of dollars in cuts to Medicare, Medicaid, federal pensions, and many other parts of the social safety net, called for a reduction in federal spending of $ 2-3 for every dollar accrued from wealth tax increases. American and large corporations.

Many right-wing economists felt that Obama’s vision of austerity was not enough. In particular, one economist, Phillip Swagel of the American Enterprise Institute, influenced Obama’s plan. Swagel knocked out a skewed combination of spending cuts and tax increases – a combination that would probably be considered harsh by today’s standards – a “policy, not an economy” and argued that the tax provisions in the president’s plan were a ploy to allow more federal spending. in the future.

When Gwen Ifill asked PBS NewsHour in September 2011 if there was a proposal for a “class war” against rich Americans, Swagel simply replied, “Yeah.” Eventually, talks broke down as Conservative Republican Republicans refused to approve tax increases for the rich and saved Social Security and Medicine from the Obama knife.

Swagel, a prolific academic and political analyst who has spent his career in the Republican government and right-wing think tanks and beyond, now plays an important role in the fate of President Joe Biden’s Build Back Better Act. As head of the Congressional Budget Office, Swagel has broad powers in the agency, which has become increasingly influential as it plays a key role in the reconciliation process – a complex and obscure legislative path that bypasses the Senate filibuster but obliges proposed legislation to be in deficit. -neutral or deficit-reducing after a 10-year window based on CBO analysis.

However, before a bill can enter the Senate, it must first be approved by Parliament, where the Conservative Group of Democrats has voted in favor of the law. after seeing the CBO score, some of which have already been published. They have promised to vote on the bill by the end of this week. The CBO has said it expects it to score all the provisions of the law by Friday, and House of Representatives Majority Leader Steny Hoyer has said a vote in the House of Representatives could take place as early as Thursday, assuming Conservative Democrats go along.

In their letter, in which they explained their position, the group seemed to appeal to the CBO as an impartial authority. However, budget scoring is a highly subjective practice that has in the past tended to produce estimates that deviate wildly from the actual budgetary implications of the policies pursued. And Swagel, whose history shows a deep antipathy to investing in social programs and climate resilience, can help sharpen the backbone of Conservative Democrats who want to undermine the boldest climate action and the broadest expansion of the social safety net in a generation.

It has been More than 10 years since Swagel called Obama’s deficit-cutting proposals class warfare, the moral panic caused by deficit raids in the early 2010s has largely waned, although concerns about inflation remain. The U.S. has spent trillion dollars to curb the consequences of the coronavirus pandemic, and after receiving the largest increase in infrastructure spending in a generation, Congress is now moving to a nearly $ 2 trillion package that includes the rest of Biden’s agenda. The consensus of mainstream economists has changed so much that the current view is that Obama’s primary mistake in his first term was too little money for economic recovery and that the proposed cuts to Medicare and other key programs became so toxic that Republicans failed to create momentum to seriously consider funding cuts, when they dominated all the levers of government in 2017 and 2018.

However, what has changed slowly is the big impact that deficit hawks are making at key bottlenecks in policy-making.

Swagel, a longtime figure in the world of conservative economics who served as deputy secretary of economic policy during President George W. Bush’s years in the run-up to the global financial crisis, was appointed CBO director for his four-year term. in June 2019. His election was led by then-Senate Budget Committee Chairman Mike Enzi, and was approved by John Yarmuth, Chairman of the House Budget Committee, before being sent to House Speaker Nancy Pelos and Senate Interim President Chuck Grassley for an official appointment. The appointment of Swagel, which Democrats were technically free to oppose but did not oppose, followed a tradition in which the chairmen of the House of Representatives and Senate Committee on Budgets made a choice and gave another wide margin when it was their turn to choose.

A look at Swagel’s writings and public comments over the past 20 years in public life reveals a conservative intellectual who has struggled to adapt to a changing economic consensus, and calls into question the wisdom of the Democrats who made his appointment possible without significant resistance.

In his time as a researcher and visiting researcher at the American Enterprise Institute, a conservative incubator heavily known for opposing government programs and financial regulation, Swagel wrote articles condemning Obama’s modest expansion of the welfare state and financial regulatory system. These writings included numerous calls for aggressive cuts in Medicare, Medicaid, and Social Security.

In his last article as a researcher at the American Enterprise Institute, written a few months before he was appointed director of the CBO, Swagel himself criticizes the concept of a legislative package that links climate change measures to additional investment in the social safety net. one thesis from the Build Back Better program. The work, entitled “Action on Climate Change, Must Not Include the Creation of New Rights,” was published in the Conservative Washington Examiner.

The CBO is no stranger to the controversy. It has caused headaches for the majority party since its founding in 1974, including Republicans in their unfortunate attempt to repeal the Affordable Care Act in 2017. The overthrow of power from President Richard Nixon’s Office of Administration, originally planned by the Democratic Congress. The budget, the agency, and its headline points have become a thorn in the side of liberal decision-makers who want to reorient federal politics for the benefit of lower and middle-class Americans. As several economic analysts and commentators have recently pointed out, almost all of the core elements of the American welfare state (such as Medicare and Social Security) were passed before legislation was required to go through the thorough fiscal scoring process mandated today.

Ever since Swagel took office as director of the agency, he has been careful to emphasize the nominally impartial nature of the CBO. In a number of media and paid speeches, including his speech to the Foreign Policy Organization on 5 November, he has worked hard to make the agency “an impartial body set up by Congress to act as an honest broker. To measure and evaluate the impact of fiscal policy and budgetary decisions.” He has also refrained from making public comments that could be construed as criticizing the fiscal policies of Biden or his predecessor.

But the agency’s own actions challenge the public relations activities led by Swagel. The results produced by the CBO under Swagel have given Democrats good reason to fear that the agency will make a calculated blow to their chances of passing the presidential agenda.

Over the past few years, the agency has repeatedly had to revise its core debt forecasts so that economic growth and tax revenues are stronger than previously anticipated. And earlier this year, the CBO came under intense fire from Democrats and workers ’activists in Congress as it proposed raising the minimum wage to $ 15 an hour. This score, which found that raising the minimum wage would increase the federal deficit and lead to the loss of more than a million jobs, contradicted the analyzes of several impartial institutions and the results seen by several municipalities and states. has raised its minimum wage policy in recent years.

Ari Rabin-Havt, a longtime assistant to Senator Bernie Sanders, I-Vt., who spoke at length about the role of the CBO in the recent Deconstructed episode, said the score was incorrect based on actual data. it also came after the CBO spent a considerable amount of time proposing to legislators that its future score on the pay rise would be relatively indisputable.

The backlash against the result was so strong that some Congress Democrats questioned whether they should replace Swagel so that he would not become another unelected bureaucrat with conservative ties and effectively vetoing the party’s legislative program. When asked to comment on the agency’s work on minimum wage points and Swagel’s comments criticizing federal investment in climate and social programs, the agency referred to The Intercept on sections of its website that explained the CBO’s processes.

Starting Wednesday many provisions of the Build Back Better Act are ignored. But the CBO’s estimate released on Monday of the headline, which included provisions to improve the IRS’s executive powers, significantly underestimated the Treasury Department’s analysis that the provision would raise nearly $ 300-400 billion in revenue over the next 10 years. By comparison, the CBO found that the measure would raise only $ 120 billion, creating a loophole for deficit eagles who eagerly claim the package will increase government debt and exacerbate inflationary pressures on the economy. The drastic difference was a warning shot to Democrats who hoped the CBO’s analysis of the package would be largely in line with the numerous analyzes done by other federal agencies. Josh Gottheimer, DN.J., who will hold the keys on Tuesday, reported that he will move forward notwithstanding the number of points awarded by the agency under this order.

Its explanation for the increased funding shortfall in the tax administration – that the benefits of increased enforcement will diminish significantly over time as the wealthy find new ways to circumvent tax policy – is plausible, but should not be seen as politically neutral, as conservative Democrats no doubt try to argue.

As Rabin-Havt said, “All these processes are based on the idea that these institutions are not political: the office of a Member of Parliament, the CBO, the courts.… That is not the world we are in. Everything is political. There is no institution above politics.”

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