Desperate Times, Desperate Measures

Wow, the S&P downgrade has sent the panic in liberal Washington to incredible heights.

In what must be a coordinated effort, numerous Obama administration officials, leading Democrats, and liberal media outlets, including David Axelrod, John Kerry, Howard Dean, and the usual suspects at the New York Times, took to the airwaves and print over the weekend in an aggressive attempt to brand the S&P downgrade as the “Tea Party Downgrade.”

They’ve resorted to the theory of throwing everyone up against the blame wall in the hopes that someone sticks. The Tea Party has now joined a wall that already includes George W. Bush (ad nauseum), S&P, fat cat Wall Street bankers, China, Big Corporations, private jet owners, “millionaires and billionaires”, Boeing and pretty much everyone except themselves and their campaign contributors.

Desperate times call for desperate measures.

We do not identify ourselves as Tea Partiers. We’ve previously cautioned them to not overplay their hand during the debt ceiling debacle, for which they obliged, yet they are unjustifiably the scapegoat du jour for President Obama's administration. This is the ultimate cop-out in populist politics, shows an incredible lack of leadership and is revolting.

Let's look at the plain facts of the debt ceiling debate, the result of which led to the S&P downgrade:

• The President wanted a clean debt ceiling increase, and has proposed a budget that increases spending to historic levels. 
• The Tea Party opposed a debt ceiling increase, arguing that it’s too high already, and provided input into a Republican budget that significantly cuts spending in an effort to balance the budget. 
• Congress and the President reached a compromise where the President received 100% of his debt ceiling increase, upfront, in exchange for some immaterial spending cuts over the next 10 years and the hopes of additional, yet still immaterial, cuts-to-be-named-later by another special committee that is doomed to fail.

Despite the liberal outrage, it seems that President Obama worked out a pretty good deal. He got all of his requested debt limit increase, avoiding an election season showdown, only had to agree to immaterial cuts to discretionary spending, and washed his hands of any future cuts by deferring the tough decisions to a Congressional committee. This "compromise” avoided a “default” but, in the minds of S&P, was too weak to keep us in the AAA club.

There is not a single rational reason why the Tea Party (which only recently has all of 15% of the total seats in Congress!) should get blamed for the downgrade, when they are the only party in town attempting to seriously fix the fiscal problems cited by S&P.

Additionally, what exactly did the Tea Party gain from the debt ceiling debacle? A moral victory from achieving spending cuts that are completely immaterial to the overall budget? Another opportunity to suggest sensible cuts that will ultimately get ignored by Democrats and most Republicans because supporting those cuts might hurt their ever-important re-election campaign? Their biggest win was avoiding President Obama’s last-minute, Populist Politics 101, demand for tax increases on “millionaires and billionaires” (interestingly defined as those who make more than $250,000 a year, including small businesses) that wouldn’t have made a dent in our budget problems anyway, and in fact, could actually compound the problem.

The President and Democrats were so intent on avoiding a “default” that they were happy to just kick the can down the road...again. Apparently S&P’s had enough with the can kicking and took the bold action of downgrading the US from a 0.0001% chance of default (AAA rating) to 0.001% chance of default (AA+ rating), turning a virtually meaningless downgrade into a political football.

The President and Democrats quickly punted and immediately went on defense by aggressively pointing their fingers at the Tea Party and holding yet another press conference spouting out the same meaningless clichés and talking points.

The American people want leadership in the face of our economic crisis, not blame games, condesending clichés about “shared sacrifice” and “compromise” or deferrals of important decisions to others.

Desperate times indeed.

The "Progressive Crack Up"

Here's a brilliant op-ed in Saturday's WSJ by Peter Berkowitz.  No party has a stranglehold on hypocrisy, but this piece does an excellent job at highlighting the hypocrisy in today's progressive politics.  A couple of our favorite lines -

"Progressive partisans also displayed economic illiteracy, refusing to recognize the respectability or even the existence of alternative economic views."

"How often they have haughtily lectured the nation on the vital importance of civility in public discourse, the urgency of constraining executive power under law, and the need for impartial expertise in public affairs to pragmatically weigh competing public-policy options. But in the debt-limit debate the virtues they profess could hardly have been more spectacularly absent."

"Add to this the progressive belief that human beings can be perfected through the rule of experts, and you have a recipe—when the people make choices contrary to progressive dictates—for generating contempt among the experts for the people whose interests they claim to alone represent. And not just contempt, but even disgust at diversity of opinion, which from the progressive's perspective distracts the people from the policies demanded by impartial reason."

But Americans Want It!

“Poll after poll suggests that Americans prefer the president’s call for a mix of spending cuts and tax increases to the Republican Party’s anti-tax approach.” – Ross Douthat in his Op-Ed in today’s New York Times

This is an argument that we hear over and over again from the “tax the rich” crowd (President Obama, New York Times, Bill Maher, etc.), but it’s an incredibly weak argument and fails the test of logic.

For starters, it’s a stretch to say that the results “suggest” that Americans prefer a mix of spending and tax increases.

50% responded that the deficit is best reduced with only/mostly spending cuts, while only 11% respond that the deficit is best reduced with only/mostly tax increases. To me, this “suggests” that tax increases aren’t very popular. Additionally, given the fact that the President continues his sharp rhetoric for “millionaires and billionaires” and “huge corporations” paying higher taxes, it would be reasonable to assume that 98% of those who replied “mostly with spending cuts” (30%) and many who replied ”equally with spending cuts and tax increases” (32%) support raising someone else’s taxes, not their own. Which leads to my next point…

It’s a flawed analysis of responses to an incomplete survey question. 

Does it surprise anyone that Americans prefer that someone else pay more taxes to reduce the deficit? It shouldn’t. I wonder what the results would be if we changed “Equally with spending cuts and tax increases” to “Equally with spending cuts and an increase in my taxes”? How many people would change their mind if it was their own money being used to reduce the deficit created in Washington, and not just "milionaire and billionaire" money?

Simple analogies illustrate the flawed analysis. What if we polled everyone in line at the post office (where we know there will be a statistically significant sample) and asked them "who should pay for your postage?" The multiple choice question has two answers – “I should pay for my postage” and “Millionaires and billionaires should pay for my postage”. I guarantee the poll would “suggest” that Americans prefer that "millionaires and billionaires" pay for their postage.

Would it then be logically sound to use those poll results as an argument for forcing "millionaires and billionaires" to pay for the postage charges of the rest of the populiation? How about a poll asking “Would you prefer to pay for pizza on Friday’s or have free pizza on Friday's?” Again, I guarantee that poll would “suggest” that we pass legislation requiring Free Pizza Friday’s across the country, because, hey, poll data suggests that Americans prefer free pizza.

As we've mentioned before, we're not necessarily opposed to tax increases, but we'd prefer tax policy to be based on sound economic theory and evidence, not poorly constructed public opinion polls, which as we've shown above, will always "suggest" that someone else pick up the tab.