Chuck Dalldorf: The political battle over the US national debt limit

"On this side of the Atlantic, we are stuck in the grip of a self-created political and possibly economic crisis. With only days to go before the United States defaults on loans and forces a large economic disaster, which may have global implications.

This political battle is a schizophrenic series of events in the context of a terrible, anemic economy with high unemployment, wrapped up in the beginnings of a huge political campaign for the 2012 elections. President Barack Obama is running for re-election in the fall of 2012. He is not alone and all 435 members of the US House of Representatives and one third of US Senators face re-election with the President in 2012.

The U.S. Constitution authorizes Congress to manage federal spending and borrowing. Congress controls what the U.S. Treasury can borrow through the establishment of the debt limit, which currently is $14.29 trillion. As the US has struggled through the global economic recession and the operations of two wars, expenditures of the federal budget have not matched tax revenue leaving the U.S. national government no alternative but to borrow money.

Historically, Congress has used the issue of extending or modifying the debt ceiling as another tool to grandstand on federal budget related issues, or programs supported or opposed by the political party opposite. In the current battle over the extension of the debt ceiling, the President is a Democrat, the Senate is controlled by the Democratic Party and the House of Representatives is controlled by the Republican Party.

Generally speaking, Democrats want the debt ceiling extended to help fund needed programs as well as paying for debt the US has related to the economic downturn and fighting two, long and on-going wars. Republicans believe in smaller government and want to see government spending reined in. (Though it is interesting Republican’s want federal spending reduced outside war funding, which has been the single largest expenditure driving the US economy into debt long before the massive global economic recession. But I digress…)

As the US economy began plunging in 2008, both US Presidents Bush and Obama expended huge amounts of federal money to shore things up. The results of those emergency efforts were mixed, but mostly Americans feel there was little choice in those efforts.

One of the largest expenditures, outside the wars, was the effort the Obama administration pursued in creating a federal stimulus effort to try to even out and slowly grow the economy. I think the stimulus worked some, but did not place enough federal money in the right places and to the right people.

The economic struggle at hand is a very real one. We are desperately fighting a double dip recession and we have clearly not created enough jobs. A jobless recovery cannot create growth and confidence.

America’s political culture has changed and it has changed for the worse. We seem to no longer believe some issues are more important to resolve for all Americans then seeing those issues as ways to make political points. This is now true in national, state and local governments throughout the country.

The political crisis of the extension of the national debt limit has become a self-inflicted slow motion train wreck for the economy and continued alienation of Americans from political participation and faith in the leadership of our nation. Each party sees a jam opportunity but everyone is flirting with a possible massive economic meltdown that would affect the US and global economies.

We are in a race to the bottom right now and there will be enough blame to go around. The Tea Party leaning Republicans seem to be re-enacting a failed a battle strategy from the Vietnam War where they seem to be saying they are ready to “destroy the village in order to save it.” Traditional Republicans, including House Speaker John Boehner, look to find ways to win points for GOP house members and to cause damage to the President.

President Obama and Democrats in the Senate and House have not used enough opportunities to focus on the creation of jobs. Democrats are also playing political theater to demonstrate how Republicans are hurting core constituents in the budget process and the impacts to them in proposals to cut costs to gain acceptance to solve the debt ceiling crisis.

Daily polling from a number of sources show there is continuing damage to both parties as well as the President. We continue to foster a political culture of conflict over solutions. We no longer seem able to find a shared national interest where both parties can work together to create jobs and allow families to recover from this damaging, ongoing recession. Without this focus and joint commitment to resolve what ails Americans, both major parties continue to alienate voters and make party politics irrelevant".
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This week's guest blog was from our good friend Chuck Dalldorf, Public and Political Affairs Consultant and Part-time Lecturer at Sacramento State.

Back in 2009 Chuck authored a blog for the CSPP entitled West of the West Wing. You should check it out.

(Image courtesy of the BBC)

An Audience with... the Class of 2011

Our annual policy summit, the Big Event, is now available to watch on our YouTube channel.

You can watch the Q&A session with three new MSPs below. The video features Marco Biagi MSP, Alison Johnstone MSP and Willie Rennie MSP.

The Big Event's public service debate

Our annual policy summit, the Big Event, is now available to watch online via our YouTube channel.

You can watch our session on Scotland's Got (Public Service) Talent: Scotland's Emerging Public Service Jigsaw below.

Our thanks to Deloitte, Clackmannanshire Council, Comhairle nan Eilean Siar, Orkney Islands Council, Shetland Council and the Herald for making this event possible.

The Big Event's Speakers Corner

There is nothing worse than sitting for two hours with a five minute Q&A session, which is why we always aim to ensure our events are participant driven.

At the recent Big Event we held an open mic session where delegages could outline their public policy concerns or ideas.

You can watch this session below.

Watch the Big Event - town centres session

Our annual policy summit, the Big Event, is now available to watch online via our YouTube channel. In total they are 16 videos for you to watch on town centres, speakers corner, public service innovation and a Q&A session with new MSPs.

Click here to start watching the event or via our blog. Below you can watch the Genuis Towns session with Dave Gorman SEPA, Head of Environmental Strategy, Ian Lindley,Scottish Small Towns Group Chair & member of Scotland's Towns Partnership Policy Group and Lesley Riddoch
Author, Broadcaster & Commentator.

This event was sponsored by Architecture + Design Scotland and DLA Piper.

Ross Martin: Simpler planning system could help build a way out of recession

Published in the Scotsman, 23/7/11

"To shelter from the coming economic storm, we must boost our defences, starting with the housebuilding sector

First, we had the financial crisis which precipitated a collapse of the established economic order. Next it was the Westminster political establishment, caught with its hands in the expenses till. Now, as we watch on like a voyeuristic red top reporter salivating over scandal, the tabloid press appears to be hacking itself to death through its own immoral, professionally grubby and personally hurtful practices.

The resultant general crisis in confidence is gathering pace, twisting together a triple helix of social, economic and political reputations into a single, all-consuming destructive tornado. Even the Metropolitan Police have been sucked into the storm, with Scotland Yard's finest forced to resign in an atmosphere of accusation, suspicion and mistrust.

It is anybody's guess as to where this reputation-wrecking twister will strike next, who or what will be shredded in its path. All around, the hatches are being battened down as other parts of society prepare for the worst. From scandal to corruption, from incompetence to inability, the impact of dodgy decisions in so many walks of life is now emerging.

Across the private sector, we've already seen pensions being slashed, wages cut and jobs lost. A large number of once-proud companies, such as many well-known high street stores, have simply ceased to exist. Now the winds of change, driven by the economic-political-social storm centred on London are beginning to reach Scotland.

The effect of these chill winds will be felt most keenly here, where the public sector is such a dominant feature of our landscape. Of course, fiscal-political deals between the Scottish Government and HM Treasury have sheltered us from the icy blasts until now, but we cannot be protected forever.

We are about to feel the full force unless we can quickly mount a strong, well-constructed defence. If we are to protect ourselves from the inevitable impact, we desperately need to rebuild our country's economic defences, and fast.

Brick by brick, using the tools of trusted trades where a hard day's work is rewarded with an honest wage, this can indeed be done, starting with the housing sector.

Even though the mortgage market has still to reopen accessible entry points, demand for new housing, across all sectors, remains strong. Innovative financial products, such as shared equity schemes, mid-market rents and other mechanisms that can strengthen our housing base are beginning to make a marginal difference, but our planning system still impedes development.

In order to deliver the Scottish Government's central policy focus of sustainable economic growth, we must make it easier to build more new housing, and simultaneously redevelop the 50,000 houses that are currently lying vacant in Scotland. Many more properties are being used for other purposes, such as under-utilised storage space above struggling shops in our town centres.

While remaining true to the environmental targets of our world-leading climate change legislation, we must introduce greater flexibility into our planning system and encourage, through financial incentives, a greater diversification of our housebuilding sector. By changing the tax treatment of existing properties and encouraging their re-use, by incentivising the redevelopment of derelict sites, and by introducing a range of other measures to enable new sites to come forward, we can make a real difference.

It is a scandal of our time that the construction industry is on its knees, when we have the skills base, the ingenuity and the desire to better match the supply of a more varied housing stock with the undimmed demand for new homes.

We need to identify the blockages that are stopping the development of what could be a strong economic defence against the fast approaching fiscal storm. Aside from the few public sector projects that have been sanctioned by the Scottish Government, including the M74 extension and the M80 upgrade, and the continuing expansion of the still buoyant supermarket sector, the rest of the construction industry continues to bump along the bottom of the recessionary floor. We can, and we must, do better.

For example, almost all Local Plans, the map of any local authority area designated by potential type of land use, are premised on the hope that very large-scale housing allocations can fund the huge and expensive items of infrastructure required to support them. Many of these "Major Growth Areas", where councils have allocated between 2,000 and 5,000 houses to individual locations, are struggling to get started.

The Scottish Government's original, optimistic target of 35,000 house completions per annum will never be met until greater flexibility is introduced into these development plans. A realistic approach to infrastructure challenges must therefore be taken, recognising the difficulties that many of these large-scale sites have in securing up-front funding for major items of infrastructure.

For example, where a new high school is required, the up-front cost of well over £30 million makes a site unfundable and therefore undeliverable at this time, and this is without even looking at new or upgraded motorway junctions or rail stations. Where councils have managed to allocate large scale sites in areas where these items of infrastructure already exist, in all or in part, these sites do of course have a chance of coming forward.

However, in other areas, where these sites are unlikely to lay a single brick in the next few years, councils should be enabled to bring forward additional smaller sites which can make a start tomorrow.

It is clear that sites of varying size are required to get the housing market moving again, everything from a few houses built by local developers to sites of 750 houses or so put together by the big house building firms and or innovative investors.

The level of infrastructure investment required for these smaller sites, eg a new primary school rather than a new high school, can be supported, even in the challenging economic climate.

So, if allocated, many of these developments could begin tomorrow, immediately creating well paid, skilled jobs and kick starting local economic activity.

A little ingenuity and a lot more flexibility is now required to enable the planning system to deliver on the fine and laudable aims that the parliament aspired to when passing this legislative planning framework; increased efficiency, more localised decision making and greater clarity on costs for all concerned.

With additional incentives on the re-development of existing (so called brown field) sites, the re-use of existing residential units, and an increase in the density of housing developments, where appropriate, a huge and timely boost could be given to the house building sector at local and national levels.

Such an injection of economic activity would strengthen our defences against the oncoming fiscal storm considerably. This would provide quality employment for thousands of individuals, strengthen the supply chain by benefiting small businesses and deliver new homes for families.

A number of simple steps to deliver this robust range of benefits could be taken today. These building blocks for economic stability, and the preparation for sustainable growth, are ready to be laid.

Scotland has the people, the skills and the ingenuity to construct a better future. It's time to get the policy trowel out and get started".

Ross is CSPP policy director

Opening public services

The UK Coalition Govt has published its long awaited White Paper entitled "Open Public Services". You probably haven't seen much of it in the press because of the all-pervading issue that is News International.

You can watch the PM deliver his speech below.

Ross Martin: Public sector in dire need of ideas

Published in the Scotsman, 5/7/11

"OUR focus must be on new funding models to deliver higher quality, more localised public services. Then London mayor Ken Livingston visited Edinburgh at the time of the congestion charge debate in 2005. If the Capital had gone down the "Red Ken" route and simply imposed the charge, it could have funded the trams Picture: Neil Hanna

When it comes to tax, Scotland has a strange sense of priorities. We are happy to pay tax when performing the most basic of bodily functions - 30p entry to the public toilets in Auchterarder - but we don't need to spend even a penny to park our gas guzzler at an out-of-town shopping mall when many of our high streets are struggling to compete.

Similarly, we are used to paying for access to the telephone or rail network, even to the extent of paying peak charges at times of busy traffic, but ask us to pay a small toll to travel the most expensive part of our motorway network, the recently opened M74 extension, and we'd most likely drive the congested few miles alternative back over the Kingston Bridge to avoid it. Our relationship with taxation is quite perverse.

It could have been so different. In 1999, carried along on the wave of devolution optimism, we Scots actually voted to pay more tax; up to 3p in the pound could be raised, or lowered, by our new parliament in Edinburgh. Sadly, our parliamentarians proved to be out of step with public opinion and declined to use the tax powers that we, the people, had graciously granted them. The die was cast.

Just like their Westminster cousins, our MSPs have consistently chosen not to see the headline tax rate as a key part of economic strategy, rather they have sought to vary taxes as a tactic, creating or removing individual, sometimes localised charges instead: abolishing the tolls from the Forth Road Bridge and the Skye Bridge, implementing free prescription charges and eye tests, removing car parking charges at hospitals and granting all pensioners, regardless of personal wealth, free bus travel around Scotland.

This tactic of removing individual charges proved politically popular in times of economic boom, and even as we entered the public expenditure squeeze. However, as budgetary bust begins to bite home in countries all around Europe, from Greece in the East, to Portugal in the West, a more coherent strategy is required here in Scotland, and quickly.

The rise in universalism has limited the options. By removing a range of revenue raising measures that could plug significant parts of the public sector funding gap, our MSPs, of all parties, have boxed themselves into a corner.

Like David Haye, in his fight with Kiltschko, our MSPs talked a good game, but they too could find it impossible to overcome the relentless plodding progress of a colossal opponent that simply refuses to budge - the budgetary black hole.

The funding gap is huge, £39 billion over the next three parliaments, according to last year's Independent Budget Review. In order to get out of this tight fiscal corner, our parliamentarians must look for new ways to raise revenue for public service provision and lever in additional capital investment for much needed infrastructure improvements.

So what is to be done? In England, the Conservative-Lib Dem Government have continued with the privatisation route and market-driven reforms of the public services begun under Thatcher and continued by the Brown Treasury, under Tony Blair.

Here in Scotland, with a body politic which can fairly be described as a kind of "Social Democratic Soup", that is not only unpalatable, but politically unworkable. A different set of ingredients must be mixed if Scotland is to reform its public services in a manner that will prove palatable to the people, especially as the local government elections loom large. The only way forward is to dig deep into the political and civic consciousness of this country, evoking the innovative spirit of the Enlightenment and looking to design new ways to raise revenue and cut costs, enabling the delivery of more efficient and effective public services.

OK, some of these ideas will not be entirely new, while others are still in their wrappers, but all possible forms of taxation must be considered. For both revenue and capital expenditure, our focus must be on new funding models that will enable us to redesign and deliver higher quality, more localised and personalised public services.

Simultaneously, as we look to increase the amount of cash that government, at all levels, can raise to help plug that funding gap, so too must we be brave, and occasionally brutal, in stripping out costs that contribute very little, if anything, to the common weal. This side of the public service reform balance sheet is a story for another day, but suffice to say that the fundamental, root and branch review of every public pound spent, as advocated by the Christie Commission, is indeed urgent.

On taxation, we must get serious about different types of tax, the rates at which they may be levied, who should be responsible for them and, crucially, what impact they have on the quality of Scotland's public services. Each Scottish Parliament has declined to show a lead on innovative tax measures; this one needs to shape up.

A few initial ideas. In transport, congestion charging would have funded the complete construction costs for the Capital's trams, avoiding the need for the UK's best bus company, Lothian Buses, to be dragged to the table.

The marriage of these two key parts of the public transport network in and around Edinburgh should have been based upon operational partnership, not on a dash for cash to fund an expenditure black hole. We are in danger of repeating that strategic mistake on a national scale.

The decision by the city council to put the Congestion Charge to a city-wide ballot was both unnecessary and unlikely ever to succeed. Unnecessary, because "Red Ken" Livingston had shown the way in London. Unlikely to succeed, because the electorate was rightly suspicious of granting politicians another tax-raising power, when they hadn't had the courage, or the vision, to use the last one they were given.

Like many of our other infrastructure projects this national asset will quickly turn a corner in public perception once it is up and running. As soon as passengers feel the benefit of a modern mass transit system, improving the public transport experience beyond all recognition, the Capital's trams will raise the level of expectation, which will in turn raise standards across the network. It's just as well that the subway in Glasgow has secured much needed modernisation funds as the comparison, once operational, would have been stark.

This link between improved quality and increased charges must be the benchmark for public service reform in Scotland. From public toilets to public transport, we either raise revenue to fund these services through general taxation or we introduce user charges that create a revenue stream hypothecated to that project or service. This is essentially the argument over tuition fees, whether the cost is paid for up-front by all or collected through usage, in this case by English and non-European students.

Similar arguments and contradictions apply across the entire public service family. In health, we sanction the operation of private sector practitioners in dental care, working alongside the NHS, whereas to suggest a penalty fee for those serial no-shows at the local GP's surgery is like, well, pulling political teeth. In education, many a teacher makes a nice little, often tax-free, earner from private tuition (sometimes even when striking), but when will a Scottish council integrate that mass, often middle-class activity into its own operation?

On the capital side of the budget, it has been painful watching the political contortions over the alphabet soup of funding mechanisms; PFI, PPP and NPDB - the Private Finance Initiative, Public Private Partnerships and Non Profit Distributing Body, in case you wondered.

Using essentially the same financing vehicle, these variations on a theme are presented as radically different options to an increasingly disinterested public. Next up are TiFs and LABVs - Tax Incremental Financing and Local Asset Backed Vehicles - both forms of a commercial mortgage taken out against the value of a public, or contributing private asset.

An open and honest debate is urgently required. If our MSPs signed up for that, I might even pay an entry fee to watch, listen and learn."

Ross Martin is Policy Director for the Centre.