Back when he was first announced as co-chairman of the Obama administration’s debt commission, former Republican Senator Alan Simpson (WY) bucked today’s conservative orthodoxy by saying that the commission needed to consider tax increases as well as spending cuts to get long-term deficits under control. “To say that all we have to do is take care of waste, fraud and abuse, and foreign aid is a like a sparrow’s belch in the midst of typhoon,” he said. “That is nothing, less than 1 percent of the budget.”

Simpson has garnered criticism from the right for his stance. “He’s old and grumpy, and he doesn’t like the Reagan Republican Party,” said anti-tax crusader Grover Norquist said. Simpson was not cowed, however, and today went back on the offensive, slapping down the conservative ethos around Ronald Reagan and his supposed resistance to any and all tax increases.

At a public hearing of the commission, Simpson said that one of the “myths, and the misconceptions, and the distortions and, as one president said, the plain damn lies” promulgated by the right is that Reagan didn’t raise taxes when the situation called for it. As Simpson pointed out, he most certainly did:

Let’s just disengage ourselves from the myth that Ronald Reagan never raised taxes. He did. And here are four big ones. So I hope this will clear the air for some of the groups today. In 1982, the Tax Equity and Fiscal Responsibility Act, that rolled back about a third of his ’81 tax cuts, raised corporate tax rates, and to a lesser extent income tax rates. Raised taxes by almost one percent of GDP, which at that time was the largest percentage in peacetime increase ever. 1982 gas tax increase, 1983 Greenspan commission raised payroll taxes…Then there was the 1984 deficit reduction tax…Then there was the Railroad Retirement Revenue Act, Consolidated Omnibus Budget of ’85…So there were a lot of them. Just thought I’d throw that in.

Watch it:

Reagan, in fact, raised taxes in seven of his eight years in office. “No peacetime president has raised taxes so much on so many people,” Paul Krugman pointed out.

“Reagan was more pragmatic than those who now quote him,” said former Sen. Pete Domenici (R-NM), who also is of the opinion that tax increases must be on the table to deal with the long-term deficit. “Those who claim they’re better Republicans than we are — put their solutions in front of us and let’s see if they’re doable.”

As former Reagan economic official Bruce Bartlett wrote, “every serious budget analyst — I mean every — knows that revenues must be part of the solution to our deficit problem…[T]he idea that we can or even should embark on serious deficit reduction with no tax increase whatsoever is grossly immature and unworthy of consideration.” But that is the idea that the modern conservative movement clings to, as unrealistic as it is.

For the last few weeks, both the Senate and the House have been unable to enact measures aimed at boosting the economy — like providing aid to states, extending unemployment benefits, or getting money to schools so they don’t have to lay off teachers — because Republicans (and quite a few Democrats) have become infected with deficit hysteria and are staunchly against short-term spending.

The GOP argues that the national debt precludes any steps to boost the economy, with Senate Minority Leader Mitch McConnell (R-KY) accusing those who want to continue fiscal stimulus of “fiscal recklessness.” However, today, Doug Elmendorf, Director of the non-partisan Congressional Budget Office, said that there’s simply no contradiction between advocating short-term stimulus spending and evincing a concern for addressing long-term deficits:

“There is no intrinsic contradiction between providing additional fiscal stimulus today, when unemployment is high and many factories and offices are underused, and imposing fiscal restraint several years from now when output and employment will probably be closer to their potential,” said Congressional Budget Office Director Douglas Elmendorf…He cautioned that he wasn’t advising Congress on what approach to take, but said it was “important to understand the difference between the effects of government borrowing for a limited period when the economy is weak and [borrowing] for indefinite periods when the economy has recovered.”

In fact, it’s very possible that a hesitancy to spend now is going to make it harder to pay back the debt in the future, as tax revenues stay depressed and social safety net spending stays elevated. “What worries me the most is this idea that austerity is going to be helpful,” said Michael Reich, an economics professor at UC Berkeley. “When you make an economy shrink, it makes it harder to pay back debt in the future.”

As CAP’s Michael Ettlinger said today in testimony before the Obama administration’s debt commission, focusing on spending cuts now, like those McConnell and his colleagues in the Senate advocate “would seriously cramp our economic recovery and would, in fact, make longer term deficit reduction less likely”:

It has become a cliché to say “we can’t grow ourselves out of our deficit problem.” It’s true, of course, but it’s also true that we’re not going to “spending-cut our way out of the deficit problem” or “tax ourselves out of our deficit problem”…The consequences of moving towards a balanced budget without an assist from economic growth would be devastating for the country—a grim scenario that we may see in Greece.

But instead, we have a Congress that is unwilling to take steps to boost growth, and it content scoring political points by fearmongering about the deficit.

Yesterday, after weeks of ducking interviews with the mainstream press, Senate candidate Sharron Angle — who is running on the Republican ticket in Nevada — appeared on Face to Face with Nevada journalist Jon Ralston to clarify some of her positions, including her view that unemployment benefits should be cut because “spoiled” workers are living off of them instead of getting a job.

Ralston asked Angle what she meant by that statement, and Angle replied that there are plenty of jobs out there for the unemployed, but extended benefits are discouraging workers from reentering the workforce because they pay more than entry-level work does:

They keep extending these unemployment benefits to the point where people are afraid to go out and get a job because the job doesn’t pay as much as the unemployment benefit does…What has happened is the system of entitlement has caused us to have a spoilage with our ability to go out and get a job…There are some jobs out there that are available. Because they have to enter at a lower grade and they cannot keep their unemployment, they have to make a choice now.

Watch it:

Ralston then asked, “if people lose their jobs through no fault of their own, as many have during this recession, Sharron Angle’s solution is to cut their unemployment benefits so low so they’re somehow gonna go out and find jobs that don’t exist?” “There are jobs that do exist. That’s what we’re saying, is that there are jobs,” Angle replied. “But those are entry-level jobs.”

Angle’s clarification doesn’t make her position look any better, and her assertion that there a multitude of jobs available for the unemployed is simply rubbish. First, the average unemployment benefit is just $290 per week. There are nearly five workers actively searching for work for every job available, compared to 1.5 per job opening before the recession began. “That is incredibly unusual, so therefore it’s premature to give up on those emergency benefits,” said Mark Zandi, chief economist of Moody’s Economy.com.

In all, there are currently 15 million Americans unemployed, and almost half of them have been out of work for at least six months, which is a post-World War II record. As Heather Boushey, Luke Reidenbach, and Christine Riordan pointed out, “since the 1950s, federal unemployment insurance extensions remained in place during recessionary periods until unemployment dropped to as low as 5.0 percent. The highest unemployment rate at which these extensions were allowed to expire was 7.2 percent.” But Angle is sure that these benefits actively keep people from working, and if we only slashed them, employment would flourish.

During the 20 hour negotiating session that produced what is now the first version of the Dodd-Frank financial regulatory reform bill, conferees added an exception to the Volcker rule — which bans banks from trading for their own benefit with federally insured money — sought by Sen. Scott Brown (R-MA). The exemption allows banks to invest 3 percent of their tier one capital in risky hedge funds and private equity firms and to continue managing those firms.

The namesake of the Volcker rule — former Federal Reserve Chairman and current Obama administration adviser Paul Volcker — had warned against watering it down in precisely this way. “Allowing a bank to invest in a speculative fund goes against the very intent of the bill as we seek to define those activities that are worthy of government protection,” he said. So it shouldn’t come as much of a surprise that he’s disappointed with the final product:

Volcker, the 82-year-old former Federal Reserve chairman, didn’t expect the proposal to be diluted so much, said a person with knowledge of his views. He’s content with language that bans banks from trading with their own capital, the person said.

Sens. Carl Levin (D-MI) and Jeff Merkley (D-OR), who proposed the toughest version of the Volcker rule during the regulatory reform debate, “were also dissatisfied with the result, for the same reasons as Volcker.”

The final bill that came out of conference undeniably has some warts that are unfortunate. In addition to the watered down Volcker rule, it has an unjustifiable exemption for auto dealers from new consumer protection laws and a weakened version of Sen. Blanche Lincoln’s (D-AR) derivatives spin-off. That said, it still make huge strides toward building a financial system that doesn’t have its incentives entirely backwards and that puts consumer protection on a more even-footing with bank profits.

But Volcker’s disappointment shows that passing a single piece of legislation isn’t the end of creating a financial system that’s stable and fair. This point was underscored this week by a New York Times report that the financial services industry is turning its attention from lobbying lawmakers to lobbying regulators who will be tasked with designing and implementing the new rules of the financial road:

Well before Congress reached agreement on the details of its financial overhaul legislation, industry lobbyists and consumer advocates started preparing for the next battle: influencing the creation of several hundred new rules and regulations…[The bill] is notably short on specifics, giving regulators significant power to determine its impact — and giving partisans on both sides a second chance to influence the outcome.

The implementation of some provisions in the bill will quite literally take years, so the banks will have ample opportunity to bend them to their advantage. It’s worth paying attention to.