Published: Monday 1 August 2011
"The
'debt ceiling' deal has been crafted so that 'centrist' Democrats and
Republicans can finally implement the draconian measures they both
want."
Today
we're watching the end of a brief manufactured crisis - and the
beginning of a long national nightmare. The "debt ceiling" deal has been
crafted so that "centrist" (i.e., right-wing) Democrats and Republicans
can finally implement the draconian measures they both want, but in an
indirect way that gives them as little accountability as possible.
As
might be expected, there's a lot of confusion around the deal -- in
fact, it's designed to create confusion. Here are four myths about the
deal, followed by four ways it's likely to hurt you personally if it
isn't stopped:
Myth #1: The deal "preserves Social Security and Medicare."
Right-leaning
Democrats are busy telling this story this morning, but it's not true.
It only defers the day of reckoning. Social Security and Medicare are
exempted from the first and smaller round of cuts, but not from
the larger $1.5 trillion in cuts that the unelected "Super Congress"
must find. Half of this unelected group will consist of Republicans
pledged to gut these programs, and it's looking likely that at least
half of the Democrats will include Senators like Kent Conrad, the
entitlement-cutting solon who briefly shuttled messages between the two
parties as this "deal" was being crafted.
The
likeliest outcome? Unnecessary and drastic benefit cuts to Social
Security that probably involve raising the retirement age even more than
it's already scheduled to rise, the "chained-CPI" that artificially
lowers cost-of-living standards to well below what seniors need for
their expenses, and possibly a means-testing system that sounds
reasonable but will quickly target middle-income Americans.
This
isn't a deal to protect Medicare and Social Security. It's a deal to
deliver those cuts through a body that's not accountable to voters
(except in their own states and ...
Published: Monday 1 August 2011
"Ron
Paul suggested that the Fed could destroy the $1.6 trillion in
government bonds that it now holds as a way of getting room under the
debt ceiling."
Economists
believe that people respond to incentives. The fact that economists
never suffer career consequences for failing to consider new ideas
explains why they so rarely consider any policy that has not long been
in the standard bag of tricks. I mention this background since it is
relevant to the reaction given a proposal on the debt ceiling that Ron
Paul originally put forward and that I subsequently endorsed.
Paul suggested that the Fed could destroy the $1.6 trillion in
government bonds that it now holds as a way of getting room under the
debt ceiling. Debt to the Fed counts as part of the government debt
subject to the limit. If the Fed destroyed $1.6 trillion in debt, then
it would create a space of $1.6 trillion under the ceiling.
This
is an interesting way of getting around the ceiling; although it would
almost certainly require an act of Congress to do it. As it turns out,
the other side of this story is even more interesting. The Fed plans to
sell off the $1.6 trillion in government bonds it currently holds. It
also plans to sell off more than $1 trillion in mortgage-backed
securities it bought to help stabilize financial markets at the peak of
the financial crisis. Following the logic of Paul's idea, I suggest that
the Fed could simply hold on to large amounts of debt for an indefinite
period of time. The interest on this debt would continue to be paid to
the Fed and then be refunded to the Treasury—an effective and easy way
to reduce the deficit that almost no one is talking about.
As
long as the Fed holds onto the bonds that it currently holds, it
receives the interest on them. Last year, the Fed refunded almost $80
billion in interest to the Treasury. Once the Fed sells off its assets,
it will no longer be issuing these large refunds. Instead, the interest
on the Treasury ...
Published: Monday 1 August 2011
"The Republic, common sense and decency have been trampled."
The
raw deal on the budget ceiling has been cut. The Tea Party terrorists –
the extremist faction willing to hold the economy hostage to get their
way – have won. The Republic, common sense and decency have been
trampled.
With
the economy deeply depressed, 25 million people in need of full time
work, the raw deal will impede any recovery. It precludes any serious
action on jobs from the federal government. It will cost jobs as
spending is cut. Instead of getting serious about a plan to revive this
economy and put people back to work, Washington will remain fixated on
what and how much to cut. From the President to the Tea Party zealots,
politicians will tell Americans that this agreement is “important to our
economy.” Yes, it is important – important in the way a virus is
important to a sickly patient. It will make things worse.
With
Gilded Age inequality, and hedge fund billionaires paying a lower
effective tax rate than their secretaries, the deal contains no tax
hikes. Poor and working Americans are asked to pay to clean up the mess
that Wall Street’s excesses created.
Although
the terms of the agreement are complicated, the capitulation is clear.
There will be deep cuts in discretionary spending—$900 billion over 10
years, one-third from the Pentagon—in the first step. There are no tax
revenues, much less higher taxes on millionaires in that mix. (The
President touts that domestic discretionary spending will be ...
Published: Monday 1 August 2011
The question that remains is: How much damage?
“Given
the choice between a Republican and someone who acts like a Republican,
people will vote for the real Republican all the time,” said Harry
Truman.
If the thirty-third president was right, then Barack Obama just did himself and his party a world of hurt.
Faced
with the threat that Tea Party–pressured Republicans in the House
really would steer the United States toward default, and in so doing
steer the US economy over the cliff, Obama had to do something. But
instead of bold action—borrowing a page from Ronald Reagan to demand a
straight up-or-down vote on raising the debt ceiling; borrowing a page
from Franklin Roosevelt to pledge to use the authority afforded him by
the Constitution to defend the full faith and credit of the United
States—the president engaged in inside-the-Beltway bargaining of the
most dysfunctional sort.
In cutting a deal with Congressional Republicans that
places Democratic legacy programs—Social Security, Medicare and
Medicaid—at risk while cutting essential programs for working families
and the poor, Obama has positioned himself and his administration to the
right of where mainstream Republicans such as Howard Baker, Bob Dole
and George H.W. Bush used to stand in fights with the fringe elements of
their party.
Now,
the fringe is in charge of the GOP. And Obama is cutting deals to
satisfy Republicans that Britain’s banking minister describes as “
Published: Monday 1 August 2011
"This
compromise does make a serious down payment on the deficit reduction we
need and gives each party a strong incentive to get a balanced plan
done before the end of the year."
President
Barack Obama and congressional leaders reached a historic agreement
late Sunday to dramatically cut federal deficits by trillions of dollars
over the next decade while likely ensuring that the nation's debt limit
will be raised before Tuesday's deadline — averting a possible economic
crisis.
"This
compromise does make a serious down payment on the deficit reduction we
need and gives each party a strong incentive to get a balanced plan
done before the end of the year," Obama said Sunday night. "Most
importantly, it will allow us to avoid default and end the crisis
Washington imposed on the rest of America."
The
first part of the agreement will cut nearly $1 trillion in federal
spending over the next decade, Obama said, while a special legislative
committee will look for more cuts. "Everything will be on the table," he
said.
Obama
spoke as financial markets opened in Asia — Japan's Nikkei index had
climbed nearly 2 percent within an hour of his remarks — and eased fears
that the United States would default on its debt and perhaps slip back
into recession.
Congressional
leaders said they would present details of the deal to their party
members on Monday and were confident that both houses would approve the
compromise before Tuesday night, when the nation's $14.3 trillion debt
limit must be increased.
The
agreement, forged after weeks of unusually intense, often personal
Washington drama, still needs congressional approval, and lawmakers
signaled Sunday that they wanted to learn details of a plan that was
hammered out at the 11th hour.
Senate leaders quickly had warm words for the agreement.
"I
know this agreement won't make every Republican happy. It certainly
won't make every Democrat happy, either," said Senate Majority Leader
Harry Reid of Nevada, who signed off on the deal subject to approval of
his caucus.
"Both ...
Published: Sunday 31 July 2011
"None
of the debt ceiling “deals” that House and Senate leaders advanced last
week asked any of these top 400 — or any other rich Americans — to pay a
penny more in taxes than they do now."
At
times of national fiscal crisis, President Franklin Roosevelt ever so
firmly believed, you don't give the awesomely affluent a free pass. You
pound them — and then you pound them some more.
Against
a Congress where zealously rich people-friendly conservatives hold the
upper hand, how much can a President of the United States committed to
greater equality realistically hope to accomplish?
The
answer from today’s White House: not much. Advocacy for equality has to
take a backseat, Obama administration insiders insist, once fanatical
friends of the fortunate in Congress recklessly put at risk our nation’s
full faith and credit.
But
history offers another alternative. Back in 1943, halfway through World
War II, a President of the United States confronted a debt ceiling
crisis eerily similar to our own. That President, Franklin Roosevelt,
faced a congressional opposition to inconveniencing the rich — with
higher taxes — every bit as rabid as ours.
FDR's choice, in the face of this opposition? He doubled down on equality.
Roosevelt’s debt ceiling battle
actually began in the months right after Pearl Harbor. The nation
needed dollars — and lots of them — to wage and win the new war. FDR
wanted those dollars raised as equitably as possible.
That
would require, FDR and his New Dealers believed, a steeply graduated
income tax, with tax rates on income in the top income brackets much
higher than rates on income in the bottom brackets.
How
high should the top rates go? All the way, FDR proposed, to 100
percent. At a time of “grave national danger,” the President told
Congress in April 1942, “no American citizen ought to have a net income,
after he has paid his taxes, of more than $25,000 a year,” an income
just shy of $350,000 in today’s dollars.
The year before, gun executive Carl Swebilius had pulled ...
Published: Saturday 30 July 2011
"Politicians aren't arguing about stimulating the economy; rather they're debating how quickly and how much to cut spending."
Lawmakers
trying to reach a deal on spending cuts in order to raise the nation's
debt ceiling risk causing serious economic harm if they cut government
programs too much in the near term, economists warn.
The
U.S. economy grew at an anemic 1.3 percent rate from April to June, the
Commerce Department reported Friday. It also revised downward the
growth rate over the first three months of 2011 to just 0.4 percent.
Despite
the weak growth, politicians aren't arguing about stimulating the
economy; rather they're debating how quickly and how much to cut
spending, thus shaving economic growth in the process.
The U.S. Chamber of Commerce called on lawmakers Friday to be mindful of the weak economy.
"The
recovery is clearly on a lower trajectory, and it will likely be some
time before the economy rebounds to the point it will create much in
terms of job growth," Martin Regalia, the group's chief economist, said
in a statement.
That
means, he said, that "the stakes on the debt limit debate ... are that
much higher. With growth rates this low, even a small negative impact
resulting from failure to increase the debt ceiling and defaulting on
our obligations could turn the economy back into a recession."
While
Republicans in the House of Representatives capture headlines by
demanding steep spending cuts, the version proposed by Senate Democrats
actually would thwart economic growth potentially more, according to two
economic research groups.
Macroeconomic
Advisers, a leading forecaster, said Thursday that a rewritten plan
offered by House Speaker John Boehner, R-Ohio, would shave more than a
tenth of a percentage point off of growth next year, while the plan
being pushed by Senate Majority Leader Harry Reid, D-Nev., would cause
an even larger hit on growth in fiscal 2013 — shaving almost half a
percentage point.
That view was shared by Thomas Lam, Singapore-based chief economist at ...
Published: Friday 29 July 2011
Published: Friday 29 July 2011
"The weak first half shows the economy struggling to maintain forward momentum and calls into question any second-half rebound."
The
U.S. economy grew at a weak 1.3 percent annual rate from April through
June, the government said Friday, in a report that underscored concerns
about the sluggish pace of recovery in an increasingly fragile economy.
The
Bureau of Economic Analysis also revised downwards its earlier
estimates of growth for the first three months of the year — from 1.9
percent down to only 0.4 percent. The first half of the year recorded
the slowest growth since the United States pulled out of recession in
June 2009.
The
weak second quarter was expected by economists, who warned of drags
from high energy prices and spillover effects from the devastating
earthquake and tsunami in Japan that disrupted the global supply chain
for many manufacturers.
Still,
the weak first half shows the economy struggling to maintain forward
momentum and calls into question any second-half rebound. The political
theater in Washington over raising the debt ceiling and slashing future
spending isn’t boosting confidence either.
"The
acceleration in real GDP in the second quarter primarily reflected a
deceleration in imports, an upturn in federal government spending, and
an acceleration in nonresidential fixed investment that were partly
offset by a sharp deceleration in personal consumption expenditures,"
the BEA report said.
Imports
weigh against growth, so their slowdown — from 8.3 percent in the first
quarter to 1.3 percent in the second — boosts the nation’s gross
domestic product, the broadest measure of U.S. output of goods and
services. Exports were also a plus, rising 6 percent in the quarter,
although slower than the 7.9 percent pace in the first three months of
2011.
The
trade picture was one of the few bright spots in recent economic data.
Another came Thursday, when first-time claims for unemployment benefits
fell below 400,000 for the first time since April. Economists hope
that's a sign the economy is ...
Published: Friday 29 July 2011
"As
the Republican-controlled House of Representatives struggled to pass
its own plan, Obama and the capital looked to the Senate."
President
Barack Obama urged Americans Friday to keep the pressure on Congress to
compromise, saying Democrats and Republicans are not that far part on
proposals to avert a debt crisis next week.
"Keep
it up," Obama said in nationally televised remarks from the White
House. " Let your members of congress know…Keep the pressure on
Washington and we can get past this."
As
the Republican-controlled House of Representatives struggled to pass
its own plan, Obama and the capital looked to the Senate.
Obama
said proposals from Senate Democratic Leader Harry Reid, D-Nev., and
from Republican Leader Mitch McConnell, R-Ky., each would avert the
crisis expected Tuesday when the government runs out of authority to
borrow to pay bills already in the pipeline.
"This
is not a situation where the two parties are miles apart," Obama said.
"There are plenty of ways out of this mess. But we are almost out of
time."
Senate
Democrats Friday plan to begin consideration of their plan to cut
federal deficits by $2.2 trillion and raised the debt limit through the
end of 2012—as House of Representatives Republicans remained deadlocked
over how to proceed with their own proposal.
As
the fractured House GOP met behind closed doors Friday morning, Senate
Majority Leader Harry Reid of Nevada said he will move ahead with his
plan—even though it’s unlikely to draw many, if any, Republican votes.
“The
deadline will not move,” he said of the deadline for raising the
nation’s $14.3 trillion debt ceiling. Unless that ceiling is raised by
Tuesday, the government will default, triggering an economic panic and
probably throwing the nation back into recession.
“We
have hours, I repeat, hours, to act,” said Reid, speaking on the Senate
floor as he opened the Senate for business Friday. “That’s why, by the
end of the day, I must take action on the ...
Published: Friday 29 July 2011
"The
current debate is not about trimming this small program here and
nipping that tax break there. It’s about the fundamental direction of
the government for years to come."
First came the plans, then came the criticism. To be expected -- except the criticism came from ideological allies.
Senate
Majority Leader Harry Reid released his debt-ceiling plan -- and the
liberal group MoveOn.org pounced, complaining that the Nevada Democrat’s
proposal was flawed because it did not insist on a “balanced approach
that ends outrageous tax breaks and loopholes for big corporations and
the rich.”
Also,
the group warned, the supercommittee to recommend further cuts was a
Trojan horse for gutting entitlement benefits. "Any plan that includes a
backdoor to cut those vital programs,” it thundered, “is just as
unacceptable as one that puts the cuts upfront."
House
Speaker John Boehner unveiled his debt-ceiling plan -- and the
conservative Cut, Cap and Balance Coalition pounced, complaining that
the Ohio Republican’s approach was flawed because it did not hew to
every jot and tittle of the program: The guaranteed vote on a
balanced-budget amendment would not be linked to lifting the debt
ceiling. And the amendment might -- horrors! -- allow a tax increase
with less than a two-thirds majority.
Also,
the group warned, the supercommittee was a Trojan horse for raising
taxes. “History has shown that such commissions, while well-intentioned,
make it easier to raise taxes than to institute enduring budget
reforms,” it thundered.
With friends like this, who needs the other party?
Howls
from implacable purists and relentless interest groups on both sides
are nothing new. The “mischiefs of faction,” as James Madison observed,
have been present since the founding. Tending to the base is like
weeding the garden, a chore as endless as it is tedious. The ...
Published: Thursday 28 July 2011
"Boehner told House Republicans in a closed-door meeting to "get your ass in line" and support his bill."
With
stocks tanking and next Tuesday's debt-default deadline looming for the
country, no sign of compromise between Democrats and Republicans
emerged Wednesday in Congress.
Both
parties continued to pursue separate tracks as Senate Majority Leader
Harry Reid, D-Nev., and House Speaker John Boehner, R-Ohio, went back to
their drawing boards to revise their plans to cut federal spending and
increase the debt ceiling. The nonpartisan Congressional Budget Office
issued studies that found that both plans fell short of their promised
spending cuts.
Both
men shrugged off the CBO reports as minor obstacles easily fixed.
Republican officials said the House of Representatives could vote on
Boehner's revised bill as early as Thursday, while the timing of Reid's
retooled measure remained unclear.
Meanwhile,
anxiety over the debt stalemate in Washington erupted on Wall Street as
stocks on the Dow Jones industrial average plunged 198.75 points, most
in the final hour of trading, to close at 12,302.55. Many authorities
have warned that Washington's failure to raise its debt ceiling by
Tuesday could cause financial markets to panic and kick the weak U.S.
economy back into recession.
Both
Reid's and Boehner's plans would slow the already sluggish U.S.
economy, according to an analysis Wednesday from Macroeconomic Advisers,
a prominent St. Louis-based forecaster. Reid's plan would slow U.S.
growth by about one-quarter of a percentage point per year from fiscal
2012 through 2015, while Boehner's would slow growth by about 0.1
percentage point per year on average over the same period. Both plans
would reduce federal spending, which stimulates the economy.
Senate
Democrats united behind Reid's plan, but Boehner appeared to be still
scurrying for GOP votes in the Republican-controlled House to put his
measure over the top. Many conservatives oppose his deficit-cutting plan
as too weak, and many also refuse to vote ...
Published: Wednesday 27 July 2011
"It's time for moderates to abandon centrism and stop shifting with the prevailing winds."
What
the country yearns for is moderation. What we hear about is the
political center. But centrism has become the enemy of moderation.
Moderation
in politics is about balance. It means believing in a vibrant and
innovative private sector and a government substantial enough to do what
the private sector doesn't and to enforce sensible rules for economic
competition. It means incentives for success, help for those making
their way up, and security for the sick, the aging, the poor, the
unlucky. It means equilibrium between our love of individualism and our
desire for community. This, in turn, means that reducing the budget
deficit can't rely only on cutting programs. Yes, taxes need to go up.
All the polls I have ever seen peg the vast majority of Americans as moderate by this definition.
Centrism
is something altogether different. It's not a philosophy. It's a
position based on calculation. It doesn't start with fixed principles.
It measures where everyone else stands on some political spectrum at a
given moment and then frantically adjusts.
Because
centrism is reactive, you never really know what a centrist believes.
Centrists are constantly packing their bags and chasing off to find a
new location as the political conversation veers one way or another.
Right
now, this sort of centrism is enabling our irrational, dangerous and
decidedly immoderate debt-ceiling conversation. Pushed by the tea party,
Republicans have created an unprecedented situation by tying an
increase in the debt ceiling, once a routine matter, to sharp cuts in
spending. And their most conservative members have blocked any new tax
revenues to cut the deficit.
Worse, the right would junk majoritarian ...
Published: Wednesday 27 July 2011
Published: Monday 25 July 2011
"House Progressives have leverage - lots of leverage. "
As
online "Countdown Clocks" count the hours before there's a debt ceiling
disaster, the spotlight is on the individuals and groups who can make
or break a deal. We've heard a lot about the Senate's Gang of Six,
members of the Administration, House leaders Boehner and Cantor, and the
radical Tea Party Republicans who allegedly hold 'veto power' over any
proposed deal.
But
another group holds at least as much power as those radical
Republicans, and it has the added advantage of representing views that
are widely supporting by Americans in both political parties. That group
is the House Progressive Caucus.
The
media coverage is revealing. Tea Party Republican Joe Walsh holds no
official position in Congress except that of a freshman Representative,
and his economic views are far to the right of the American mainstream.
Yet as we write this, a Google News search on "Joe Walsh" (excluding
"guitar" and "Eagles" to eliminate "Rocky Mountain Way" Joe Walsh) gets
1,461 hits. Rep. Keith Ellison, on the other hand, co-chairs a large
Congressional caucus whose support may be vital to the passage of any
deal. Yet his name only gets 157 hits - a figure that falls even more
when you eliminate references to his religion.
Rep.
Joe Walsh: To paraphrase his namesake, life's been good to him so far.
Rep. Keith Ellison, on the other hand, must sometimes feel as if he's
fighting in the dark. Yet the way ...
Published: Friday 22 July 2011
"The tea party opposes all laws that force energy conservation on the public."
I
have a horrible confession to make. I'm an environmentalist who's been
hoarding old incandescent light bulbs before they become illegal in
January. But it was all unnecessary, so I learn.
In 2007, Congress passed a law (signed by President George W. Bush) requiring that light bulbs be 70 percent more efficient by 2020. The tea party opposes all laws that force energy conservation on the public. (I like them.)
My objection to the squiggly "energy savers" is purely aesthetic. I can't stand the way they look.
Anyhow,
the right-wingers are hollering that the meanies in Washington are
banning the incandescent bulb that Great Grandpa used to light the
milking shed. Now, they add, we'll all go mad trying to complete our
30-page tax returns under
Published: Thursday 7 July 2011
say no to more subsidies for multinational corporations (i.e., no to 'repatriation holiday')
In
2004, corporate lobbyists successfully lobbied for a doozy of a
corporate tax break--after already getting years of tax deferral on
their offshore profits (oftenprofits that should have been taxed
in the US, for which companies had dreamed up transfer pricing schemes
to move the profits offshore, such as selling IT properties to
their offshore subsidiaries at a claimed third-party comparable price,
even though they would NEVER really sell it to any third party so it was
truly priceless), they got added to the deferral tax break a near-zero 'repatriation' tax break.
As CTJ notes (see below) this was a downright ridiculous reward to the
very corporate tax dodgers who had intentionally kept profits offshore
to keep from paying tax and then paid an army of lobbyists to get them
the tax break they wanted to bring it back.
The
republicans in control of the House and Presidency at the time claimed
it would be a big job booster--they even named the disastrous bill that
enacted that and myriad other corporate tax breaks (the wish list
that corporations had been vying for going on 20 years) the
"American Job Creation Act". HAH! The joke was on Congress and the
workers who bore the brunt of the job cutting by these same corporate
giants. Of course, the bill did nothing of the sort. Some of the
biggest repatriation dollars went to share buybacks (ie, benefited the
wealthiest amongst us that make up the investor class) while tens of
thousands of workers were laid off. Hewlett-Packard was a prime
example.
Repatriation
was a flop,that is, for everybody except the managerws and wealthy
investors who own most of the financial assets in the country and are
pushing the corporatist agenda that is dominating the GOP and ...
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