by Robert Reich
Published on Friday, July 15, 2011 by The New York Times
There aren’t many positive aspects to the looming possibility of a U.S. debt default. But there has been, I have to admit, an element of comic relief — of the black-humor variety — in the spectacle of so many people who have been in denial suddenly waking up and smelling the crazy.Of course, the other shirt reads: 'I'm not just an incompetent invertebrate, I'm a Democrat'. Both shirts come in many sizes.
A number of commentators seem shocked at how unreasonable Republicans are being. “Has the G.O.P. gone insane?” they ask.
Why, yes, it has. But this isn’t something that just happened, it’s the culmination of a process that has been going on for decades. Anyone surprised by the extremism and irresponsibility now on display either hasn’t been paying attention, or has been deliberately turning a blind eye.
And may I say to those suddenly agonizing over the mental health of one of our two major parties: People like you bear some responsibility for that party’s current state.
Let’s talk for a minute about what Republican leaders are rejecting.
President Obama has made it clear that he’s willing to sign on to a deficit-reduction deal that consists overwhelmingly of spending cuts, and includes draconian cuts in key social programs, up to and including a rise in the age of Medicare eligibility. These are extraordinary concessions. As The Times’s Nate Silver points out, the president has offered deals that are far to the right of what the average American voter prefers — in fact, if anything, they’re a bit to the right of what the average Republican voter prefers!
Yet Republicans are saying no. Indeed, they’re threatening to force a U.S. default, and create an economic crisis, unless they get a completely one-sided deal. And this was entirely predictable.
First of all, the modern G.O.P. fundamentally does not accept the legitimacy of a Democratic presidency — any Democratic presidency. We saw that under Bill Clinton, and we saw it again as soon as Mr. Obama took office.
As a result, Republicans are automatically against anything the president wants, even if they have supported similar proposals in the past. Mitt Romney’s health care plan became a tyrannical assault on American freedom when put in place by that man in the White House. And the same logic applies to the proposed debt deals.
Put it this way: If a Republican president had managed to extract the kind of concessions on Medicare and Social Security that Mr. Obama is offering, it would have been considered a conservative triumph. But when those concessions come attached to minor increases in revenue, and more important, when they come from a Democratic president, the proposals become unacceptable plans to tax the life out of the U.S. economy.
Beyond that, voodoo economics has taken over the G.O.P.
Supply-side voodoo — which claims that tax cuts pay for themselves and/or that any rise in taxes would lead to economic collapse — has been a powerful force within the G.O.P. ever since Ronald Reagan embraced the concept of the Laffer curve. But the voodoo used to be contained. Reagan himself enacted significant tax increases, offsetting to a considerable extent his initial cuts.
And even the administration of former President George W. Bush refrained from making extravagant claims about tax-cut magic, at least in part for fear that making such claims would raise questions about the administration’s seriousness.
Recently, however, all restraint has vanished — indeed, it has been driven out of the party. Last year Mitch McConnell, the Senate minority leader, asserted that the Bush tax cuts actually increased revenue — a claim completely at odds with the evidence — and also declared that this was “the view of virtually every Republican on that subject.” And it’s true: even Mr. Romney, widely regarded as the most sensible of the contenders for the 2012 presidential nomination, has endorsed the view that tax cuts can actually reduce the deficit.
Which brings me to the culpability of those who are only now facing up to the G.O.P.’s craziness.
Here’s the point: those within the G.O.P. who had misgivings about the embrace of tax-cut fanaticism might have made a stronger stand if there had been any indication that such fanaticism came with a price, if outsiders had been willing to condemn those who took irresponsible positions.
But there has been no such price. Mr. Bush squandered the surplus of the late Clinton years, yet prominent pundits pretend that the two parties share equal blame for our debt problems. Paul Ryan, the chairman of the House Budget Committee, proposed a supposed deficit-reduction plan that included huge tax cuts for corporations and the wealthy, then received an award for fiscal responsibility.
So there has been no pressure on the G.O.P. to show any kind of responsibility, or even rationality — and sure enough, it has gone off the deep end. If you’re surprised, that means that you were part of the problem.© 2011 The New York Times
Published on Friday, July 8, 2011 by The Nation
The big story out of Washington—and rightly so—is the debt-ceiling fight that President Obama seems to be coming very close to losing. If the president abandons his 2008 campaign promise to be an absolute defender of Social Security, Medicare and Medicaid, he will have very little indeed to run on in 2012.
But that won't be what beats him.
Because the biggest story in America is a different one from the biggest story in Washington. Americans are not that into the debt-ceiling debate. Polling has suggested that less than a quarter of Americans are "closely following" the fight. Those numbers will rise a bit as the deadline gets closer and as the media hypes the issue.
The issue that Americans have been following closely, and will continue to follow straight through the 2012 election cycle, the issue that tops the polls on the list of concerns, is the jobs crisis. Americans are worried about unemployment and underemployment.
And on Friday they got a lot more worried.
The Los Angeles Times headline was stark: "Dismal Jobs Report Shows Unemployment Rising to 9.2%."
The New York Times headline was, if anything, bleaker: "Job Growth Falters Badly, Clouding Hopes for Recovery."
The 9.2 percent official unemployment rate—up from 9.0 percent two months ago and 9.1 percent a month ago—is only a pale shadow of the real rate. Categorized in official terms as the "U6" unemployment, the real rate includes the offically unemployed as well as Americans who are underemployed and those who have given up on the search for work. It stands at more than 16 percent nationally. And in depressed states, such as Michigan (which Obama carried handily in 2008 but where his approval ratings are now troublingly low), it is well over 20 percent.
The official and the real unemployment rates are devastating. These numbers are some of the worst since the Great Depression. But they are not getting the response that high unemployment rates got from Democrats in the Depression era of other periods of economic downtown in the years since.
President Obama and his team have never focused on job issues with the intensity that is needed. And now they are simply being ridiculous.
David Plouffe, the president's political czar, said on the eve of the release of Friday's dismal jobs numbers that he does not believe that the high unemployment rate poses a threat to President Obama's 2012 reelection campaign.
Speaking to reporters this week, Plouffe said, “The average American does not view the economy through the prism of GDP or unemployment rates or even monthly jobs numbers. People won’t vote based on the unemployment rate, they’re going to vote based on: ‘How do I feel about my own situation? Do I believe the president makes decisions based on me and my family?’ ”
The almost 10 percent of Americans who are officially unemployed probably don’t feel all that great about their situation. The same goes for the the tens of millions of additional Americans who are underemployed or who have fallen off official radar because they have given up on the search for work in communities where there are simply no jobs to be had.
The unemployed, the underemployed and the abandoned add up to almost one in five Americans. And an awfully lot of them live in battleground states such as Indiana, Michigan, Ohio and Pennsylvania —all of which President Obama won in 2008, all of which President Obama needs to win in 2012.
Now, let’s be clear, no one in their right mind thinks that Republicans who would be president are any more concerned about jobless Americans than is the Obama administration.
But neglecting unemployment as an issue—or presuming, as Plouffe does, that Americans will give Obama the benefit of the doubt—is political madness.
When unemployment reaches the level that it has nationally, and the even higher levels that it has in battleground states, potential Obama voters start losing faith that "the president makes decisions based on me and my family."
Some of the disappointed may still vote for Obama out of fear of the Republicans, some will find social issues that draw them to the Republicans, but millions will simply stay home —as they did in 2010.
That's the danger heading into the 2012 race, and it is more profound today that at any time in Barack Obama's presidency.
Obama is toying with the notion of running for reelection as the president who did what George Bush could not: cut Medicare, Medicaid and Social Security.
That calculus suggests that Obama and his team really are out of touch with the electoral dynamic.
But that is not the most politically tone deaf scheme to come out of the president's camp this week.
While the president's apparent willingness to take the best argument available to Democrats going into the 2012 election cycle—the promise that they will defend Medicare, Medicaid and Social Security—suggests that Obama learned nothing from the Democratic party's devastating electoral experience in 2010, his top political aide's statements with regard to unemployment suggest that his team has learned even less.
No president since Franklin Roosevelt has won reelection when the unemployment rate was over 7 percent. And Roosevelt won because he ran as a candidate who was fully willing to use the power of the federal government to create jobs —and programs like Social Security.
The notion that a Democratic president can win reelection with an unemployment rate that is edging upward—perhaps toward double digits—and talk of cutting Social Security is not merely unrealistic. It is evidence of a disconnect that could devastate not just Obama's reelection campaign in 2012 but Democratic prospects for years to come.Copyright © 2011 The Nation
By David Weigel
from Slate, June 30, 2011
ASPEN, Colo.—We're taking a break inside the Doerr-Hosier Center, a stately box of glass and concrete that sits on a green hill as elegantly as a tiara sits on Miss USA. Former Sen. Alan Simpson, the co-chairman of the president's bipartisan fiscal reform commission, is standing a few steps away from me. I start to ask him about the debt-ceiling debate, which was just discussed by President Obama in a morning press conference, but Walter Isaacson, the president and CEO of the Aspen Institute, has spotted the senator and walked right over.
"Here's a smooth-talking son of a bitch!" says Simpson, with admiration.
Isaacson rolls with it. "You've got to start being a smooth son of a bitch about your deficit commission!" he says. "We've got to keep selling it!"
This was what Simpson wanted to talk about. "Bill Clinton works Obama over on this baby about once a week," he says. "He went into there and said, 'God, if I'd appointed a commission, and five Democrats and five Republicans and an independent come out with a recommendation, I'd have taken that in a minute!'"
We spend the next 10 minutes hashing out the politics and listening to Simpson hit his expletives-per-minute quota. Between the expletives he describes a world of bipartisan compromise—of AARP backing down on Social Security, of Grover Norquist backing down on tax hikes. "Republicans can't be in thrall to him!" says Simpson. He comes back to the debt debate, the last best hope for compromise, and explains how Treasury Secretary Tim Geithner—"tough little guy"—can broker a deal. He offers a script: If you think I'm shitting ya, I've raided every pirate cove, torn up all the gold crates, and this is it—Aug 2.
"If it wasn't for that," says Simpson, "this would be the same old shit."
This is the mood—call it optimistic desperation, or maybe desperate optimism—that pervades Aspen, where I arrived Monday. Politico has dubbed the event "D.C.'s summer camp." Happily, very little of the content, and few of the luminaries, are intimately connected with politics. That said, I see no reason why a political celebrity would want to pass this up. This is the sort of place where people smile and show off blurry cell phone photos that they've captured of Alan Greenspan or Michael Chertoff as they strolled over to the Greenwald Tent or the Koch Building. (The Koch Building—yes, donated by David, who owns a home nearby—has a seemingly endless supply of Pepsi Max.)
The people on the Aspen campus this week pay attention to politics, but they have slightly different attitudes. The first is boundless optimism. Think-tankers and sustainability pioneers and representatives talk up the investors they've got and the interest they're generating. Panels on "green jobs" and education reform and food policy are packed.
There's a good reason for this. If you're interested in making money, the sticky political status of these issues isn't necessarily good. But it's something you can deal with. After one session, I picked up a helpful, glossy brochure from Ernst & Young, titled "Action Amid Uncertainty: The Business Response to Climate Change" (PDF). It finds that "despite regulatory uncertainty, climate change investment is on the rise," and that "the majority of companies surveyed [internationally] say they are committed to investing in climate change initiatives in 2010, and they are interested in adopting innovative approaches to product and service development." So Congress can't pass a comprehensive cap-and-trade bill? So Republicans are putting their hands on their hearts and pledging that climate change is a hoax? The safe bets are still on regulation and green energy, still.
And then there's the second view of politics in Aspen: Despair. The crowd here is not monolithically liberal, but it is monolithically disappointed in Obama. The disappointments change from subject to subject. Phil Beck, a Republican lawyer from Chicago, says Obama "squandered an opportunity to pass some really effective legislation" and "handed it off to Reid and Pelosi." Martha Jackson, whose husband's company develops oil deals in South America, says Obama has prolonged the war in Afghanistan more than she would have liked.
How can he turn things around?
"He can win a second term," she says.
This was the tenor of a lot of Obama critiques. On Tuesday afternoon, David Axelrod took a friendly shellacking from Time's Joe Klein about all the opportunities Obama had missed. The attendees agreed with Klein—to a point. Their questions, about Obama's economic appointments and about his messaging problems, all began with some variation of "I'm going to vote for Obama again, and work for him, but …"
No one expressed that worried ambivalence quite like Feisal Abdul Rauf. I walked with the president of the Cordoba Initiative, the martyr of the "Ground Zero Mega-Mosque" tempest, when he was on his way to see Axelrod. Rauf had gotten only the least helpful of assists from Obama, back when the heat was on—a comment that opposed the furor over the project, followed by a walkback about he, Barack Obama, was agnostic on whether it should be built. Was that really so good for the cause, I asked?
"He has to worry about winning an election," Rauf said with a shrug.
Rauf caught Axelrod, and handed me his empty cup of tea so he could rustle up his business card. He walked up to Obama's strategist and gave him some advice.
"Just win the election in 2012!"
There's desperation where there used to be hope. No one here still believes Obama can engineer great change. He's what we've got; he's offering more than the Republicans. The most realistic ideas about what can be done politically are predicated on what Washington will be forced to do by crisis.
Which takes us back to Simpson. The Aspen consensus is that bipartisan fiscal reform needs to happen—it must be willed into existence, and a critical mass of smart people could help. After Isaacson departs, Simpson is buttonholed by someone else, someone who wants to bring him and Erskine Bowles together to speak at the Council of Foreign Relations. Sooner or later, the Washington consensus will be replaced by the Aspen consensus. If Washington is going to keep dealing with political crises, forced upon them by stasis, the city will eventually listen to the bipartisans. It has to, doesn't it?
"We're at 15 percent revenue, and historically it's been closer to 20 percent," says Simpson. "We've never had a war without a tax, and now we've got two," he says. "Absolute bullshit."
Published on Friday, June 3, 2011 by CommonDreams.org
Republicans are engaged in a dangerous game of brinksmanship over raising the debt ceiling. It’s a game that could end in disaster.
The US is a debtor nation, and as such, we are desperately dependent upon good credit. So far, we have been able borrow and borrow at favorable rates because “the full faith and credit of the US government” stands behind every bond, every borrowed dollar.
But that could change if Republicans continue their cynical game of economic chicken.
What Republicans risk, even if they eventually capitulate and raise the debt ceiling, is the loss of this faith, and the unprecedented catastrophe that loss would bring on.
If the international community even suspects the US will routinely consider not honoring its debts, the cost of money for US industry, consumers and government would skyrocket almost overnight, bringing on the mother of all depressions, possibly with simultaneous inflation.
Republicans claim they’re doing this because they’re genuinely alarmed by the deficit, and that it poses a clear and present danger to us.
Let’s be clear. Republicans don’t give a damn about the deficit. Here’s the proof.
Fact: The Ryan budget – which Republicans voted for and support with an almost religious fervor – doesn’t achieve a balanced budget until 2063.
Why does it take so long? Because balancing the budget isn’t really the point. In fact, Ryan's budget adds at least $62 trillion to the debt between now and 2063 – so much for their faux emergency.
In reality, the Ryan budget is a stealth vehicle designed to pass a nightmarish wish list of very unpopular Republican giveaways to the rich and powerful, while repealing popular social programs.
For example, it cuts taxes on the highest wage earners from the current 35% down to 25%, it lowers corporate taxes by the same amount, it dismantles Medicare, guts Medicaid, eliminates regulations on Wall Street and the financial community, eviscerates Pell grants, establishes a process for “reforming” the Social Security program, and all but eliminates environmental protections – on an on it goes. By now, you know the drill – give trillions to Wall Street and the uber-wealthy, kill regulations that create a level playing field, and pay for it out of the hides of the middle class.
Fact: Republicans created most of the deficit.
Our current deficit is about $13.5 trillion dollars. Reagan, Bush I, and Bush II are responsible for nearly 70% of that debt – an amount more than twice as much as all previous presidents combined. And conservative attempts to blame a Democratic Congress don’t hold water -- for the most part, Congress passed budgets slightly lower than those requested by Bush and Reagan. During the time this massive debt was being run up, did Republicans express even an iota of concern? Nope. In fact, Dick Cheney famously said, “Reagan proved deficits don’t matter.”
Fact: The People's Budget proposed by the Congressional Progressive Caucus creates a budget surplus by 2021, and for the most part, the proposals it uses to do it are supported by the majority of Americans.
If the deficit were a dire emergency worth risking the US’s financial credibility and a catastrophic economic meltdown, then surely eliminating the deficit by 2021 is better than eliminating it by 2063 and amassing an additional $62 trillion in debt in the meantime? Not if you’re a Republican. Nor, apparently, if you’re in the Obama Administration.
The bottom line is, Republicans created the economic crisis and the debt they are now brandishing as a weapon in a political war, precisely so they could mount a stealth attack on the New Deal programs Americans love, and they are risking America’s future prosperity to do it.
Right now, the media and the Democratic Party are feeble enablers of this reckless and dangerous strategy. Indeed, the Obama administration’s penchant for compromising with Republican lunacy is now so finely honed, one has to believe that if Republicans announced that we needed to sacrifice 100 virgins to fix the economy, Obama would stick out his chin and say, “No. We only need 50 – and I won’t sacrifice even one more than that.”
As Robert Reich pointed out in his June 1st blog, the US economy suffers from a demand deficit, not a budget deficit. And with industry sitting on more than $2 trillion in profits instead of investing it, that demand can come from only one place – government. This means revenue must be a part of any deficit reduction, if we are to achieve prosperity.
But with Obama arguing about the number of virgins we should sacrifice, instead of using to the Bully pulpit to back a serious budget proposal capable of creating prosperity, don’t count on it.
And as yesterday’s Congressional vote on raising the deficit ceiling shows, Democrats are petrified of being labeled soft on the deficit, so don’t look for leadership there, either.
Meanwhile, the media is lionizing Paul Ryan’s ludicrously self-contradictory budget, while ignoring a serious proposal that actually accomplishes what Republicans say we must accomplish.
Here’s the irony – Puff the Mighty Deficit Dragon was created to serve the interests of the rich and powerful, the ones who call the tune in Washington. The ones who set the politicians dancing and the media elite singing. But right now, the Mighty Deficit Dragon has gotten away from them, and is threatening to bring down the whole house of cards.
We hear all this blather about how the US is such a wealthy nation. Not true. Before Ronald Reagan became President, the US was the world's largest creditor nation. People and countries owed us more money than we owed them. Now some 30 years later the US is the world's largest debtor nation. This is the definition of a poor - not a rich - nation. China on the other hand holds $3 trillion in international reserves including $1 trillion of US debt. Other nations have sovereign wealth funds which contain vast amounts of money. The US has only a huge pile of debt - some $14 trillion worth. The US used to be the world's largest importer of raw materials and exporter of manufactured goods. Now we're the world's largest exporter of raw materials and importer of manufactured goods with a trade deficit of some $600 billion a year. At the present time the US has a deficit of some $2 trillion in needed infrastructure repairs while China is building high speed rail track at such a rate that it will soon have more miles than the rest of the world combined. Meanwhile, the US spends more on its military establishment than the rest of the world combined while cutting safety nets and education for its own citizens.
Americans have pulled the wool over their own eyes. Despite having a national debt of $14 trillion, despite having gone from a net creditor nation to a net debtor nation in little over 30 years, despite having enormous trade deficits month after month, year after year, despite having an infrastructure in need of $2 trillion worth of repairs, Americans think they live in a wealthy nation. The truth of the matter is that the US is a poor nation within which live a lot of wealthy individuals. China on the other hand holds a little over $1 trillion of US debt making it a fairly wealthy nation albeit with a large but diminishing number of poor people. China is building new infrastructure at an astonishing rate. It's a fallacy to think a wealthy nation is a nation comprised of a large number of wealthy individuals. In fact many Banana Republics are comprised of a small class of wealthy individuals surrounded by a sea of poverty. The US is on track to becoming one of those. A recent survey showed that there is a higher level of inequality in the US than exists in Pakistan, Ethiopia and Ivory Coast.
It is not hard to diagnose why the US is a poor nation which thinks itself rich while China is a rich nation which passes itself off as being poor. All the free trade agreements like NAFTA and CAFTA have resulted in the decimation of the US manufacturing base. US factories are closing in droves:
2010 comes in the midst of a stunning wave of U.S. factory closings that stretches from coast to coast. Once upon a time America was the greatest manufacturing machine that the world has ever seen, but now it seems as though the only jobs available for working class Americans involve phrases such as “Welcome to Wal-Mart” and “Would you like fries with that?” Even though the population of the United States has exploded over the last several decades, the number of Americans employed in the manufacturing sector today is smaller than it was in 1950. America has become a voracious economic black hole that ”consumes” as much as possible and yet actually produces very little. The United States is becoming deindustrialized at a blinding pace, and it is becoming increasingly difficult for blue collar American workers to find jobs that will actually enable them to support their families. The sad truth is that American workers don’t have a whole lot to actually celebrate this Labor Day. 14 million U.S. workers are “officially unemployed” and tens of millions of others have been forced to take part-time or temporary jobs that they are overqualified for just so they can survive. Unfortunately, this is not just a temporary situation for American workers. As millions of good jobs continue to get outsourced and offshored, Labor Day celebrations in coming years will be even more depressing.
Since 2001, The U.S. Has Lost 42,400 factories. The "giant sucking sound" that Ross Perot predicted has become a point of actual fact. But this doesn't seem to bother America's leaders. They are dedicated to the policy that US consumption drives US GDP and as long as US GDP is the largest in the world, who cares? Sales are up! However China, as the world's second largest economy as measured by GDP, is on track to overtake the US in the near future. American politicians only care about transnational corporations, nominally American, and how they can maintain the US consumer appetite (and their profit margins) for buying their goods even though most of those goods are produced overseas. They coddle these corporations by lowering their taxes, having their lobbyists drill loophioles in the tax code and giving them a "tax holiday" during which they can "repatriate" their overseas capital and bring it "home" without any tax consequences.
The model of trickle down economics, long since discredited, is still being championed by right wing politicians with the result that the fig leaf of prosperity is being shredded to reveal a naked transfer of wealth from the middle class to the upper one per cent. Naked power grabs are becoming the order of the day as the recent vote to extend taxpayer subsidies to the five Big OIl companies, despite their being the most profitable corporations in human history, reveals. At the same time those same right wing policticians are demanding that the budget be balanced on the backs of the poor and middle class. While countries such as Norway fund their safety net with royalties from oil drilling, the US gives away its natural resources to oil corporations including BP which is not even headquartered in the US. The neocon model of privatization and eliminating safety nets, although unsuccessful in Argentina and Brazil, is achieving considerably more success when practiced here at home. Trade unions are being decimated. States are being turned into fiefdoms and dictatorships. Public education is being defunded. There is an all out assault on teachers, police and other public workers. The notion that government doesn't work and can't be trusted is being fostered.
The US is becoming the very definition of a Banana Republic. It is becoming a nation largely bereft of a middle class, a nation in which there exists a small class of extremely wealthy individuals surrounded by a sea of impoverishment, a nation of antiquated infrastructure, a nation in which there is no there there. All that exists is a diminshing probablity of getting rich or even making it into the middle class. Students are being saddled with immense and obscene amounts of student loan debt. Middle classers are losing their homes to foreclosure. Poor people are being shunted aside as food stamp programs are being shut down and home heating oil allowances are drying up. The war on the poor is raging. And the American people continue to vote the guys that are screwing them into office because they pander to them with promises of unlimited rights of gun ownership and promises that they won't allow gays to marry
The US in point of fact is not a wealthy nation despite attempts to brainwash us that it is, and it's becoming poorer by the hour. But instead of implementing a rational health care system, we continue to give away billions to the pharmaceutical companies that we wouldn't have to if the government weren't prevented by law from negotiating with them. We continue to give away billions in subsidies to Big Oil and Big Agriculture. We continue to give away billions in tax breaks to the rich. We continue to pour billions down ratholes in Afghanistan, Pakistan, Iraq, Israel and many other places. .
These countries are taking us for a ride, and the Israeli President Netanyahu lectures our President on why he won't cooperate to bring about mideast peace. They are manipulating us out of our money while actually working and fighting against us as revealed by Pakistan's harboring of bin Laden. If Obama had tried to coordinate bin Laden's capture with Pakistan instead of going it alone, bin Laden would probably have been tipped off with the result that the Seals, to Obama's embarassment, would not have found bin Laden at home. What, no bin Laden? Just innocent women and children.
As China eats the US' lunch and the rest of the world rips off Uncle Sucker for billions of US taxpayer dollars, the American people should get used to the fact that we're not number 1 any more. Far from being the world's richest nation we're fast becoming one of the world's poorest nations where some of the world's richest people happen to reside. But don't worry about them. They also own villas in France, Italy and Spain. They only continue to hold US citizenship as a convenience. They could live anywhere. They could headquarter their corporations anywhere. It's still convenient for them to headquarter here so they can use their lobbyists to rip off American taxpayers and sell into the American consumer market. But as time goes on most of their sales will be to emerging consumer markets in China and elsewhere.
Posted by John on May 21, 2011 at 08:13 AM in John Lawrence, American Social System, China, Corporations, Debt, Deficit, Education, Careers, Jobs, Employment, Free Trade, Inequality, Infrastructure, Manufacturing, Obama Presidency, Outsourcing, Poverty, Republican War on the Poor, Safety Net, Student Loans, Teachers, The Economy, The Middle Class, The Military Industrial Complex, The Role of Government, Wealth | Permalink | Comments (0) | TrackBack (0)
by Robert Reich
Technically, the federal government has now reached the limit of its capacity to borrow money.
Raising the debt ceiling used to be a technical adjustment, made almost automatically. Now it’s a political football.
Democrats should never have agreed to linking it to an agreement on the long-term budget deficit.
But now that the debt ceiling is in play, there’s no end to what the radical right will demand. John Boehner is already using the classic “they’re making me” move, seemingly helpless in the face of Tea Party storm troopers who refuse to raise the ceiling unless they get their way. Their way is reactionary and regressive – eviscerating Medicare, cutting Medicaid and programs for the poor, slashing education and infrastructure, and using most of the savings to reduce taxes on the rich.
If the only issue were cutting the federal deficit by four or five trillion dollars over the next ten years, the President and Democrats wouldn’t have to cave in to this extortion. That goal can be achieved by doing exactly the opposite of what radical Republicans are demanding. We can reduce the long-term budget deficit, keep everything Americans truly depend on, and also increase spending on education and infrastructure — by cutting unnecessary military expenditures, ending corporate welfare, and raising taxes on the rich.
I commend to you the “People’s Budget,” a detailed plan for doing exactly this – while reducing the long-term budget deficit more than either the Republican’s or the President’s plan does. When I read through the People’s Budget my first thought was how modest and reasonable it is. It was produced by the House Progressive Caucus but could easily have been generated by Washington centrists – forty years ago.
But of course the coming battle isn’t really over whether to cut the long-term deficit by trillions of dollars. It’s over whether to shrink the government we depend on and to use the savings to give corporations and the super-rich even more tax benefits they don’t need or deserve.
The main reason the “center” has moved so far to the right – and continues to move rightward – is radical conservatives have repeatedly grabbed the agenda and threatened havoc if they don’t get their way. They’re doing it again.
Will the President and congressional Democrats cave in to their extortion? When even Nancy Pelosi says “everything is on the table” you’ve got to worry.
We can fortify the President and congressional Democrats and prevent them from moving further right by doing exactly what the Tea Partiers are doing — but in reverse.
Call it budget Jujitsu.
The message from the “People’s Party” should be unconditional: No cuts in Medicare and Medicaid or Social Security. More spending on education and infrastructure. Pay for it and reduce the long-term budget deficit by cutting military spending and raising taxes on the rich. The People’s Budget is the template.
But what if the President and Dems show signs of caving? This is the heart of the progressive dilemma. Are we prepared to say no to raising the debt ceiling our demands aren’t met? That way, the responsibility for rounding up the necessary Republican votes shifts to Wall Street and big business — arguably more eager to raise the debt ceiling and avoid turmoil in credit markets than anyone else. They’re also better able to push the GOP — whom they fund.
Which leads to a more basic question: Are we ready and willing to mount primary challenges to incumbent Democrats who cave?
Six months ago President Obama faced a hostage situation. Republicans threatened to block an extension of middle-class tax cuts unless Mr. Obama gave in and extended tax cuts for the rich too. And the president essentially folded, giving the G.O.P. everything it wanted.
Now, predictably, the hostage-takers are back: blackmail worked well last December, so why not try it again? This time House Republicans say they will refuse to raise the debt ceiling — a step that could inflict major economic damage — unless Mr. Obama agrees to large spending cuts, even as they rule out any tax increase whatsoever. And the question becomes what, if anything, will get the president to say no.
The debt ceiling itself is a strange feature of U.S. law: since Congress must vote to authorize spending and choose tax rates, why have a second vote on whether to allow the borrowing that these spending and taxation policies imply? In practice, however, legislators have historically been willing to raise the debt ceiling as necessary, so this quirk in our system hasn’t mattered very much — until now.
What has changed? The answer is the radicalization of the Republican Party. Normally, a party controlling neither the White House nor the Senate would acknowledge that it isn’t in a position to impose its agenda on the nation. But the modern G.O.P. doesn’t believe in following normal rules.
So what will happen if the ceiling isn’t raised? It has become fashionable on the right to assert that it would be no big deal. On Saturday the editorial page of The Wall Street Journal ridiculed those worried about the consequences of hitting the ceiling as the “Armageddon lobby.”
It’s hard to know whether the “what, us worry?” types believe what they’re saying, or whether they’re just staking out a bargaining position. But in any case, they’re almost surely wrong: seriously bad consequences will follow if the debt ceiling isn’t raised.
For if we hit the debt ceiling, the government will be forced to stop paying roughly a third of its bills, because that’s the share of spending currently financed by borrowing. So will it stop sending out Social Security checks? Will it stop paying doctors and hospitals that treat Medicare patients? Will it stop paying the contractors supplying fuel and munitions to our military? Or will it stop paying interest on the debt?
Don’t say “none of the above.” As I’ve written before, the federal government is basically an insurance company with an army, so I’ve just described all the major components of federal spending. At least one, and probably several, of these components will face payment stoppages if federal borrowing is cut off.
And what would such payment stops do to the economy? Nothing good. Consumer spending would probably crash, as nervous seniors started wondering how to pay for rent and food. Businesses that depend on government purchases would slash payrolls and cancel investments.
Furthermore, markets might well panic, especially if interest payments are missed. And the consequences of undermining faith in U.S. debt might be especially severe because that debt plays a crucial role in many financial transactions.
So hitting the debt ceiling would be a very bad thing. Unfortunately, it may be unavoidable.
Why? Because this is a hostage situation. If the president and his allies operate on the principle that failure to raise the debt ceiling is an unthinkable outcome, to be avoided at all cost, then they have ceded all power to those willing to bring that outcome about. In effect, they will have ripped up the Constitution and given control over America’s government to a party that only controls one house of Congress, but claims to be willing to bring down the economy unless it gets what it wants.
Now, there are good reasons to believe that the G.O.P. isn’t nearly as willing to burn the house down as it claims. Business interests have made it clear that they’re horrified at the prospect of hitting the debt ceiling. Even the virulently anti-Obama U.S. Chamber of Commerce has urged Congress to raise the ceiling “as expeditiously as possible.” And a confrontation over spending would only highlight the fact that Republicans won big last year largely by promising to protect Medicare, then promptly voted to dismantle the program.
But the president can’t call the extortionists’ bluff unless he’s willing to confront them, and accept the associated risks.
According to Harry Reid, the Senate majority leader, Mr. Obama has told Democrats not to draw any “line in the sand” in debt negotiations. Well, count me among those who find this strategy completely baffling. At some point — and sooner rather than later — the president has to draw a line. Otherwise, he might as well move out of the White House, and hand the keys over to the Tea Party.
I have a proposal: Let’s double US government funds devoted to promoting renewable energy. Let’s expand allocations for foreclosure prevention to help another million Americans keep their homes. Let’s launch a $10-billion infrastructure programme to repair crumbling roads and bridges. Let’s double the number of new maths and science teachers that President Obama hopes to train, bringing the total to 200,000. And let’s hire back all of those police officers fired by the city of Camden, New Jersey – already among the most dangerous places in the country before budget constraints compelled it to dismiss half of its police force in December.
While we’re at it, let’s reduce the deficit by about $40 billion.
This proposition is not voodoo economics. It is taboo economics. All of these things could be accomplished by trimming US military spending by just 10 per cent. Some of these suggestions (teacher training, Camden cops) are trifling items by the standards of Pentagon budgeting, together accounting for less than the cost of a single Lockheed Martin F-35 fighter jet.
Last year, the New York Times website offered an interactive feature, through which readers could attempt to balance the budget by choosing between a variety of cost-saving measures. The exercise showed that runaway healthcare expenses must be controlled for the US government to remain solvent in the long term. Yet, even with the troublesome burden of our private healthcare system, covering the projected 2015 budget shortfall was easy, provided you did two things: allowed Bush-era tax cuts to expire (including estate tax cuts for the wealthy) and opted for a selection of modest rollbacks for the military.
You can learn a lot from Americans’ attitudes about the budget, which are out of whack in several notable areas. When polled, US voters consistently overestimate the amount spent on foreign aid. Most believe it’s now around a quarter of the federal budget. In a show of iron-willed (if isolationist) penny-pinching, the average survey participant proposes it should be pared down to just 10 per cent of government spending.
In contrast, Americans wildly underestimate Pentagon spending. Only 25 per cent of those in a recent Rasmussen poll thought the country should spend at least three times as much as any other nation on defence. (Some 40 per cent thought we should spend less, with the remaining 35 per cent unsure.) Yet the United States’ annual outlays on its military – around $700 billion – come to more than six times the amount paid out by arms-happy China, our nearest rival.
US weapons-makers are geniuses at preventing cuts. They spread production for pricey armaments widely across Congressional districts so that lawmakers take military allocations personally, viewing them as a source of jobs for people back home. Thus, even as rightwingers spare no vitriol in attacking Obama’s stimulus spending – arguing ‘if Washington wants to help the economy, the best thing it can do is get out of the way’ – their ‘free market’ convictions disappear when it comes to stemming the flow of Pentagon largesse.
This year, several freshly elected Tea Partiers broke with traditional conservatives and vowed that defence cuts should be ‘on the table’. Yet, for all the talk of a new regime, both Democratic and Republican budget proposals actually increase military spending. The Pentagon’s 2012 funding request is the largest since World War Two. Even adjusting for inflation, it exceeds anything that Ronald Reagan or George W Bush had the audacity to push forward.
Would we not be a more humane, more responsible country if we spent far less on arms? Even in this age of austerity, answering in the affirmative in Washington remains seriously taboo.
A Black Agenda Radio commentary by Glen Ford
from the Black Agenda Report
“The government is only broke because the rich pay so little and the military costs so much.”
When the enemy convinces us that his victory is inevitable, then he has already won the psychological war. Wall Street, which owns the White House, most of both Houses of Congress and, quite literally, the corporate media, is in a mad rush to save itself from its own contradictions by dismantling or privatizing much of the government, while cutting taxes for its own class to the bone. At the same time, under the canard of national defense, the U.S. military spends as much as the rest of the world combined to bring the entire planet under the Pentagon’s full spectrum dominance. The ever-expanding war budget is justified on national security grounds, while the destruction of the domestic social safety net is supposedly unavoidable because…well, because the government is broke.
Of course, banks and other corporations are not broke; they’re doing better than ever. And the rich are richer than at any time in history. They are the ones demanding austerity, and expect their demands are to be treated as law, like stone tablets delivered by Moses from the hands of God.
Obama and the Republicans sing variations on the same song: Surrender to the Inevitable. For Black America, which is being pushed back to pre-civil rights era levels of income and wealth disparity, surrender is no option. Thus, it was encouraging that overwhelming numbers of the Congressional Black Caucus voted in favor of a so-called “People’s Budget” that shows, in dollars and cents, that the Republican and Obama agenda is not inevitable, that the budget deficits can become surpluses by the year 2021 while saving social programs.
“The People’s Budget shows that, in dollars and cents, that the Republican and Obama agenda is not inevitable.”
The government is only broke because the rich pay so little and the military costs so much. The People’s Budget, put together by the Congressional Progressive Caucus, raises tax rates on the rich and increases government revenues by $4 trillion over ten years, It shuts down the Iraq and Afghanistan wars, and does not budget money for any more such wars, and thus saves $2.3 trillion from the black hole of the Pentagon. That’s all it take for the government not to be broke anymore.
Of the 77 congresspersons that voted for the People’s Budget, 34 – almost half – were Black. Only four Black lawmakers voted against the People’s Budget, so let’s call out their names in shame: Sanford Bishop, the Black Blue Dog from Georgia, who is always at the far right of the Caucus, as is fellow Georgian David Scott. Al Green, from Texas, has also surrendered to the rich man’s psychological warfare. Bobby Scott, from Virginia, is usually among the more progressive Caucus members, but now appears to be adrift. Two Black Caucus members didn’t vote either way: New York’s Gregory Meeks has served as a bag man for the corporatist Democratic Leadership Council; there’s nothing progressive about him. And Congresswoman Terri Sewell, of Alabama, is a newcomer.
The 77 supporters of the People’s Budget were outnumbered by the 108 Democrats that voted with the GOP and Obama’s side of the party. But they did show that not everyone believes that resistance is futile, even if a Black president tells them so. For Black Agenda Radio, I’m Glen Ford. On the web, go to www.BlackAgendaReport.com.
BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.
by Robert Reich
How debates are framed is critical because the “center” or “middle ground” is supposedly halfway between the two extremes.
We continue to hear that the Great Budget Debate has two sides: The President and the Democrats want to cut the budget deficit mainly by increasing taxes on the rich and reducing military spending, but not by privatizing Medicare. On the other side are Paul Ryan, Republicans, and the right, who want cut the deficit by privatizing Medicare and slicing programs that benefit poorer Americans, while lowering taxes on the rich.
By this logic, the center lies just between.
According to the most recent Washington Post-ABC poll, 78 percent of Americans oppose cutting spending on Medicare as a way to reduce the debt, and 72 percent support raising taxes on the rich – including 68 percent of Independents and 54 percent of Republicans.
In other words, the center of America isn’t near halfway between the two sides. It’s overwhelmingly on the side of the President and the Democrats.
I’d wager if Americans also knew two-thirds of Ryan’s budget cuts come from programs serving lower and moderate-income Americans and over 70 percent of the savings fund tax cuts for the rich – meaning it’s really just a giant transfer from the less advantaged to the super advantaged without much deficit reduction at all – far more would be against it.
And if people knew that the Ryan plan would channel hundreds of billions of their Medicare dollars into the pockets of private for-profit heath insurers, almost everyone would be against it.
The Republican plan shouldn’t be considered one side of a great debate. It shouldn’t be considered at all. Americans don’t want it.
Which is why I get worried when I hear about so-called “bipartisan” groups on Capitol Hill seeking a grand compromise, such as the Senate’s so-called “Gang of Six.”
Senator Dick Durbin, Democrat of Illinois, a member of that Gang, says they’re near agreement on a plan that will chart a “middle ground” between the House Republican budget and the plan outlined last week by the President.
Watch your wallets.
In my view, even the President doesn’t go nearly far enough in the direction most Americans would approve. All he wants to do, essentially, is end the Bush tax windfalls for the wealthy – which were designed to be ended in 2010 in any event – and close a few loopholes.
But why shouldn’t we go back to the tax rates we had thirty years ago, which required the rich to pay much higher shares of their incomes? One of the great scandals of our age is how concentrated income and wealth have become. The top 1 percent now gets twice the share of national income it took home thirty years ago.
If the super rich paid taxes at the same rates they did three decades ago, they’d contribute $350 billion more per year than they are now – amounting to trillions more over the next decade. That’s enough to ensure every young American is healthy and well-educated and that the nation’s infrastructure is up to world-class standards.
Nor does the President’s proposal go nearly far enough in cutting military spending, which is not only out of control but completely unrelated to our nation’s defense needs – fancy weapons systems designed for an age of conventional warfare; hundreds of billions of dollars for the Navy and Air Force, when most of the action is with the Army, Marines, and Special Forces; and billions more for programs no one can justify and few can understand.
If Americans understood how much they’re paying for defense and how little they’re getting, they’d demand a defense budget at least 25 percent smaller than it is today.
Finally, the President’s proposed budget doesn’t deal with the scandal of the nation’s schools in poor and middle-class communities – schools whose teachers are paid under $50,000 a year, whose classrooms are crammed, that can’t afford textbooks or science labs, that have abandoned after-school programs and courses like history and art. Most school budgets depend mainly on local property taxes that continue to drop in lower-income communities. The federal government should come to their rescue.
To think of the “center” as roughly halfway between the President’s and Paul Ryan’s proposals is to ignore what Americans need and want. For our political representatives to find a ”middle ground” between the two would be a travesty.
By PAUL KRUGMAN
Published: April 17, 2011, by the New York Times
Last week, President Obama offered a spirited defense of his party’s values — in effect, of the legacy of the New Deal and the Great Society. Immediately thereafter, as always happens when Democrats take a stand, the civility police came out in force. The president, we were told, was being too partisan; he needs to treat his opponents with respect; he should have lunch with them, and work out a consensus.
That’s a bad idea. Equally important, it’s an undemocratic idea.
Let’s review the story so far.
Two weeks ago, House Republicans released their big budget proposal, selling it to credulous pundits as a statement of necessity, not ideology — a document telling America What Must Be Done.
But it was, in fact, a deeply partisan document, which you might have guessed from the opening sentence: “Where the president has failed, House Republicans will lead.” It hyped the danger of deficits, yet even on its own (not at all credible) accounting, spending cuts were used mainly to pay for tax cuts rather than deficit reduction. The transparent and obvious goal was to use deficit fears to impose a vision of small government and low taxes, especially on the wealthy.
So the House budget proposal revealed a yawning gap between the two parties’ priorities. And it revealed a deep difference in views about how the world works.
When the proposal was released, it was praised as a “wonk-approved” plan that had been run by the experts. But the “experts” in question, it turned out, were at the Heritage Foundation, and few people outside the hard right found their conclusions credible. In the words of the consulting firm Macroeconomic Advisers — which makes its living telling businesses what they need to know, not telling politicians what they want to hear — the Heritage analysis was “both flawed and contrived.” Basically, Heritage went all in on the much-refuted claim that cutting taxes on the wealthy produces miraculous economic results, including a surge in revenue that actually reduces the deficit.
By the way, Heritage is always like this. Whenever there’s something the G.O.P. doesn’t like — say, environmental protection — Heritage can be counted on to produce a report, based on no economic model anyone else recognizes, claiming that this policy would cause huge job losses. Correspondingly, whenever there’s something Republicans want, like tax cuts for the wealthy or for corporations, Heritage can be counted on to claim that this policy would yield immense economic benefits.
The point is that the two parties don’t just live in different moral universes, they also live in different intellectual universes, with Republicans in particular having a stable of supposed experts who reliably endorse whatever they propose.
So when pundits call on the parties to sit down together and talk, the obvious question is, what are they supposed to talk about? Where’s the common ground?
Eventually, of course, America must choose between these differing visions. And we have a way of doing that. It’s called democracy.
Now, Republicans claim that last year’s midterms gave them a mandate for the vision embodied in their budget. But last year the G.O.P. ran against what it called the “massive Medicare cuts” contained in the health reform law. How, then, can the election have provided a mandate for a plan that not only would preserve all of those cuts, but would go on, over time, to dismantle Medicare completely?
For what it’s worth, polls suggest that the public’s priorities are nothing like those embodied in the Republican budget. Large majorities support higher, not lower, taxes on the wealthy. Large majorities — including a majority of Republicans — also oppose major changes to Medicare. Of course, the poll that matters is the one on Election Day. But that’s all the more reason to make the 2012 election a clear choice between visions.
Which brings me to those calls for a bipartisan solution. Sorry to be cynical, but right now “bipartisan” is usually code for assembling some conservative Democrats and ultraconservative Republicans — all of them with close ties to the wealthy, and many who are wealthy themselves — and having them proclaim that low taxes on high incomes and drastic cuts in social insurance are the only possible solution.
This would be a corrupt, undemocratic way to make decisions about the shape of our society even if those involved really were wise men with a deep grasp of the issues. It’s much worse when many of those at the table are the sort of people who solicit and believe the kind of policy analyses that the Heritage Foundation supplies.
So let’s not be civil. Instead, let’s have a frank discussion of our differences. In particular, if Democrats believe that Republicans are talking cruel nonsense, they should say so — and take their case to the voters.
by Robert Reich
As the government approaches its borrowing limit of $14.3 trillion, Republicans are seeking political advantage over what conditions should be attached to raising that limit.
This is a scandal — or should be. Raising the debt limit shouldn’t be subject to party politics. Economic extortion should be out of bounds.
It’s bad enough government shutdowns have become an accepted part of political negotiation. But failure to increase the amount the Treasury can borrow would have far graver results.
Not only would the government be unable to issue Social Security or Medicare checks but the United States couldn’t pay interest on its current debt.
We’d go into default. The full faith and credit of the United States would be in jeopardy. Treasury bonds would go into free fall. Interest rates would skyrocket. We, and most of the rest of the world, would fall into financial chaos.
The recovery is still fragile. All this would force us and most of the rest of the world into a deeper recession or worse.
No one in their right mind would threaten this. Yet it’s talked about as if it’s just another aspect of Washington politics — a threat that might be carried out in early July when the Treasury runs out of ways to keep paying our debts.
In fact, it’s a giant game of highway chicken, and if one driver doesn’t yield the crash will be catastrophic.
Games of chicken are won by drivers able to convince their opponents they won’t swerve. That gives a strategic advantage to Republicans backed by the Tea Party, who are so convinced government is evil they’ve signaled they’d be willing to risk it.
But this shouldn’t be a matter of political strategy. Disagreement about the nation’s budget should be worked out through the constitutional process of majority votes in Congress, followed by the President’s signature or veto, and Congress’s right to override the veto.
No group of legislators is entitled to threaten to crash the United States economy if its demands aren’t met.
The biggest surprise is the silence of American business and Wall Street. They have as much if not more to lose as anyone if this game ends in tragedy. Yet the GOP — which big business and Wall Street fund — insists on playing it.
Why isn’t the Business Roundtable decrying the use of this tactic? Where are the leaders of Wall Street? Where are the corporate statesmen? They should insist this game of chicken be called off or they’ll stop the funding.
Maybe they think the crash won’t happen, that Obama and the Dems will cave in to Paul Ryan’s and the Republicans’ before that.
If so, they’re wrong. The Republicans’ demands are so far beyond the pale — turning Medicare into vouchers that funnel money to private insurance companies, turning Medicaid and food stamps into block grants that would deliver less to the poor, giving a giant tax windfall to the very rich — they cannot be met without causing the Democratic base (and most Independents) to revolt.
Yesterday Standard & Poor’s (hardly a beacon of reliability after the Crash of 2008, to be sure) downgraded America’s credit outlook. Expect more downgrades if the game of chicken continues.
by Robert Reich
Paul Ryan says his budget plan will cut $4.4 trillion over ten years. The President says his new plan will cut $4 trillion over twelve years.
Let’s get real. Ten or twelve-year budgets are baloney. It’s hard enough to forecast budgets a year or two into the future. Between now and 2022 or 2024 the economy will probably have gone through a recovery (I’ll explain later why I fear it will be anemic at best) and another downturn. America will also have been through a bunch of elections – at least five congressional and three presidential.
The practical question is how to get out of the ongoing gravitational pull of this awful recession without cow-towing to extremists on the right who think the U.S. government is their mortal enemy. For President Obama, it’s also about how to get reelected.
(Yes, we also have to send a clear signal to global lenders that America is serious about reducing its long-term budget deficit. But in truth, global lenders don’t need much reassurance. Bond market yields in the U.S. are now lower than they were when the government was running a budget surplus ten years ago.)
Seen in this light, Obama’s plan isn’t really a budget proposal. It’s a process proposal.
Stage 1, starting now and ending in June, requires that Republican and Democratic leaders devise a budget for 2012. Apparently they’ve already agreed to try.
That budget would also include a “framework” for deficit reduction over the longer haul. But that framework will be mainly for show. It will give House Republicans enough cover to vote to raise the ceiling on the amount the U.S. government can borrow. (The vote has to occur before the Treasury runs out of accounting maneuvers, in early July.)
And because the framework’s details will be filled in after Election Day, it will give Obama wiggle room before the election to campaign on his priorities. If he wins big – and if Democrats retake the House – its details will look completely different from what they’d look like in the alternative.
Stage 2 occurs in 2014 – fully two years after Election Day. Then, according to Obama’s proposal, if the ratio of the nation’s deficit to the GDP hasn’t fallen to 2.5 percent (it’s now over 10 percent), automatic across-the-board cuts will go into effect to get it there.
Importantly, these cuts wouldn’t apply to Social Security and Medicare, or to Medicaid and other programs designed for the poor. And they wouldn’t be limited to spending. They’d also apply to tax expenditures – that is, to tax deductions and tax credits.
The betting in the White House is that by 2014 the recovery will be in full force, and the economy will have grown so much that the ratio of deficit to the GDP will be in the range of 3 to 5 percent anyway. That means any across-the-board cuts wouldn’t have to be very deep.
The White House is also betting that a strong recovery will take the sting out of any recommendations to slow the growth of Medicare spending emanating from the Medicare board set up under the new health care law (officially known as the Independent Payment Advisory Board.) Under Obama’s new plan, such proposals will be necessary if Medicare spending grows .5 percent faster than growth of the economy (under the law, it’s 1 percent faster).
All told, it’s a clever strategy. It might well avoid a dangerous game of chicken over raising the debt ceiling. It still allows the President to charge Paul Ryan and other Republicans who join him as ending Medicare as we know it – which they are, in fact, proposing to do. (This may help Democrats win back seniors, whose support for Democratic house candidates dropped form 49% in 2006 to 38% in 2010.) And it gives the President lots of room to maneuver between now and Election Day, and between Election Day and 2014.
But there’s one big weakness. The whole thing depends on the recovery picking up steam. If the economy doesn’t, the process could backfire – leading to indiscriminate budget cuts later on, as well as big cuts in Medicare. Indeed, if the recovery fails to fire up, Obama’s own chance of reelection is dimmed considerably, as are the odds of a Democratic House after 2012.
Yet what are the chances of a booming recovery? The economy is now growing at an annualized rate of only 1.5 percent. That’s pitiful. It’s not nearly enough to bring down the rate of unemployment, or remove the danger of a double dip. Real wages continue to drop. Housing prices continue to drop. Food and gas prices are rising. Consumer confidence is still in the basement.
By focusing the public’s attention on the budget deficit, the President is still playing on the Republican’s field. By advancing his own “twelve year plan” for reducing it – without talking about the economy’s underlying problem – he appears to validate their big lie that reducing the deficit is the key to future prosperity.
The underlying problem isn’t the budget deficit. It’s that so much income and wealth are going to the top that most Americans don’t have the purchasing power to sustain a strong recovery.
Until steps are taken to alter this fundamental imbalance – for example, exempting the first $20K of income from payroll taxes while lifting the cap on income subject to payroll taxes, raising income and capital gains taxes on millionaires and using the revenues to expand the Earned Income Tax Credit up to incomes of $50,000, strengthening labor unions, and so on – a strong recovery may not be possible.
Published on Friday, March 11, 2011 by The Capital Times (Wisconsin)
U.S. corporations are sitting on $2 trillion in cash -- trillion, not billion. The same people who shipped millions of jobs overseas, caused the financial crisis, and pay themselves multimillion-dollar bonuses every year are now sitting on a mountain of cash. Yet both state and local governments feel the need to give them more tax cuts. To what end? So they can create more profits and sit on bigger piles of cash, so they can play monopoly as they buy each other out, or so they can give themselves even bigger bonuses? There is no indication that they are interested in doing anything to spur the economy.
In December we heard the Republicans tell us that people making over $250,000 per year couldn’t afford a 4 percent tax increase, and it would be terrible for the economy to increase their taxes. Thirty years ago they were paying 70 percent in taxes. Now they pay half that, but a 4 percent increase is just too much to bear.
Now we are told that state workers making $40,000 to $60,000 per year are stealing the state blind. The same workers who for the last two years have taken over a 3 percent pay cut in the form of furloughs are now told they haven’t sacrificed enough. Now they must forfeit 7 percent or more of their pay, and give up their right to negotiate their future. What is appalling is the state workers were willing to give up the money to help out the state. All they asked was to keep their right to negotiate. Yet the wealthiest in our country aren’t willing to give up anything to help our country out of the financial mess they created.
In 1980 Ronald Reagan told the biggest lie ever perpetuated on the American public. He condemned Jimmy Carter for running a $40 billion deficit, and then told everyone he could cut taxes and balance the budget. Voodoo economics -- that’s what George H.W. Bush called Reagan’s economic plan. He was right, and by the mid ’80s the budget deficit had ballooned to over $200 billion.
Of course it was the rich who walked away with virtually all of the Reagan tax cuts. During the last 25 years the Republicans have doubled down over and over again, giving more and more tax cuts to the rich. While the rich have gotten incredibly wealthy, the poor have gotten poorer. It is a reverse Robin Hood economy where we take from the poor and give to the rich. It has been the greatest transfer of wealth in the history of our country -- the 400 richest have more than the 155 million poorest.
Ballooning government deficits weren’t a problem when Republicans were in the White House, but with a Democratic president, it is suddenly a crisis. The recession we’ve been living through proves the fallacy of Milton Friedman, Reaganomics, Ayn Rand, Alan Greenspan and the rest who told us that markets are self-correcting and regulation is bad. Banking regulations kept this country out of serious recession for 70 years, but once the regulations were repealed it took only a decade to bring the world’s economy to its knees. Yet Republicans refuse to acknowledge how wrong they were as they continue to try to gut government regulations.
Every time a politician tells you he wants to make the government more business friendly, what he’s really telling you is that he wants to increase taxes on your children and grandchildren. Every environmental law that is weakened will mean a cleanup to be paid for by future generations. Every bad business practice that is endured will be funded by taxpayers having to clean up the mess at some later date.
Now we are told that everyone must sacrifice to bring state and federal government budgets in line. But somehow the sacrifices once again all fall on those at the bottom of the economic ladder. Once again businesses are given tax cuts, money is found to increase spending on roads, but education, health care and help for the poorest in our society are cut.
There isn’t a financial crisis at either the state or the federal government. The crisis is our unwillingness to ask those who have gained the most from our society pay a fair and equitable share from the wealth this society has allowed them to accumulate. It is the honest, Christian, and patriotic thing to do.© 2011 The Capital Times
by Robert Reich
In the next week the action moves from Wisconsin to Washington, where the deadline looms for a possible government shutdown over the federal budget. President Obama has to take a more direct and personal role in that budget battle – both for the economy’s sake and for the sake of his reelection. But will he? Don’t count on it.
Worried congressional Democrats say the President needs to use his bully pulpit to counter defections in Democatic ranks, such as the ten Democrats and one allied Independent who on Wednesday voted against a Senate leadership plan to cut $6.2 billion from the federal budget over the rest of fiscal year 2011. They want Obama to grab the initiative and push a plan to eliminate tax breaks for oil companies and for companies that move manufacturing facilities out of the country, and a proposal for a surtax on millionaires.
Most importantly, they’re worried the President’s absence from the debate will result in Republicans winning large budget cuts for the remainder of the fiscal year – large enough to imperil the fragile recovery.
But Obama won’t actively fight the budget battle if the current White House view of how he wins in 2012 continues to prevail.
Shortly after the Democrats’ “shellacking” last November, I phoned a friend in the White House who had served in the Clinton administration. “It’s 1994 all over again,” he said. “Now we move to the center.”
The supposed parallel between 2010 and 1994 is something of an article of faith in the Obama White House. That’s partly because so many of President Barack Obama’s current aides worked for Bill Clinton and vividly recall Clinton’s own shellacking in 1994. It’s also because the Clinton story had a happy ending, at least electorally. The fact that Bill Clinton went on to win re-election is a source of comfort to the current White House as it looks ahead to 2012.
From this, many in the Obama White House have concluded that the president should follow Clinton’s campaign script — distancing himself from congressional Democrats, embracing further deficit reduction, and seeking guidance from big business. If it worked for Clinton, it must work for Obama — or so it’s supposed.
The superficial logic that so often passes for thought in Washington typically sees causation where there’s only correlation. In fact, there’s no reason to believe that Clinton’s lurch rightward at the start of 1995 is what won him re-election the following November. He was re-elected because of the strength of the economic recovery.
By the spring of 1995, the American economy had bounced back, averaging 200,000 new jobs per month. By early 1996, it was roaring — creating 434,000 new jobs in February alone. I remember suggesting to Clinton’s political adviser, Dick Morris, that the president should come up with some new policy ideas for the election. Morris scowled. This election will be about the economy — nothing more, nothing less, he said. Morris knew that voters didn’t care much about policy. They cared about jobs. “The president,” said Morris, “is going to say, ‘You’ve never had it this good, and you ain’t seen nothing yet.’”
The 1991-1992 recession was relatively mild as recessions go. As is typical of most recessions, it had been brought on by the Federal Reserve raising interest rates too high in response to fears of inflation — meaning that a recovery would occur when the Fed reversed course and reduced short-term rates, which then-Chair Alan Greenspan obligingly did.
President Obama won’t be as fortunate. The Great Recession resulted from the bursting of a giant debt bubble. Wall Street’s irresponsible lending and speculating, negligible oversight by federal regulators, and the insatiable desire of Americans to use their homes as ATMs created a toxic mixture that exploded at the end of 2007 and continues to sicken the economy.
The Fed has kept interest rates near zero for more than a year and has opened the spigots of its discount window, without much result. Unemployment continues to hover around 9 percent. Economic growth is pathetic.
While jobs used to follow corporate profits, American corporations now rack up big profits without expanding employment. Their profits are coming mainly from buoyant sales by their foreign operations — especially in China and India — combined with cuts in jobs, wages, and benefits here in the U.S.
The richest 10 percent of Americans, who own about 90 percent of all financial assets, are buying again (sales at Neiman Marcus and Tiffany’s are way up). But most Americans still have little purchasing power. Under a huge load of debt, worried about meeting mortgage payments, and seeing their major asset — their home — continue to drop in value, they’re holding back from the malls.
A strong recovery cannot be sustained by the richest 10 percent. Before the Great Recession, the top 10 percent received about half of total income, but they accounted for only about 40 percent of total spending. Forty percent of spending isn’t enough to convince businesses to invest in new capacity and jobs, which is why corporations are still sitting on $1.4 trillion of cash.
So many jobs have been lost since Obama was elected and so many people have entered the workforce needing jobs that even if job growth were to match the extraordinary pace of the late 1990s, year after year, the unemployment rate wouldn’t fall below 6 percent until 2016. That pace of job growth is unlikely, to say the least.
If Republicans manage to cut federal spending significantly between now and Election Day while state outlays continue to shrink, the certain result is continued high unemployment and anemic growth.
Obama’s challenge in 2012 has nothing to do with Bill Clinton’s in 1996. He must fight the Republican plans to cut the budget deficit this year and next, and explain to the public why he’s doing so. And he must convince Americans that public spending during the next few years is necessary to get the economy moving, reduce the long-term debt as a portion of the total economy, and get jobs back.
Public sector worker sitting in a bar: “They’re trying to take away our pensions.”
Private sector worker: “What’s a pension?” —Cartoon in the Houston Chronicle
As states struggle to meet their budgets, public pensions are on the chopping block, but they needn’t be. States can keep their pension funds intact while leveraging them into many times their worth in loans, just as Wall Street banks do. They can do this by forming their own public banks, following the lead of North Dakota—a state that currently has a budget surplus.
Wisconsin Governor Scott Walker, whose recently proposed bill to gut benefits, wages, and bargaining rights for unionized public workers inspired weeks of protests in Madison, has justified the move as necessary for balancing the state's budget. But is it?
After three weeks of demonstrations in Wisconsin, protesters report no plans to back down. Fourteen Wisconsin Democratic lawmakers—who left the state so that a quorum to vote on the bill could not be reached—said Friday that they are not deterred by threats of possible arrest and of 1,500 layoffs if they don't return to work. President Obama has charged Wisconsin’s Governor Scott Walker with attempting to bust the unions. But Walker’s defense is:
“We're broke. Like nearly every state across the country, we don't have any more money."
That’s what he says, but according to Wisconsin’s 2010 CAFR (Comprehensive Annual Financial Report) [pdf], the state has $67 billion in pension and other employee benefit trust funds, invested mainly in stocks and debt securities drawing a modest return.
A recent study by the Pew Center for the States showed that Wisconsin’s pension fund is almost fully funded, meaning it can meet its commitments for years to come without drawing on outside sources. It requires a contribution of only $645 million annually to meet pension payouts. Zach Carter, writing in the Huffington Post, notes that the pension program could save another $195 million annually just by cutting out its Wall Street investment managers and managing the funds in-house.
The governor is evidently eying the state’s pension fund, not because the state cannot afford the pension program, but because he sees it as a potential source of revenue for programs that are not fully funded. This tactic, however, is not going down well with state employees.
Fortunately, there is another alternative. Wisconsin could draw down the fund by the small amount needed to meet pension obligations, and put the bulk of the remaining money to work creating jobs, helping local businesses, and increasing tax revenues for the state. It could do this by forming its own bank, following the lead of North Dakota, the only state to have its own bank—and the only state to escape the credit crisis.
This could be done without spending the pension fund money or lending it. The funds would just be shifted from one form of investment to another (equity in a bank). When a bank makes a loan, neither the bank’s own capital nor its customers’ demand deposits are actually lent to borrowers. As observed on the Dallas Federal Reserve’s website, “Banks actually create money when they lend it.” They simply extend accounting-entry bank credit, which is extinguished when the loan is repaid. Creating this sort of credit-money is a privilege available only to banks—but states can tap into that privilege by owning a bank.
The state-owned Bank of North Dakota (BND) has allowed North Dakota to maintain its economic sovereignty, a conservative states-rights ideal. The BND was established in 1919 in response to a wave of farm foreclosures by out-of-state Wall Street banks. Today, the state not only has no debt, but it recently boasted its largest-ever budget surplus. The BND helps to fund not only local government but local businesses and local banks, by partnering with the banks to provide the funds to support small business lending.
The BND is also a boon to the state treasury, having contributed over $300 million to state coffers in the past decade, a notable achievement for a state with a population less than one-tenth the size of Los Angeles County. In 2008, the BND returned a 26 percent dividend to the state. In comparison, California’s public pension funds are down more than $100 billion—that’s billion with a “b”—or close to half the funds’ holdings, following the Wall Street debacle of 2008. It was, in fact, the 2008 bank collapse rather than overpaid public employees that caused the crisis that shrank state revenues and prompted the budget cuts in the first place.
Faced with federal inaction and growing local budget crises, an increasing number of states are exploring the possibility of setting up their own state-owned banks, following the North Dakota model. On January 11, 2011, a bill to establish a state-owned bank was introduced in the Oregon State legislature; on January 13, a similar bill was introduced in Washington State; on January 20, a bill for a state bank was filed in Massachusetts (following a 2010 bill that had lapsed); and on February 4, a bill was introduced in the Maryland legislature for a feasibility study looking into the possibilities. They join Illinois, Virginia, and Hawaii, which introduced similar bills in 2010, bringing the total number of states with such bills to seven.
If Governor Walker wanted to explore this possibility for his state, he could drop in on the Center for State Innovation (CSI), which is located down the street in his capital city of Madison, Wisconsin. The CSI has done detailed cost/benefit analyses of the Oregon and Washington state bank initiatives, which show substantial projected benefits based on the BND precedent. See reports here and here.
For Washington State, with an economy not much larger than Wisconsin’s, the CSI report estimates that after an initial start-up period, establishing a state-owned bank would create new or retained jobs of between 7,400 and 10,700 a year at small businesses alone, while at the same time returning a profit to the state.
Economists looking at the CSI reports have called their conclusions conservative. The CSI made its projections without relying on state pension funds for bank capital, although it acknowledged that this could be a potential source of capitalization.
If the Bank of Wisconsin were to use state pension funds, it could have a capitalization of more than $57 billion—nearly as large as that of Goldman Sachs. At an 8 percent capital requirement, $8 in capital can support $100 in loans, or a potential lending capacity of over $500 billion. The bank would need deposits to clear the checks, but the credit-generating potential could still be huge.
Banks can create all the bank credit they want, limited only by (a) the availability of creditworthy borrowers, (b) the lending limits imposed by bank capital requirements, and (c) the availability of “liquidity” to clear outgoing checks. Liquidity can be acquired either from the deposits of the bank’s own customers or by borrowing from other banks or the money market. If borrowed, the cost of funds is a factor; but at today’s very low Fed funds rate of 0.2 percent, that cost is minimal. Again, however, only banks can tap into these very low rates. States are reduced to borrowing at about 5 percent—unless they own their own banks, or, better yet, unless they are banks. The BND is set up as “North Dakota doing business as the Bank of North Dakota.”
That means that technically, all of North Dakota’s assets are the assets of the bank. The BND also has its deposit needs covered. It has a massive deposit base, since all of the state’s revenues are deposited in the bank by law. The bank also takes other deposits, but the bulk of its deposits are government funds. The BND is careful not to compete with local banks for consumer deposits, which account for less than 2 percent of the total. The BND reports that it has deposits of $2.7 billion and outstanding loans of $2.6 billion. With a population of 647,000, that works out to about $4,000 per capita in deposits, backing roughly the same amount in loans.
Wisconsin has a population that is nine times the size of North Dakota’s. Other factors being equal, Wisconsin might be able to amass over $24 billion in deposits and generate an equivalent sum in loans—over six times the deficit complained of by the state’s governor. That lending capacity could be used for many purposes, depending on the will of the legislature and state law. Possibilities include (a) partnering with local banks, as in the North Dakota model, strengthening their capital bases to allow credit to flow to small businesses and homeowners, where it is sorely needed today; (b) funding infrastructure virtually interest-free (since the state would own the bank and would get back any interest paid out); and (c) refinancing state deficits nearly interest-free.
The budget woes of Wisconsin and other states were caused not by overspending on employee benefits, but by a credit crisis on Wall Street. The “cure” is to get credit flowing again in the local economy, and this can be done by using state assets to capitalize state-owned banks.
Against the modest cost of establishing a publicly owned bank, state legislators need to weigh the much greater costs of the alternatives—slashing essential public services, laying off workers, raising taxes on constituents who are already over-taxed, and selling off public assets. Given the cost of continuing business as usual, states can hardly afford not to consider the public bank option. When state and local governments invest their capital in out-of-state money center banks and deposit their revenues there, they are giving their enormous credit-generating power away to Wall Street.
On Meet the Press last Sunday David Gregory said, "The national conversation is about spending cuts." Really! I thought it was about deficit reduction, and there's two ways to cut the deficit: spending cuts and/or revenue enhancement. The revenue enhancement part of the equation isn't even being discussed. In fact if Obama hadn't compromised on extending the Bush tax cuts for the rich, there would be no need for spending cuts. This society is in a downward spiral precisely because the only consideration is for spending cuts and spending cuts for social services at that. Where is the talk about cutting the bloated military-industrial complex budget which is greater than all the rest of the world's military budgets combined? Where is the talk about cutting the subsidies to the most profitable corporations in world history - the oil companies - and to agribusiness? Where is the talk about fixing the loopholes that let corporations offshore their money and not pay their fair share of taxes. And it goes on and on. Instead, all the talk is about balancing the budget on the backs of the poor and middle class.
And the situation in Wisconsin is all about breaking the backs of the unions which are the largest contributors to Democratic politicians leaving only the big contributors to Republican politicians still active. Republicans are trying to run the table in such a way that the only money in political races will be Republican money. The Democratic party will have been marginalized. Democrats might as well pack their bags and go home if that happens. Republican governors are engaged in a coordinated attack on unions in an attempt to break them. That's why it's so important for Wisconsin workers to stand their ground. Ohio is next. Governor Walker initiated $137. million in tax breaks for business and then declared that their budget was $137. short and they would have to fix it by breaking the unions. What's more the Wisconsin Republicans just passed a measure making it more difficult to raise taxes. So they cut taxes there by creating a financial crisis and use this as a rationale for cutting public services. It's about time that the American middle class woke up and realized what is happening to them at the hands of Republicans whose only goal is to use government to transfer money from the poor and middle class to the wealthy. There is more inequality in America than there is in Egypt for chrissake.
But back to the national budget. Republicans have done everything in their power to insure that no tax breaks for the rich will be rescinded. They voted down Nancy Pelosi's initiative to close the loophole that lets corporations offdhore their money and not pay taxes on it. They voted down inititaives that would let the government negotiate with pharmaceutical companies in order to bring down the cost of drugs. They voted down the initiative that would provide for a public option in the Health Care Bill that would bring down the cost of health care. In fact the problem is not primarily with spending on government programs; it's the fact that Republicans have systematically eroded the tax base for the last 30 years thereby underfunding government and precipitating this downward spiral that they say can only be reversed by busting unions and balancing the budget on the backs of the poor and middle class.
People are resorting to suicide as the only way out. A letter from a 99er who had his unemployment benefits cut off tells the tragic consequences of unemployment:
To the unemployed, sick, disabled and poor:
I'm unemployed over two years now, a 99er without any benefits for three months. I followed Unemployed Friends almost from its start, never posted until now, but am grateful for my time with you all. I did as asked with calls and e-mails, etc. I've a confession to make to you all. I'm a criminal.
I've obeyed the 10 commandments and all laws except: I'm unemployed and that's now a crime, I'm poor and that's a crime, I'm worthless surplus population and that's a crime, I'm a main street American Citizen born and raised in the USA and that's now a crime, and I'm euthanizing myself as I write this note -- so arrest my corpse. This isn't a call for help, the deed is done, it's not what I wanted. Death is my best available option. It's not just that my bank account is $4, that I've not eaten in a week, not because hunger pangs are agonizing (I'm a wimp), not because I live in physical and mental anguish, not because the landlady is banging on the door non-stop and I face eviction, not that Congress and President have sent a strong message they no longer help the unemployed. It's because I'm a law abiding though worthless, long-term unemployed older man who is surplus population. Had I used my college education to rip people off and steal from the elderly, poor, disabled and main street Americans I would be wearing different shoes now -- a petty king. Hard work, honesty, loving kindness, charity and mercy, and becoming unemployed and destitute unable to pay your bills are all considered foolishness and high crimes in America now. Whereas stealing and lying and cheating and being greedy to excess and destroying the fabric of America is rewarded and protected -- even making such people petty kings and petty queens among us.
Since the end of 2008, when corporate America began enjoying the resumption of growth, profits have swelled from an annualized pace of $995 billion to the current $1.66 trillion as of the end of September 2010. Over the same period, the number of non-farm jobs counted by the Labor Department has slipped from 13.4 million to 13 million -- there is no recovery for the unemployed and main street. We taxpayers have handed trillions of dollars to the same bank and insurance industry that started our economic disaster with its reckless gambling. We bailed out General Motors. We distributed tax cuts to businesses that were supposed to use this lubrication to expand and hire. For our dollars, we have been rewarded with starvation, homelessness and a plague of fear -- a testament to post-national capitalism.
Twelve years ago, I lost the last of my family. Ten years ago, I lost the love of my life, couldn't even visit him in the hospital because gays have no rights. I fought through and grieved and went on as best I could. Seven years ago, I was diagnosed with Diabetes and Stage 2 high blood pressure with various complications including kidney problems, mild heart failure, Diabetic Retinopathy. These conditions are debilitating and painful. I am on over eight prescribed medications, which is very difficult without insurance and income. But I struggled on and my primary caregiver was very pleased with my effort overtime with my A1C at seven. Still these physical disabilities have progressively worsened, and I have had a harder and harder time functioning in basic ways. All the while, I give thanks to God because I know there are many more worse off than me -- and I tried to help by giving money to charities and smiling at people who looked down and sharing what little I had.
I am college educated and worked 35 years in management, receiving written references and praise from every boss for whom I worked. Yet, after thousands of resumes, applications, e-mails, phone calls, and drop ins, I've failed to get a job even at McDonalds. I've discovered there are three strikes against me -- most 99ers will understand. Strike one -- businesses are not hiring long-term unemployed -- in fact many job ads now underline "the unemployed need not apply." Strike two -- I am almost 60 years old. Employers prefer hiring younger workers who demand less and are better pack mules. Strike three -- for every job opening I've applied, there are over 300 applicants according to each business who allow a follow up call. With the U3 unemployment holding steady at 9.6 percent and U6 at 17 percent for the past 18 months, the chances of me or any 99er landing a job is less than winning the Mega Million Jackpot. On top of that, even the most conservative economists admit unemployment will not start to fall before 2012 and most predict up to seven years of this crap.
I believe the Congress and President have no intention of really aiding the unemployed -- due to various political reasons and their total removal from the suffering of most Americans, their cold-hearted, self-serving natures. Had they really wanted to help us, they could have used unspent stimulus monies or cut foolish costs like the failed wars or foreign aid, and farm subsidies. The unspent stimulus money alone could have taken care of ALL unemployed persons for five years or until the unemployment rate reached 7 percent if Congress and the President really wanted to help us -- and not string us all along with a meager safety net that fails every few months. In any case, if I were to survive homelessness (would be like winning the mega-millions) and with those three strikes against me, in seven more years, I'll be near 70 with the new retirement age at 70 -- now who will hire an old homeless guy out of work for nine years with just a few years until retirement?
So, here I am. Long term unemployed, older man, with chronic health problems, now totally broke, hungry, facing eviction. My landlady should really be an advocate for the unemployed -- she bangs on my door demanding I take action. A phone call and a "please" are not enough for her -- she is angry. She is right to be angry with me, I am unemployed -- as apparently everyone is now angry with us unemployed.
Two hundred and eleven social services cannot help single men. Food banks and other charities are unable to help any more folks -- they are overwhelmed with the poor in this nation. So I have the "freedom" to be homeless and destitute and "pursue happiness" in garbage cans and then die -- yay for America huh? It's the end of November and cold. A diabetic homeless older person will experience amputations in the winter months. So I will be raiding garbage cans for food, as my body literally falls apart, a foot here, a finger there. I have experienced and even worked with pain from my diseases -- hardship I can face. I just cannot muster the courage to slowly die in agony and humiliation in the gutter.
I have no family, I have no friends. For the past two years, I've had nobody to talk with as people who knew me react to the "unemployed" label as if it were leprosy and contagious. I am not a bad person, in fact people really like me. But everyone seems to be on a tight budget these days and living in incredible fear. It is hopeless since we all are hearing more and more that we unemployed are to blame for unemployment, that we are just lazy, that we are no good, that we are sinners, that we are druggies, yet we are the victims who suffer and are punished while the robber baron banksters and tycoons become senators, congress, presidents and petty kings. So the only option left for me is merciful self euthanasia.
It is with a heavy heart that I have set my death in motion, but what I am facing is not living. So off I go, I have made peace with God and placed my burden on Jesus and He forgives me. This nation has become evil to the core, with cold-hearted politicians and tycoons squeezing what little Main Street Americans have left. It is not the America into which I was born -- the land of the free and the home of the brave with kind folks who help neighbors -- it is now land of the Tycoon-haves and the rest of us have-nots who march into hopelessness and despair.
Every unemployed person I have met over these past two years has been saintly. Sharing what little they have, and being charitable -- being kind and patient and supportive. Isn't it amazing that we Americans who suffer so much, have not taken to the streets in violence, riots or gotten out the guillotines and marched on tycoons and Washington in revolt as would happen in most other nations? But rather we plead with deaf politicians to please help us. We don't demand huge sums -- just 300 bucks a week, barely enough to cover housing for most. Most of all we say, please help us get a job, please allow us dignity.
I can't help but juxtapose our plight to the tycoons and politicians. They are never satisfied with their enormous wealth, and always want more millions no matter whom it hurts. They STEAL from pension funds, banks, the people and government, and little Wall Street investors. Then rather than face punishment, they become petty kings in this world. They are disloyal to America, unpatriotic, and serve their own foreign UN-American greedy causes and demand more and more and more. I feel that this is not the nation into which I was born. I was born in America, the land of the free and the home of the brave. America, where people give as much as they receive. America, where all people work for the common good, and try to leave a better and more prosperous nation for the next generation. America, where people help their neighbors and show charity and mercy. This new America is alien to me -- it is an America of greed and corruption and avarice and mean spirited selfishness and hatred of the common good -- it is an America of savage beasts roaring and tearing at the weak, and bullying the humble and peacemakers and poor and those without means to defend themselves. I am not welcome here anymore. I don't belong here anymore. It's as if some evil beast controls government, the economy, and our lives now.
I must go now, my home is someplace else. Goodbye and God bless you all. God bless the unemployed and poor and elderly and disabled. God bless America and the American people except the tycoons and politicians -- may God retain the sins of tycoons and politicians and phony preachers and send them to the Devil.
Mark is at peace now having chosen death as the best option available to him. Sick, old - but not old enough to collect social security - and destitute, it seems that death is preferable to a homeless life digging through garbage cans.
A favorite subject of attack for the right wing is social security. There is no crisis in social security. All they have to do is to lift the cap - the amount of income on which social security is taxed - and social security would be in the black forever. All this would mean is that the rich would be taxed a little more. Naturally, the Republicans don't want to do it. You have to follow the money in politics. Republicans don't want to extend unemployment for the unfortunate, and they don't want to do anything that would result in the rich paying more taxes. In addition social security payouts could be means tested. Those with ample pensions and wealth shouldn't receive it at all. Naturally, Republicans don't want to take this route either. Finally, the social security trust fund contains $2.5 trillion. That represents Treasury bonds backed by the full faith and credit of the US government. But you'll never hear Republicans mention this either. The only thing they will talk about is that social security payouts will add $45 billion to the deficit this year. That's because the money coming in is less than the money going out. As long as the reverse was true, Republicans were only too glad to pay for their tax breaks for the rich on the backs of the regressive, overcharged social security taxes. Now that the government needs to draw on that $2.5 trillion in the social security trust fund and float more Treasury bonds to refinance it, Republicans are all worried. Give me a break.
The Health Care Act needs to be amended in such a way as to deal with the rising costs of Medicare, but Republicans won't do that either. Democrats tried with the original version. It all depends on whose ox is gored and the Republican ox is the private health insurance companies that are driving up the cost of health insurance and Medicare. A rational system would contain costs as every other country has done. In Germany, by the way, unemployment insurance never ends, and there is free health care during unemployment. Most advanced countries will bend over backwards with assistance in helping the unemployed find a job. After all it's in their best interests to do so since it lowers unemployment payouts and increases incoming taxes. But the logic of this strategy seems to have fallen on deaf ears in the US. US to the unemployed: fend for yourselves.
The military-industrial complex needs to be scaled back to a reasonable level. Hundreds of billions could be potentially saved there. Republicans don't want to consider this either. Finally, the Bush tax cuts for the wealthy need to be ended if Republicans are serious about debt reduction. The downward spiral the US finds itself in is caused primarily by historically low levels of taxation on the wealthy. The country was in much better fiscal shape under Eisenhauer, Nixon and Clinton when taxes on the wealthy were much higher. I don't think the wealthy were suffering then and the economy in general was much more robust.
The continuation on this current path of cutting taxes and then curtailing government programs is resulting in a downward spiral that will turn the US into a third rate nation within a generation or two.
by Robert Reich
Wisconsin is in a showdown. Washington is headed for a government shutdown.
Wisconsin Governor Scott Walker won’t budge. He insists on delivering a knockout blow to public unions in his state (except for those, like the police, who supported his election).
In DC, House Republicans won’t budge on the $61 billion cut they pushed through last week, saying they’ll okay a temporary resolution to keep things running in Washington beyond March 4 only if it includes many of their steep cuts — among which are several that the middle class and poor depend on.
Republicans say “we’ve” been spending too much, and they’re determined to end the spending with a scorched-earth policies in the states (Republican governors in Ohio, Indiana, and New Jersey are reading similar plans to decimate public unions) and shutdowns in Washington.
There’s no doubt that government budgets are in trouble. The big lie is that the reason is excessive spending.
Public budgets are in trouble because revenues plummeted over the last two years of the Great Recession.
They’re also in trouble because of tax giveaways to the rich.
Before Wisconsin’s budget went bust, Governor Walker signed $117 million in corporate tax breaks. Wisconsin’s immediate budge shortfall is $137 million. That’s his pretext for socking it to Wisconsin’s public unions.
Nationally, you remember, Republicans demanded and received an extension of the Bush tax cuts for the rich. They’ve made it clear they’re intent on extending them for the next ten years, at a cost of $900 billion. They’ve also led the way on cutting the estate tax, and on protecting Wall Street private equity and hedge-fund managers whose earnings are taxed at the capital gains rate of 15 percent. And the last thing they’d tolerate is an increase in the top marginal tax rate on the super-rich.
Meanwhile, of course, more and more of the nation’s income and wealth has been concentrating at the top. In the late 1970s, the top 1 percent got 9 percent of total income. Now it gets more than 20 percent.
So the problem isn’t that “we’ve” been spending too much. It’s that most Americans have been getting a steadily smaller share of the nation’s total income.
At the same time, the super-rich have been contributing a steadily-declining share of their own incomes in taxes to support what the nation needs — both at the federal and at the state levels.
The coming showdowns and shutdowns must not mask what’s going on. Democrats should make sure the public understands what’s really at stake.
Yes, of course, wasteful and unnecessary spending should be cut. That means much of the defense budget, along with agricultural subsidies and other forms of corporate welfare.
But America is the richest nation in the world, and “we’ve” never been richer. There’s no reason for us to turn on our teachers, our unionized workers, our poor and needy, and our elderly. The notion that “we” can no longer afford it is claptrap.
Nothing better shows corporate control over the government than Washington's basic response to the current economic crisis. First, we had "the rescue", then "the recovery". Trillions in public money flowed to the biggest US banks, insurance companies, etc. That "bailed" them out (is it just me or is there a suggestion of criminality in that phrase?), while we waited for benefits to "trickle down" to the rest of us.
As usual, the "trickle-down" part has not happened. Large corporations and their investors kept the government's money for themselves; their profits and stock market "recovered" nicely. We get unemployment, home-foreclosures, job benefit cuts and growing job insecurity. As the crisis hits states and cities, politicians avoid raising corporate taxes in favor of cutting government services and jobs – witness Wisconsin, etc.
Might government bias favoring corporations be deserved, a reward for taxes they pay? No: corporations – especially the larger ones – have avoided taxes as effectively as they have controlled government expenditures to benefit them.
Compare income taxes received by the federal government from individuals and from corporations (their profits are treated as their income), based on statistics from the Office of Management and the Budget in the White House, and the trend is clear. During the Great Depression, federal income tax receipts from individuals and corporations were roughly equal. During the second world war, income tax receipts from corporations were 50% greater than from individuals. The national crises of depression and war produced successful popular demands for corporations to contribute significant portions of federal tax revenues.
US corporations resented that arrangement, and after the war, they changed it. Corporate profits financed politicians' campaigns and lobbies to make sure that income tax receipts from individuals rose faster than those from corporations and that tax cuts were larger for corporations than for individuals. By the 1980s, individual income taxes regularly yielded four times more than taxes on corporations' profits.
Since the second world war, corporations have shifted much of the federal tax burden from themselves to the public – and especially onto the middle-income members of the public. No wonder a tax "revolt" developed, yet it did not push to stop or reverse that shift. Corporations had focused public anger elsewhere, against government expenditures as "wasteful" and against public employees as inefficient.
Organizations such as Chambers of Commerce and corporations' academic and political allies together shaped the public debate. They did not want it to be about who does and does not pay the taxes. Instead, they steered the "tax revolt" against taxes in general (on businesses and individuals alike). The corporations' efforts saved them far more in reduced taxes than the costs of their political contributions, lobbyists' fees and public relations campaigns.
At the same time, corporations also lobbied successfully for many loopholes in the tax laws. The official federal tax rate on profits is now around 35% for large corporations, which theoretically have to pay additional state taxes on their profits and local taxes on their property (land, buildings, business inventories, etc). Those official and theoretical tax obligations have been used to support conservatives' claims that corporations pay half or more of their profits to federal, state and local levels of government combined. However, because of loopholes, the truth is very different. The actual tax payments of corporations, and especially large corporations, are far lower than their official, theoretical obligations.
The most comprehensive recent study of what larger corporations actually pay by three academic accountants – professors at Duke, MIT and the University of North Carolina – gets at that truth. It examined a large sample of corporations. Their average turned out to be a rate of total taxation (federal, state and local combined) below 30 %. The study concluded:
"We find a significant fraction of firms that appear to be able to successfully avoid large portions of the corporate income tax over sustained periods of time. Using a 10-year measure of tax avoidance, 546 firms, comprising 26.3% of our sample, are able to maintain a cash effective tax rate of 20% or less. The mean firm has a 10-year cash effective tax rate of approximately 29.6%."
General Electric (GE) deserves special mention. The New York Times reported that its total tax payment amounted to 14.3% over the last five years. Citizens for Tax Justice corrected that down to 3.4%, as the profits tax it paid in the US. Thus, GE paid a far lower tax rate on its income than most Americans paid on theirs. In 2009, GE received a huge $140bn bailout guarantee of its debt from Washington. By choosing GE's chief executive, Jeffrey R Immelt, to head his economic advisory panel, President Obama effectively rewarded the corporate program: give us more and tax us less.
Corporations repeated at the state and local levels what they accomplished federally. According to the US Census Bureau, corporations paid taxes on their profits to states and localities totaling $24.7bn in 1988, while individuals then paid income taxes of $90bn. However, by 2009, while corporate tax payments had roughly doubled (to $49.1bn), individual income taxes had more than tripled (to $290bn).
If corporations paid taxes proportionate to the benefits they get from government and in fair proportion to what individuals pay, most US citizens would finally get the tax relief they so desperately seek.
by Robert Reich
The Republican strategy is to split the vast middle and working class – pitting unionized workers against non-unionized, public-sector workers against non-public, older workers within sight of Medicare and Social Security against younger workers who don’t believe these programs will be there for them, and the poor against the working middle class.
By splitting working America along these lines, Republicans want Americans to believe that we can no longer afford to do what we need to do as a nation. They hope to deflect attention from the increasing share of total income and wealth going to the richest 1 percent while the jobs and wages of everyone else languish.
Republicans would rather no one notice their campaign to shrink the pie even further with additional tax cuts for the rich – making the Bush tax cuts permanent, further reducing the estate tax, and allowing the wealthy to shift ever more of their income into capital gains taxed at 15 percent.
The strategy has three parts.
The battle over the federal budget.
The first is being played out in the budget battle in Washington. As they raise the alarm over deficit spending and simultaneously squeeze popular middle-class programs, Republicans want the majority of the American public to view it all as a giant zero-sum game among average Americans that some will have to lose.
The President has already fallen into the trap by calling for budget cuts in programs the poor and working class depend on – assistance with home heating, community services, college loans, and the like.
In the coming showdown over Medicare and Social Security, House budget chair Paul Ryan will push a voucher system for Medicare and a partly-privatized plan for Social Security – both designed to attract younger middle-class voters.
The assault on public employees
The second part of the Republican strategy is being played out on the state level where public employees are being blamed for state budget crises. Unions didn’t cause these budget crises — state revenues dropped because of the Great Recession — but Republicans view them as opportunities to gut public employee unions, starting with teachers.
Wisconsin’s Republican governor Scott Walker and his GOP legislature are seeking to end almost all union rights for teachers. Ohio’s Republican governor John Kasich is pushing a similar plan in Ohio through a Republican-dominated legislature. New Jersey’s Republican governor Chris Christie is attempting the same, telling a conservative conference Wednesday, “I’m attacking the leadership of the union because they’re greedy, and they’re selfish and they’re self-interested.”
The demonizing of public employees is not only based on the lie that they’ve caused these budget crises, but it’s also premised on a second lie: that public employees earn more than private-sector workers. They don’t, when you take account of their education. In fact over the last fifteen years the pay of public-sector workers, including teachers, has dropped relative to private-sector employees with the same level of education – even including health and retirement benefits. Moreover, most public employees don’t have generous pensions. After a career with annual pay averaging less than $45,000, the typical newly-retired public employee receives a pension of $19,000 a year.
Bargaining rights for public employees haven’t caused state deficits to explode. Some states that deny their employees bargaining rights, such as Nevada, North Carolina, and Arizona, are running big deficits of over 30 percent of spending. Many states that give employees bargaining rights — Massachusetts, New Mexico, and Montana — have small deficits of less than 10 percent.
Republicans would rather go after teachers and other public employees than have us look at the pay of Wall Street traders, private-equity managers, and heads of hedge funds – many of whom wouldn’t have their jobs today were it not for the giant taxpayer-supported bailout, and most of whose lending and investing practices were the proximate cause of the Great Depression to begin with.
Last year, America’s top thirteen hedge-fund managers earned an average of $1 billion each. One of them took home $5 billion. Much of their income is taxed as capital gains – at 15 percent – due to a tax loophole that Republican members of Congress have steadfastly guarded.
If the earnings of those thirteen hedge-fund managers were taxed as ordinary income, the revenues generated would pay the salaries and benefits of 300,000 teachers. Who is more valuable to our society – thirteen hedge-fund managers or 300,000 teachers? Let’s make the question even simpler. Who is more valuable: One hedge fund manager or one teacher?
The Distortion of the Constitution
The third part of the Republican strategy is being played out in the Supreme Court. It has politicized the Court more than at any time in recent memory.
Last year a majority of the justices determined that corporations have a right under the First Amendment to provide unlimited amounts of money to political candidates. Citizens United vs. the Federal Election Commission is among the most patently political and legally grotesque decisions of our highest court – ranking right up there with Bush vs. Gore and Dred Scott.
Among those who voted in the affirmative were Clarence Thomas and Antonin Scalia. Both have become active strategists in the Republican party.
A month ago, for example, Antonin Scalia met in a closed-door session with Michele Bachman’s Tea Party caucus – something no justice concerned about maintaining the appearance of impartiality would ever have done.
Both Thomas and Scalia have participated in political retreats organized and hosted by multi-billionaire financier Charles Koch, a major contributor to the Tea Party and other conservative organizations, and a crusader for ending all limits on money in politics. (Not incidentally, Thomas’s wife is the founder of Liberty Central, a Tea Party organization that has been receiving unlimited corporate contributions due to the Citizens United decision. On his obligatory financial disclosure filings, Thomas has repeatedly failed to list her sources of income over the last twenty years, nor even to include his own four-day retreats courtesy of Charles Koch.)
Some time this year or next, the Supreme Court will be asked to consider whether the nation’s new healthcare law is constitutional. Watch your wallets.
The strategy as a whole
These three aspects of the Republican strategy – a federal budget battle to shrink government, focused on programs the vast middle class depends on; state efforts to undermine public employees, whom the middle class depends on; and a Supreme Court dedicated to bending the Constitution to enlarge and entrench the political power of the wealthy – fit perfectly together.
They pit average working Americans against one another, distract attention from the almost unprecedented concentration of wealth and power at the top, and conceal Republican plans to further enlarge and entrench that wealth and power.
What is the Democratic strategy to counter this and reclaim America for the rest of us?
Most Americans think the United States should raise taxes for the rich to balance the budget, according to a 60 Minutes/Vanity Fair poll released on Monday.
President Barack Obama last month signed into law a two-year extension of Bush-era tax cuts for millions of Americans, including the wealthiest, in a compromise with Republicans.
Republicans, who this week take control of the House of Representatives, want to extend all Bush-era tax cuts "permanently" for the middle class and wealthier Americans. They are also demanding spending cuts to curb the $1.3 trillion deficit.
Sixty-one percent of Americans polled would rather see taxes for the wealthy increased as a first step to tackling the deficit, the poll showed.
The next most popular way -- chosen by 20 percent -- was to cut defense spending.
Four percent would cut the Medicare government health insurance program for the elderly, and 3 percent would cut the Social Security retirement program, the poll showed.
Asked which part of the world they would fix first, the largest proportion of respondents -- 36 percent -- chose Washington, compared with 23 percent who picked the Middle East and 14 percent who chose Haiti.
The poll included a random sample of 1,067 adults across the United States from November 29 to December 2. The margin of error may be plus or minus 3 percentage points, 60 Minutes/Vanity Fair said.
(Reporting by Kristina Cooke; Editing by Daniel Trotta and Peter Cooney)© 2011 Reuters
President Obama's "deal" with Republican Senators to give another round of tax breaks to rich and middle class alike is just another example of kicking the deficit/debt can down the road. Democrats are furious about Obama's violation of his campaign promise not to extend the Bush tax cuts for the rich as well they should be. It is just a gratuitous addition to the national debt which is already out of control. It's like someone who has just eaten a high caloric fast food meal is being offered a banana split for dessert that he doesn't really want or need. In return for extending the tax breaks for the rich for two years, Obama got unemployment insurance extended for 13 months. What the "deal" really represents is a failure, due to short term expediency, to come to terms in a rational manner with the US' deficit/debt problem. In the long term does anyone really think Obama will take up the fight against tax breaks for the rich again in 2012, an election year?
Of course Obama and the Democrats totally mischaracterized the tax cuts. Even under the Democratic plan, the rich would have gotten a greater tax cut than the middle class. They just wouldn't have gotten a tax cut on all their earnings. So a large tax cut, larger than any member of the middle class would have gotten, was not enough for Republicans who are the representatives of the rich. They just wanted the Bush tax cuts continued in their totality. The Bush tax cuts are one of the chief drivers of increasing inequality in the US, and Republicans are determined to see that that inequality continues to increase. Today the richest one percent account for 24% of the nation's income. These people hardly need another tax break. Their tax breaks are breaking the financial integrity of the nation as a whole and destroying democracy.
Although extending unemployment benefits is a worthy goal, many believe that Obama didn't have to capitulate to the Republicans to achieve it. He should have drawn a line in the sand and proceeded by a different route to obtain the unemployment benefits. For example, Harry Reid could have kept the Senate in session right through Christmas Eve, Christmas day and New Year's Eve if necessary. Some Republicans would have eventually caved rather than miss their Christmas holidays. When it comes right down to it, they are a selfish lot. This would have been a fight worth having. The worst that could have happened is that none of the Bush tax cuts would have been extended into the New Year saving the government $3.7 trillion. The middle class would have hardly noticed the difference in their paychecks just like they didn't notice the addition to their paychecks caused by the stimulus tax breaks, and the deficit problem would have been largely solved.
As long as citizens via their elected representatives will always find ways to give themselves tax breaks, there is no hope of achieving fiscal soundness especially in the face of a $1 trillion military budget. The Republicans will now do their best to chip away at the social safety net in order to reduce the deficit. They will attempt to balance the budget on the backs of the poor and middle class even as they give more tax breaks to the rich. Democrats will oppose cutting social security and Medicare even as Medicare costs spiral out of control. Because of the chasm between the two parties, no rational solution will be found. The deficit and, consequently, the national debt will continue to increase until there is some sort of bond market crisis as is now being experienced in Ireland and Greece. The difference is that Ireland and Greece have the EU to bail them out. The US has no other entity to bail it out and will have to go it alone when push comes to shove. Nations after all, including the US, are at the mercy of the bond market. The Federal Reserve's "quantitative easing," another name for printing money, will only tend to provoke the crisis sooner rather than later as the value of the dollar is eroded. As more gratuitous dollars enter the economy, the value of the dollar decreases just as the value of a company's stock is diluted as more stock is sold to the public in subsequent public offerings. As the number of shares in circulation decreases when a company buys back its shares, the value of each share increases. It's the same scenario for the dollar.
Military overreach and monetary dilution with an electorate's refusal to raise taxes on itself will hasten the demise of the US as the world's premier economic and military power. The US is following the same route as other empires, including the Roman Empire, which have eventually collapsed. Obama's refusal to draw a line in the sand over tax breaks to the rich has just kicked the can of fiscal responsibility down the road. There is no reason to believe that politicians will ever stop kicking the can down the road until eventually the US collapses into Third World status. By then the"American model" will have been entirely discredited. That leaves the Chinese model, the European model and the Brazilian model as likely candidates for assuming the mantle of the world's leading superpower. US style democracy will have seen better days. It will be seen as a model in which the temptations for individual short term gain outweighed the collective fiduciary responsibilities of the electorate as a whole. It will be seen as a model in which individual and corporate wealth dictated the terms of its own demise over and against the will of the people. After all some 70% of American citizens were against extending the Bush tax cuts for the wealthy, and politicians extended them anyway. So much for the collective propriety of the American people.
If Obama gets his way, the issue of separating stimulative tax breaks for the middle class from unstimulative tax breaks for the rich will have been entirely vitiated. This was the time to make the point that giving another $100,000. on average to millionaires and billionaires should have come to a stop. However, Obama's penchant for compromise has resolved that issue in favor of the Republicans and put Democrats on the defensive as Republicans will undoubtedly engage in a rising chorus of deficit reduction by other means - by means of cutting programs which benefit the poor and middle class. If they are successful in doing that, Obama will have shot himself in the foot. The accomplishment of securing unemployment benefits for 13 months might pale in comparison to the pressure brought to bear to eliminate social programs worth far more to the middle class. Either Obama is a poor negotiator or he doesn't have the vision to see alternative ways to bring about the results which I believe he would like to achieve.
Then there is the issue of money. Obama's largest campaign contributor was Goldman Sachs. Due to the Supreme Court's Citizens United decision untold torrents of money are entering the political arena. Obama can ill afford to take a last ditch stand against the forces which ultimately control the political process. Do we believe that the folks at Goldman wanted tax breaks for the rich extended? Of course we do. Can Obama appear not to compromise with the bulk of the money controlling the political process? No, he can't. If he is too intransigent on behalf of rationality and the middle class, the money that helped him and other Democrats get elected in the first place will all shift to the other side with the result that there will be no voices of moderation to be found in Congress. Bernie Sanders and Dennis Kucinich then will be really lone voices crying out in the wilderness and the wasteland which the US will become as the rich totally control the political process. As America becomes a Third World nation, the rich will pile more and more of the burdens of financial licentiousness on the middle class. Taxes will become even more regressive and the social safety net more frayed. Maybe this is what Obama was considering as he contemplated whether or not to force Republicans to the wall. Better to kick the can down the road than to be responsible for the imminent collapse of the Democratic party.
by Rep. Jan Schakowsky
From Huffington Post, December 3, 2010
While I cannot support the Simpson-Bowles plan, I thank the co-chairmen for their dedication to our difficult task over the last eight months, and I agree with them that the work was constructive despite our inability to get fourteen votes.
I offered my own plan to achieve the goal outlined by the President to achieve primary budget balance by 2015 with one very different assumption. I believe that we can do it without further eroding the middle class in America.
It pays to remember that just 10 years ago we had a budget surplus and the debt was rapidly decreasing. During the Bush years, those surpluses disappeared and huge debt accumulated due to two unfunded wars, two unfunded tax cuts that mainly enriched the already wealthy, and a blind eye to the recklessness of Wall Street which caused 8 million Americans to lose their jobs and millions more to lose their savings, the value of their homes and the homes themselves.
Now we are on an "unsustainable fiscal path," to quote the report, which threatens our future economic viability. But there is another grave threat to both our economy and our democracy, and that is the alarming redistribution of wealth that is shrinking the middle class. The top 1% of Americans now owns 34% of our nation's wealth - more than the combined wealth of 90% of Americans. Even during this great recession, the top 5% of households have seen their income rise. Just this week, two million Americans lost their unemployment insurance benefits. If we fail to extend them, not only will that be another slap to the middle class, but it will hurt the economy by depriving our businesses - large and small - of money these struggling Americans will rush out and spend.
And now we have a commission report that glibly talks about "shared sacrifice" and making "painful" decisions. I ask, "Painful for whom?" These recommendations ask those who have already been and are sacrificing to sacrifice further. Those who have not enjoyed the prosperity party over the last many years are being asked to pick up the tab.
We do not need to do this. There is another way.
* My plan recognizes the need to create jobs - a deficit-reducing strategy - that some, incorrectly, view as just more spending. Their plan does not include up front investments to lower the unemployment rate. It is important to note that if America's unemployment rate were still at its pre-recession level of 4.5%, we would only be facing a modest deficit.
* Their plan addresses rising health care costs by asking elderly Medicare beneficiaries to pay more out of their own pockets, even though they already pay about 30% of their mostly meager incomes (the median income for seniors is $18,000 per year) on their own. Their plan cuts Medicare by $110 billion by imposing higher cost-sharing requirements on seniors and people with disabilities. Mine requires Medicare to negotiate with pharmaceutical companies for lower prices like the Veteran's Administration does, bringing down the cost to seniors and the government by billions of dollars. It also would implement a public option, which we already know would save $10 billion by 2015.
* Their plan cuts the bloated military budget, which is a very good thing. Mine does as well, but not by freezing noncombat military pay for three years or by cutting military health care benefits. These military families are not getting rich serving our country and should not be the target of deficit reduction.
* Responding to Republican calls to slash spending, the Bowles-Simpson plan calls for deep cuts in domestic discretionary spending. Using the Bowles-Simpson formula, the Center for Budget and Policy Priorities calculates a 22% cut in current funding levels in 2020, jeopardizing everything from nutrition and education to medical research and job training.
* Amazingly, their plan opens a new huge loophole to incentivize companies to outsource jobs. By adopting a territorial tax system, U.S. based multi-national corporations will never have to pay taxes on profits earned from subsidiaries in foreign countries.
* Finally, the Bowles-Simpson plan would require cuts in Social Security benefits. The good news is that they acknowledge that Social Security has nothing to do with the deficit, and their plan is to make Social Security solvent for the next 75 years and not to use it for debt reduction. The bad news is that average benefits for middle-income workers (average lifetime earnings of between $43,000 and $69,000 per year) could be cut up to 35% depending on when they retire. There is no need to cut Social Security in order to save it, as my plan proves.
I have highlighted just a few of the ways that the Bowles-Simpson plan further erodes the middle class and threatens low-income Americans. There are many things in their plan that are also in mine, however. I appreciate that there has been consensus that the defense budget must be subjected to scrutiny and trimming in ways never seriously suggested before. It is very significant that tax expenditures, or as they call "tax earmarks," all those deductions that are largely skewed to the wealthy, are finally being recognized for what they are - spending, but through the tax code.
Some will criticize my approach to deficit reduction as politically impossible. But I gladly subject my ideas to the public, knowing that protecting Social Security and Medicare benefits, investing in jobs, and asking the richest Americans to contribute more, represents a majority view despite the inside-the-beltway conventional wisdom of what is possible. No wonder people are angry. They watch Wall Street tycoons getting bonuses and government bailouts, shopping for holiday gifts at Tiffany's, while they are trying to scrape together enough money for the rent.
Bottom line, this Commission on Fiscal Responsibility and Reform has proven that fixing our nation's fiscal challenges is not mission impossible. I look forward to the constructive debate that has been started and I will continue to stand up for low-income and middle class Americans so that we can uphold the truly American notion of leaving each generation better off than the one that came before it.
Follow Rep. Jan Schakowsky on Twitter: www.twitter.com/janschakowsky
Obama has been backed into a corner on the extension of the Bush tax cuts. When they were enacted in 2000 under President Bush, it was done in such a way that they were to automatically expire in 2010. These tax cuts added trillions to the national debt so it is only fitting, at a time when the national debt is a big concern, that they expire and, therefore, contribute to a reduction in the debt going forward. However, there is the lingering fact of the Great Recesssion and 10% unemployment. So Obama wedded himself to the idea of letting the Bush tax cuts expire for those earning more than $250,000. a year for a married couple or $200,000. for a single. This expiration of the Bush tax cuts for the rich would save the government $700 billion over ten years.
Well and good. Now enter the Republicans who argue that the Bush tax cuts should not expire for anyone, that the rich should keep their tax cuts too. They are seemingly not the least bit concerned about the tax cuts for the rich adding to the deficit. Not only that, but unemployment benefits should not be extended because this would add a meager amount to the deficit. Republicans have this amazing ability to compartmentalize. When it comes to unemployment insurance they are infinitely concerned about the deficit; when it comes to tax cuts for the rich, they haven't a care in the world about the deficit although these tax cuts are precisely what caused the deficit in the first place. They are hoping that no one will notice this logical discrepancy, or at least that enough of the electorate is so dumb that they won't make this logical connection.
Another connection which American citizens are not making is that, even with Obama's proposal, the rich will still get a bigger tax cut than the middle class. Everyone making more than $250,000. will get a bigger tax cut than everyone earning less than $250,000. because they will still get the tax cut on the first $250,000. of their income. Democrats have failed to explain the meaning of marginal tax rates. The tax cuts for the rich which Obama wants to eliminate only apply to income over $250,000.
Now the New York Times is concerned that Obama has been backed into a corner from which his only course is to give in to the Republicans. Surprise! Surprise! Obama is always placing himself in a position from which his only recourse is to give in to Republicans. In fact he concedes his position in advance. Take the pay freeze for Federal workers. Obama unilaterally announced this pay freeze; it wasn't part of some hard won negotiation. He announced a pay freeze for two years for all non-military Federal workers. The White House says the move will save $2 billion during the rest of the current fiscal year and $28 billion over the next five years. Now wait a minute. First of all $2 billion is a paltry sum compared to the $70 billion per year the government would save by not extending the Bush tax cuts for the rich. Second of all there is an apparant logical fallacy in saying the freeze is for two years but the freeze would save $28 billion over five years. What kind of legerdemain is that? By the way the definition of legerdemain by the online Merriam-Webster dictionary, interestingly enough includes this example: "the reduction of the deficit is due in part to financial legerdemain that masks the true costs of running the government."
Now let's get this straight. The government proposes to freeze workers' pay for two years but it will save money over five years? Maybe this failure to communicate is what got the Dems into the hot water they now find themselves in - with Republicans turning up the heat. After two years government workers' pay will not be frozen any more. Therefore, it could rise to almost any level. How can the government predict what the savings could be over five years? We know what the savings would be over two years because workers' pay is frozen, but who's to say that after two years it wouldn't rise to the point that it would have been at if it hadn't been frozen in the first place? The savings over two years during the course of the freeze is predictable, but the savings after that is not. Hmmm. Unless... Unless ... Unless pay raises for government workers are entirely predictable? But that's ridiculous. Why at least would they not rise based on inflation? What it boils down to is the fact that Obama isn't explaining this sufficiently and is attempting to wow you with these huge savings "over five years." Hey, just tell us the savings over the two years the freeze will be in effect; that would be sufficient.
OK. Now that we've gotten that out of the way and the fact that Obama opens the negotiations by making a unilateral concession, let's get to the heart of the matter. Obama is allowing himself to be backed into a corner because he is wedded to extending the Bush tax cuts for the middle class, and the Republicans know this. Come Hell or high water, Obama thinks he must have these middle class tax cuts. Why? Why not just let all the tax cuts expire as they were supposed to do when they were enacted in 2000? What's the worst that could happen? The middle class would find their taxes had gone up. So what. It would reduce the deficit almost to zero, and that at least would solve one problem. Maybe we wouldn't have to hear the Tea Baggers complain about the debt we're leaving to our grandchildren any more. That would be a good thing.
The Republicans will play chicken with the tax cuts. But Obama starts out from a bargaining position in which he has tipped his hand that he must have these tax cuts for the middle class. So the Republicans say, "Well, we'll give you your tax cuts for the middle class only under the condition that you agree to give them to the rich also." So what is going to happen? Obama will inevitably back down. Instead of drawing a line in the sand and saying "we want tax cuts for the middle class but not for the rich" he'll cave and give them to the rich also. The bargaining, the negotiations are over in advance because Obama is a terrible negotiator. He makes concessions in advance. He tips his hand. He stakes out a position that he must have, and, therefore, the Republicans can make whatever demands they want full in the knowledge that they have Obama by the balls and he must back down to them.
Woe to Obama. Negotiation is not his strong suit. For an intelligent man, he's an imbecile when it comes to negotiating with Republicans. He needs to draw a line in the sand about the tax cuts and risk that the middle class won't get theirs. And Democrats need to make it clear who would be the culprit if the middle class doen't get theirs: the REPUBLICANS. The New York Times is all concerned that, if all the tax cuts expire, Republicans will come back next year with a tax bill that would be even worse than the Bush tax cuts - that it would be an even bigger tax cut for the wealthy and would add even more to the deficit. But why are they in fear of this? Any tax bill not to Democrats' liking originating in the House can just not be acted on in the Senate. The Democrats still control the Senate, remember? And if worse came to worse and somehow it got passed by both the House and the Senate, Obama could always veto it. And the worst that could happen is that the Bush tax cuts would expire for everybody. Not that big a deal in my opinion. But Obama thinks he has to have those middle class tax cuts, and so he puts himself in a weaker bargaining position vis a vis the Republicans.
Here's what Obama should do. Draw a line in the sand and come Hell or high water refuse to budge on eliminating tax cuts for the rich. Democrats need to stand for something. They need to educate the public about something. There is no issue that they absolutely need Republican support for or the world will come to an end. Even if the world was coming to an end, it could be a teachable moment about which party was standing in the way of legislation which would have prevented it. Democratic positions need to be made absolutely clear just as Republicans have made their positions absolutely clear. If it means nothing gets done, this is preferable to caving in to Republicans. The point is that Obama doesn't need Congress to get some things done. What the people really want is not a tax cut but a job. People who don't have a job don't pay taxes anyway.
Obama can get a lot done by executive order. FDR created the Works Projects Administration by executive order. In order to put people back to work, Obama can create a modern WPA in the same way - by executive order. And he doen't have to look to Congress for funding. As Commander-in-Chief, he is in charge of the military-industrial complex budget. He can divert funds from the Pentagon to fund a new WPA. Or he can find the funds somewhere else in the budget that he controls. How about taking money from agricultural and oil and coal industry subsidies? As Commander-in-Chief Obama can commandeer monies that have already been appropriated by Congress. He is the chief decision maker of how those monies are ultimately to be spent. He needs to use his power and not ask Republicans permission to use it.
So here's my prescription for Obama. Draw a line in the sand about no tax cuts for the rich. Make the Republicans concede to you or educate the public about the loss of middle class tax cuts if that's the eventuality. Take a hard line with Republicans. Then create a modern WPA by executive order diverting money to fund it from other programs the monies for which have already been appropriated by Congress. That way you don't have to ask Congress to fund it which you wouldn't get anyway. You don't need to pander either to Republicans or to the middle class although you need to make it clear that you are for middle class interests and won't give in to the rich. The denouement is that Democrats are for every principled position whether it is the supposedly conservative principle of fiscal responsibilty or trying to create jobs for the middle class while Republicans are only out for themselves and political power.
by Matthew Cardinale
ATLANTA, Georgia - The private central bank of the United States, the Federal Reserve, has begun purchasing $600 billion of long-term U.S. Treasury Bonds, essentially subsidising the federal deficit for the year.
The practice is called Quantitative Easing 2 or QE2 - "quantitative" because the Federal Reserve is changing the quantity of money in the economy, and "easing" because it is easing the pressures of the market.
The vast majority of all money in the U.S. economy is created already, when private banks issue loans to individuals.
IPS has previously reported on how, through a little-known practice called fractional reserve lending, private banks create new money when they issue loans, although how much new money they are allowed to create is regulated.
This means, when private banks create money, it is not being taken from somewhere and then loaned to someone else; it is instead being conjured into existence.
This also means that private banks control how much money is in the total money supply of the U.S. economy at any given time.
Enter the Federal Reserve
It should not be terribly surprising the Federal Reserve is creating money; this power rests with the U.S. government, although the U.S. has not created money since President Abraham Lincoln printed all the money needed to win the U.S. Civil War against the South.
Economist Ellen Brown explained the mechanics of QE2 to IPS. The U.S. Treasury typically sells bonds, or interest-bearing promises to pay, at an auction, to primary dealers like Goldman Sachs. The dealers sell the bonds to others, including foreign governments like China, although China has recently stopped purchasing new U.S. bonds.
In QE2, the Federal Reserve is buying the bonds from Goldman Sachs with money it literally created. However, instead of profiting off of the interest from the bonds, the Federal Reserve refunds all of its proceeds into the U.S. Treasury. Therefore, the Federal Reserve is financing the U.S. deficit almost interest-free.
Brown argues this is a good thing and even suggests that over time the Federal Reserve could purchase all of the U.S. debt.
"What it [QE2] is doing, why we have to have it, is, we can't afford to pay any more interest on the federal debt. Half of our personal income taxes go to pay interest on the federal debt," Brown said.
"The government is perfectly capable of printing its own money. Ideally, the government itself would issue the money, but what we have is the central bank issuing money to the government interest-free," she said.
"What people don't realise is all money is borrowed into existence. The loans have collapsed. When the loans collapse the money isn't out there and that's why we have a Depression. The credit system has collapsed, the pitcher doesn't have anything in it," she said.
"People are complaining about inflation but what we have is deflation. When old loans get paid off and new loans aren't issued, money is destroyed. Fifteen trillion has disappeared from real wealth. So we need to fill that bucket back up before we can get to inflation," Brown said.
The first quantitative easing by the Federal Reserve, QE1, took place last year. The Federal Reserve bought 1.2 trillion dollars in toxic mortgage-backed securities from private banks.
"If QE1 had any positive impact, it allowed banks to unload some of their toxic waste... it strengthened their balance sheet a little bit, but to really help the banks you'd have to buy trillions in bad assets," said Randall Wray, a professor of economics at the University of Missouri-Kansas City.
Wray argues there is no need for the government to issue bonds, because the bonds are circuitous. In fact, Wray argues, when one understands how the government issues money, the whole idea of a deficit is a myth.
"The way the government spends is through keystrokes. It credits bank accounts," Wray said. "A sovereign government, the U.S., is the issuer of the currency. It's impossible for the U.S. to borrow dollars. You can't borrow IOU's from yourself."
"Really it is religion. Economists figured it out in the 1960s - the way the government spends is by crediting bank accounts. But if the public understood this, they would demand more services. We need the myth [of deficits and the need to balance budgets through borrowing]. They're just really scared to death people will find out," Wray said.
"There is no financial limit on the government. There's real limits, there's inflation limits, there should be budgets," Wray said.
Japan, over the last 20 years, had its own quantitative easing programme.
"In Japan they did a lot of this, over the last 20 years, they did monetise the debt," said Mark Weisbrot, co-director of the Center for Economic and Policy Research. "They didn't get any inflation out of that at all, five percent total inflation over 20 years. That indicates they could have done and should have done - monetised a lot more."
"We have two competing systems. The European Union is doing the austerity thing- they have a fixed amount of money and they're gonna make do. That system won't work- it won't work with Greece, Ireland, Spain, Portugal. They're gonna have to let more money into the system," Brown said.
"The Japanese have been doing QE for some time, they're still the third largest economy in the world. For a small island, they're not doing that bad. They have a big debt, but it doesn't hurt anything in terms of productivity. Half of that debt is owned by their central bank."Copyright © 2010 IPS-Inter Press Service
by Frank Thomas
Chalmers Johnson’s judgement on America’s descendance into an excessive military spending paradigm nearly bankrupting the nation in more ways than one is True. You and I, John, have dwelled on this problem often in past writings. Some time ago, I wrote on Robert Reich’s blog about England’s point of bankruptcy after WWI caused by an empire-building obsession and related overblown military spending. To save itself from total collapse, England had to wipe out about three-quarters of its military expenditures in the 1920s.
We still can’t come to grips with the similar financial excesses of our military establishment. It’s a clever insider power-center unto itself. This is reflected in the reporting of DOD annual expenditures which vary from $800 billion to $1.1-1.4 trillion including non-DOD military related expenditures. Everywhere one looks at the spending data, there’s a different number popping up. We are a nation constantly searching for enemy targets and rationalizing blooted military spending on social-engineering, police-enforcing and protecting other societies when we can’t afford to bring social-economic stability and renewal to our own society.
As one study concludes: “If the Pentagon were an independent country, it would be the 10th richest in the world.” Our current defense budget is 6 times China’s and has been rising 9% a year since 2000. This spending excess is in direct contrast to most European countries that are now Reducing their already modest but considered unsustainable defense budgets given current and future harsh economic realities of aging societies, slower growth patterns and natural resource limitations.
For example, here’s the Netherlands’ total defense personnel reduction trend and near term target:
2009………………………………………………69,000 (includes 24,000 civilian workers and 45,000 military personnel)
Near Term Target…………………………..59,000 (includes +-40,000 military personnel)
Here is some recently published data on Europe’s defense outlays as a % of GDP for selected countries in 2009:
United States…………………….5.5% (+-$782 billion excluding: +-$165 billion for Iraq/Afghanistan wars; +-$140 billion interest cost for federal deficits caused by past and current war spending; +-98 billion veterans affairs; +-$55 billion for Homeland security; plus more billions on nuclear weapons’ research, testing, production …. bringing total direct and indirect military spending to well above 8% of GDP.
The 2009 U.S. DOD spending level of $782 billion amounts to over $2,500 per capita, dramatically rising to over $4,000 per capita when total military related expenditures are taken into account. This compares to Netherlands’ defense spending of less than $780 per capita in 2009. U.S. defense spending outside the DOD brings between $350 billion to $600 billion in added military related spending. Thus, when costs of the two wars, interest on the national debt created by past and present military spending, veterans affairs, etc., are added to the defense budget, total defense spending constitutes well over 50% of the Federal Budget excluding Social Security and Medicare trusts which have their own tax revenue inflows/benefit outflows.
Non-discretionary or mandatory spending items in the Federal Budget include Social Security, Medicare, interest on the national debt and veterans’affairs. These costs alone comprise almost 60% of the Federal Budget. The remaining 40% is discretionary spending including all defense related expenditures. Although cost reforms for Social Security and Medicare are obviously a high priority, it’s clear that reducing our plus $1 trillion annual deficits cannot be done in the non-discretionary area alone.
Deficit reduction will have to come from a number of tax revenue generation measures, closure of tax-avoidance loopholes, and cost reduction actions …. including raising the retirement age or cap for Social Security (as you suggest, John), reducing Medicare costs, but also equally importantly, gradually making substantial reductions in a bloated defense spending culture by bringing the defense budget down to +-3% of GDP over the next 5 years.
We are now at a national debt level of $13 trillion (or 85% of GDP) expected by many economists to reach $20 trillion by 2015. In combination with gigantic trade deficits, this direction of debt acceleration is unsustainable. We don’t have the resources. The DOD defense budget makes up about 60% of all discretionary spending …. the latter comprising, as stated earlier, 40% of the Federal Budget items that must be appropriated annually by Congress before government funds can be supplied.
So the message here is simple: to reduce our plus $1 trillion annual deficits also down to 3% of GDP (and preferably lower), the bulk of the discretionary spending cuts must come from the defense budget. Some of the cost reductions achieved here in the intermediate term and in cost-quality effective reform of entitlements over the long term can be more productively invested, with higher yields and job growth results, in updating our nation’s decayed infrastructure and in converting rapidly to green energy independence …. with latter also having additional economic benefit of significantly reducing our +$50 billion a month trade deficits.
Does this makes some sense? Any rational person would think so. But making sense has not been our governance trademark lately.
by Robert Kuttner
If anything is more overrated than bipartisanship, it is post-partisanship. The Republicans surely get this. They dig in their heels, don't budge, and wait for the Democrats either to fail, or to come to them.
But the media are infatuated with the idea that excessive partisanship is a symmetrical problem. If only the Republicans and the Democrats would meet each other halfway, the nation's ills would be solved. It is hard to watch the Sunday talk shows without seeing one interviewer after another demanding, why can't you people just compromise?
There are two problems with this formulation, one tactical and the other substantive. The tactical problem is that the Republicans and Democrats aren't playing the same game. So if the Democrats meet the Republicans half way, the Republicans only demand that they do it again. House Democratic Leader Nancy Pelosi is identified as media enemy number one because she rejects this nonsense.
The tactical asymmetry connects to the substantive problem -- the fact that the solution to what ails the economy is somewhere to the left of most Democrats, not midway between, say, President Obama and Mitch McConnell. The economy will be fixed only with more public investment, more progressive taxation, and more regulation, but partisan compromise dictates less of each.
Our President, unfortunately, has played right into this trap, with creations such as the bipartisan panel on fiscal reform and responsibility, which will very likely come out with a plan to narrow the federal deficit by slashing what's left of public investment. The whole tilt of this commission is somewhere between conservative Democrat and far-right Republican.
Obama started out as a wishful post-partisan. His post-partisanship, in the face of Republican obstructionism, handed the mid-term election to his enemies. Now he is still trying to be post-partisan, but in even worse terrain.
On Wednesday, the commission will either issue some kind of report, or will be hamstrung by divisions. President Obama's order creating the commission required a supermajority of 14 out of its 18 members for its recommendations to be official.
At this writing, its three legislative progressive members are dead set against a budget plan that cuts Social Security or places deficit-reduction ahead of economic recovery. One of these, Rep. Jan Schakowsky of Illinois, issued her own alternative plan, which increases social investment in the short run in order to get a stronger recovery going, then reduces the deficit over time with higher growth, progressive taxation and cuts in military spending.
Two others, Senator Dick Durban and Rep. Xavier Becerra, are disinclined to support the proposed plan. One other progressive on the commission, former SEIU president Andy Stern, has held out hopes of a grand bargain but no bargain that might appeal to Stern seems to be forthcoming. One other member, conservative Democrat Senator Max Baucus might be friendly to the deficit-hawk mentality, but is opposed to a fast-track formula of mandatory budget targets that might impinge on his prerogatives as Senate Finance Committee chairman. So the best we can hope for is that the commission will fall of its own weight.
To get a sense of what the Commission's two chairmen, Wall Street Democrat Erskine Bowles and wacko Republican Alan Simpson, would like to do, consider the proposal that they have been circulating. This would begin cutting the deficit in just 10 months, whether or not the economy is in recovery. The plan would gratuitously cut Social Security benefits, not raise taxes on the wealthy, and use spending cuts for about two-thirds of the proposed deficit reduction.
For an antidote to this economically insane medicine, have a look at the counterproposal written by three progressive think tanks, which proposes recovery first. A similar manifesto, by the Citizens Budget Commission, has just been released as an explicit alternative to the official commission's expected report. (Disclosure: I am involved with both efforts.)
The latest incarnation of the bipartisan delusion is an organization calling itself "No Labels." This is not an anti-designer consumer protest, but a political organization advertising the conceit that there is something virtuous per se about being post-partisan, never mind the content.
No Labels, according to the Wall Street Journal,
has raised more than $1 million to seed its effort against what it calls "hyper-partisanship." Backers include co-chairman of Loews Corp. Andrew Tisch, Panera Bread founder Ron Shaich and ex-Facebook executive Dave Morin. Los Angeles Mayor Antonio Villaraigosa, as well as U.S. senators Joseph Lieberman of Connecticut and Michigan's Debbie Stabenow, will attend the New York launch.
The group's goal is to start a centrist equivalent to the tea-party movement on the right and MoveOn on the left. It sees an opportunity based on the defeat of liberal Republicans in recent years and the heavy losses taken by conservative Democrats in 2010.
'I've never seen such a wide opening for a third force in American politics,' says William Galston, a Brookings Institution fellow and No Labels adviser.
Spare me! Is Joe Lieberman, one of the great hacks of American politics, anybody's idea of a fresh thinker?
Come to think of it, what exactly is Galston's "third force" a third way between?
The original Third Way, Sweden, was advertised as somewhere between communism and capitalism. More recent third-way organizations, like the Democratic Leadership Council, have positioned themselves midway between Democratic liberals and business conservatives. As the presidential Democratic Party keeps moving right-of-center, the third way people now position themselves in between neutered Democrats and far-right resurgent Republicans.
You can see where this leads. But it sure is popular with financiers and the elite press.
What are Debbie Stabenow and Antonio Villaraigosa, of all people, doing associating themselves with this crowd? Didn't partisan Democrats and the labor movement work their tails off to get these people elected?
One of the two organizers of the effort is Nancy Jacobson, a big-time Democratic fund-raiser who is married to strategist Mark Penn, the pollster who invariably advises Democrats to move to the right. You can guess who will get the contract if this outfit takes off.
According to several reports, the fantasy of this group is that New York Mayor Michael Bloomberg would agree to run as a centrist independent in 2012.
Perfect. Bloomberg, a gazillionare and media mogul from Wall Street, would bring us no reform of financial excess, belt tightening for ordinary people, and the kind of privatizing of public services that has endeared him to Manhattan's economic elite.
Oh, and he's a social liberal. The media will love it. And the donors -- well, Bloomberg is so rich he doesn't need donors.
So the next phase of American politics will be Republican faux-populist loonies versus fat-cat post-partisans.I keep thinking of Yeats. "The best lack all conviction while the worst are full of passionate intensity." A real progressive, with courage and convictions, could expose these people as false messiahs.
© 2010 Huffington Post
Robert Kuttner is co-founder and co-editor of The American Prospect magazine, as well as a Distinguished Senior Fellow of the think tank Demos. He was a longtime columnist for Business Week, and continues to write columns in the Boston Globe and Huffington Post. He is the author of A Presidency in Peril: The Inside Story of Obama's Promise, Wall Street's Power, and the Struggle to Control our Economic Future, Obama's Challenge, and other books.
by Bernie Sanders
The billionaires are on the warpath. They want more, more, more.
In 2007, the top 1 percent of all income earners in the United States made 23.5 percent of all income -- more than the bottom 50 percent. Not enough! The percentage of income going to the top 1 percent nearly tripled since the mid-1970s. Not enough! Eighty percent of all new income earned from 1980 to 2005 has gone to the top 1 percent. Not enough! The top 1 percent now owns more wealth than the bottom 90 percent. Not enough! The Wall Street executives with their obscene compensation packages now earn more than they did before we bailed them out. Not enough! With the middle class collapsing and the rich getting much richer, the United States now has, by far, the most unequal distribution of income and wealth of any major country on earth. Not enough!
The very rich want more, more and more and they are prepared to dismantle the existing political and social order to get it. During the last campaign, as a result of the (Republican) Supreme Court's Citizens United decision, billionaires were able to pour hundreds of millions of dollars of secret money into the campaign -- helping to elect dozens of members of Congress. Now, having made their investment, they want their congressional employees to produce.
Republicans in Congress, needless to say, are all on board. The key question is whether a Democratic president and a Democratic Senate go along to get along, or whether they draw a clear line at protecting the interests of the middle class and vulnerable populations of our country while tackling our economic and budgetary problems in earnest.
In the next month, despite all their loud rhetoric about the "deficit crisis," the Republicans want to add $700 billion to the national debt over the next 10 years by extending Bush's tax breaks for the top 2 percent. Families who earn $1 million a year or more would receive, on average, a tax break of $100,000 a year. The Republicans also want to eliminate or significantly reduce the estate tax, which has existed since 1916. Its elimination would add, over 10 years, about $1 trillion to our national debt and all of the benefits would go to the top 0.3 percent. Over 99.7 percent of American families would not gain a nickel. The Walton family of WalMart would receive an estimated tax break of more than $30 billion by repealing the estate tax.
That's just the start.
The billionaires and their supporters in Congress are hell-bent on taking us back to the 1920s, and eliminating all traces of social legislation designed to protect working families, the elderly, children and the disabled. No "social contract" for them. They want it all.
They want to privatize or dismantle Social Security, Medicare and Medicaid and let the elderly, the sick and the poor fend for themselves.
They want to expand our disastrous trade policies so that corporations can continue throwing American workers out on the street as they outsource jobs to China and other low-wage countries. Some also want to eliminate the minimum wage so that American workers can have the "freedom" to work for $3.00 an hour.
They want to eliminate or cut severely the U.S. Department of Education, making it harder for working class kids to get a decent education, childcare or the help they need to go to college.
They want to rescind the very modest financial reform bill passed last year so that the crooks on Wall Street can continue to engage in all of the reckless behavior that has been so devastating to our economy.
They want to curtail the powers of the Environmental Protection Agency and the Department of Energy so that Exxon-Mobil can remain the most profitable corporation in world history, while oil and coal companies continue to pollute our air and water.
They want to make sure that billionaire hedge fund managers pay a lower federal tax rate than middle-class teachers, nurses, firefighters, and police officers by maintaining a loophole in the tax code known as "carried interest".
We know what the billionaires and their Republicans supporters want. They've been upfront about that. But what about the Democrats? Will President Obama continue to reach out and "compromise" with people who have made it abundantly clear that the only agreement they want is unconditional surrender? Or, will he utilize the powerful skills that we saw during his 2008 campaign for the White House and bring working families, young people, the elderly and the poor together to fight against these savage attacks on their well-being? Will the Democrats in the Senate continue to pass tepid legislation, or will they use their majority status to protect the interests of ordinary Americans and, for a change, put the Republicans on the defensive?
The time is late. The stakes are extraordinary. While it is true that the billionaires and their supporters are "fired up and ready to go," there is another more important truth. And that is that there are a lot more of us than there are of them. Now is the time for us to stand together, educate and organize. Now is the time to roll back this orgy of greed.
Published on Wednesday, November 17, 2010 by The Nation
by John Nichols
In contrast, another commission member, Jan Schakowsky, is a "current." She currently represents a Chicago-area Congressional district, having served since 1999 as a heavy-lifter in the House, with an assignment on the Energy and Commerce Committee and a key leadership role on the Steering and Policy Committee. As an Illinois legislator and member of the US House, she has for the better part of two decades been an engaged player in budget debates, and she continues to make the hard choices in the real-world setting of the Congress as opposed to the theoretical zone where Simpson and Bowles operate. Additionally, Schakowsky's grassroots experience makes her one of the most uniquely qualified members of the deficit commission, as she served as program director of Illinois Public Action, the state's largest public interest group, and executive director of the Illinois State Council of Senior Citizens.
And what Schakowsky is saying adds a needed dose of realism to the debate about how to balance budgets, reduce debt and grow the economy.
"Lower- and middle-class Americans did not cause the deficit. Just ten years ago the federal budget was generating a surplus as far as the eye could see. That surplus was turned into a deficit due to massive tax cuts—mainly to wealthy Americans; two wars paid for by borrowed money; and a major recession caused by the recklessness of the big Wall Street banks. Over the last decade the incomes of middle-class Americans have actually shrunk, while those of the wealthiest 2 percent of the population have exploded," argues the Congresswoman.
Schakowsky is blunt about how best to approach the commission's charge.
"The middle class did not benefit from the Republican economic policies that led to the current deficit—they were the victims—they should not be called upon to pick up the tab," says the congresswoman.
As such, Schakowsky rejects the Simpson-Bowles scheme, which would weaken Social Security, Medicare and Medicaid while cutting taxes for multinational corporations. "The president's Fiscal Commission has been given a concrete goal: to achieve primary budget balance in 2015, ensuring that all spending is paid for except for interest on the national debt," she explains. "Last week, co-chairs Erskine Bowles and Alan Simpson laid out their plan, which they presented to the commission and to the public. Their proposal would have serious consequences for lower- and middle-class Americans, and that is why I cannot support it."
But Schakowsky is not just saying "no."
She has an alternative plan to reduce the deficit by $427 billion over the next five years, far surpassing the target proposed by President Obama, and she would do it with an eye toward protecting the poor and the middle class and strengthening the economy.
"Fixing the federal deficit is not an end in itself. The goal of budget policy should be to assure long-term, widely shared economic growth," explains Schakowsky. "Economic growth is not just good for businesses and families—it will reduce the deficit. Sustained, long-term economic growth requires that we end the trend of concentrating more and more wealth in the hands of the rich and less and less in the hands of a middle class that can then afford to buy the products and services that will sustain economic growth."
Notably, Schakowsky preserves Social Security and other programs that protect and serve working Americans. Instead of undermining the program, she would assure its long-term solvency by eliminating the wage cap on the employer side and raising it to 90 percent on the employee side, applying FICA to all wage income below the cap, and establishing a modest legacy tax on wealthier Americans.
This is part of a broader plan from Schakowsky, which has five key elements:
1. Increased economic stimulus to spur growth in the immediate term
• Provide $200 billion to invest over the next two years in measures to create jobs and spur economic growth, including passing the Local Jobs for America Act; and funding for education and law enforcement; Unemployment Insurance, Federal Medical Assistance Percentages (FMAP) and Supplemental Nutrition Assistance Program extensions; and infrastructure.
• Adopt the president's proposals to eliminate overseas tax havens and incentives for outsourcing
2. Smart, targeted spending cuts
• Non-Defense Discretionary—$7.55 billion in savings through increased efficiency and cuts to programs that benefit large corporations that don't need assistance.
• Defense Discretionary—$110.7 billion in cuts from the 2015 defense budget, including efficiency savings, reducing our troop levels, cutting weapons systems we don't need and scaling back the wartime increases in the size of the military.
3. Mandatory spending cuts
• Healthcare—at least $17.2 billion in savings by implementing measures to bring down the cost of healthcare to the federal government and lower healthcare inflation overall.
• Other—$7.7 billion in savings by cutting agriculture subsidies in half, and redistributing federal support to offer greater benefits to small family farms and reduce subsidies to large corporate agribusiness.
4. Reductions in tax expenditures
• Raise $132.2 billion by closing tax subsidies for companies that ship American jobs overseas.
5. Increases in revenues
• Raise $144.6 billion in revenue through progressive reforms to the estate tax, treating capital gains and dividends as regular income, and enacting a cap-and-trade proposal that includes protections for lower-income people.
• Enact President Obama's budget proposal to let the Bush tax cuts for the top two brackets expire and return to 2009 estate tax levels.
• Nontax revenue—raise $7 billion by addressing places where the private sector is currently underpaying.
The plan that Schakowsky has produced is not the final word on how progressives ought to approach debates about fiscal policy, debts and deficits. There needs to be more consideration of the role that the trade deficit plays in destabilizing the US economy and the financial health of the federal government, as Ohio Congressman Marcy Kaptur has noted. There should be consideration of the proposals by Oregon Congressman Peter DeFazio for taxes on speculation and financial transactions. And there should be new approaches to how the Federal Reserve manages bank funds, as economist Robert Pollin has suggested.
But Schakowsky has provided a essential framework for the coming debate. Progressives can say there is an alternative to austerity—and alternative that balances budgets, reduces debt, serves working families rather than Wall Street CEOs, protects Social Security and expands the economy.Copyright © 2010 The Nation
by Dean Baker
If the current deficit were larger, we would have more jobs and growth. But many deficit hawks seem more interested in cutting benefits than economic truths.
November 14, 2010 | from Alternet
The country in which most people live is experiencing an economic disaster. More than 25 million people are unemployed, underemployed, or have given up looking for work altogether. Tens of millions are now underwater on their mortgages, with millions facing the imminent loss of their homes. Furthermore, there is little prospect that the situation will improve anytime soon.
Many fewer live in the other America, the world of Wall Street and Washington lobbyists. This is where you’ll find former Wyoming Republican Senator Alan Simpson and investment banker-turned-Clinton Chief of Staff Erskine Bowles, the co-chairs of President Obama’s deficit commission, which on Wednesday outlined its plans for what it calls “fiscal responsibility.” In their world the key fact is that, today, corporate profits are back to their pre-recession peaks. As long as the bonuses on Wall Street are again hitting record highs, the economy must be just fine, so what else is there to do but worry about deficits?
It would be hard to understand how ostensibly serious people could be concerned about the deficit right now, unless we realize that they stand apart from the economic calamity that has engulfed most of the country. The suffering caused by this recession simply does not register on their radar screens.
This is not just a moral complaint, although it is troubling that the people most responsible for the economic wreckage are doing just fine. More important is that there is no evidence that Simpson, Bowles, and the rest of the deficit cutters have the slightest understanding of the economy. If they did they would be looking at the deficit in a completely different way.
First, the current deficit should not even be viewed as a problem. Yes, a deficit of $1.4 trillion is big, but this is a direct result of the loss of demand stemming from the collapse of an $8 trillion housing bubble. This bubble was driving the economy until its collapse. There were two channels through which the bubble generated demand in the economy: bubble-inflated house prices led to a boom in construction, bubble-inflated wealth led consumers to increase their spending, pushing saving rates to almost zero.
This demand has disappeared now that the bubble has deflated. The economy has lost more than $600 billion in annual construction demand as builders cut back in response to an enormous over-supply of both residential and non-residential property. Similarly, consumption has plummeted. This left an enormous gap in demand that, at least in the near-term, can only be filled by the government. If the government were to spend less—say it instantly balanced its budget—the primary result would be a further decline in demand and more job loss.
We are in a peculiar situation where the main problem for the economy is a lack of demand. More demand will mean more growth and more jobs. Government must supply demand because there is no other entity that can step forward to do it—unless someone gets very good at counterfeiting hundred dollar bills.
by Robert Freeman
For the past thirty years the rich have been waging war on the middle class. It’s been astonishingly effective, partly because it has been undeclared. But even that pretense is now being abandoned. The President’s National Deficit Commission has effectively declared that the rich will now go after what is left of working and middle class wealth and will take whatever steps are necessary to seize it. If allowed to succeed, their plan will reduce Americans to a state of serfdom.
Ronald Reagan began the war on the middle class with his “supply-side” economics. Its very purpose, according to David Stockman, Reagan’s Budget Director, was to transfer wealth and income upwards. It cut the marginal tax rate on the highest income earners from 75% to 35% while dramatically expanding spending for war. The results were two-fold: massive federal debt and an astonishing rise in the share of income and wealth going to those who were already the wealthiest people in the world.
The national debt quadrupled between 1980 and 1992. George W. Bush would repeat Reagan’s policies and double it again between 2000 and 2008. Meanwhile, the share of national income going to the top 1% more than doubled, from 9% to 24%. The share going to the top one-tenth of 1% of income earners more than tripled. We now have the most unequal distribution of income in the developing world and the inequality is growing rapidly.
Shifts of this magnitude over such short periods of time have never been seen in American history. With the rich getting much, much richer, its means that everybody else is getting poorer. And in fact, real wages for median workers are lower today than they were in 1973. Indeed, while the inflation-adjusted income of the bottom fifth of workers fell by $6,900 between 1979 and 2007, the top 1% saw its annual income increase by $741,000!
To try to keep up with living standards Americans resorted to debt. They increased their personal debt-to-income ratio from 62% in 1980 to 130% in 2008. When housing prices fell 35% nationwide in the recent collapse it left Americans with a smaller share of equity in their homes, 48%, than at any time since the Great Depression. The share they have lost has been taken by the banks.
In other words, all of the income and wealth gains for middle Americans from the “golden years” between 1945 and 1975 have now been wiped out. Or more accurately, have now been transferred to the very rich. The top 1% holds 34% of the nation’s wealth while the bottom 50% holds just 2.5%. The bottom 40% owns absolutely nothing.
These effects and numbers can be numbing, even dizzying. But it’s important to understand that they have not been the result of random events or impersonal market forces. Rather, they have followed as the intended consequences of the relentless application of a wide array of government and industry policies.
The massive run-up in debt is one such policy. The wealthy are net lenders. This means that massive public and private debt transfers interest income to them from the rest of the economy. Another method for effecting massive wealth transfer: Beginning in 1981 the Reagan administration effectively stopped enforcing anti-trust laws, allowing monopolies to gouge everyone who had to buy their products.
The government actually provided tax subsidies so that corporations could eliminate jobs in the industrial heartland and ship them to Mexico and later, China, India, and other low-wage countries, reducing wages and pitting American workers against each other for those jobs remaining.
The bank deregulation that began in the early 1980s reached its apex with the repeal of the Depression-era Glass-Steagall Act in the late nineties. This set up the “casino capitalism” of the next decade that would spawn massive criminality and mortgage fraud by the nation’s leading banks—none of which has been prosecuted. The result was the greatest economic collapse since the Great Depression.
But even as more than five million homeowners have lost their homes, the wealthy had their losses covered by the Bush and later Obama administrations. Bloomberg news estimates that the transfer to the banks through the financial bailout comes to some $13 trillion dollars.
We could go on and on and on with the roster of ways the wealthy have used the government to transfer national wealth to themselves. Environmental and health laws that are not enforced. Deals with the pharmaceutical industry so they don’t have to compete with foreign manufacturers. Health care “reform” that forces tens of millions of Americans to buy questionable insurance products, even as insurers continue to kick legitimate claimants off their rolls. Give-aways of the telecommunication spectrum worth hundreds of billions of dollars to media monopolies that ladle out state propaganda as if were news and never, ever challenge official narratives.
In these and a thousand other ways, the rich have conspired with the government they largely control to shift more and still more of the nation’s wealth away from the working and middle classes, to themselves. It amounts to the most insidious class warfare and the most rapacious looting of public and private resources in the history of the world.
The result is vast impoverishment, demoralization, and the destruction of the American middle class. One out of eight Americans are on food stamps. One out of five people are in official poverty. One out of four children are raised in poverty. Twenty five million people cannot find enough work, while their skills atrophy and their families and communities are destroyed. These are not figures describing a banana republic, a disaster-stricken region, or a third world country. They describe the United States of America after three decades of plunder by the rich. And now they want to go in for the kill.
Not satisfied with the staggering wealth they have already siphoned away, the ultra-rich are now using Barack Obama’s National Deficit Commission to propose even more brazen plunder. And the looting is no longer taking place behind closed doors or under the cover of arcane public policies.
The commission proposes to cut the federal government’s budget deficit by $4 trillion over the next decade. But 75% of the “savings” will come from gutting programs that help stabilize the middle class and their communities. None of it comes from policies that would harm the rich.
For example, the commission proposes cutting the tax deduction for mortgage payments. Not only will this render housing much less affordable for millions of prospective home buyers, it will reduce housing prices, perhaps substantially, for without the tax writeoff, buyers will be able to afford much less house. This will decimate the sole source of wealth of tens of millions of Americans.
It is housing wealth that undergirds retirement security for the middle class. Or, at least it did until one out of four homeowners went underwater on their mortgage in the recent bank-triggered collapse. Then, even as the Commission plans to decimate home prices and owner equity, it proposes cutting back benefits to Social Security recipients.
It would lower Social Security cost-of living adjustments while raising the minimum retirement age. And this is being proposed at the very moment that the bank-owned Federal Reserve Board is beginning to print hundreds of billions of dollars to bail out the banks from what’s left of their toxic assets still held from the housing crash.
The ensuing inflation is going to destroy the value of retirement incomes at exactly the moment that 77 million baby boomers head off into retirement. It was exactly this process of money printing and bankrupting of retirees that destroyed the German middle class in the early 1920s, giving rise to Adolph Hitler.
The Commission’s proposals would increase co-pays and deductibles for Medicare, making it unaffordable to millions. It proposes taxing as income the health insurance benefits millions receive from their employers. The Child Tax Credit would be eliminated as would 10% of all federal government jobs. This, at a time when more than 20% of the workforce is already underemployed and there are five workers trying for every available job.
We should be crystal clear: these policies amount to a mortal assault on what remains of middle class solvency and the democracy that a vibrant middle class makes possible.
But even as it girds up for this assault, the Commission barely touches the ultra-rich on whose boards they serve and who have gained so much over the past 30 years. And it cannot go without being said that it was these same professional predators who actually wrecked the economy, pitching it into its greatest collapse since the Great Depression.
The Commission’s proposals would actually lower the maximum tax on the highest income earners, from 35% to 24%. The nominal tax rate on corporate income would fall as well, from 35% to 26%. There is nothing proposed to raise taxes after so many decades of steadily amassed wealth. No financial transactions tax (as the IMF recommends) to stanch the kind of tsunami of speculative buying and selling that brought down the economy. Such a tax would raise over $700 billion over the next decade.
Of course, there will be no claw-backs of the trillions of dollars transferred to the rich under the phony duress of “saving the system” during the height of the financial crisis. No proposal that the cap on earnings subject to Social Security withholding should be removed. That proviso alone would raise more than half a trillion dollars over the next decade.
In fact, it is in comparison with other give-aways to the rich that the take-aways from the middle class by the Commission can be seen as so one sided and venal. Remember, they propose to save $4 trillion over 10 years.
But the war in Iraq, which we now know was entirely premised on lies, will cost more than $5 trillion, according to Nobel economist Joseph Stiglitz. It has proven a huge boon to the rich weapons makers, bankers, logistics companies and oil companies that Bush used to coddle as his “base.”
As mentioned above, Bloomberg news estimates that the financial bailout cost some $13 trillion, all of it going to the very richest people on the planet. There is not a syllable in the Commission’s report proposing getting any of that back to help reduce the deficit.
Or consider the notorious Bush tax cuts of 2001 and 2003 where fully 40% went to the top 1% of income earners. Obama once promised to overturn them but, as is his typically cowardly pattern, is now folding. The Center on Budget and Policy Priorities has estimated that they will cost the government more than $18 trillion over their lifetime—four times what the Deficit Commission claims it will achieve in savings. But God forbid we should ask for even a penny of that back to help battle the deficit.
In other words, there are many, many substantial and just ways that the savings the Commission proposes to create could be secured via small contributions from those who have gamed the system and gained the most over the past three decades. But that is not the Commission’s plan. And it is in that omission that its true intent is revealed.
There is no more time for stealth, no more need for subtlety. Western capitalist economies are declining at a pace that is frightening their elite stewards and compelling such desperate, slovenly measures as the wholesale printing of money to postpone the inevitable. While Obama sings lullabies of “hope” and “change” to tranquillize the suckers out front, the rich are backing the truck up to the vault in the back, no longer even deigning to disguise the heist. And of course, why should they? They have the additional diversion of the moronic Tea Party vigilantes (“Keep the government out of my Medicare”), ever ready to cut other people’s throats to cure their own nosebleeds.
The Commission’s proposal is the most naked, undisguised declaration of class warfare possible. Its agenda is not to reduce the deficit but rather to reduce what is left of the American middle class and American workers, to a condition of servitude, of feudal peonage. Their poverty will make them docile and subservient. This will make possible the final looting of America by those whose sociopathic greed has brought it so low already. The battle over this proposal is the last bulwark against the devastation and final destruction of America. It must be fought and won or our freedom and security ceded forever. There is no other choice.
by Ted Rall
Still, theoretical budget-balancing exercises help enlighten us about where our taxdollars really go. So let's roll up our sleeves and start some back-of-the-envelope slashing.
The 2010 federal budget shows $3.6 trillion in spending and $2.4 trillion in revenues. Net deficit: $1.2 trillion. It's a doozy, too. It nearly 13 percent of GDP. It's the highest since 1943, during World War II.
The goal, then, is to close a $1.2 trillion budget gap. Can we find at least $1.2 trillion in budget cuts? News flash: getting rid of the National Endowment for the Arts ($161 million in 2010, or about 0.01 percent of the deficit), ain't gonna do the trick.
Any serious budget cutter has to start with defense. The reason is simple: it accounts for 54 percent of discretionary (i.e., optional) federal spending. It's the biggest piece of the pie by far.
(Mainstream news reports usually state that defense accounts for 20 percent of federal outlays. But they're fudging the facts in order to pretty up the military-industrial complex. For example, they include budget items like Social Security that no one can do anything about--they're in a trust fund.)
Of that 54 percent, 18 percent is debt service on old wars. There's nothing we can do about that--though that number should probably give us pause the next time a president wants to invade Panama or Grenada.
Anyway, that leaves 36 percent, or $1.3 trillion to play with. $200 billion a year goes to Afghanistan and Iraq.
Let's pull out. We're losing anyway.
New Deficit: $1.0 trillion.
In 2007 Chalmers Johnson wrote a book about the staggering costs of American imperialism. "The worldwide total of U.S. military personnel in 2005, including those based domestically, was 1,840,062 supported by an additional 473,306 Defense Department civil service employees and 203,328 local hires," he wrote. "Its overseas bases, according to the Pentagon, contained 32,327 barracks, hangars, hospitals, and other buildings, which it owns, and 16,527 more that it leased. The size of these holdings was recorded in the inventory as covering 687,347 acres overseas and 29,819,492 acres worldwide, making the Pentagon easily one of the world's largest landlords."
We're broke. It's time to bring those 2.3 million men and women home. At an average cost of $140,000 per employee--crazy but true--we could save $322 billion annually.
New Deficit: $676 billion.
After Defense, the other big costs are Social Security, Medicare and Medicaid.
The obvious place to start slashing is wealthy recipients. Why should Bill Gates, worth $58 billion, get Social Security or Medicare benefits? Dean Baker sums up the traditional liberal argument in favor of giving tax money to people who don't need it: "Social Security enjoys enormous bipartisan support because all workers pay into it and expect to benefit from it in retirement. Taking away the benefits that better-off workers earned would undoubtedly undermine their support for the program. This could set up a situation in which the program could be more easily attacked in the future."
Yeah, well, whatever. We. Are. Broke. "Means testing"--for example, eliminating benefits for the approximately one percent of families over age 65 who earn over $100,000 a year--could save $150 billion a year.
New deficit: $526 billion.
Now let's talk about the other side of the equation: income. How can the U.S. government scare up some extra cash?
Allowing the Bush tax cuts for the richest three percent of Americans to expire on schedule would bring in $70 billion a year. Seems like a no-brainer: anyone earning over $250,000 a year is doing awesome. Moreover, if Democrats don't insist on the expiration of at least some of those "temporary" tax cuts, what's the point of the deal they cut with the GOP back in 2001?
New deficit: $456 billion.
When it comes to revenues, you have to go where the money is: the wealthy. The rich have gotten richer, which is a big part of the reason we're in a Depression again. They're hogging all the goodies. The rest of us can't spend.
Despite the miserable economy, there are still 2 million American households earning a whopping $250,000 or more per year. (Their average income is $435,000.) If we were to increase these super-rich Americans' marginal income tax rate from 35 to 50 percent--the same it was during the early 1980s under Reagan--we'd bring in an extra $131 billion a year. If we raised it back to 91 percent--the top rate during the boom years between 1950 to 1963--the Treasury would collect $487 billion.
Budget SURPLUS: $31 billion.
And we haven't started on corporate taxes.
Ted Rall is the author of the new books "Silk Road to Ruin: Is Central Asia the New Middle East?," and "The Anti-American Manifesto" . His website is tedrall.com.
by Dean Baker
Senator Alan Simpson and Erskine Bowles appeared to have largely ignored economic reality in developing the proposals they presented to the public [on Wednesday].
The country is suffering from 9.6 percent unemployment with more than 25 million people unemployed, underemployed or who have given up looking for work altogether. Tens of millions of people are underwater in their mortgage and millions face the prospect of losing their home to foreclosure.
This situation is not the result of government deficits, contrary to what Mr. Bowles seemed to suggest at the co-chairs' press conference today. The downturn was caused by the bursting of an $8 trillion housing bubble. This bubble was the basis of the construction and consumption demand that drove the economic expansion through 2007.
The large government deficits are the only factor sustaining demand following the loss of this bubble wealth. If today's deficit were smaller, we would not be helping our children; we would just be putting their parents out of work. Simpson and Bowles somehow think they have covered this concern by delaying their cuts until fiscal year 2012, 11 months from now. Virtually all projections show the unemployment rate will still be over 9.0 percent at the point when the Simpson-Bowles cuts begin to slow the economy further. This leaves the economy like a plane with one engine already out and Simpson-Bowles prepared to knock out the other engine as well.
The failure to understand current deficits contributes to a misunderstanding of the debt burden. For example, Simpson and Bowles raised fears of an exploding debt reaching 90 percent of GDP by the end of the decade. There is no reason that the Fed can't just buy this debt (as it is largely doing) and hold it indefinitely If need be, the Fed can use other tools at its disposal to ensure that this expansion of the monetary base does not lead to inflation.
This creates no interest burden for the country, since the Fed refunds its interest earnings to the Treasury every year. Last year the Fed refunded almost $80 billion in interest to the Treasury, nearly 40 percent of the country's net interest burden.
This means that the country really has no near-term or even mid-term deficit problem, just paranoia being spread by many of the same people who led the economy into its current disastrous situation.
Over the longer term, the country is projected to face a deficit problem but this is almost entirely attributable to the projection that private sector health care costs grow at an explosive rate. This projected growth rate of health care costs would eventually lead to serious budget problems in addition to leading to enormous problems for the private sector. However, the underlying problem is the broken health care system, not public sector health care programs. For some reason, though, Simpson-Bowles never directly addresses these of the health care system.
Simpson and Bowles apparently never considered a Wall Street financial speculation tax (FST) as a tool for generating revenue. This is an obvious policy-tool that even the IMF is now advocating, in recognition of the enormous amount of waste and rents in the financial sector. Through an FST, it is possible to raise large amounts of revenue, easily more than $100 billion a year, with very little impact to real economic activity. The refusal to consider this source of revenue is striking since at least one member of the commission has been a vocal advocate of financial speculation taxes. It is also worth noting that Mr. Bowles is a director of Morgan Stanley, one of the Wall Street banks that would be seriously impacted by such a tax.
Finally, it is striking that the Co-Chairs felt the need to address Social Security, even though it was not part of their mandate. The commission's mandate was to deal with the country's fiscal problems. Since Social Security is legally prohibited from ever spending more than it has collected in taxes, it cannot under the law contribute to the deficit. Their proposal would cut benefits for tens of millions of middle class workers who are overwhelmingly dependent on Social Security for their retirement income. It would also raise the retirement age for lower income workers who have seen little increase in life expectancy.
While there are some positive items in the report (it would limit the mortgage interest rate deduction get rid of the deduction for cafeteria benefit plans), it suffers from the fact that the co-directors never reflected on their basic economic assumptions. It is hard to avoid the conclusion that this exercise was a waste of time and that we should go back to having Congress determine our budgets through the normal process rather than secret commissions.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer ( www.conservativenannystate.org) and the more recently published Plunder and Blunder: The Rise and Fall of The Bubble Economy. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.
by Robert Freeman
One of the most successful deceits of the past thirty years is that Republicans are the party of "fiscal discipline." In fact, Republicans are the party of fiscal wreckage. Simply put, Republicans love deficits and debt. They have buried the country with them. They expand them with orgiastic fervor every time they get the chance. Until we come to grips with this simple truth we will never gain control of our fiscal destiny.
In 1980 the national debt stood at $1 trillion. Over the prior 204 years, the nation paid for the Revolutionary War, the Civil War, the build-out of an entire continent, the First World War, the Great Depression, the Second World War, Korea, Vietnam, and the better part of the Cold War. And through all that, we still only borrowed $1 trillion.
But over the next 12 years of relative peace and prosperity, Republicans Ronald Reagan and George H.W. Bush would quadruple the national debt, to $4 trillion. They did it by dramatically lowering taxes on the wealthy and furiously expanding government spending. This isn't even economics, it's arithmetic: bring in less income while spending more money, and the result is debt. Mountains of it.
Bill Clinton reversed the Republicans' destructive formula, raising taxes on the rich and cutting spending to 17.4% of GDP, a level not seen in 30 years. The result was the longest economic expansion in American history. More than 20 million jobs were created, another record, while the stock market tripled. Most importantly, Clinton produced the first budget surpluses since 1969, handing George W. Bush a $140 billion surplus.
Bush immediately returned to the tried-and-true deficit producing policies of Reagan and his father. He lowered taxes on the wealthy through a $1.6 trillion giveaway in which 50% of the gains went to the top 1% of income earners, his "base" as he called them. And he expanded spending to 20% of GDP by initiating two wars, lying to pass a $600 billion giveaway to the pharmaceutical industry, and more.
Again, bring in less income, spend more, and the result is debt. Under Bush's catastrophic economic stewardship, the national debt more than doubled, from $5.6 trillion to over $12 trillion while producing the greatest economic collapse since the Great Depression.
A Republican has occupied the White House for 26 of the past 40 years. Not once in any of those years has any Republican president mustered a single balanced budget. So, the fact that Republicans love deficits and debt and expand them whenever they get the chance is not an ideological or political construct. It is the empirical, manifest conclusion of their own policies and actions. Those are the facts.
Less well understood is why this is so. But like the record itself, it is important that Americans know why it is that Republicans love debt. The reasons are two-fold and straightforward.
The first and most important reason Republicans love debt is that they make more money when there's more debt outstanding. The wealthy, after all, are lenders. They would prefer everybody-governments, companies, individuals-be up to their eyeballs in debt. That way they can charge everybody obscenely high rates of interest, as they do the desperately poor who use payday lending facilities with interest rates in the hundreds of percent a year.
The wealthy will collect almost $4 trillion in interest payments in the U.S. this year-27% of the entire $15 trillion GDP going to pay interest! And that's a time of extreme slack in the economy. As the economy recovers and demand for borrowed money increases, rates will rise. Imagine the obscene interest the country will be forced to pay on its $14 trillion national debt when the U.S. government itself becomes a payday borrower!
Which points to the second reason Republicans love debt. At some point it becomes so onerous it will bankrupt the government. This will make it impossible for the government to carry out its essential functions. It will have to sell off assets to its creditors, just as it is doing now, to raise money.
The same wealthy interests who caused the nation to go bankrupt will then buy up public resources at pennies on the dollar. That's how foreclosure sales work. They will then sell the services from those resources back to the public at monopoly rates. We see this around the country where thousands of cities and dozens of states are already selling off essential assets in exchange for a one-time infusion of cash.
Arizona selling off its state-house. Michigan selling the bridge to Canada. States across the country selling their toll-roads, airports, prisons, water systems, parks, even police and fire departments. School districts selling their schools in the guise of making them "charters" when in fact, they are franchised corporate education providers: McSchools.
Privatization of everything is the goal, with no public sector. You can do it when you have bankrupted the government. This is Republican nirvana: the rich paying essentially no taxes; extracting trillions of dollars in interest payments from captive, maxed-out borrowers, public and private; and owning all the public resources (in addition to all of the private resources which they already own). How much better can it get?
The second advantage of bankrupting the government (at least from the vantage of Republicans), is regulatory. It leaves no institutional force in society capable of standing up to the concentrated power of big capital.
This is what made the recent financial meltdown possible: regulation had been gutted, allowing the predators to run amok through the economy. It is what enabled the catastrophic oil spill in the Gulf of Mexico: little or no regulation on the oil companies.
What Republicans want in the private sphere is untrammeled dominion over desperate workers. In the public sphere, they want the ability to cow the government to do its bidding and to transfer all governmental operations to private hands. Bankrupting the government through onerous debts is the surest way to do both, for who, then, can stand up for the interests of the public? Or for democracy, for that matter?
Republicans have gotten so good at drowning the country in debt they even baked it into Obama's administration. According to the non-partisan Congressional Budget Office, almost ninety percent of Obama's deficits are due to policies and events initiated by George W. Bush: massive tax cuts for the rich; two unendable wars; and-once again-the greatest economic collapse since the Great Depression. Without these albatrosses Obama's budget would be almost in balance.
Republicans want nothing to do with policies that actually reduce deficits. If they did, they would have mustered more than a façade of concern over the past 40 years. But they haven't. And the most insufferable part of it all is their unctuous posturing about "fiscal discipline." It's like Heidi Fleiss posing as a model of moral probity, all the better to sucker more two-faced Johns into her bordello.
It was Cicero, in 45 B.C., who laid out the simplest formula in history for understanding such matters. They are the two most powerful words in political forensics: "Qui Bono?" Who benefits? When we answer this question and look at their record, we learn everything we need to know about Republicans and debt. All the rest of the posing is a sham. It's a shame the Democrats don't have the backbone to call this truth for what it is.
Robert Freeman writes on economics, history and education. His earlier pieces, "The Five Circles of Economic Hell," and “The U.S. is Facing a Weimar Moment,” were also published on CommonDreams. He can reached at email@example.com.
The upcoming election is all about jobs. No, it's all about taxes. No, it's all about debt. Well, I guess it depends on who you talk to. The Tea Partiers are all concerned about the debt and lowering taxes. That supposedly will produce more jobs. Only we've tried that for 10 years and it hasn't worked. Lowering taxes is not going to produce any jobs. That's been established. But that amounts to the Republicans' jobs program: lower taxes. Well, how does lower taxes - if it doesn't produce more jobs - affect the national debt. Well, the Republicans have a track record on that too. Lowering taxes increases the debt because there are less revenues coming into the Federal government. George Bush pretty much proved that. In fact the deficit - which is the yearly contribution to the debt - would by and large be eliminated if we just eliminated all the Bush tax cuts - those on the wealthy and those on the middle class.
So let's say we eliminate the Bush tax cuts on everyone. Problem solved at least as far as adding to the debt is concerned. Of course there are other ways of raising additional government revenues which would also eliminate the deficits. Problem is the government as presently constituted doesn't have the political will do do any of them. But one thing is for sure: you can't lower taxes and reduce the debt. And if lowering taxes doesn't produce more jobs, it seems like a no brainer to at least solve the debt problem by raising taxes, not necessarily on the middle class, but somewhere.
Thom Hartmann in his new book Rebooting the American Dream says this:
One way in which the think tanks and the conservative media con the American public is to conflate income taxes for the rich with income taxes for everyone else. And this is the crux of the con job. When Bill Clinton proposed tax increases in 1993, think tanks like Heritage and Cato immediately opposed them with their myths about the negative consequences of tax increases.
Those negative consequences would be a lack of job creation. But we've had low taxes and ... WHERE ARE THE JOBS??!! If job creation is not a consequence of lowered taxes, which has been historically proven, then why not raise taxes on those who can afford to pay? Taxes could be raised on the rich and lowered on the middle class. The $100 billion that corporations park offshore each year, and, consequently, pay no taxes on could be reclaimed by changing the law. The middle class has already been pounded by the fact that most income over the last 10 years has gone to the upper income groups resulting in the greatest amount of income and weath inequality since the 1920s.
So it's a no brainer to raise taxes on the wealthy to solve the deficit problem at least. Now what about the jobs problem? Right now corporations are being given tax breaks to move jobs out of the US. It's hard to believe but that is government policy. Democrats tried to pass a law changing this, but guess who opposed it? That's right, the Republicans who will do everything in their power to keep the present status quo which favors the big corporations who want to increase profits by offshoring jobs to where they can be performed by cheap labor. So it's patent BS that lowering taxes on corporations will create more jobs in the US when the overriding penchant is for corporations to outsource jobs, and they will continue to do that tax breaks or no tax breaks.
Most big corporations are multinationals. That means they have no allegiance to the US or to American jobs. They will create jobs wherever it's profitable to do so. Right now a lot of American corporations are American in name only; they do most of their business - both in terms of producing and in terms of selling - overseas. So why not change the law to discourage imports that could be produced in the US and give favorable treatment to companies that create jobs in the US. Obviously, the US cannot just be a consumer market for products produced abroad. Stuff must be produced here in order that workers can earn enough money to consume the products they need. The US cannot be just a consumer market for multinational companies.
So how are more jobs in the US to be created? 1) Discouraging imports and encouraging production within the US. 2) Massive government involvement in infrastructure repair and creation. #2 would require government expenditures that would increase debt only if the money is borrowed. However, raising taxes can not only be a solution to solving the debt problem, but it can also be a partial solution to solving the jobs problem without increasing the debt. So why isn't it being proposed by the Democrats? Partly, it's because right wing media has labeled Obama a socialist already for his puny American Recovery and Reinvestment Act which was mainly another tax cut. All this tax cut did was add to the debt. The puny amount that was directed towards saving and creating jobs was not big enough to have a major effect on the unemployment rate although it did some good. What is needed is a massive infrastructure investment program and revenue enhancement in the form of tax increases on those who can afford to pay to fund it.
So there you have it: problem solved, debt stabilized, jobs created. And the way it's solved is to raise taxes on those possessing all the money that's sloshing around in the casino economy and going back to a tax structure similar to what was in effect under Eisenhauer (when the top marginal tax rate was 91%) and Nixon (when the top marginal tax rate was 70%). Not only are the Bush tax cuts ruining the financial solvency of the US government but the Reagan tax cuts are adding to the ruin. But Democrats can hardly run on raising taxes even though they are gaining some traction with the idea of raising taxes on the wealthy but not on the middle class. They need to keep repeating this theme so that the American middle class will deconflate raising taxes with raising taxes on everyone.
Robert Reich and others have pointed out that income inequality was at a maximum both in 1928 just before the Great Depression and again in 2007 just before the Great Recession. In both cases the share of the nayional income going to the top 1% was greater than 23% as the following graph shows.
If you superimpose a graph of the top income tax rate, you can see that it is almost the inverse of the graph of the share of income going to the upper 1%. In the 1920s the top tax rate was 25%. In the period which Reich calls the Great Prosperity, roughly from 1945 to 1980 the top tax rate was high, 91% under Eisenhauer, 70% under Nixon and 39.6% under Clinton as the following graph shows. Roughly the peaks in the first graph correspond to valleys in the second and vice versa.
We can conclude from these two graphs that income inequality increases as top marginal tax rates decrease. There is almost a direct correlation. But in addition to that government revenues diminish when top tax rates are lowered and increase when they are raised. So lowering taxes produces more income inequality and diminished government revenues. Reagan and the first Bush lowered taxes and quadrupled the national debt from $1 trillion to $4 trillion. The second Bush lowered taxes and doubled the national debt from $5 trillion to $10 trillion. Fiscal responsibility as defined by government revenues exceeding government spending has been achieved by every Democratic President since Johnson and by no Repuiblican President since then as shown by the following graph.
Clinton ran budget surpluses four years in a row, a feat not achieved since the 1920s. Even though top tax rates were low in the 1920s, the government still ran surpluses for all those years. This was because the economy was booming so a lower tax rate was sufficient to produce ample revenues. Supply side economics promised the same result but didn't deliver. Instead lowering taxes produced huge government deficits which added huge sums to the national debt. In the 1930s, when the Great Depression hit, the government started running deficits, but it had built up a relative surplus in the 1920s so it could better afford to run deficits than it can today since such huge deficits were run up during the Bush administration.
Keynsian economics says that the government should spend more and run deficits during recessions and save more and run surpluses during expansions. That theory made some sense during the 1920s and 1930s when the surpluses of the 20s were somewhat balanced by the deficits of the 30s although the deficits were about triple the surpluses. Today, however, we have a dual problem: the need for the government to spend money to stimulate the economy and the need not to add more to the national debt. One way the government can do this is to raise income taxes on the wealthy which would solve two problems. It would reduce income inequality and it would decrease government deficits. Since the wealthy don't add greatly to aggregate demand especially after a certain amount of wealth has been accumulated, this will not affect the economy negatively. Also, as has been proved by the Bush administration, increasing the wealth of the already wealthy does not create jobs.
Another way the government can solve the deficit problem is to find other sources of revenue. Up until approximately the First World War most government revenues were derived from excise taxes (mainly on cigarettes and alcohol) and tariffs. By the 1920s these sources had been largely replaced by the income tax. Excise taxes are taxes on particular products produced and sold within the US. They are similar to the VAT tax which is used in Europe. But the VAT tax applies to all products not just certain selected ones. The VAT tax is basically a national sales tax. Excise taxes could be reinstated and applied to speculative financial products in the form of a Financial Transactions Tax (FTT). This would net hundreds of billions of dollars a year. Hundreds of billions more could be gotten from collecting taxes on profits illegally parked offshore. Tariffs could be applied selectively to certain countries and/or certain products in order to equalize the trade balance which has been running huge deficits. This would mean abandoning free trade in favor of fair trade.
Keynsianism is outmoded today because the government can't afford to go into debt to stimulate the economy. However, the government can raise revenues by instututing increased taxes on the upper 1% and other forms of taxation such as a FTT that won't affect the purchasing power of the middle class. Royalties on oil and minerals extracted from the US by corporations could also be taxed at rates similar to what other countries are taxing their oil. Today the US is practically giving away its natural resources. The problem in today's economy is lack of demand so purchasing power must be increased among those who are in a position to increase demand, namely, the middle class. Government spending that is offset by government revenues is deficit neutral. One of the greatest problems in the currrent economy is lack of job creation. Government spending that directly and indirectly creates jobs will do much to ameliorate the current lack of demand, and if that spending is balanced by increased revenues, the national debt can be paid down at the same time.
Posted by John on October 04, 2010 at 05:25 PM in John Lawrence, Robert Reich, Debt, Education, Careers, Jobs, Employment, Inequality, Infrastructure, Obama Presidency, Poverty, Taxes, The Economy, The Middle Class, The Role of Government, Trade, Unemployment | Permalink | Comments (0) | TrackBack (0)
by David Michael Green
How stupid are you?
I mean, let's just face it, shall we? That is precisely the question the right has been asking the American public for thirty years (and more) now. And that is the question the American public has been enthusiastically answering for the same period of time.
Like a crack junkie, in fact.
In the 1980s, Ronald Reagan presented America with a set of economic lies so transparent that even a monster like George H. W. Bush called them "voodoo economics". When he was contesting Reagan for the Republican nomination, that is. Once Bush had lost it, and when he wanted to be added to the ticket as the Vice Presidential nominee, everything became hunky dory, and no more voodoo critiques were uttered. That was one of the greatest acts of treason (I choose my words carefully) in American history.
But back to Reagan. "Watch this", he said. "I'm gonna slash taxes, especially for the rich, spend huge sums on ‘defense', and balance the budget at the same time".
Okay, so he wasn't a math major in college. Two out of three ain't bad, though, eh? Well, it is if you have to pay for his ‘mistakes', plus interest, as so many of us continue to do to this day. Prolly not a big problem, though. Even though Americans hate taxes with the passion of the truly infantile, I'm sure they don't mind working extra hours flipping burgers each week to pay for the enrichment of the previous generation of plutocrats and defense contractors. Right?
Or maybe it's just that their answer to the "How stupid" question is: "Very".
You might think that, because Reagan and Bush actually managed to quadruple the national debt with their little exercise in national folly. Or you might especially think that because Lil' Bush came along with the exact same snake oil a decade later. You had to be stupid to buy it the first time, but you had to have been really stupid to buy it the second time. We, of course, were.
And not just in terms of federal debt, either. A generation of Reaganomics has now succeeded in suspending ninety-eight percent of the country in standard-of-living formaldehyde, so that they felt zero effect whatsoever from the substantial growth in GDP over the last thirty years, and now those policies are cutting off their legs from underneath them altogether. All while the people of Reagan's class, of course, just piled on the riches. How stupid do you have to be to not notice who's diddling you?
Very, of course, but not necessarily as stupid as is maximally possible. ‘Cause, guess what? Here they come again. This week Republicans once again have issued a manifesto calling for slashing taxes on billionaires and cutting deficits, all at the same time. And once again they will win big electoral landslide victories in November despite that patent idiocy. Or perhaps because of it.
Why don't they just come out and do magic tricks, instead? Oh wait. That's their Jesus bit. Never mind.
On the one hand, I don't blame Americans for voting for the party that isn't the Democratic Party this fall. Obama and crew are miserable failures, as completely unable to provide meaningful solutions to the problems facing Americans today as they are inept at winning political fights against manifest criminals. Looking at the landscape in front of them as it appears to voters' blinkered vision, it makes perfect sense to desperately swing to the party not in government when the house is on fire and the party in government is showing up with squirt guns. What could be more logical? This is, indeed, the fundamental notion of ‘responsible government' itself, and it is at the core of democratic theory.
On the other hand, of course, there are two very excellent reasons why such a vote is completely idiotic. First, because there actually are more than two alternatives to choose from. I wish we had viable third parties in America but I don't normally advocate for them, given the massive systemic improbability of their success. That said, if there was ever a moment for which a third party vote was called for, this is it.
And second, because ‘the alternative' to the Democrats are the very folks who put us in these crises to start with, and they are now explicitly devoted to making conditions even worse for ordinary Americans. That's exactly what will happen, of course, and if you think the present moment is grim, wait until you see how much fun the next two years are gonna be. They're gonna look like the mangled and ferocious spawn of a tainted marriage between the Depression politics of the Hoover era, the sick depravity of McCarthyism, the relentless scandal-mongering of the Gingrich era, and the completely unmitigated greed of the Cheney years. Welcome to the dismantling of civilized society in America. Yes, yes, I know - it's quite arguable whether such a beast ever existed. Well, at least that's one debate we're about to put to rest definitively.
And we also know for sure of yet one more thing Ol' W was wrong about. Remember when he said: "There's an old saying in Tennessee - I know it's in Texas, probably in Tennessee - that says, fool me once, shame on - shame on you. Fool me - You can't get fooled again!"
He shoulda checked with Karl Rove and the rest of his party of predatory shucksters, who seem quite incapable of not constantly trying to fool the public. And he shoulda considered the ridiculous improbability of his own presidency before attempting to quote Pete Townshend. Not to mention the current moment. We know why the GOP has to lie, and does so compulsively. Even in contemporary America, surely the stupidest country on the planet, the homo sapiens are still sentient enough to opt out of the most overt cases of self-immolation. If kleptocratic Republicans told the truth, who in the world would ever vote for them, other than the richest two percent of Americans?
The bigger mystery is why people continue to fall for this crap over and over. This is the "shame on me" concept that Dauphin George was reaching for but couldn't quite grasp (too bad he didn't actually, er, study, when he was at Yale). How many times can fools be told the same foolish line and be fooled into foolishly falling for it, like a pack of so many fools?
It would appear that for Americans, at least, there is no limit, based on the contents of the Republicans' just released "Pledge to America" manifesto, which I could have drafted for them, so predictable is its contents. There is of course, loads of debauchery and rampant destruction in there, dressed up as piety and patriotism. But the fiscal insanity is the most egregious. Can they really pledge the old voodoo economics once again - slashing tax revenue while simultaneously cutting deficits - and get away with it? Yes they can, and yes they have.
Perhaps their lies are more plausible because they have promised to cut spending. It's just that there are two little caveats they hope you won't notice. First, that they somehow miraculously fail to specify in advance of the election what they intend to cut. Gee, I wonder why that is? Could it be that if people knew what those cuts would be they would be aghast? Or could it be - and this brings us to the other small footnote - that what they are proposing is to mathematics what a dropped object falling upward would be to physics?
As Paul Krugman notes, the Republican Pledge claims that "everything must be cut, in ways not specified - ‘except for common-sense exceptions for seniors, veterans, and our troops.' In other words, Social Security, Medicare and the defense budget are off-limits. [Krugman should have also mentioned service to the existing debt, which is one of the biggest single items in the federal budget today, and absolutely cannot be touched.] So what's left? Howard Gleckman of the nonpartisan Tax Policy Center has done the math. As he points out, the only way to balance the budget by 2020, while simultaneously (a) making the Bush tax cuts permanent and (b) protecting all the programs Republicans say they won't cut, is to completely abolish the rest of the federal government: ‘No more national parks, no more Small Business Administration loans, no more export subsidies, no more N.I.H. No more Medicaid (one-third of its budget pays for long-term care for our parents and others with disabilities). No more child health or child nutrition programs. No more highway construction. No more homeland security. Oh, and no more Congress.'"
And yet - of course - poll data shows that the folks purveying this heap of garbage are about to be swept into office. Meanwhile, city governments are folding their tents across America, slashing all their services entirely, and the GOP is nominating former witches, anti-masturbators, racists, wrestling promoters and every other form of personal screw-up and jive con-artist to be found everywhere killers and thieves congregate.
I'm sorry, but surveying the landscape, it just feels so over now in America. We seem like little more than a popped balloon, with only the faux blustering fart noises of rapid deflation remaining where once there was an empire and once there were truly revolutionary and truly valuable ideas.
It's no accident, either, that the near-complete obsession of the tea party right and their followers is taxes. It's naked greed, it's more infantile than the politics of a kindergarten sandbox, and it's as corrosive as can be. Oliver Wendell Holmes wrote "Taxes are what we pay for civilized society". He meant it, too. When he died, he donated his estate to the US government.
What is happening to America today is nothing short of the dismantling of such civilized society. Does anyone think the country is economically better off today than in the 1950s or 1960s? Does anyone seriously think that the Millennial Generation will be better off than their parents? Would anyone seriously bet on America today, as an economic comer? Does anyone think that the next hundred years will be the American century?
There is so much tragedy to this story that it is hard to know where to start. Perhaps the greatest ugliness of the whole affair is the self-inflicted nature of our demise, and, therefore, the complete lack of necessity for all the pain and suffering already endured and the vastly greater amounts still to come. It never had to be this way, which just makes it all the more pathetic.
If there is any silver lining here it is that the hooligans of the right will manifestly fail at governing, which at least opens up the potential for them to be rejected once again.
I will be interested - as a political scientist, not as a citizen - to see what sort of budget proposal Republicans will pass out of the House once they control it. Like Reagan and Bush before them, their numbers cannot possibly jibe. Unlike Reagan and Bush, however, they will have far less luxury to resort to the shell game of grossly irresponsible deficits as a way out of their own lies, having made deficit reduction so overtly the centerpiece of their campaign this year. The freaks of the tea party right don't seem so likely to let them off the hook for another round of campaign lies as they were the last two times out. How's that for an irony? The only prospect of real accountability for these monsters would be coming from the monsters of their own constituency.
But, assuming the GOP can find a way around that problem (perhaps by proposing a draconian pretend budget that they know could never be accepted by congressional Democrats or Obama?), I would expect them to prevail again in 2012. Unless the jobs picture changes radically in 2011 - and no economist that I know of is predicting that - Obama is complete toast. Indeed, he is probably so wounded that we might expect a Democrat or two to challenge him in the primaries for the nomination. Doesn't matter, though. Either way, whoever the Republicans nominate will be the next president.
Which is where I start to get real nervous. Governments that combine a commitment to holding power at all costs with a total absence of real policy solutions and an amoral willingness to do anything to serve their true aspirations are a truly scary prospect. History suggests that the years after 2012 could be the ones during which the wheels finally came off the wagon of what is left of American democracy.
But it could be far worse than that, too, for us and for others. The prospect of a hugely powerful empire lashing out at the rest of the world - whether in rage or seeking domestic diversion - is not a pretty one at all. The Soviet superpower was kind enough to implode rather innocuously. I'm not at all convinced that we yanks would be quite so gracious about doing the same.
I remain haunted to this day by the words of John le Carré, written on the eve of the Bush invasion of Iraq: "America has entered one of its periods of historical madness, but this is the worst I can remember: worse than McCarthyism, worse than the Bay of Pigs and in the long term potentially more disastrous than the Vietnam War".
Sadly, I think he had everything right in his assessment, save for the word "periods". That term implies a temporariness to our condition that might at least make it somehow barely tolerable.
But what if it only gets worse from here?
And let's be honest. Given the nature of the Republicans, the Democrats, the media and the public in America today, how does it not?© 2010
David Michael Green is a professor of political science at Hofstra University in New York. He is delighted to receive readers' reactions to his articles (mailto:firstname.lastname@example.org), but regrets that time constraints do not always allow him to respond. More of his work can be found at his website, www.regressiveantidote.net.
by Robert Reich
Who deserves a tax cut more: the top 2 percent — whose wages and benefits are higher than ever, and among whose ranks are the CEOs and Wall Street mavens whose antics have sliced jobs and wages and nearly destroyed the American economy — or the rest of us?
Not a bad issue for Democrats to run on this fall, or in 2012.
Republicans are hell bent on demanding an extension of the Bush tax cut for their patrons at the top, or else they’ll pull the plug on tax cuts for the middle class. This is a gift for the Democrats.
But before this can be a defining election issue in the midterms, Democrats have to bring it to a vote. And they’ve got to do it in the next few weeks, not wait until a lame-duck session after Election Day.
Plus, they have to stick together (Ben Nelson, are you hearing me? House blue-dogs, do you read me? Peter Orszag, will you get some sense?)
Not only is this smart politics. It’s smart economics.
The rich spend a far smaller portion of their money than anyone else because, hey, they’re rich. That means continuing the Bush tax cut for them wouldn’t stimulate much demand or create many jobs.
But it would blow a giant hole in the budget — $36 billion next year, $700 billion over ten years. Millionaire households would get a windfall of $31 billion next year alone.
And the Republican charge that restoring the Clinton tax rates for the rich would hurt the economy — because it would reduce the “incentives” of the rich (including the richest small business owners) to create jobs — is ludicrous.
Under Bill Clinton and his tax rates, the economy roared. It created 22 million jobs.
By contrast, during George Bush’s 8 years, commencing with his big 2001 tax cut, the economy created only 8 million jobs. And as the new Census data show, nothing trickled down. In fact, the middle class families did far worse after the Bush tax cut. Between 2001 and 2007 — even before we were plunged into the Great Recession — the median wage dropped.
It’s an issue that could also be used to expose the giant chasm that’s opened between the rich and everyone else — aided and abetted by Republican policies. As I’ve noted before, in the late 1970s, the top 1 percent got 9 percent of total national income. By 2007, the top 1 percent got almost a quarter of total national income.
These figures don’t even count in taxes. The $1.3 trillion Bush tax cut of 2001 was a huge windfall for people earning over $500,000 a year. They got about 40 percent of its benefits. The Bush tax cut of 2003 was even better for high rollers. Those with net incomes of about $1 million got an average tax cut of $90,000 a year. Yet taxes on the typical middle-income family dropped just $217. Many lower-income families, who still paid payroll taxes, got nothing back at all.
And, again, nothing trickled down.
As I’ve emphasized, the U.S. economy has suffered mightily from the middle class’s lack of purchasing power, while most of the economic gains have gone to the top. (The crisis was masked for years by women moving into paid work, everyone working longer hours, and, more recently, the middle class going into deep debt — but all those coping mechanisms are now exhausted.) The great challenge ahead is to widen the circle of prosperity so the middle class once again has the capacity to keep the economy going.
In other words, this is the right issue. It’s the right time. It allows Democrats to explain what the Bush tax cuts really did, why supply-side economic is bogus, and the economic challenge ahead.
Even if Democrats feel they have to respond to the Republican charge that taxes shouldn’t be raised on anyone when the employment rate is 9.6 percent, they have a powerful fallback: Extend the Bush tax cuts for everyone through 2011, then end them for the rich while making them permanent for the middle class.
Get it, Democrats? Please don’t blow it this time.
by Dean Baker
Most people are familiar with the concept of "chicken hawks." Chicken hawks are the politicians who are anxious to send other people to risk their lives in war, but somehow managed to avoid service when they had the opportunity to fight themselves. Former Vice-President Dick Cheney and former President George W. Bush are the leading members of the chicken hawk society.
It turns out that we have a similar story with budget policy, where there appears to be a large contingent of budget deficit chicken hawks. The deficit hawks have been filling the news lately. These are the folks who are yelling that something terrible will happen if we don't reduce the deficit. Most of them seem to have missed the fact that something terrible is now happening. We have almost 15 million people unemployed and 9 million underemployed, with several million facing the loss of their home in the next few years.
People of all ages are seeing their lives wrecked by a economic disaster that was entirely preventable, if the folks running economic policy were not too incompetent to notice an $8 trillion housing bubble. In fact, one of the reasons that this bubble did not get noticed was that even before the bubble burst -- creating large deficits -- the deficit hawks were running around yelling about the deficits. These deficit hawks were able to get far more attention for their whining than the people who were warning about the dangers posed by the housing bubble.
Now that we have seen this collapse, rather than supporting action to get the economy back on its feet, the deficit hawks are again yelling about the long-term deficit. But, what is really striking is that many of the people who whine loudest about the deficit are the most reluctant to take steps to reduce the deficit -- at least when it involves powerful interest groups.
So, in the last week, we were treated to the sight of two senators who are leading Democratic deficit hawks, Kent Conrad from North Dakota and Ben Nelson from Nebraska, both coming out for the extension of the portion of President Bush's tax cuts that went to upper income people. These two senators, who have been in a near panic about the debt that we are handing on to our children, came out firmly for more debt for our children if the alternative was higher tax payments by the wealthy.
Unfortunately, this chicken hawk approach to deficit reduction is more the rule than the exception. The surge in the deficit in the last three years was overwhelmingly due to the economic collapse. It might be reasonable therefore to look to Wall Street to pick up much of the tab for future shortfalls. My calculations indicate that a tax on financial speculation could raise in the neighborhood of 1.0 percent of GDP or $150 billion a year.
Yet, almost none of the deficit hawks will go near a financial speculation tax. In fact, when America Speaks, a group funded by Wall Street investment banker and leading deficit hawk Peter Peterson, put on a series of town halls on the deficit, their booklet told participants that a speculation tax could only raise 0.1 percent of GDP, one third of what the United Kingdom gets from taxing stock trades alone.
It is not only Wall Street that is protected by the deficit chicken hawks. The insurance and pharmaceutical industries can also count on the deficit chicken hawks. As all budget analysts know, the country's long-term budget problem is due to our broken health care system. We pay more than twice as much per person as the average in other wealthy countries.
But the deficit hawks are scared to talk about fixing the health care system. This would hurt the insurance industry, the pharmaceutical industry and other powerful interest groups. When America Speaks came to health care, they said reform was off-limits. They only wanted participants to talk about cutting Medicare and Medicaid. The elderly and the poor don't have powerful lobbies like the industry groups.
Basically, the deficit chicken hawks want deficit reduction, but they only want it to be at the expense of the elderly and the poor, hence their attacks on Social Security and Medicare. Of course the public is not anxious to go along with gutting the programs on which they and their parents depend, which is why the deficit chicken hawks prefer to do their work through commissions that hold secret meetings.
The deficit chicken hawks also don't have much commitment to honesty. When America Speaks reported its results to the public and President Obama's deficit commission, it noted that one cut to Social Security, raising the retirement age, got majority support from participants. However, it turns out that this result was based on a software error. When the error was corrected, support fell to 39 percent.
Remarkably, America Speaks did not have the integrity to publicly acknowledge and correct this mistake. It just quietly changed the number on its website. This is the sort of behavior we should expect from deficit chicken hawks who want to attack the programs on which so many ordinary working people depend, while protecting the interests of the rich and powerful.
The American Recovery and Reinvestment Act of 2009 provided $787 billion in funds to get the economy moving again. The government was focused on getting the economy out of recession which is defined as negative economic growth for two straight quarters as indicated by a decrease in GDP. The present definition of recession has nothing to do with unemployment. It's just defined as a decrease in GDP for two straight quarters. Therefore, GDP could increase but unemployment remain high. Such is the situation we're now in - the so-called jobless recovery.
The theory is that if government primes the pump by pouring money into the economy, which was the effect of the $787 billion, that economic activity would increase, consumers would buy more products and services and this would create more jobs. GDP is made up of private consumption plus investment plus government spending plus exports minus imports. In the US consumption is 70% of GDP and the trade balance (exports minus imports) is negative so it actually detreacts from GDP. When consumer spending drops off, that leaves government spending to make up the difference since private companies are not investing in the US and hence are not creating jobs. So the GDP is overly dependent on consumer spending, and hence Bush's reponse to the 9/11 attacks was "Go out and shop." Consumer spending stimulates economic activity which then means business will invest in order to produce more and this will mean more jobs for American citizens. This was the conventional wisdom a few years ago, but this chain of logic doesn't work any more.
The government dumping dollars into the hands of consumers as Bush did with his stimulus, Bush's so-called "booster shot for the economy," means that consumers will spend more temporarily, but it does not mean that jobs will be created in the US because most US consumer goods are made in China. So the jobs created, if anywhere, will be in China. Therefore, the US government is left with the denouement that it must pour money into the economy on a perpetual basis and this is impossible because it would lead to increasing deficits with no sustainable results in terms of job creation. The nation’s international trade deficit in goods and services increased to $42.3 billion in May from $40.3 billion (revised) in April, as imports increased more than exports. This was taken as a good sign in that this showed an increase in American consumption pointing the way out of recession. Yes, GDP increased, but the trade deficit increasing showed that the jobs created by this increase in consumption were mainly abroad.
The US relies too much on consumption. Temporary government programs such as the "Cash for Clunkers" program and the $8000 tax rebate for new home purchases improve the economy temporarily. They do not create sustainable jobs. So the government is left with the dilemma of pouring money into the economy and increasing the national debt or getting GDP up by encouaging those who do have money to consume more or investing in the economy in a way that will increase jobs directly WPA style rather than just giving money to consumers and hoping that their spending it will create jobs. However, the government response at present seems to be to worry about the deficit and hence to gut government spending. This is rational insofar as pouring money into consumers' hands in the hopes of creating jobs is irrational for the reasons given above. However, it doesn't solve the problem of widespread joblessness.
The stimulus bill was almost equally divided among tax cuts, contracts, grants and loans and entitlements. The tax cuts put money in consumers' hands that increased consumption but did not create jobs (except perhaps in China), the grants and loans merely staved off job losses by bailing out states and municipalities and entitlement spending similarly just put money in consumers' hands without creating jobs. This leaves contracts as the sole source of job creation. If the stimulus had put relatively more money into contracts, then perhaps more jobs would have been created. The result was that only a paltry number of jobs were created. There is plenty of work that needs to get done, but private enterprise does not want to do it. Private enterprise is oriented towards producing individual consumer products. The work that needs to be done is more general in nature such as infrastructure rebuilding.
Right now most government contracts are taken up by defense spending. This creates jobs for defense contractors and in the military. It does not create jobs in the civilian economy except in the FBI and CIA and other defense related jobs. Also defense contractors such as Boeing and General Dynamics create jobs in the civilian economy. Evidently, this spending which is huge is not sufficient to create enough jobs to bring unemployment down to an acceptable level. Therefore, the government has two choices it seems to me. 1) Expand the military even further even though the US spends more money on its military than the rest of the world combined. 2) Create WPA style jobs funded directly or indirectly by the government to rebuild infrastructure.
What most people don't realize is that functionally the military and military-related jobs are identical to WPA style jobs. Both are funded by the government either directly or indirectly through contracting. Both serve the same purpose in the economy of creating and sustaining jobs. Both are public sector jobs. If the government wants to create sustainable private sector jobs, then it has to do something about its trade policies. Right now US trade policy is such as to create non-American jobs. The net result is ongoing trade deficits as far as the eye can see which add to the national debt. Bringing jobs home from overseas would not only spur the American economy in terms of job creation but would help the national debt once the trade balance becomes positive again.
Politically, both Republicans and Democrats seem incapable of creating sustainable WPA style jobs in the civilian economy. The Republican solution would be more defense spending, tax cutting and elimination of social programs. The result of this would be that former teachers, firemen and policemen would be forced to join the military in order to get a paycheck. Republicans could conceivably set up programs to encourage millionaires and billionaires to consume more thus elevating GDP. Democrats have been caught flat-footed and have fallen for the conventional wisdom that stimulating the economy by putting money into consumers' hands will ultimately result in job creation here in America. That hasn't happened, and is not likely to happen. They are left with FDR style WPA solutions which they don't seem to have the heart to even bring up. Therefore, they are and will continue to be tarred with the brush of big spenders as their methods of stimulating the economy don't produce sustainable jobs and hence sustainable increases in government revenues. Taxing the rich and limiting the offshoring of corporate profits would provide immediate relief to government deficit problems, but the poltical will to do it is not there. Republican tax cutting will only exacerbate the deficit as 30 years of Reaganomics has shown. Reagan and Bush tax cutting skyrocketed the national debt. Tax cutting not adding to the deficit is what George H W Bush called "voodoo economics" and he was right.
The result is that both political parties are missing the boat. The Democrats' policies of putting government money into the economy are merely staving off disaster for many middle class families which is a good thing, but they are not creating long term sustainable jobs which would help not only the middle class but government revenues themselves. Republican policies would be a continuation of the Reagan-Bush policies of the last 30 years which produced the economic mess we now find ourselves in. Tax cuts have been directly responsible for adding to the national debt. A resumption of these policies would be a prescription not only for more hardship for the middle class and the poor but for outright disaster. The US would come to resemble a Third World country in which there are a few very rich families while the majority of the people are extremely poor. It would be a country in which 20% unemployment would be the new normal and Great Depression style homelessness would be widespread and acceptable. The US would be forced into an austerity lifestyle (except for the rich) and the government's whole fiunction would be to merely pay interest on the national debt.
Posted by John on July 22, 2010 at 06:21 AM in John Lawrence, Debt, Democrats, Economics, Education, Careers, Jobs, Employment, Free Trade, Homelessness, Infrastructure, Obama Presidency, Politics, Poverty, Republicans, Taxation, The Economy, The Military Industrial Complex, The Role of Government, Wealth | Permalink | Comments (0) | TrackBack (0)
President Obama likes to use the metaphor that the Republicans drove the car into a ditch and that the Democrats are heaving mightily to get it out. Can't you just picture it? As soon as the Democrats get the car back on the road after exerting much effort, the Republicans are standing there, having not broken a sweat, demanding the keys back. If the voters are smart, they won't give them to them. The whole Republican strategy for the election this fall is to get the voters in a "throw the bums out" mood meaning throw the Dems out because they control Congress, at least the House and nominally the Senate, but, due to the filibuster rule and other arcane obfuscations, the Republicans really control the Senate even though they are a minority.
If the voters were smart ... that's a big if because they've proven to be anything other than smart in recent years. They let the Republicans get them all riled up about guns and gays while, at the same time, they are stealing their wallets. The issue to focus on is the economy, and, even though Obama and the Democrats haven't yet pulled the car out of the ditch, at least they're pulling in the right direction. Give Republicans the keys and they'll promptly drive the car off the nearest cliff laughing all the way to the bank. The Democrats are trying to repair the damage of the Bush years but they can't do it overnight. There is structural unemployment, but Republicans don't even want to extend unemployment benefits. Good luck to the jobless when they take over!
The reason the deficit and the national debt are so large is that Bush doubled the national debt from $5 trillion to $10 billion while building in deficits for as far as the eye can see. The deficits under Obama are really mainly composed of Bush built-in structural deficits. Bush started two wars of aggression which so far have cost roughly a trillion dollars while beefing up the Pentagon budget to approximately an annual $1 trillion if all costs are taken into account, greater than the combined military budgets of all of the rest of the world. Bush gave the rich two tax cuts that were entirely unpaid for. That means they were added to the deficit and in due course to the national debt. Ditto for the senior pharmaceutical drug benefits. They were entirely unpaid for too which means that they are added to the deficit year after year and the deficit is added to the debt year after year. This is what Obama has to wrestle with even though he is trying mightily to get the country out of a depression and hold it together by bailing out the states while doing it all insofar as is possible by not adding to the deficit ... by actually paying for his expenditures.
Of course, the Republicans don't want Obama spending any money. Only they can spend money. It's just Obama's job to clean up their mess so that when they're reelected again, they can create another one presumably for some down the road Democrat to clean up in an ever reoccurring nightmare: Republicans make mess; Democrats clean up.
The Republicans want voters to believe that their discredited economic policies (after all they're what created the financial meltdown of 2008) are exactly what the US needs right now after Obama has failed to get unemployment down to a normal 5%. Obama has failed to replace the 8 million jobs lost under the Bush administration so Democrats should be booted out of office and replaced with Republicans who will continue to pursue the supply side economics of Ronald Reagan. More tax breaks for the wealthy - that's just what we need. That's just what the doctor ordered. Deficits don't matter as Dick Cheney so famously said (at least when Republicans are in office)! So when the Republicans get back in, they'll spend like drunken sailors on war and tax breaks while nary a discouraging word will be heard about the deficit or the debt. Because we all know, it's an article of faith, that giving tax breaks to the wealthy will encourage them to create more jobs ... right? Yeah, they'll create more jobs alright ... in China!
While the Obama administration hasn't been successful in repairing all the damage of the Bush and Reagan administrations especially in regard to unemployment and the deficit, at least they are proceeding in the right direction. Voters, if they use their common sense, must ask themselves will they be better off electing people who are trying to pull the car out of the ditch or will they be better off handing over the car keys to a party that will promptly drive it off a cliff.
Now the debate is should the US go further into debt in order to help the unemployed among other things and to spur the economy or should we cut social programs in order to bring the debt down. Well there are two other options: raise taxes or cut the military. All the debt fighters want the "cut the military" option taken off the table although that's the expenditure that's killing us ... literally. In June 103 of our troops and allies were killed in Aghanistan, all to get the remaining 100 or so al Quaeda that are still there. In order to justify the huge amounts of money that are sent down that rathole every month, now we're engaged in nation building. It's not mission creep; it's mission morph. We went there to get al Quaeda. Now we have to get the Taliban just for the ostensible reason that they are allied with them.
Fareed Zakaria had this to say:
Zakaria noted that the war is costing the U.S. a fortune in both blood and treasure. "Last month alone there were more than 100 NATO troops killed in Afghanistan.," the CNN host said. "That's more than one allied death for each living Al Qaeda member in the country in just one month.
"The latest estimates are that the war in Afghanistan will cost more than $100 billion in 2010 alone. That's a billion dollars for every member of Al Qaeda thought to be living in Afghanistan in one year."
To critics who suggest that we need to continue fighting the war against the Taliban because they are allied with Al Qaeda, Zakaria countered that "this would be like fighting Italy in World War II after Hitler's regime had collapsed and Berlin was in flames just because Italy had been allied with Germany."
"Why are we investing so much time, energy, and effort when Al Qaeda is so weak?" Zakaria concluded. "Is there a more cost-effective way to keep Al Qaeda on the ropes than fight a major land and air war in Afghanistan? I hope someone in Washington is thinking about this and not simply saying we're going to stay the course because, well, we must stay the course."
So $1 billion for every al Quada in Afghanistan and 1 NATO death per month for every al Quaeda. It does seem like a total waste at a time when people are so concerned about the national debt. While we waste money there, Congress can't even vote to support the unemployed who have been receiving a paltry unemployment check. And teachers, firemen, policemen and other government employees are being laid off. State and municipal governments are making Draconian cuts while the Federal government spends $10 billion a month on a damn war. Americans are going broke, but spending money here at home to help American citizens is out of the question because there's no money available and we have a massive national debt. The American way of life is being hollowed out and millions are ending up on the streets but that's not important compared to war, the winning of which not only can't be defined but won't make a dime's worth of difference to US interests.
Well, here's an idea to reduce the national debt: CUT THE MILITARY BUDGET. We're only making the world safe for Chinese investment while doing nothing to further US interests except the ones of jingoism and machoism for those who think fighting wars makes us look tough.
Paul Krugman thinks the government needs to spend more money to stimulate the economy. Niall Ferguson thinks that we have to pay down the national debt or else the international bond traders might disapprove and steal a march on the US the way they did on Greece. No one wants to raise taxes although targeted tax increases would do a lot to balance the budget while having little effect on hurting the economy and job creation. Investors are just sitting on their cash; they're not investing their money in productive business pursuits that might involve job creation. So why not tax capital that is just being used to make money in the financial economy which has nothing to do with productive investment. A financial transaction tax would slow down the speculation and casino aspects of the economy while not hurting job creation. The government has to get smart about increasing revenues AND spending in order to get the economy moving again before it gets backed into a corner and can do nothing.
Actually, the government is effectively backed into a corner now when it can neither cut the military, raise taxes, create jobs or reduce the debt. The government, if it played its cards right, should be able to raise taxes on the rich, cut the military, cut the debt and spend money into the economy creating jobs with public-private partnerships and providing much needed repairs to the infrastructure. But that would involve a "smart" government capable of assessing the problems realistically and actually doing something about them. What we have right now is a Congress intent on lining their own pockets and those of their wealthy patrons and the hell with everyone else.
By: Jason Rosenbaum Wednesday June 30, 2010 12:22 pm
Today on a call with reporters and bloggers, Representatives McGovern (D-MA) and Pingree (D-ME) made it crystal clear that not only is the war in Afghanistan not making us safer, it’s truly hampering efforts to get this country back on track.
Repeatedly, Pingree and McGovern related how when it comes to domestic priorities like jobs, unemployment insurance and aid to states, the arguments they’re having with their colleagues in the House of Representatives center on spending, the deficit and the seemingly all-important question, "How are you going to pay for it?" But when it comes to the war, there’s no such debate. As Representative McGovern put it bluntly:
We’re going bankrupt, we can’t extend unemployment insurance, but when it comes to Karzai, we’re a bottomless pit.
Pingree agreed, saying, "We spend $7 billion a month on Afghanistan, we can’t afford it. It’s unthinkable that we spend money on this war, don’t pay for it, and every other thing like unemployment insurance we have this big argument about how to pay for it."
Every time we hear about that number, and it’s constantly mentioned, I think about how much we spend, a billion dollars per year per Al-Qaeda member to defeat them. It’s not making ourselves safer, it’s undermining the economy, and I’m troubled by that number because it shows flaw in our strategy.
McGovern threw in the crucial point that the war in Afghanistan isn’t about Al-Qaeda:
If there’s 50 Al-Qaeda, let’s go after those 50. But that’s not what we’re doing. We’re going after the Taliban, we’re nation-building, we’re making huge policy that changes month to month.
I wish they’d focus more nation building in Worcester, Massachusetts. We have issues here that are critical, and employment is one of them.
I’m glad McGovern and Pingree kept bringing the conversation back to this question, because it is indeed the key one. For weeks now, the House and Senate have turned back bills aimed at creating jobs and economic growth because of unfounded deficit hysteria. And yet, we’re increasing the deficit and throwing money way to the tune of $7 billion every month on the wars. It’s almost surreal.
The supplemental will likely be up for a vote in the House tomorrow. McGovern and Pingree are confident that they will be able to get a vote on McGovern’s amendment to impose a responsible timetable on the war in Afghanistan. There will also likely be a vote to strip foreign aid to Afghanistan from the bill. And finally, the war funding portion of the bill will be put to a straight up or down vote.
Any Representative who fails to vote for a timetable and vote down funding on this war is literally taking jobs, food and shelter away from Americans and throwing it into a pit halfway across the world. They are denying their duty to take care of their constituents, they’re pushing our economy further towards crippling depression, and they’re morally bankrupt.
Rich people complain about the fact that they are paying more than their fair share of Federal income taxes. If you think that everyone, rich or poor, should pay the same amount of income tax, this is true. Of the $8.8 trillion paid in income tax in 2007, the top 1%, income wise, paid over 40% or $451 billion according to an IRS report. (Note: this information was provided by Frank Thomas.) This was more than the bottom 95% paid. However, for all they paid, they still made tremendous gains in income and wealth while the middle class stagnated, and tax policies were largely the reason why the rich got richer while the poor got poorer.
The fact of the matter is that, as late as 1980, the top 1 percent by income in the United States had about nine percent of total national income. But since then, you’ve had increasing concentration of income and wealth to the point that by 2007 the top 1 percent was taking home 21 percent of total national income. Now, when they’re taking home that much, the middle class doesn’t have enough purchasing power to keep the economy growing. That was hidden by the fact that they were borrowing so much on their homes, they kept on consuming because of their borrowing. But once that housing bubble exploded, it exposed the fact that the middle class in this country has really not participated in the growth of the economy, and over the long term we’re not gonna have a recovery until the middle class has the purchasing power it needs to buy again.
The top tax rate under Eisenhauer was 92%; under Nixon it was 77%. When Reagan entered office, it was 69%; when he left, it was 28%. Under Reagan the national debt tripled due to the fact that he had dropped income tax rates so low. Clinton raised tax rates to 39.6%, had a booming economy and actually balanced the Federal budget and paid down the national debt!
There are two purposes for collecting taxes: 1) to fund the government to do the various things that we want government to do and 2) to promote economic growth while lessening income inequality. Therefore, tax rates have to be high enough in general so that the government doesn't go into debt and 2) tax rates have to be progressive enough that income and wealth inequality doesn't increase. The top tax rate today is 35%. But wealthy people pay on average an even lower rate due to the fact that most of their income is in capital gains which are taxed at 15%.
In addition when tax rates were 92% under Eisenhauer CEO pay was aoround $2 or $3 million. This is because higher amounts would have been essentially confiscated and so money was plowed back into the business instead of being dispensed as CEO pay. Today most CEO pay is in the form of stock options which means that getting stock prices higher is the main concern of most CEOs and, when they cash in those options, they only pay taxes at the 15% capital gains rate. The fairness of the tax structure needs to be made clearer in that the first increment of money made by all people is taxed at the same rate while higher increments are taxed at progressibvely higher rates. What that means, for example, is that billionaires should pay the same rate on their first $100,000. of income as do those whose total income is $100,000. Fair enough? It's only on higher increments, say the second and third increments of $100,000. and so on that billionaires should pay a higher rate of taxation. Lumping all of this together into one overall rate hides the fact that different increments of income, as they should be, are taxed at different rates. Obama is starting to make this distinction clear by saying that he will raise taxes only on those making more than $250,000. a year while keeping taxes on those making less than $250,000. the same as they are. He could make the distinction even clearer by pointing out that those making over $250,000. are in fact taxed at the same rate as those making less than $250,000. on the first $250,000. of their income. It is only on higher increments that they should be taxed more.
The net result of the lowering and deprogressivizing of the tax rates over the last 30 years is that 1) the government has gone broke and 2) income and wealth inequality has continued to increase. So what should be done to get our fiscal house in order? The government needs to raise top tax rates while keeping rates on the middle class and the poor at the same level or even lowering them. The government also needs to find other ways to raise revenues and reduce expenditures such as eliminating subsidies to oil companies and corporate farmers and taxing financial transactions. Ending wars and reducing the size of the military-industrial complex would also produce large cost savings. The government needs to be run more like a capitallist enterprise, that is, it needs to be in the business of capital accumulation instead of capital depletion which Repuiblican policies of lowering taxes have produced.
Republican policies of giving tax breaks to the rich need to be eliminated. Even though the rich pay most of the income taxes, the rate at which they are now paying isn't sufficient to prevent widespread inequality and to prevent the government from taking on massive debt while their percentage of the national income continues to increase. Eliminating fraud, abuse and war would also save the government money. State capitalist economies, such as China and to a lesser extent some European economies, are building government wealth while the US model is resulting in increasing debt. What this means is that those nations as nations, despite the fact that they contain a lot of poor individuals, are growing stronger while the US as a nation, despite the prescence of a lot of rich individuals, is growing poorer. When the state acts as a capitalist, that is, the state is in the business of accumulating money or capital, that state will eventually dominate states like the US whose national model seems to be to let rich individuals and corporations cannibalize the national treasury for their own private purposes. Lobbyists and recent Supreme Court decisions have promoted the interests of the rich while neglecting the interests of the poor, the middle class and the government itself, and this means that the US government, as a capitalist, will find itself not only increasingly poor but eventually bankrupt. Right now it's in the position of having a credit card with no limit, it can borrow as much as it wants to. But some day that will no longer be the case, as many individuals have recently found out, and the chickens will come home to roost. The resultant austerity will not be pleasant for the American people nor for those whose interests reside chiefly in the military-industrial complex.
John Coltrane: One Down, One Up
Monk and Coltrane: Thelonious Monk and John Coltrane at Carnegie Hall
Best album of 2005 (*****)
Doug Ramsey: Take Five: The Public and Private Lives of Paul Desmond
This is a great book! Paul Desmond and Dave Brubeck formed the heart of one of the best all time jazz groups. Paul was the quintessential intellectual, white jazz musician. A talented writer, he never published anything. However author, Doug Ramsey has collected Paul's letters here. How ironic that now his writing in the form of letters to his father and ex-wife, among others, is finally published showing another window on the mind of this talented person. A sideman, for the most part, his entire life, the Dave Brubeck Quartet might never have happened at all due to the fact that Paul had managed to offend Dave to the point where he never wanted to see him again. It had to do with a gig that Paul actually was the leader of. Paul wanted to take the summer off to play another gig, and Dave wanted Paul to let him take over the gig at the Band Box in Palo Alto, CA. Paul wouldn't let him and Dave, married with two children, proceeded to starve. Due to an elaborate publicity campaign, when he realized the error of his ways, Paul managed to worm himself back into Dave's good graces. The rest is history. This book is remarkable for the insight it gives into a working jazz musician's mind, wonderful pictures and interviews with the significant figures in Paul's life. Author Ramsey, not a remarkable penman himself, has nevertheless done a magnificent job of assembling all these various materials. Unlike a lot of jazz authors, he doesn't overly idolize his subject with the result that you get the feeling that you have met a real person and not a idealized version. That's high praise indeed for any biographer. (*****)