Republicans Discover Evidence of Jobs Crisis

By Ezra Klein Feb 6, 2014
Bloomberg


The U.S. has been in a jobs emergency since at least 2008. The cause of the crisis -- too little demand -- isn’t mysterious, and neither are the solutions. We could invest in infrastructure to create construction jobs. We could give tax breaks to employers who hire new workers. We could restore the payroll tax cut to workers so they have more money to spend. We could help state and local governments hire back some of the employees they laid off during the recession. Macroeconomic Advisers, an economic consulting firm, found that the American Jobs Act, which contained many of these policies, would have created 2 million jobs.

But in recent years, these policies have been either blocked or canceled by congressional Republicans. They fought Democrats to scuttle the American Jobs Act and allow the payroll tax break and long-term unemployment benefits to expire. Creating jobs, they argued, was neither feasible nor affordable.

That’s the proper context in which to view this week’s hysteria about Obamacare. The nonpartisan Congressional Budget Office just released updated estimates for the health law. It found that the disastrous rollout last fall put Obamacare behind schedule -- on track to insure 2 million fewer people than projected by the end of 2014. On the other hand, it also found that insurance premiums were about 15 percent lower than projected, and that the law would cost less than previously estimated. It found that the risk corridors designed to safeguard insurance companies from the effects of acquiring too many high-risk customers -- which Republicans have been calling an “insurer bailout” -- will actually yield $8 billion in net payments from insurers to the federal government.

The finding that made the news, however, concerned the Affordable Care Act’s long-term effect on labor supply. In past reports, the CBO has estimated that the law will, on net, lead some people to drop out of the labor market or cut back on their hours because their health insurance is no longer tied to their job. Imagine a 62-year-old who would like to shift to part-time work but can’t because he can’t afford -- or, due to pre-existing conditions, wouldn’t even be sold -- insurance on the individual market. Now, because Obamacare has made that insurance affordable and available, he can -- and will. As a result, his work hours will be (voluntarily) reduced.

Previously, the CBO had estimated this would reduce total hours worked by about 0.5 percent. Now, it estimates the effect at 1.5 percent to 2 percent of hours worked -- a reduction in hours equivalent to more than 2 million full-time jobs.

The CBO was very clear about what this means: “The estimated reduction stems almost entirely from a net decline in the amount of labor workers choose to supply, rather than from a net drop in business’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment.”

The CBO’s clarity didn’t forestall a festival of motivated misreadings. The conservative Washington Times, for instance, featured this headline: “Obamacare will push 2 million workers out of labor market.” That has the distinction of being not only untrue but also the very opposite of the truth. Workers are choosing to cut back hours -- not being pushed to do so.

Whether this is good or bad depends on your views about human flourishing. Lower labor-force participation is bad for economic growth. On the other hand, the point of life is not for everyone to work every possible hour until they die. Workers should be able to choose to leave their jobs or cut their hours without worrying that their families won’t survive a medical emergency. In addition, as the Urban Institute’s Donald Marron tweeted, “employers will be competing harder for workers,” which will push wages to rise for everyone remaining in the workforce.

In context, the freakout over the CBO estimate is perverse. Is it really the Republican position that we should do nothing - - in fact, cut aid -- for the millions of long-term unemployed, but express shock and terror that employed people will, in a few years, cut back their hours or leave the labor force by choice? Shouldn’t we be more concerned about people desperate to join the workforce, who can’t, than about people voluntarily leaving the workforce, who can?

Some Republicans will say, of course, that they don’t oppose helping the jobless. They just oppose increasing the deficit or increasing taxes to do so. But repealing Obamacare raises the deficit, too! So rather than increasing the deficit to help people who want jobs get them, we would be increasing the deficit to make sure people who want to leave their jobs can’t. That’s insane.

Policies don’t exist in vacuums. By untying the link between employment and health care, the Affordable Care Act reduces the incentive to work. But there are ways to increase incentives to work without making people dependent on their jobs for health insurance. We can help people without taking away their health care.

So here’s a simple proposal. Repeal of the Affordable Care Act would cost hundreds of billions of dollars over the next few decades because of the law’s spending cuts and new revenue. So instead of repeal, how about if Congress devotes that same amount of money to policies to increase employment now. Republicans could even dictate that all the money flow to targeted tax cuts.

If they are worried about employment rather than scoring points against Obamacare, this should be an easy compromise to strike. Anyone think it will be?

A Nation of Moochers and Potheads...To Be Spied Upon Forever

 

 

The Economic Consequences of US Debt Default

Teapublican Fantasies
by JACK RASMUS


The economic ignorance of the Teapublican faction of the Republican party in the US House and Senate is perhaps exceeded only by the similar ignorance of its economic advisers.

Appearing in the public press in recent days is the latest ‘brilliant’ Teapublican view that a default by the US government on paying interest on its debt would not have a negative impact on the US or global economy.

Both the US and global economies are already slowing noticeably, with the Federal Reserve in the US continuing to downgrade and lower its estimates of future US growth, and the IMF doing the same for growth rates in China and the rest of the world. The Teapublicans claim a US debt default would not impact these already negative trends.

While it is true that the US government will not completely run out of money with which to pay its debts on October 17, 2013, as Treasury Secretary, Jack Lew, has publicly stated, it is equally true that it will definitely do so sometime between October 24 and early November. Thereafter, some funds will continue to come into the government, but not nearly enough to pay all its bills. That will force the Obama administration to choose between what it will pay: either bondholders who own US debt or grandma and grandpa on social security. Teapublicans no doubt want to force Obama to make that ‘Hobsons’ Choice’ (i.e. damned if you do and damned if you don’t). Teapublicans will argue he should pay the bondholders first, and forego paying social security. It’s their way to start cutting social security before they even negotiate an official reduction in it with Obama.

To quote one Teapartyer’s statement today, Republican Representative, Joe Barton, of Texas: “We have more than enough cash flow to pay interest on the public debt, so there is no way we’re gong to default on the public debt unless the president of the United States intentionally does so”.

Such statements by lesser known Teapublicans were followed up today in the business press with an article by Teapublican notable, Paul Ryan. Ryan made it clear that the focus of the debt ceiling discussion was to provoke further concessions by Obama on Social Security-Medicare cuts. US House radicals thus are attempting to put Obama in a negotiating box: either he agree to cut Obamacare or to cut Social Security-Medicare.

What the Teapublican faction in all their economic ignorance don’t understand, however, is that the psychological effects of a default—or even a near default—on the US and global economy will prove significant. One does not have to wait for a complete default for that to happen.

What then are some of the possible impacts?

First is the prospect of rising interest rates. Interest rates have already begun to rise, starting on a base that has already risen since the US Federal Reserve’s bungled attempt to signal over the past summer its intent to begin reducing (tapering) its Quantitative Easing (QE) $85 billion a month liquidity injections. That Fed ‘faux pas’ has already driven up long term rates by more than 1%, thereby causing an abrupt halt to a very timid US housing recovery earlier this year. In the past month banks and mortgage servicing companies have already announced thousands of layoffs in their mortgage departments, signaling the virtual end of that housing recovery. Further interest rate hikes, short and long term, on top of the Fed’s recent bungling—which will now certainly occur as the default approaches—will all but ensure the end of any housing recovery in the US.

Short term rate increases will most likely accelerate further throughout the month of October. That includes, in particular, Treasury bill rates which will in turn impact other rates. ‘Other rates’ include the critically important ‘Repo Market’ rates. Destabilizing the repo market is a dangerous game. It is likely the locus for the next financial crash, the analog to the subprime market that was the center of the last financial crash. Teapublicans are thus playing a dangerous game, one that may well in a worst case scenario precipitate another financial instability event on the scale of 2008.

Rising interest rates also mean the end of the latest stock price and junk bond booms. In itself, that doesn’t affect average folks much. But the psychological impact of a rapid decline in asset prices can, and does, spill over to consumer and business spending. That leads to layoffs, in a US job market that is, at best, producing only part time, temp, and low paid jobs as it is.

Rising rates and an even weaker job market in November-December will translate into slowing consumption, which is already showing signs of weakness in August-September. Retail sales in general will weaken still further as a consequence of the debt ceiling default, as will an already ‘long in the tooth’ auto sales cycle.

The negative impact of debt default on consumption is already becoming evident in recent weeks. A Gallup Poll in recent days showed consumer confidence dropping precipitously. While some argue confidence surveys are typically volatile and unreliable as indicators of consumer spending, that is not as true for abrupt and significant movements in confidence indicators. That may now be happening, as the public begins to focus on the dual crises events.

The recent Gallup poll in question fell to -35 from a prior -15. This compares to -56 during the August 2011 worst period of that prior debt ceiling debacle. During the worst period of October 2008 the index was -66. Already falling significantly early in the current crisis, one can estimate where the -35 current poll will be by October 17-24 should the crisis not be resolved by then. We will almost certainly be in the August 2011 territory, when the third quarter US GDP nearly went negative (and did so if the GDP deflator was substituted with the CPI index for that quarter).

Globally, the approaching debt ceiling crisis has already provoked widespread public responses by foreign governments, warning a potential default by the US would have dire consequences for US debt holdings and future purchases. China, Japan, and the IMF have all raised warnings in recent days. If default occurs, then US bond rates will rise even further and faster than at present, raising a real question whether they will continue to purchase US Treasury debt when the price of their holdings are declining significantly in the wake of a default.

There are also important implications of a default (or even near default) for the Eurozone’s own current economic recovery and its still very fragile banking system.

Yet another negative impact globally will be a decline in Euro exports. A default situation would result in the US currency losing value, causing a further rise in the already fast appreciating Euro currency. That trend would challenge German and Euro export growth and therefore that region’s tepid 0.3% last quarter’s recovery.

Another problem potentially to grow worse is the Euro banking system. The Eurozone’s version of QE-the LTRO liquidity injection policy of the past year amounting to more than $1.5 trillion-will soon need another LTRO II injection by the European Central Bank in a matter of months. In addition, more than $1 trillion of the LTRO I will need to be refinanced soon. Nearly all the major banks in Italy, for example, have yet to repay anything of their share of the LTRO $1.5 trillion and will need further liquidity in coming months. Rising interest rates from a debt default in the US will spill over to Europe, thus raising the costs of LTRO II, as well as the financing of much of LTRO I. That will cause further fragility in the Euro banking system and economic recovery there, especially for the highly fragile Italian banks.

For Japan, its recent export gains would also slow, at a time when it has decided to raise taxes while suspending structural economic reforms.

Currency volatility in emerging markets would also intensify from a debt default in the US, likely causing a retreat once again in real growth in those markets, just a few months after their recent ‘stop-go’ provoked by US Fed QE policy uncertainties this past summer.

Throughout the past 18 months, this writer has forewarned that a fragile US economic and global recovery-not nearly as robust as some maintain-is susceptible to a ‘double dip’ recession in 2013-14 should one or more of the following negative ‘tail events’ occur: first, a renewed banking crisis in the Eurozone or elsewhere; second, significant further deficit cutting in the US; and thirdly a continued drift upward in US long term interest rates as a consequence of QE tapering or other events. While it appears the Euro banking crisis has temporarily stabilized—except for Italian banks perhaps—the deficit cutting and interest rate trajectory in the US are very real and serious trends that may yet precipitate a descent into a double dip condition in the US economy.

And if the Teapublican faction in the US House of Representatives managers to prevent a resolution of the debt ceiling issue into the latter part of October, then the economic consequences for both the US and global economies will be severe, and may even prove sufficienet to precipitate a double dip recession in the US.

The Tea Party thinks it hates Wall Street. It doesn’t.

By Mike Konczal, Published: October 12

When it comes to financial regulation, there are no substantial issues on which Tea Party Republicans differ from Wall Street.

This fact may surprise you, because the latest argument among conservatives is that the Tea Party agenda isn't shaped by the financial sector. In fact, they'll say, the Tea Party is where the smartest ideas on financial reform are being generated.

Tim Carney of the Washington Examiner has made this case, writing that a “Republican who doesn’t care about Bank of America checks wasn’t possible before the Tea Party.” And Ross Douthat argues that the same far-right members of the Tea Party who called for the shutdown are “more open to new ideas on ... financial reform.”

One problem with this argument is that many Tea Party Republicans are in favor of the same bills favored by the financial industry. Take the Financial Takeover Repeal Act of 2013, a one-line bill sponsored by Sen. David Vitter (R-La.) that repeals Dodd-Frank and replaces it with nothing. This bill has 22 co-sponsors this year, including notable Tea Party senators such Mike Lee, Rand Paul and Ted Cruz.

Of course, not everyone on Wall Street is in favor of repealing Dodd-Frank and replacing it with nothing. After all, that could produce a backlash from the public. In many cases, the financial industry would just prefer to weaken existing regulations. And here, too, they've often found support from Tea Party types.

For instance: One change favored by Wall Street is to pull back on the more aggressive parts of Dodd-Frank's derivatives regulation. And here we see Citigroup actually writing the text of a bill that House Republicans took up and voted for. That was just one of many in the grab-bag of derivatives reforms that the Republican House, with some Democratic support, pushed for this year.

The financial industry has also pushed to weaken the independence of the Consumer Financial Protection Bureau (CFPB). And changing the funding of the CFPB has been a demand from the GOP from the beginning. Notice that the question of funding independence doesn't usually break down along ideological lines. The bank-friendly Office of the Comptroller of the Currency, for instance, also isn't funded through the annual appropriation process. Yet Senate Republicans didn’t make a fuss over this when they voted to put Thomas Curry in charge of the OCC last year.

Another reform at issue is whether the Federal Deposit Insurance Corp. (FDIC) should be able to force financial firms into a receivership during a crisis — a move that would end Too Big To Fail. For this process to work, those financial firms would have to be subject to scrutiny, special capital requirements, restrictions on capital purchases and bonuses, and possible restructuring. Yet the GOP wanted to lift these requirements as part of their government shutdown wish-list. It’s also a major feature of Paul Ryan's plan.

And there's more than Dodd-Frank at issue here. The Department of Labor, for instance, is releasing new fiduciary requirements to better deal with 401(k)s, IRAs and the rest of the wave of personal, private, tax-exempt savings accounts. House Republicans are trying to block these rules.

One might think conservatives would support these fiduciary requirements as a way of bolstering support for private-savings vehicles like 401(k)s over Social Security. Back in the 1980s, conservative think tanks supported tax carve-outs for private-savings vehicles in order to create the conditions for ending Social Security. And nowadays, one of the strongest arguments for boosting Social Security is the growing suspicion that 401(k)s and other private retirement programs are ripping people off. The lack of clear standards can actually strengthen support for government safety-net programs.

Still, the financial industry doesn’t want the fiduciary requirements, and the Tea Party doesn’t either.

These are not minor nitpicks, or obscure regulatory codes I’m bringing up as cheap shots. These are the major, substantive issues of the regulatory response to the largest financial crisis since the Great Depression. I’m not saying that you should support all these measures (though I do think this list, on the whole, is smart policy). But the pattern is obvious.

Some people will bring up the Brown-Vitter plan to raise capital significantly. That's a plan to strengthen financial regulation and is supported by a Republican. But the bill only has one other Republican co-sponsor, having lost one since its debut. And it's worth noting that Vitter hasn't pushed for higher leverage requirements at other points. (Indeed he didn’t acknowledge the surprise increase in leverage requirements over the summer proposed by U.S. banking regulators.)

Similarly, there are now three remaining important capital rules still on the table, dealing with liquidity, extra capital for the biggest banks and the question of how banks hold debt. There’s no support, or acknowledgement, of any of these rules from either the Tea Party or Vitter (other than a push to repeal Dodd-Frank entirely).

What are the takeaways here? The first is that the actual disagreements between the Tea Party and Wall Street appear to be over tactics — whether shutting down the government will help or hurt the cause. Tactical disagreements are important, but they shouldn’t be confused with substantive disagreements on policy.

Another point is that the alliance between Tea Party Republicans and Wall Street often gives substantial power to centrist Democrats on these issues, who become the swing vote on what gets passed. Given that financial influence is large with this group, it’s of grave concern that there's not actually a left-right alliance concerned with Wall Street.

The one time a left-right alliance on financial matters did emerge, in the form of support for a Fed audit amendment during Dodd-Frank, the alliance collapsed quickly. Those on the right wanted to dismantle the dual mandate, while those on the the left half wanted to remove bankers and regional Fed chairs from decision-making. Meanwhile, most of the “smart” conservative takes on financial reform start with the premise that Dodd-Frank is the law on the books, while Tea Party intellectuals do not.

Finally, the way the conservative press approaches this topic doesn't help. Take a recent piece by Tim Carney on the House Republican plan, known as the PATH Act, to privatize the GSEs without maintaining a credit guarantee. There are financial groups who oppose this bill (“The most powerful opposition to the House ... comes from the Mortgage Bankers Association”), which leads Carney to suggest that conservatives are standing up to "special interests." But he doesn’t mention that other parts of the financial industry do support the bill. Indeed, the American Securitization Forum has testified that they “strongly support the introduction of the PATH Act.”

Which is to say that there’s no neutral position here. The key question is how to best create rules for the financial system so that it works better for the economy as a whole, a process that will necessarily create winners and losers. Perhaps it is just a coincidence that Tea Party anger over the idea of a federal, regulatory state just happens to overlap with the interests of Wall Street. Perhaps. But I see no reason people should take comfort in that.

The Sequester, Explained

—By Kevin Drum| Mother Jones

Where did the whole idea of sequestration originate? 

It goes back to 1985. The tax cuts of Ronald's Reagan early years, combined with his aggressive defense buildup, produced a growing budget deficit that eventually prompted passage of the Gramm-Rudman-Hollings Act. GRH set out a series of ambitious deficit reduction targets, and to put teeth into them it specified that if the targets weren't met, money would automatically be "sequestered," or held back, by the Treasury Department from the agencies to which it was originally appropriated. The act was declared unconstitutional in 1986, and a new version was passed in 1987.

Sequestration never really worked, though, and it was repealed in 1990 and replaced by a new budget deal. After that, it disappeared down the Washington, DC, memory hole for the next 20 years.

What about the 2013 version? Where did that come from? 

 In the summer of 2011, Republicans decided to hold the country hostage, insisting that they'd refuse to raise the debt ceiling unless President Obama agreed to substantial deficit reduction.

After months of negotiations over a "grand bargain" finally broke down in July, Republicans proposed a plan that would (a) make some cuts immediately and (b) create a bipartisan committee to propose further cuts down the road. But they wanted some kind of automatic trigger in case the committee couldn't agree on those further cuts, so the White House hauled out sequestration from the dustbin of history as an enforcement mechanism. It would go into effect automatically if no deal was reached.

In the end, no immediate cuts were made, but a "supercommittee" was set up to propose $1.5 trillion in deficit reduction later in the year. To make sure everyone was motivated to make a deal, the sequester was designed to be brutal: a set of immediate, across-the-board cuts to both defense spending and domestic spending, starting on January 1, 2013. The idea was that everyone would hate this so much they'd be sure to agree on a substitute.

Needless to say, no such agreement was reached. So now we're stuck with the automatic sequestration cuts.

How big is the sequester?  

You'd think this would be an easy question to answer. In fact, it's surprisingly complicated! Are you ready?

The basic amount of the sequester is $1.2 trillion in deficit reduction over 10 years. But when you reduce spending, you also reduce interest on the national debt. This means that we only need $984 billion in actual program cuts. And since it's for 10 years, naturally that means we divide by nine to get annual spending cuts of $109 billion. For FY2013, this comes to $12 billion per month, because there are only nine months from January (when the sequester begins) through the end of the fiscal year in September.

But wait! The fiscal cliff deal in January delayed the sequester until March 1, so it also lopped off two months of cuts. This means that the total amount of spending cuts for this year clocks in at $85 billion.

So what gets cut? 

The sequester is split evenly between defense spending and domestic spending. The domestic half has two parts: Medicare and everything else. For Medicare, the sequester specifies a flat 2 percent cut in reimbursements. Doctors will continue to bill at their usual rate, but they'll only receive 98 cents on the dollar. According to the Congressional Budget Office, here's how the whole thing nets out (see Table 1-2):

• Defense: $42.7 billion
• Medicare: $9.9 billion
• Other domestic: $32.7 billion

Aside from Medicare, how are the other cuts divvied up?  

The sequester legislation requires the cuts to come evenly from every budget account. This means everything (with a few exceptions) gets cut the same amount. This is an especially stupid way to cut spending, since everyone agrees that some programs are more important than others, but that's the way it is. If you really want to torture yourself, you can read this Office of Management and Budget report, which contains 224 pages listing the sequester amounts from every single agency in the United States government. It's followed by another 158 mind-numbing pages of agency accounts that are exempt from the sequester.

But as stupid as this is, don't get too excited about it. It's only for FY2013, which lasts seven more months. After that, although the total amount stays in place ($109 billion, split evenly between defense and domestic spending), congressional appropriations committees have much more flexibility about how to juggle the cuts.

Aren't we still in a recession? What are these cuts going to do to the economy?  

Technically, we're no longer in a recession, but there's no question the economy remains weak. A big bunch of dumb spending cuts is about the last thing we need.

That said, the actual impact of the cuts is hazy. Among private forecasting firms, Macroeconomic Advisers figures the sequester will cut GDP by 0.7 percentage points, while IHS Global Insight puts it at 0.3 percent. Back before the sequester was delayed, CBO estimated 0.8 percentage points. Given a consensus growth forecast of about 2 percent for this year, this is a fairly substantial headwind. In terms of jobs, it will probably increase the unemployment rate by about half a percentage point. This is why Fed chairman Ben Bernanke basically told Congress on Tuesday that they were nuts to let the sequester proceed.

That's all sort of bloodless. How about some horror stories? You know, three-hour waits at airports because of TSA cutbacks, food poisoning epidemics thanks to USDA cutbacks, that sort of thing?  

The White House has been making a lot of hay over its 50-state breakdown of cutbacks. California, for example, will lose 1,200 teachers, 8,200 Head Start slots, 49,000 HIV tests, $5 million in meals for seniors, etc. You can see the forecasts for your state here. Aside from that, Wonkblog seems to be the go-to site for alarmist coverage of the sequester. Brad Plumer has the impact on R&D spending here. In an interview with Ezra Klein, former NIH director Elias Zerhouni says it will be a "disaster for research." Suzy Khimm interviews a former Homeland Security official here who says smuggling will increase. And MoJo's own Zaineb Mohammed lists six ways the sequester will hurt the environment here, including higher risk of damage from wildfires.

That's terrible! Does anyone have a plan to avoid the sequester? 

 Sure. Sort of. President Obama has proposed a substitute that includes about $1.1 trillion in spending cuts and $700 billion in new revenue. It was dead on arrival because Republicans are flatly unwilling to consider any plan that includes higher taxes. Back in December, Republicans in the House passed a bill that would have kept all the domestic cuts and replaced the defense cuts with yet more domestic cuts, mostly to anti-poverty programs. It was DOA too, for obvious reasons. House and Senate Democrats have plans as well.

But the truth is that there's probably no deal to be made. Republicans won't accept tax hikes, Democrats won't accept any bill that's exclusively spending cuts, and neither party is willing to just kill the sequester outright, which is the most sensible option. For now, all that's really happening is that both sides are barnstorming the country blaming the other guys. Obama seems to be winning that battle at the moment.

'Collusion With Austerity' Will Sink Obama, say Progressives

Tuesday, February 26, 2013 by Common Dreams  
An 'elite bipartisan consensus' sends the bill for Wall Street’s mess to the middle class and the president has done far too much "playing along"
- Jon Queally, staff writer


As the deadline of the so-called "budget sequestration" nears, progressives are warning President Obama that his obsession with giving credence to the "cut the deficit" antics of Republicans is a trap and that if Democrats don't jettison the failed "economics of austerity" immediately, they'll have no one to blame but themselves.

Richard Eskow calls it "Washington's Stupid, Destructive Game."

Robert Kuttner, his colleague at the Campaign for America's Future, names it "The Sequestering of Barack Obama," while The Nation's Katrina vanden Huevel says it's not the president, but "common sense" that's being locked up in Washington as Democrats systematically trade the proven economics of stimulus spending—which has so far saved the economy from ruin following its collapse in 2008—for the 'slash and burn' politics of the Republican party.

With the usual candor, Princeton economist and Nobel laureate Paul Krugman marked the whole debacle down last week as the "Sequester of Fools."

What these progressive voices have in common (in addition to acknowledging the ridiculous nature of the debate by Beltway establishment figures) is agreement that President Obama and the Democrats—far from winning a public opinion "blame game"—are sadly playing directly into the hands of a Republican Party hell bent on pushing an economic austerity agenda on the country at a time when the exact opposite course is needed.

And the chorus of alarm against the President's strategy—namely his willingness to cut programs like Social Security and Medicare while simultaneously embracing the flawed wisdom of budget cuts and deficit reduction—is growing.
As recently as today, in remarks made at a shipbuilding plant in Virginia, Obama said:

Now, the reason that we're even thinking about the sequester is because people are rightly concerned about the deficit and the debt.

But, according to economists, that's exactly "not right." That's exactly "wrong." And this is the problem.

Writing at The American Prospect, Kuttner explains:

Though too few Democrats will come right out and say it, there is a far better path to both economic recovery and eventual stabilization of the debt ratio. We need to increase public spending in the next few years, using both deficit spending and higher taxes on the wealthy, to get the economy back on a high-growth path. Taxes on the wealthy are better put toward public investment than to deficit reduction. Taxing the rich is far less of a hit to purchasing power than hiking taxes on working families, who spend nearly all of their disposable income. With a program of economic expansion, we can reach a stable long-term debt ratio, but at a higher level of economic output and a more broadly shared prosperity. The goal is economic recovery—and the recovery improves the debt ratio, not the other way around.

Among the economists in this camp are Nobel laureates Paul Krugman and Joseph Stiglitz, as well as Larry Mishel of the Economic Policy Institute, Dean Baker of the Center for Economic and Policy Research, James Galbraith of the University of Texas, and former Biden chief economist Jared Bernstein. In a recent article for the Economic Policy Institute, economists Josh Bivens and Andrew Fieldhouse observed that the “output gap”—the difference between what the economy is producing and what it is capable of producing—is now about a trillion dollars a year. If you cut the budget in such circumstances, you slow growth and get further away from stabilizing the debt ratio. The problem is that these people are not part of the conversation at the White House, which is a dialogue among Obama’s top aides, the corporate austerity-mongers, and Republicans, all of whom believe in deficit reduction.

At the Center for Economic and Policy Research, Dean Baker says the clear problem is that both parties have played into the idea that deficits are a problem when, in fact, the opposite is true.

"Rather than being a bad thing," Baker writes, "the deficit is providing a needed boost to the economy." And challenging the idea that deficit reduction will spur private spending, he adds: "There is no plausible story whereby private-sector demand will fill the gap created by a smaller deficit."

"Colluding in the politics of budget austerity has left Obama with no real capacity to offer the public investment that the economy needs for a robust, broadly-based recovery, and leaves him with the prospect of a weak economy between now and the end of his term–unless he drastically shifts course and repudiates the entire view of the budget and the economy." -Robert Kuttner

Robert Reich, UC Berkeley economist and former labor secretary, argues that unless Obama and the Democrats confront the two-headed lie of "austerity economics and trickle-down economics" pushed daily by the GOP, "the nation will continue to careen from crisis to crisis, showdown to showdown."

The problem is not deficits, according to Reich, but "too few jobs, lousy wages, and slow growth." He continues, "Cutting the budget deficit anytime soon makes the problem worse because it reduces overall demand. As a result, the economy will slow or fall into recession – which enlarges the deficit in proportion."

If you want proof, says Reich, just look at what austerity policies have done to economies across Europe.

Yet, as vanden Huevel writes, "most of Washington — from the newly reelected Democratic president to the self-described insurgent Tea Party Republicans — is ignoring this reality to focus on cutting deficits." She writes:

The Republican Congress seems intent on letting the “sequester” take place — the idiotic across the board cuts that were explicitly designed to be anathema to both parties. Senate Democrats call not for repealing these cuts, but for “paying for” delaying them for a few more months.

Why this fixation? Deficits aren’t careering out of control. In fact, as the Congressional Budget Office reports, in relation to the economy, the deficit has fallen faster over the past three years than at any time since the demobilization after World War II. Calls for cutting Medicare benefits ignore the reality that the slowing rise in Medicare costs has already cut about $500 billion from its projected costs over 10 years compared to estimates made two years ago.

Meanwhile, Kuttner argues that by playing into the GOP's mantra on 'cutting deficits' as a legitimate strategy, Obama has "miscalculated both the tactical politics of the sequester and the depressive economic impact of budget cuts on the rest of his presidency."

He continues:

Long term, colluding in the politics of budget austerity has left Obama with no real capacity to offer the public investment that the economy needs for a robust, broadly-based recovery, and leaves him with the prospect of a weak economy between now and the end of his term–unless he drastically shifts course and repudiates the entire view of the budget and the economy.

And later notes:

As the Greeks have painfully learned over and over again, you can cut spending and raise taxes, and the deficit just keeps growing larger—because you are destroying your economy. The same has been demonstrated for Spain, Portugal, and Britain. Something similar occurred on a more modest scale in the fourth quarter of 2012 right at home.

And George Lakoff, professor of linguistics and political analyst, says that until Democrats confront the GOP's moral stance—one that actually favors the pain imposed by austerity—the Democrats and Obama continue to miss an opportunity to discuss the "heart of the problem" that undergirds the ongoing series of fights over the economy. What that demands, says Lakoff, is a vocal challenge on the part of the Democrats and progressives to address the "moral divide at the heart of our public life."

"Whether they know it or not, those pushing for smaller deficits are promoting less growth and more unemployment." - Dean Baker, CEPR

Taking a deeper look at Republican intentions, Eskow says the ongoing debate amounts to a "hostage crisis" in which austerity economics is being forced on "an unwilling population – [cloaked] in a false debate about how to do it, not about why we shouldn’t do it at all."

And to Republicans, argues Kuttner, it hardly matters if the fight now hurts them in the short term, when their eyes are fixed on 2014 and 2016 when few voters will likely remember the current series of events.

"An austere budget slows the recovery and leaves the Democrats with no economic bragging rights going into 2014 and 2016," he writes.

But would the GOP be so cynical as to trash the economy for political gain? Yes, says Kuttner, before concluding that in upcoming election cycles: "nobody will much remember who was more at fault in the sequester battle of early 2013. The voters will be looking at their own economic situation, and it won't be pretty."

And as Baker concludes: "Whether they know it or not, those pushing for smaller deficits are promoting less growth and more unemployment. It would be the best possible outcome of the sequester debate if this simple point could be made in polite circles in Washington again."

But it's not to be. As vanden Huevel laments:

This elite consensus ignores how we got into the fix we are in. The deficit was under 2 percent of gross domestic product in 2007 and the debt under 40 percent of GDP when Wall Street’s wilding blew up the housing bubble and drove the economy into the Great Recession. Wall Street got bailed out, but the deficit soared to 11 percent of GDP and Americans lost nearly 40 percent of their wealth. You’d think anyone so fixated on avoiding another Pearl Harbor moment would focus on making certain Wall Street was properly shackled, and the too-big-to-fail banks broken up.

But the elite bipartisan consensus is focused on sending the bill for Wall Street’s mess to an already battered middle class, by weakening the basic pillars of a family’s economic security — Social Security, Medicare and Medicaid. And they are a lot closer than anyone thinks. The sequester is just the first of a series of austerity bombs that the Republican Congress will use to extort cuts in these benefits.

It’s time to stop such extortionists from holding our country’s economic future hostage.

The most notable hostage of the austerity trap, however, seems to be President Obama himself. And unless he changes course soon, his critics say, it will be more than his legacy that gets sunk.

Obama Could End the Sequester

President Obama has revealed his real preferences in the current blame game by not calling for a clean bill eliminating the Sequester.
February 27, 2013 | By William K. Black

We are in the midst of the blame game about the “Sequester.” I wrote last year  about the fact that President Obama had twice blocked Republican efforts to remove the Sequester. President Obama went so far as to issue a veto threat to block the second effort. I found contemporaneous reportage on the President’s efforts to preserve the Sequester – and the articles were not critical  of those efforts. I found no contemporaneous rebuttal by the administration of these reports.

In fairness, the Republicans did “start it” by threatening to cause the U.S. to default on its debts in 2011. Their actions were grotesquely irresponsible and anti-American. It is also true that the Republicans often supported the Sequester.

The point I was making was not who should be blamed for the insanity of the Sequester. The answer was always both political parties. I raised the President’s efforts to save the Sequester because they revealed his real preferences. Those of us who teach economics explain to our students that what people say about their preferences is not as reliable as how they act. Their actions reveal their true preferences. President Obama has always known that the Sequester is terrible public policy. He has blasted it as a “manufactured crisis .”

The administration has stated publicly the three reasons this is so. First, the Sequester represents self-destructive austerity. Indeed, it would be the fourth act of self-destructive austerity. The August 2011 budget deal already sharply limited spending and the January 2013 “fiscal cliff” deal raised taxes on the wealthiest Americans and restored the full payroll tax. The cumulative effect of these three forms of austerity has already strangled the (modest) recovery – adding the Sequester, particularly given the Eurozone’s austerity-induced recession, could tip us into a gratuitous recession.

Second, the Sequester is a particularly stupid way to inflict austerity on a Nation. It is a bad combination of across the board cuts – but with many exemptions that lead to the cuts concentrating heavily in many vital programs that are already badly underfunded.

Third, conservatives purport to believe in what Paul Krugman derisively calls the “confidence fairy.” They assert that uncertainty explains our inadequate demand. The absurd, self-destructive austerity deals induced or threatened by the Sequester have caused recurrent crises and maximized uncertainty. They also show that the U.S. is not ready for prime time.

When he acted to save the Sequester, Obama proved that he preferred the Sequester to the alternative. When the alternative threatened by the Republicans was causing a default on the U.S. debt (by refusing to increase the debt limit), one could understand Obama’s preference (though even there I would have called the Republican bluff). The Republicans, however, had extended the debt limit in both of the cases that President Obama acted to save the Sequester in 2011.

Similarly, President Obama has revealed his real preferences in the current blame game by not calling for a clean bill eliminating the Sequester. It is striking that as far as I know (1) neither Obama nor any administration official has called for the elimination of the Sequester and (2) we have a fairly silly blame game about how the Sequester was created without discussing the implications of Obama’s continuing failure to call for the elimination of the Sequester despite his knowledge that it is highly self-destructive.

The only logical inference that can be drawn is that Obama remains committed to inflicting the “Grand Bargain” (really, the Grand Betrayal) on the Nation in his quest for a “legacy” and continues to believe that the Sequester provides him the essential leverage he feels he needs to coerce Senate progressives to adopt austerity, make deep cuts in vital social programs, and to begin to unravel the safety net. Obama’s newest budget offer includes cuts to the safety net and provides that 2/3 of the austerity inflicted would consist of spending cuts instead of tax increases. When that package is one’s starting position the end result of any deal will be far worse.
In any event, there is a clear answer to how to help our Nation. Both Parties should agree tomorrow to do a clean deal eliminating the Sequester without any conditions. By doing so, Obama would demonstrate that he had no desire to inflict the Grand Betrayal.

Showdown Fatigue

Robert Reich

We’re one week away from a massive cut in federal spending — cuts that will hurt millions of lower-income Americans who’ll lose nutrition assistance, housing, and money for their schools, among other things; that will furlough or lay off millions of government employees (adding more competition for jobs in an already horrible job market--jef), reduce inspections of the nation’s meat and poultry and pharmaceuticals and workplaces, eliminate the jobs of hundreds of thousands of people working for government contractors, and, according to Leon Panetta and other military leaders, seriously compromise the nation’s defenses.

Bad enough. If the spending cuts go through next week our fragile economy will slow further, causing more unemployment and misery. When consumers don’t have the money to buy enough to keep the economy moving, and government pulls back this much, businesses can’t justify keeping people on.

Yet the silence is deafening.

Republicans won’t deal. Obama has already cut $1.5 trillion out of the budget but Republicans insist on far more. They want the White House to propose major cuts in Social Security and Medicare.

Meanwhile, the Bush tax cuts have been extended permanently to everyone earning up to $400,000. Only the richest 2 percent have to pay at the rate they did under Bill Clinton, which was far lower than rich paid before 1981. That will generate $600 billion — less than half of the cuts Obama has accepted.

No one in their right mind would call this a balanced approach to deficit reduction. Yet Republican’s won’t even consider raising taxes on the most fortunate members of our society. They won’t limit deductions and loopholes that have driven down the super-rich’s tax rates to single digits (remember Romney’s “carried interest” loophole for private-equity mavens?).

So where’s the outcry? Why aren’t more people up in arms? Why aren’t big businesses (including major military contractors) and Wall Street screaming into the ears of the GOP? Where’s the outrage from Main Street?

I suspect most Americans are suffering showdown fatigue. After all, we got through the debt-ceiling showdown of August 2011 and the fiscal-cliff showdown on January 1, and the world didn’t end. So most people figure Washington will find a way out of this one, too.

Others have bought the Republican-Fox News lies that the deficit is our biggest economic problem, and government spending is to blame. So a massive, abrupt, and indiscriminate cut in spending seems okay.

It’s not okay. It will hurt the most vulnerable members of our society, and much of the middle class.

Yet it would be even worse if Obama and the Democrats were to give in to Republicans, and not demand more from those who have never been wealthier. Inequality is widening again. All the economic gains since the Great Recession have gone to the top. The richest 400 have more wealth than the bottom 150 million Americans put together.

Why not limit the mortgage interest deduction to $25,000 a year, so the rest of us don’t have to subsidize mansion mortgages? Why not a wealth tax on assets in excess of $5 million to pay for early-childhood education? Why not a small tax on financial transactions (as Europe is now instituting) to finance better schools? Why not close the loophole that private-equity and hedge-fund moguls live off of, to finance child nutrition and social services for the poor?

It’s no time for showdown fatigue. It’s time to fight.

The Ongoing War: After the Battle Over the Cliff, the Battle Over the Debt Ceiling

 Robert Reich

“It’s not all I would have liked,” says Republican Senator Lindsey Graham of South Carolina, speaking of the deal on the fiscal cliff, “so on to the debt ceiling.”

For Republicans, the battle over the fiscal cliff is only a prelude to the coming battle over raising the debt ceiling – a battle that will likely continue through early March, when the Treasury runs out of tricks to avoid a default on the nation’s debt.

The White House’s and Democrats’ single biggest failure in the cliff negotiations was not getting Republicans’ agreement to raise the debt ceiling.

The last time the debt ceiling had to be raised, in 2011, Republicans demanded major cuts in programs for the poor as well as Medicare and Social Security.

They got some concessions from the White House but didn’t get what they wanted – which led us to the fiscal cliff.

So we’ve come full circle.

On it goes, battle after battle in what seems an unending war that began with the election of Tea-Party Republicans in November, 2010.

Don’t be fooled. This war was never over the federal budget deficit.

In fact, federal deficits are dropping as a percent of the total economy.

For the fiscal year ending in September 2009, the deficit was 10.1 percent of the gross domestic product, the value of all goods and services produced in America. In 2010, it was 9 percent. In 2011, 8.7 percent. In the 2012 fiscal year, it was down to 7 percent.

The deficit ballooned in 2009 because of the Great Recession. It knocked so many people out of work that tax revenues dropped to the lowest share of the economy in over sixty years. (The Bush tax cuts on the rich also reduced revenues.) The recession also boosted government spending on a stimulus program and on safety nets like unemployment insurance and food stamps.

But as the nation slowly emerges from recession, more people are employed — generating more tax revenues, and requiring less spending on safety nets and stimulus. That’s why the deficit is shrinking.

Yes, deficits are projected to rise again in coming years as a percent of GDP. But that’s mainly due to the rising costs of health care, along with aging baby boomers who are expected to need more medical treatment.

Health care already consumes 18 percent of the total economy and almost a quarter of the federal budget (mostly in Medicare and Medicaid).

So if the ongoing war between Republicans and Democrats was really over those future budget deficits, you might expect Republicans and Democrats to be focusing on ways to hold down future healthcare costs.

They might be debating how to make the cost controls in the Affordable Care Act more effective, for example, or the merits of moving to a more efficient single-payer system, as every other advanced country has done.

But they’re not debating this, because the federal deficit is not what this war is about.

It’s about the size of government. Tea-Party Republicans (and other congressional Republicans worried about a Tea-Party challenge in their next primary) want the government to be much smaller.

“My goal,” says conservative guru Grover Norquist, “is to cut government in half in twenty-five years, to get it down to the size where we can drown it in the bathtub.”

What’s behind this zeal to shrink government? It’s not that the U.S. government has suddenly become larger. In fact, non-military government spending relative to the size of the U.S. economy remains the smallest of any other rich nation.

Apart from the military, Medicare and Social Security account for almost everything else the federal government does – and these programs continue to be hugely popular, as Republicans learn every time they threaten them.

The animus toward government has more to do with the growing frustrations of many Americans that they’re not getting ahead no matter how hard they work. Government is an easy scapegoat, utilized by much of corporate America to convince average Americans to cut taxes, spending, and regulations.

The median wage continues to drop, adjusted for inflation, even though the economy is growing. And the share of the economy going to wages rather than to profits is the smallest on record.

Increasingly it’s looked like the game is rigged, especially when people see government bailing out Wall Street (the Tea Party movement grew out of the bailout, as did the Occupiers), and handing out corporate welfare to big agriculture, big pharma, oil companies, and insurance companies.

The outrage grows when average working people are told – wrongly — that a growing portion of Americans don’t pay taxes and live off government handouts.

The battle over the fiscal cliff is over but the trench warfare will continue.

The Difference Between "Broadening the Tax Base" and Raising Taxes on the Rich

The President's Opening Bid on the Grand Bargain (III)

robert reich

The President says he wants $1.6 trillion in tax hikes. Republicans say they won’t raise tax rates but might be willing to close some loopholes and limit some deductions and tax credits. Is compromise in the air?

Not a chance. True enough, such “base broadening,” as Republicans like to call it, could conceivably generate $1.6 trillion in additional tax revenues over the next decade.

But, wait. Didn’t the President just win a second term? The major issue decided in last week’s election was that the rich should pay more. So, presumably, that $1.6 trillion should come out of the pockets of the wealthiest Americans.

“Broadening the base” has nothing whatever to do with the rich paying more. That’s because a lot of tax credits and deductions help the middle class and the poor.

If we end the Earned Income Tax Credit, for example, some of the poorest Americans will end up sacrificing. That tab was $63 billion last year.

Or if the “loophole” is tax-free employee health care, or the home mortgage tax deduction, or tax-deferred 401K accounts, most of the added tax revenues will come out of the pockets of the middle class.

So when Republicans talk about “broadening the base,” watch your wallets. Now that the President has set his goal on $1.6 trillion in additional taxes, the question is whether the rich are going to cough up $1.6 trillion more.

There’s no way that $1.6 trillion can come out of the pockets of the wealthy merely by capping the deductions the wealthy take advantage of.

If Republicans won’t budge on raising tax rates but insist on broadening the base, Democrats should take aim at the biggest tax loophole of all for America’s wealthy: the preference for capital gains.

Capital gains are now taxed at only 15 percent (the major reason Mitt Romney pays a rate of under 14 percent on over $20 million of annual income). Capital gains should be taxed the same as ordinary income. That way, under a progressive tax system, the wealthy would pay far more — on the way to $1.6 trillion.

++++

With the election behind us I had hoped we’d get beyond games of chicken. No such luck.
But first you need to understand that the game of chicken isn’t about how much or when we cut the budget deficit. Or even whether the upcoming “fiscal cliff” poses a danger to the economy.

The non-partisan Congressional Budget Office on Thursday warned that the automatic tax increases and spending cuts scheduled to start in January amount to too much deficit reduction, too soon. They’d put the economy back into recession, and push unemployment to about 9 percent. But the CBO also warned of an economic crisis ahead if the United States doesn’t stem the growth of the nation’s exploding deficit.

Get it? Reduce the budget deficit too quickly, and we’re in trouble. But fail to address the deficit, and we’re also in trouble.  It’s really a matter of timing. That’s why I think any deal should include a trigger mechanism that begins to cut spending and raise taxes when the economy has two consecutive quarters of 6 percent unemployment or less, and 3 percent annualized growth or more. 

In reality, though, the upcoming game of chicken isn’t about any of this. It’s over the clearest issue President Obama and Mitt Romney fought over: whether taxes should be raised on the rich.

Democrats and Republicans are now maneuvering to maximize their bargaining leverage when they sit down next year to decide this.

On Friday the President called on called on Congress to immediately make permanent the tax cuts for Americans who make less than $250,000 a year, while at the same time allowing tax rates to rise for wealthy Americans — and then making those rates part of a broader deal next year.

The President knows congressional Republicans won’t agree, but he needed to set out his central demand because it’s the one thing that can fairly be interpreted as a mandate from the election.

So what’s going to happen? Bear with me, because this gets interesting.

Some Democrats (and some White House strategists) figure they’ll have most bargaining leverage in next year’s deal if they do nothing now – allowing tax rates to rise automatically on everyone after the first of the year. Then they plan to offer Republicans a deal that reduces taxes on people earning less than $250,000 – which would be retroactive to January 1^st.

Republicans would have to choose between a tax cut on the middle class or no tax cut at all. Democrats believe Republicans would have to take the deal. Even Grover Norquist would be hard-pressed to come up with an argument against it.

Some Republicans, meanwhile, figure they’ll have more bargaining leverage if they keep things as they are until late January or February.

What’s magical about late January and February? That’s when the debt ceiling has to be raised again, which means that’s when Republicans can once again threaten to vote against raising it. (In theory, we’ll hit the ceiling at the start of January, but the government can juggle payments and take various “extraordinary measures” for another month or two beyond that – maybe even until March – before it could no longer be able to borrow enough money to pay its bills.)

This is the thinking behind House Speaker John Boehner’s proposal earlier Friday that all the tax cuts — including those for the rich — should be extended until next year, until there’s a deal. “I’m proposing that we avert the fiscal cliff together in a manner that ensures that 2013 is finally the year that our government comes to grips with the major problems that are facing us,’’ Boehner said.

So who blinks first? Democrats who don’t mind going over the cliff because they’ll get a better final deal – and the deal will be retroactive to January 1^st so it’s not really a cliff at all but more like a little hill? Or Republicans who want to extend the Bush tax cuts beyond January 1^st, until we get sufficiently close to the debt ceiling that they can once again threaten the full faith and credit of America?

As I said before, I had naively assumed the election would put an end to these games, but obviously not. Yet Obama and the Democrats are holding most of the cards now. Let’s hope they use them.

 

Five Million Voters May Lose Rights in the 2012 Elections

Tuesday, March 6, 2012 by Color Lines
by Brentin Mock


Today’s Super Tuesday primary involves 10 states and 437 delegates at stake for the Republican Party’s presidential prospects. There are two states among that crop that are worth taking a look at: Georgia and Tennessee. Both are emblems for a growing, and troubling, legislative trend in which new election laws mandate citizens to produce photo identification to vote, ask people to prove their citizenship to vote, or outright curtail voter registration efforts.

According to the Brennan Center for Justice, as many as five million eligible voters could meet difficulties this Election Day due to these new, imposing voter laws.

There are currently eight states with photo voter ID laws containing specific criteria for what qualifies as “identification”for voting purposes. Some states require that identification be state-issued and only for the state a person is voting in; some prohibit college IDs; some demand that the full name and address on the card be current; while some require that an ID card has an expiration date.

Looking at those stipulations, it’s not hard to imagine how low-income citizens, African Americans, Latino Americans, college students, and elderly voters—groups the Brennan Center has identified as the most burdened by new voter laws—might get tangled up on voter day. The Center estimates that as many as 11 percent of eligible voters lack proper identification right now. For African Americans, it’s 25 percent—that’s 5.5 million voting-age black Americans who could get turned away at the polls for being undocumented and unphotographed.

Other groups like Native Americans, transgendered people, newly divorced, newly married couples or people who’ve recently lost their homes could all have information on their drivers licenses that reflect names, addresses and faces that aren’t current. The costs for these groups will be more than an inconvenience: fees for new birth and marriage certificates, hours lost waiting in lines for updated materials and transportation costs to handle it all.


How did we get to this point? Let’s just say the emergence of these laws are no coincidence. Thousands of Republicans from dozens of states didn’t all just wake up one day and decide we need an ID card to vote. And yet almost every voter ID law now in play or pending happened in the last four years—since Barack Obama ran for and became the nation’s first black president.

Republicans in state legislatures around the country have tried to pass these laws for years. Their efforts had been repeatedly voted down or vetoed out, mostly because the U.S. Constitution prevents meddling with voters’ rights. But in 2010, Republicans not only took over Congress, they became majorities in state legislatures across the country. Numerous states that previously had Democratically controlled general assemblies turned Tea Party-red, and one of the chief items on their agendas was changing the rules of the voting game.

An example of this is Tennessee, which for the first time since the Civil War ended saw its House of Representatives, Senate and governor’s office all controlled by Republicans in 2010. Swiftly, Tennessee passed new voter ID laws, and last year made headlines when a 96-year-old African American woman named Dorothy Cooper was denied an ID to vote.

Georgia was one of the first states with a voter ID law, first passed there in 2005, and today hosts one of the Super Tuesday primaries. Today’s vote in Georgia, and fellow photo voter ID state Tennessee, will probably reveal little about how the new restrictions impact minorities and other at-risk voting groups because they mostly vote Democrat—a fact that voter ID critics stress is not lost on the Republicans who push it. Nonetheless, election officials in Tennessee and Wisconsin, which have already hosted local elections using their new voter ID laws, have bragged about how there have been no problems.

In Wisconsin, the chief elections officer Kevin J. Kennedy noted only a few voter ID glitches where people showed up with the wrong kind of ID to vote.

The story, however, is not as much what happens at the polls when the wrong ID is used as it is what happens when people don’t bother showing up at the polls at all because they think they don’t qualify due to lack of identification. The U.S. has a long history of voting shenanigans, from Jim Crow era poll taxes to current era rumors circulated, often exclusively in black communities, about who can and can’t vote.

Come this November, during the general election, the impacts of the new laws will begin to surface. Besides the eight states already holding strict voter ID laws, there are 31 more states lurking hoping to do the same. At least eight of those states could pass voter ID laws before Election Day. And of the eight that already have strict voter ID laws, five want to pass legislation this year that would make them even stricter.

Who are the movers, shakers and shapers of these potentially disenfranchising laws? A great deal of funding comes from the Koch Brothers, who’ve vowed to remove President Obama from the White House by any means, and by any billions of dollars necessary. Another player is ALEC—or, the American Legislative Exchange Council—a body that includes banks and corporations working alongside Republican legislators to craft laws that would dismantle not only voter rights, but also environmental and labor protections.

ALEC, which has Koch funding, has drafted the model legislation that many states with strict voter ID laws have followed.

This is at least true for Tennessee, but is also true for many other states. In Nebraska, where a voter ID law is being mulled, a state senator flat-out lied when a news reporter asked him about his ties to ALEC. Sen. Charlie Janssen said he wasn’t a member of ALEC and had never been to their functions, but then was confronted with the evidence that his name was listed on their site as a committee member.

Other states share similar connections. ALEC’s Minnesota state chairman, state Sen. Mary Kiffmeyer, is also the author and pusher of a voter ID proposal that the governor has already vetoed once.

In Iowa, a voter ID law co-sponsor, state Sen. Linda Upmeyer, is ALEC’s treasurer. And in Tennessee, the state’s GOP Caucus Chairman, Sen. Bill Ketron, is an ALEC member.

All of this has set up a massive and high-stakes battle for civil rights organizations in 2012. The NAACP, the League of Young Voters, AARP, black church groups and college student organizations are all rallying to preserve voter protections by scrapping photo ID laws.

In Wisconsin, lawyers from The Advancement Project, League of Women Voters, ACLU and Voces de la Frontera, are in the courts battling to have Wisconsin’s law repealed on the grounds that it discriminates against people of color.

This week, Rev. Al Sharpton and his National Action Network is leading a march from Montgomery to Selma, in commemoration of the historic Civil Rights march and to protest stifling voter ID and immigration state laws. In the federal government, the Department of Justice has intervened, blocking voter ID laws in South Carolina and redistricting laws in Texas (where there are also voter ID laws), by saying they both violate the Voting Rights Act. Attorney General Eric Holder has denounced the laws across the board and the department is side-eyeing other states that have passed them.

The irony, though, is that voter ID law proponents are using the same civil rights arguments made to secure voting rights protections to now upend them. In Texas, the state initially failed to provide data on the number of African Americans that would be impacted by new voting laws as requested by the Department of Justice. As an excuse, they said they didn’t collect data on race because the Voting Rights Act told them to be colorblind.

In South Carolina and Georgia, election officials argue that they should be released from federal oversight—put in place because of the South’s violent history with stopping African Americans from voting—because civil rights legislation has worked, and no discrimination exists now.

The states are perverting and exploiting civil rights laws in order to pretend that racial discrimination has been completely eradicated. Some even point to the election of the first black president and the record turnout of voters of color in 2008 as evidence that no traces of discrimination are left in the system. Instead, they claim to trace voter fraud—people voting with the names of other displaced, deceased or fictionalized voters—and argue this is why voter IDs are needed.

All the data shows that instances of voter fraud are negligible at best. The voter fraud argument is in many cases a ploy to disguise the racial animus that fuels the voter ID push, especially as it pertains to Latino voters. Many state legislators will state emphatically that the need for voter IDs is driven by the need to keep “illegal immigrants” from voting. Former Maryland governor and congressman Robert Ehrlich Jr., now an attorney, wrote in defense of a Maryland voter ID law that, “This ‘welcome wagon’ for illegal immigrants may reflect a majoritarian view in progressive Maryland; nevertheless, it makes the realization of free and fair elections far more difficult. … Every illegal vote cast and counted degrades our democracy. Lax immigration enforcement only magnifies the problem.”

Many voter ID proponents might argue that voter ID are made possible by the success stories of the civil rights movement, but they also want to place barriers to voting because civil rights legislation may have been too successful, as evidenced by a U.S. president who’s not only a Democrat but is black. Those working to put voter restrictions in place don’t want that kind of election to happen again.

Moochers Against Welfare

By PAUL KRUGMAN - New York Times

Published: February 16, 2012
First, Atlas shrugged. Then he scratched his head in puzzlement.

Modern Republicans are very, very conservative; you might even (if you were Mitt Romney) say, severely conservative. Political scientists who use Congressional votes to measure such things find that the current GOP majority is the most conservative since 1879, which is as far back as their estimates go.

And what these severe conservatives hate, above all, is reliance on government programs. Rick Santorum declares that President Obama is getting America hooked on “the narcotic of dependency.” Mr. Romney warns that government programs “foster passivity and sloth.” Representative Paul Ryan, the chairman of the House Budget Committee, requires that staffers read Ayn Rand’s Atlas Shrugged, in which heroic capitalists struggle against the “moochers” trying to steal their totally deserved wealth, a struggle the heroes win by withdrawing their productive effort and giving interminable speeches.

Many readers of The Times were, therefore, surprised to learn, from an excellent article published last weekend, that the regions of America most hooked on Mr. Santorum’s narcotic — the regions in which government programs account for the largest share of personal income — are precisely the regions electing those severe conservatives. Wasn’t Red America supposed to be the land of traditional values, where people don’t eat Thai food and don’t rely on handouts?

The article made its case with maps showing the distribution of dependency, but you get the same story from a more formal comparison. Aaron Carroll of Indiana University tells us that in 2010, residents of the 10 states Gallup ranks as “most conservative” received 21.2 percent of their income in government transfers, while the number for the 10 most liberal states was only 17.1 percent.

Now, there’s no mystery about red-state reliance on government programs. These states are relatively poor, which means both that people have fewer sources of income other than safety-net programs and that more of them qualify for “means-tested” programs such as Medicaid.

By the way, the same logic explains why there has been a jump in dependency since 2008. Contrary to what Mr. Santorum and Mr. Romney suggest, Mr. Obama has not radically expanded the safety net. Rather, the dire state of the economy has reduced incomes and made more people eligible for benefits, especially unemployment benefits. Basically, the safety net is the same, but more people are falling into it.

But why do regions that rely on the safety net elect politicians who want to tear it down? I’ve seen three main explanations.

First, there is Thomas Frank’s thesis in his book What’s the Matter With Kansas?: working-class Americans are induced to vote against their own interests by the GOP’s exploitation of social issues. And it’s true that, for example, Americans who regularly attend church are much more likely to vote Republican, at any given level of income, than those who don’t.

Still, as Columbia University’s Andrew Gelman points out, the really striking red-blue voting divide is among the affluent: High-income residents of red states are overwhelmingly Republican; high-income residents of blue states only mildly more Republican than their poorer neighbors. Like Mr. Frank, Mr. Gelman invokes social issues, but in the opposite direction. Affluent voters in the Northeast tend to be social liberals who would benefit from tax cuts but are repelled by things like the GOP’s war on contraception.

Finally, Cornell University’s Suzanne Mettler points out that many beneficiaries of government programs seem confused about their own place in the system. She tells us that 44 percent of Social Security recipients, 43 percent of those receiving unemployment benefits, and 40 percent of those on Medicare say that they “have not used a government program.”

Presumably, then, voters imagine that pledges to slash government spending mean cutting programs for the idle poor, not things they themselves count on. And this is a confusion politicians deliberately encourage. For example, when Mr. Romney responded to the new Obama budget, he condemned Mr. Obama for not taking on entitlement spending — and, in the very next breath, attacked him for cutting Medicare.

The truth, of course, is that the vast bulk of entitlement spending goes to the elderly, the disabled, and working families, so any significant cuts would have to fall largely on people who believe that they don’t use any government program.

The message I take from all this is that pundits who describe America as a fundamentally conservative country are wrong. Yes, voters sent some severe conservatives to Washington. But those voters would be both shocked and angry if such politicians actually imposed their small-government agenda.

The Poor Rich and the Scrooginess of Congress

Wednesday, December 21, 2011 by CommonDreams.org

by Jim Hightower

 

It's at this time of the year that generous, big-hearted Americans reach out to aid the less fortunate among us — like those who've recently been knocked down by the recession and seen their incomes plummet. I speak, of course, about our nation's severely squeezed millionaires.

Yes, many in the infamous 1 percent class are no longer feeling like a million bucks. According to a new federal report, the income of these high-living swells averaged a robust $1.4 million in 2007, but after Wall Street crashed in a heap of greed late that year, their average income took a tumble. In 2009, it fell below the millionaire threshold, leaving these poor rich folks struggling to make it on an average income of only $957,000.

Also, talk about getting a lump of coal in your Christmas stocking, the share of our nation's total income taken by the 1-percenters fell from a whopping 23 percent in 2007 (the highest since the Roaring Twenties) to a mere 17 percent in 2009. How sad for them, huh?

The only balm for their little financial ouchie is they are using the slight setback to rebuke the 99-percenters of the Occupy Wall Street protests. See, say the rich, waving the federal report, our slice of the pie in 2009 was the smallest it's been in a decade, so your protest about inequality is out of date. "Get a time machine," one front man for the Koch brothers barked at the Occupy movement.

OK, but let's travel back only a few short years in time to 1980, when the top 1 percent was very happy to pocket a meager 10 percent of all of America's income. And, by the way, today's 1-percenters have had big income gains since 2009, while the 99 percent have lost income. So the Occupiers are right — the inequality is increasing — yet, shamefully, those who're back making a killing want America's hard-hit majority to feel sorry for them!

The 1-percenters and the politicos who serve them are modern-day scrooges, oblivious to the hardships of others.

"Humbug," they mutter, expecting downsized workers to be like Bob Cratchit — grateful to be given an extra piece of coal for the fire in Ebenezer's cold workspace. As you recall, Scrooge was a nasty old miser, but even he came to see the soul-destroying evil of his ways and found redemption in the end. One wonders, though — is there any hope for the Scrooges of Washington?

Congressional Republicans continue to protect nonsensical tax breaks for Wall Street billionaires and Big Oil, while demanding that programs to aid America's growing number of poor people either be slashed or eliminated. The Obama White House is fighting most of this absurdity, but it keeps trying to appease the GOP by offering to sacrifice programs that ordinary people really need. For example, LIHEAP.

Much of the country doesn't know what that is, but people who go through the long, bitterly cold winters in the Northeast know that LIHEAP literally is a lifeline for the thousands of poor families there. It's the Low Income Home Energy Assistance Program, which helps the poor afford the steadily rising price being charged for the heating oil that Northeastern states rely on. Home heating oil in Maine is presently running $3.66 a gallon, up from $2.87 a year ago.

Yet, in a concession to GOP leaders, Obama has proposed whacking LIHEAP's funding so severely that average benefits this winter would fall from about $800 per home to just over $300. That's not just throwing a program's budget into the Republican shredder, it's throwing people into it! In Bangor, Maine, where the average January low is only 7 degrees above zero, the slashed benefits will buy only about 100 gallons of fuel for the typical low-income home. It takes 850 gallons for those homes to stay heated through the winter season.

Rather than literally tossing the poor into the cold, how about cutting off all heat to the White House and Capitol? Let those Scrooges feel the sting of their budgetary miserliness, and maybe they'd seek a bit of redemption from those they're hurting.

The Phony Payroll Tax Battle

This Isn't Stimulus
by DEAN BAKER

The economy badly needs stimulus. The collapse of the housing bubble caused us to lose more than $1.2 trillion in annual demand. Residential construction collapsed when the bubble burst, falling by more than 4 percentage points of GDP, which translates into approximately $600 billion a year in lost annual demand.

The collapse of the bubble also led to the destruction of close to $8 trillion of bubble-generated housing equity. The wealth effect of this equity on consumption generated close to $500 billion in annual consumption demand. This also was lost when the bubble burst.

In addition, the collapse of a bubble in non-residential real estate cost another $100 billion or so in annual demand. Finally, the lost tax revenue from the collapse of the housing market and the resulting fallout have forced cuts of close to $150 billion a year on state and local governments.

In total, the economy has lost close to $1.3 trillion in annual demand as a result of the collapse of the housing bubble. This explains the economy’s weak growth and high unemployment. There is no simple way to replace this demand.

We can gather together a coven of market worshipping Republicans and sacrifice all the workers and retirees we want, it still will not replace the demand gap. We can love the private sector as much as we want and it still will not make firms go out and invest and hire when they don’t see demand for their products.

That might be a painful truth for government haters to take, but it is reality. Businesses don’t invest when they don’t think it is profitable and it won’t be profitable as long as they don’t see the demand.

This means that we need the government to generate demand to boost the economy. That was the point of President Obama’s stimulus. Of course it was nowhere near large enough as his advisors told him at the time.

The stimulus package produced around $300 billion a year in stimulus in 2009 and 2010. This was nowhere near large enough to offset the drop in demand from the housing crash, but it did create 2-3 million jobs [Dartmouth].

If President Obama had been doing his job, he would have immediately began pushing for more stimulus the day after the first one passed. He should have been straightforward with the country and said that the stimulus approved by Congress was an important first step but the severity of the downturn was so great that we would likely need more.

Instead of being honest with the country, he instead started talking about the “green shoots of recovery” and said that he was going to focus on the budget deficit. This was an error of unbelievable proportions. By raising the budget deficit front and center on the national stage, he backed himself into a corner from which it is almost impossible to now escape.

It was essential that Obama keep leading the charge on stimulus, explaining to the country the cause of the economy’s weakness was a lack of demand. This story is counter-intuitive so it requires the voice of the president, along with many others, to constantly explain the logic to the country. People had to understand that we are poor because the country as a whole is spending too little to keep the workforce fully employed, not that the government is spending too much.

This is the context in which we are arguing over extending the reduction in the Social Security payroll tax for another two years. As stimulus, this is not an especially good measure. On a per-dollar basis, tax cuts will be much less effective, especially with people carrying so much debt, than direct spending. Furthermore, many of these tax dollars will go to better off taxpayers who are less willing to spend than moderate-income families. The Making Work Pay tax credit was much better targeted.

Finally, there is zero reason that this tax cut should be tied to Social Security in any way. As it stands, the trust fund is held harmless because the lost tax revenue is reimbursed from general revenue. But why even raise this as a potential issue for Social Security, why not just give everyone a tax cut equal to 2 percent of their wages up to $110,000? The only reason to tie the tax cut to Social Security is if the intention is to raise issues about the Social Security tax at some future point.

The response of the Obama people to this complaint is that this is the only tax cut that the Republican Congress will approve and that we badly need the stimulus. The second claim is definitely true and the first one may well be also. But if that is the case, it only speaks to the incredible failure of this administration to define the agenda and speak honestly about the economy. It’s not surprising that they don’t have the political support for more effective stimulus when they abandoned the effort to make the case almost two years ago.