Comics

Bi-Partisanship We Don’t Need

Wednesday, April 10, 2013 by RobertReich.org
The President Offers to Cut Social Security and Republicans Agree
by Robert Reich


John Boehner, Speaker of the House, revealed why it’s politically naive for the President to offer up cuts in Social Security in the hope of getting Republicans to close some tax loopholes for the rich. “If the President believes these modest entitlement savings are needed to help shore up these programs, there’s no reason they should be held hostage for more tax hikes,” Boehner said in a statement released Friday.

House Majority Leader Eric Cantor agreed. He said on CNBC he didn’t understand “why we just don’t see the White House come forward and do the things that we agree on” such as cutting Social Security, without additional tax increases.

The President throws things on the table before the Republicans have even sat down for dinner.

Get it? The Republican leadership is already salivating over the President’s proposed Social Security cut. They’ve been wanting to cut Social Security for years.
But they won’t agree to close tax loopholes for the rich.

They’re already characterizing the President’s plan as a way to “save” Social Security — even though the cuts would undermine it — and they’re embracing it as an act of “bi-partisanship.”

“I’m encouraged by any steps that President Obama is taking to save and preserve Social Security,”cooed Texas Republican firebrand Ted Cruz. “I think it should be a bipartisan priority to strengthen Social Security and Medicare to preserve the benefits for existing seniors.”

Oh, please. Social Security hasn’t contributed to the budget deficit. And it’s solvent for the next two decades. (If we want to insure its solvency beyond that, the best fix is to lift the cap on income subject to Social Security taxes – now $113,700.)

And the day Ted Cruz agrees to raise taxes on the wealthy or even close a tax loophole will be when Texas freezes over.

The President is scheduled to dine with a dozen Senate Republicans Wednesday night. Among those attending will be John Boozman of Arkansas, who has already praised Obama for “starting to throw things on the table,” like the Social Security cuts.

That’s exactly the problem. The President throws things on the table before the Republicans have even sat down for dinner.

The President’s predilection for negotiating with himself is not new. But his willingness to do it with Social Security, the government’s most popular program — which Democrats have protected from Republican assaults for almost eighty years — doesn’t bode well.

Destroying the Economy and the Democrats

Saturday, April 6, 2013 by The American Prospect
Amid disappointing jobs numbers, the president's budget proposal gives away his party's crown jewels: their defense of Social Security and Medicare.
by Robert Kuttner


Job creation slowed to just 88,000 in March, signaling a sluggish economy (which is what it has been for 5 years now). And President Obama, with unerring timing, picked this moment to put out an authorized leak that he is willing to put Social Security and Medicare on the block as part of a grand budget bargain that will only slow the economy further.

The deterioration in economic performance was all too predictable, given the combined lead weights of the March 1 $85 billion of budget cuts in the sequester and the January deal to raise payroll taxes by about $120 billion. (The tax hike on working people was almost double the much-hyped tax increase on the top one percent, which totaled a little over $60 billion.)

Taken together, these twin deflationary deals cut the deficit by around $270 billion dollars this year. That’s close to two percent of GDP. And according to the Congressional Budget Office, this combined contractionary pressure will cut the 2013 year’s growth rate in half. So the slowdown in job creation is just what you’d expect.

The grand bargain that, for the moment, is mercifully eluding President Obama and the Republicans, would apply the same sort of medicine for nine more years, and with the same results—a prolonged slowdown growth and jobs. Obama and the Republicans are talking of a decade of cuts in the 3 to 4 trillion-dollar range.

What could possibly go wrong with this bold, new strategy? ... Just about everything.

Has everyone lost their minds? No, but the entire elite has been influenced by the economic myths of the Robert Rubin-Pete Peterson-Fix the Debt propagandists.

You can understand Republicans wanting to crush government and hoping to slow the recovery in a way that harms the Democrat in the 2014 midterm elections. But what is the president thinking?

Listen to a “senior economic official,” as quoted in today’s New York Times’s authoritative story revealing that the administration will offer to cut Social Security (by the backdoor method of reducing the cost of living adjustment via the “chained” Consumer Price Index) and Medicare if the Republicans will reciprocate with tax increases. “[T]he things like C.P.I. that Republican leaders have pushed hard for will only be accepted if Congressional Republicans are willing to do more on revenues.”

According to the Times story, the president has decided to pick up where he left off with Speaker John Boehner and put the final deal on the table, opening with big cuts in the two most popular programs that voters count on Democrats to defend. Reporter Jackie Calmes tells us, “In a significant shift in fiscal strategy, Mr. Obama on Wednesday will send a budget plan to Capitol Hill that departs from the usual presidential wish list that Republicans typically declare dead on arrival. Instead it will embody the final compromise offer that he made to Speaker John A. Boehner late last year.”

What could possibly go wrong with this bold, new strategy? (Actually the same strategy that has failed Obama since January 2009). Just about everything.

1. First, even if works, the ten-year grand bargain that results will condemn the economy to a decade of low level depression.
2. Second, the Republicans have a well-established history of taking the White House final offer as the starting point. As any smart negotiator knows, you don’t offer your final position in the opening bid.
3. Last, the strategy gives away the Democrats’ crown jewels—their defense of Social Security and Medicare, which should not be part of a budget deal in the first place. Now voters can conclude that they can’t trust either party.

Is their any silver lining? Maybe House Speaker Boehner, once again, will save the president from himself by failing to deliver enough Republicans for a tax increase. Maybe outraged rank and file Democrats in the House and Senate will get energized and refuse to support Obama’s proposed deal. And maybe the slowing of the economy, after this year’s down-payment on a grand budget bargain, will get Obama’s attention.

How much evidence do we need that neither austerity nor appeasement is smart strategy?

The '147 People' Destroying the US Economy

Tuesday, March 26, 2013 by Campaign for America's Future Blog
by Richard Eskow



Can 147 people perpetuate economic injustice – and make it even worse? Can they subvert the workings of democracy, both abroad and here in the United States? Can 147 people hijack the global economy, plunder the environment, build a world for themselves that serves the few and deprives the many?

There must be some explanation for last week’s economic madness. Take a look:

Cyprus: The European Union acted destructively – and self-destructively – when it tried to seize a portion of the insured savings accounts of the citizens of Cyprus. They were telling anyone with a savings account in the financially troubled nations of the Eurozone: Forget your guaranteed deposits. If we need your money in order to bail out the big banks – banks which have already gambled recklessly with it – we’ll take it.

That didn’t just create a political firestorm in Cyprus. It threatened the European Union’s banking system, and perhaps the Union itself. The fact that the tax on deposits has been partially retracted doesn’t change the basic question: What were they thinking?

The Grand Bargain: The President and Congressional Republicans reportedly moved closer to a deal that would cut Social Security and Medicare while raising taxes – mostly on the middle class – without doing more to create jobs. A “Grand Bargain” like that would run counter to both public opinion and informed economic judgement.

Who would impose more economy-killing austerity when there’s so much evidence of the harm it does? Why would the White House want to become the face of a deal to cut Social Security, killing its own party’s political prospects for a generation?

There’s more:

Him again: Washington reporters once again sought the opinion of Ex-Wyoming senator Alan Simpson, a vitriolic blowhard with no discernible knowledge of either economics or social insurance, and then wrote up his opinions on those topics in flattering pieces like this one.

Derivatives, the Sequel: Four short years after too-big-to-fail banks nearly destroyed the world economy, as the nation continues to suffer the after-effects of the crisis they created, a Congressional committee moved to undo the already-insufficient safeguards in the Dodd/Frank law.

Within days of a Senate Report which outlined the mendacity, extreme risk, and potentiality criminality surrounding JPMorgan Chase’s “London Whale” fiasco, the House Agriculture Committee approved new bills that would legalize trades like the “London Whale.”

Above the Law: The Attorney General of the United States remained silent as the controversy continued over his recent admission that banks like Dimon’s were too big to face prosecution. And yet there were no moves to change either Holder’s policy or the size of these institutions. Politico, the Washington insiders’ tip sheet, ran a piece entitled “Why Washington won’t break up the big banks.”

Dimon Unbound: The Senate report also provided evidence that JPMorgan Chase’s CEO, Jamie Dimon, failed to manage his bank’s risk and concealed information about its losses from regulators. We learned last week that regulators lowered their rating of Dimon’s bank after chastising the bank’s leadership for management failures that included inadequate safeguards against money-laundering, poor risk management, and failure to separate the banks’ own investments from those of its customers.

Illegalities during Dimon’s tenure as CEO have cost his shareholders billions in settlements and fines. Poor risk management (and additional potential illegalities) cost it another $6.2 billion in Whale-related losses. And yet last week Dimon’s own Board “strongly endorsed” his dual role as CEO and Board Chair, an unusual concentration of power at what is (by some measurements) the world’s largest bank, and commended itself in a proxy filing for the “strength and independence” of its oversight, adding: “The Firm has had strong performance through the cycle since Mr. Dimon became Chairman and CEO.”

All this, in just seven days. Has the world gone insane? What is everybody thinking?

That’s where the number “147″ comes in.

Anthropologist Robin Dunbar tried to find out how many people the typical person “really knows.” He compared primate brains to social groups and published his findings in papers with titles like “Neocortex size as a constraint on group size in primates.”

Dunbar concluded that the optimum number for a network of human acquaintances was 147.5, a figure which was then rounded up to 150 and became known as “Dunbar’s Number.” He found groups of 150-200 in all sorts of places: Hutterite settlements. Roman army units. Academic sub-specialties. Dunbar concluded that “there is a cognitive limit to the number of individuals with whom any one person can maintain stable relationships.”

Around 150 or 200 people form a human being’s social universe. They shape his or her world view, his or her world.

That means that 147 people can change the course of history. Not necessarily the same 147 people, of course. But the small social groups which surround our world’s leaders have extraordinary power.

Economist Simon Johnson mentioned Dunbar’s Number last week in a column about incoming Treasury Secretary Jacob Lew and the new SEC chair, Mary Jo White. “The issue is not so much their track record,” Johnson wrote, “because neither has worked directly on financial-sector policy issues; it is much more about whom they know.”

“If most financial experts you know work at, for example, Citigroup,” added Johnson, “then you are more likely to see the financial world through their eyes.”

Lew is a former Citigroup executive. That mismanaged megabank is also the former corporate home of ex-Clinton Treasury Secretary Robert Rubin, and the current home of Peter Orszag, formerly President Obama’s OMB Director. For her part, White went from prosecuting criminals to defending Wall Street bankers. That was also Attorney General Eric Holder’s profession before he was appointed to his current position.

These are the people who surround our President, our Senators, our Representatives. They talk to them every day. They say, This is how the world works. They say, Everybody knows these things.

Their European counterparts saw the effects of austerity on the economies of their Union: Unemployment up. Gross domestic product down. Even the deficits, which austerity was meant to reduce, have been rising as the result of these unwise cuts.

But, they say, we know Angela Merkel. We know George Osborne and Christine Lagarde. We trust their judgement. How did the predictably disastrous plan to tax guaranteed savings accounts in Cyprus get approved? It’s not hard to imagine: “Everybody we know” thought it was a great idea.

That’s how it works here in the US, too. Larry Summers, Alan Greenspan and Robert Rubin were spectacularly wrong about everything: deregulation, the housing bubble, government spending, everything. But we know them.

Nobel Prize-winning economists like Paul Krugman and Joseph Stiglitz keep explaining why more stimulus spending is needed. But we don’t know them – not the way we know Larry, Alan, and Bob. Same for Simon Johnson, or William K. Black Jr., or Robert Johnson, or any of the other economists we don’t know very well.

And when we don’t know someone very well, their criticisms make us uncomfortable.

Bill Clinton’s “Third Way” triangulation led to welfare “reform” that’s proven disastrous. His Wall Street deregulation ruined the economy, and his brand of old-fashioned pseudo-centrism is out of touch with today’s political and economic realities. But we know him.

Bill Clinton doesn’t make us uncomfortable at all.

Investigate Jamie Dimon, or Lloyd Blankfein, or Robert Rubin? But they were our clients, and will be again once we leave government. Investigate them? We know them.

Dimon’s Board of Directors is a case study in Dunbar’s Number. It includes Honeywell CEO David Cote, who was a member of the Simpson Bowles Commission. There’s a retired senior executive with another big defense contractor, Boeing. Together with Dimon, that makes three CEOs who earn their money from government largesse.

The CEO of Comcast is on Dimon’s Board, too. (The media’s leaders are always among the 147.) One seat belongs to the head of one of the accounting groups that overlooked massive bank fraud when signing off on their annual statements. Another belongs to the former CEO of Exxon Mobil.

The “147″ run companies. They also hold fundraisers for politicians – in both parties.

When Senator Obama became President Obama, during the gravest unemployment crisis since the Great Depression, one of his first acts was to create a “Deficit Commission” instead of a “Jobs Commission.” Why? Because “147 people” thought that was the right priority. Then he appointed the dyspeptic, unlikable, and uninformed Sen. Simpson to co-chair it.

You see, the “147 people” in Washington’s political and media circles like Alan Simpson. To them he’s not an embarrassment to his President, a paid pitchman for billionaire Pete Peterson’s anti-Social Security jihad. (We know Pete!) To them Simpson’s not an ill-informed and misogynistic bully who taunts women with comments about “310 million tits.” To them he’s Al. They know him. They say he’s a lot of fun when you get to know him.

They really say that.

Then there are the news anchors and journalists who say things like this: Everybody knows that we need to cut Social Security. Everybody knows the deficit is our most urgent problem.
Everybody knew that Saddam had weapons of mass destruction, too.

Everybody understands that the right-wing, anti-government Simpson Bowles plan represents the “political center,” although it’s far to the right of public opinion – even of Republican or Tea Party voters’ opinion – on issues that range from job creation to increasing Social Security benefits.

You can’t fit millions of frustrated voters into a social group of 147 people.

When Teddy Roosevelt became President, J.P. Morgan (the person, not the bank) suggested he “send your man to my man and they can fix it up.” He was shocked that the new President chose instead to operate outside the Circle in order to create real change. And when Franklin D. Roosevelt became President he brought in new faces, new voices, new ideas. He broke the social circle that had paralyzed government and the economy.

But the circle of right-wing Republicans and corporatist Clintonite Democrats is still intact. That means Barack Obama, Nancy Pelosi and other Democratic leaders will keep on promoting the right-wing agenda known as Simpson Bowles until their party loses all its political power at the polls.

It also means that Republican extremism will still be reported with straight-faced gravity.Congressional committees will keep deregulating big banks, the Justice Department will avoid prosecuting them, and their Boards of Directors will keep rewarding their executives. They’ll all keep doing exactly what they’re doing – until the economy blows up again, perhaps with far worse consequences than the last time.

And when the next crisis comes, “147 people” will react to it exactly the same way they reacted to the last one. You can almost hear them now, can’t you? You can’t blame us, they’ll say. Nobody could’ve seen this coming. How do we know that?

Because we asked everybody we know.

Republicans: There's No Debt Crisis, We Just Want to Screw the Poor

Appearing on Sunday morning talk shows this weekend, Boehner and Ryan revealed that their push for spending cuts is all about ideology — not economic collapse.
March 18, 2013  |   By Alyssa Figueroa

Appearing on Sunday morning talk shows this weekend, both Republican House majority leader John Boehner and Republican Congressman Paul Ryan admitted that there is no imminent debt crisis.

On ABC’s “This Week,” Boehner said he agrees with President Obama that there is no immediate crisis concerning the country’s debt.

Boehner told ABC’s Martha Raddatz:

We do not have an immediate debt crisis. But we all know that we have one looming. And we have-- one looming-- because we have entitlement programs that are not sustainable in their current form. They're gonna go bankrupt. Washington has responsibility-- to our seniors and our near seniors-- that we firm up these programs so that they're there for the long term. Because if we don't do it, not only will they not get benefits, we will have a debt crisis right around the corner. We have time to solve our problems. But we need to do it now.

Later, on “Face the Nation,” Paul Ryan agreed, even boasting that the United States is handling debt better than European countries and has a “resilient economy.”

Then he admitted to CBS’s Bob Schieffer:

We do not have a debt crisis right now, but we see it coming. We know it’s irrefutably happening. And the point we’re trying to make with this budget is let’s get ahead of this problem.

Meanwhile, the Republican Party continues to push through a budget that emphasizes cuts to the so-called “entitlement” programs. Ryan’s proposed budget would cut more than $4 trillion from the federal budget — bringing government spending to the lowest levels since 1948. And it’s balanced mostly on the backs of the poor, as he proposed to slash Medicare, Medicaid and other social welfare programs like food stamps. His plan would also repeal Obamacare. Overall, 66 percent of his proposed budget cuts would be cuts to those with low and middle incomes.

Admitting that there’s no immediate crisis illustrates that the GOP’s proposed monstrous cuts to social welfare programs are more an attempt to push through their ideology than save the country from collapse. As the media continues to hyperbolize the deficit, the need for compromise and the instantaneous dangers that will occur if we don’t impose austerity cuts, Republicans are happily using the spin to quickly demand these absurd cuts. But now, especially with both parties acknowledging that there’s no immediate debt crisis, we must demand an honest, smart budget from Congress.

Democrats: Masters of Self-Delusion

Oh powers otherworldly, hear my prayer: Fuck, do we need more political parties to establish fair representation in the land where democracy has failed...

Losing on Every Front
by MICHAEL BRENNER


Democrats are masters of illusion – especially self-delusion. Their abject performance over the past few decades has shorn them of identity and conviction. They have lost on every front against a Republican opponent that has abandoned the mainstream for cloud cuckoo land. Their natural constituencies have been ravaged: workers, teachers, civil libertarians, the poor and almost poor, the elderly, environmentalists. Yet, today, all we hear from the Democratic faithful are cackles about the plight of the Republicans. “Is The Republican Party Obsolete?” “Can The Republicans Be Saved?” Those are the headline stories being relished by Democrats.

Landmark features of today’s scene testify to a much harsher reality. Reactionary Republicans control the majority of the nation’s governorships and state legislatures. They ruthlessly are rolling back the great achievements of twentieth century social progress. Trade unions, women’s reproductive rights, environmental protections, public education and the health of the vulnerable are being degraded. This is the outcome of the electoral debacle of 2010. That dramatic Democratic rout stemmed from the White House’s, and Democrats’ timid inability to channel the discontents aroused by the financial crisis – allowing the Tea Party and their moneyed backers to exploit popular anxiety in order to advance their own regressive agenda. What could have been an historic opportunity for ushering in an era of progressive public policy, and casting Republicans into outer orbit for a generation, instead fed the forces of reaction.

In Washington, those same elements control the House of Representatives along with the Republican minority in the Senate. Yes, Democratic candidates for the House in aggregate did win more votes than Republicans; it was gerrymandering that gave the latter their majority. But they got the chance to rig the election by the landslide in the 2010 local contests.

Most significant for the longer term is the skewing of public discourse in an ultra-conservative direction. This is true of the media, the punditocracy and inter-party debates as well. The most glaring example is provided by the fate of Social Security. It has been placed on the cutting board by both the White House and the Congressional leadership. They have locked themselves into a bipartisan consensus that mislabeled “entitlement’ programs should be looted to cover fiscal imbalances – this despite the legal reality that Social Security and Medicare draw on dedicated trust funds independent of tax revenues. That could be done by putting off indefinitely the day when contributions to the trust funds are exceeded by payouts to recipient of their earned benefits. The fund remains wholly solvent after that point, BUT instead of moneys being available to drain into the general budget, the transfer would have to be made in the opposite direction. That is the witching hour that the bipartisan alliance desperately wants to avoid. It requires reducing benefits. Nefarious? Dishonest? Yes – but it will happen.

President Obama visualizes this plunder as the central element of a “grand bargain” which he hopes will stand as his presidential legacy. Repeatedly he has moved in that direction: by offering big cuts in exchange for a mess of porridge during the budget confrontation of summer 2011; in appointing two arch critics of the programs, Erskine Bowles and Alan Simpson to head an extra-constitutional panel; in refusing to fence off “entitlements in this year’s round of hostage taking. Nancy Pelosi (a supposed liberal) just a few months ago voiced her support for cutting benefits by lowering the Cost-of-Living increment – this at the very moment she was lobbying to protect the tax breaks of the $250,000 – 400,000 earners who form her donation and support base back in California. Austerity overall has skipped across the aisle to be taken up by the Democrats as their own watchword – announced by Obama with fanfare in 2010. They have done so knowing full well that austerity is manifestly just a code word for cutbacks in domestic programs that serve primarily the “common people” who have been the backbone of the Democratic Party for almost a century.

The most grievous failure has been the surrender to Wall Street. Indentured to the big financial players by their perceived need for campaign money, identifying increasingly with their fellow elites, and drawing their candidates less and less from ordinary people – the Democrats shied from holding accountable the malefactors of financial privilege. Their tepid Dodd-Frank reform legislation does next to nothing to ward off the abuses that led to the crash; and its dilution during the prolonged process of writing specific regulations has vitiated whatever potential it had. Furthermore, they left intact a regulatory culture that is user-friendly for the biggest financial players, and sealed it by appointing persons with no enthusiasm for coming to grips with them. We need only look at Neil Barofsky’s account of his ordeal as Special Inspector General to monitor TARP for a blow-by-blow account of how the appeasers and compromisers took direction from the White House to ensure that the Wall Street barons came through the crisis unscathed.

Administration officials led by Treasury Secretary Geithner used every imaginable means to derail him. The most shocking incident involved a meeting with Herb Alison, Geithner’s right hand man whom the White House had appointed as Assistant Secretary of the Treasury responsible for TARP. It was right out of the Godfather. Alison told Barofsky amiably but bluntly that unless his curbed his righteous impulses his future, and that of his new-born daughter, would be financially bleak. Barofsky calls it the “the gold or the lead conversation.” That sort of thing does not occur unless the “proposing” party knows that he has the blessing of the top man. Barofsky, like Elizabeth Warren, was treated by the Obama administration as an enemy for presuming to stand in the way of the Wall Street juggernaut. In contrast, Mary Jo White of J P Morgan-Chase, newly appointed head of the SEC, is cut in the preferred mold.

Wherever one turns the story is the same. Be it income inequality where no Democratic plan or program worthy of the name has seen light of day; the environment – where regulation has been applied with such a light touch as hardly to be felt; trade union rights – which Obama has assiduously ignored with no protest from the party’s Congressional leadership; etc. This is not to mention the should-to-shoulder defense of the historic assaults on civil liberties under the blanket justification of the contrived “war on terror.” Last week, one heard only one recognizable Democratic voice (that of Senator Ron Wyden) denouncing Eric Holder’s latest rewriting of the Constitution in declaring that the President has legal authority to assassinate American citizens on United States soil. Nancy Pelosi went so far as to express her ambivalence as to whether it even was good idea to make public such killings. This despite polls showing fewer than 1 in 4 Americans favoring strikes against Americans even in face of an imminent threat.

Is all this simply a reflection of new political realities? The opinion surveys of public attitudes on the most salient socio-economic issues show this not to be the case. And to the extent that attitudes may have become less enlightened on certain matters, to the extent that the media are indeed in the grip of right-wing dogmatists – the meekness and inarticulateness of Democrats bears much of the responsibility. Party leaders and the sympathetic commentariat are not visibly over-exerting themselves to close the gap. Much easier, and gratifying, to laugh at the antics of the buffoonish – but winning – Republicans.

Democrats’ gravest sin is not confronting the ideological onslaught against government. The Republicans have turned back the clock a century or more in painting the state as the source of evil and government as its malign agent – except of course in the burgeoning national security domain. Reviving atavistic feelings from a bygone age, they undertook a crusade to cast Washington as the great villain. Reconciling American individualism with realities of the modern world was achieved long ago – only to be undone by a relentless campaign enabled by the Democrats’ passive acquiescence over the past 30 years. The battle wasn’t lost; the enemy was never engaged. As a consequence, all progressive forces are on their heels as their feeble attempts to preserve individual programs are thwarted by having the philosophical high ground cut from under them. It is telling that after the disasters produced by the unregulated private sector, they still could not muster the gumption or moral authority to set things right. Barack Obama instead embraced Bill Clinton’s silly, yet cynical proclamation that “the era of big government is over.” He never has made the case why government is vital and indispensable. Neither he nor Congressional leaders have framed the issues of reform, and of enlightened social policy, so as to expound the message that government and civilized society are necessary complements in this day and age.

They never tied around the Republicans’ necks the historical record of their opposition to all those programs that the large majority of Americans cherish – like Medicare. They never told audiences straight from the shoulder what the basic contradiction is between the Republican vision of a refurbished Gaslight Era and the well-being Americans have taken for granted. Why haven’t they? The excuse is Republican obstructionism. But isn’t the real reason lack of conviction – especially by a White House manifestly more comfortable with the celebrity world of movers and shakers than with the people who elected him? Indeed, is it just possible that Mr. Obama believes deep down that the Republican attitude resonates more closely with the authentic heartbeat of America?

The only thing that has prevented the Republicans from sweeping the board entirely is their own fanaticism and crude tactics. The Democrats have become like the defenders of Constantinople who for centuries withstood one siege after another from the East only because the massed besieging armies fell victim to the Plague. The Republicans indeed are plague prone given their primitive attitude toward collective management of public facilities. The spectacle of their running around in frantic circles hardly is occasion, though, for the Democrats to stand on the ramparts giddy with laughter. After all, on each of these occasions they have lost another province or two to the barbarians.

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.

An Invented Crisis Threatens the Forgotten Millions

Friday, December 7, 2012 by The New York Times
by Paul Krugman


Let’s get one thing straight: America is not facing a fiscal crisis. It is, however, still very much experiencing a job crisis.

It’s easy to get confused about the fiscal thing, since everyone’s talking about the “fiscal cliff.” Indeed, one recent poll suggests that a large plurality of the public believes that the budget deficit will go up if we go off that cliff.

In fact, of course, it’s just the opposite: The danger is that the deficit will come down too much, too fast. And the reasons that might happen are purely political; we may be about to slash spending and raise taxes not because markets demand it, but because Republicans have been using blackmail as a bargaining strategy, and the president seems ready to enter into the notorious 'grand bargain.'

Moreover, despite years of warnings from the usual suspects about the dangers of deficits and debt, our government can borrow at incredibly low interest rates — interest rates on inflation-protected U.S. bonds are actually negative, so investors are paying our government to make use of their money. And don’t tell me that markets may suddenly turn on us. Remember, the U.S. government can’t run out of cash (it prints the stuff), so the worst that could happen would be a fall in the dollar, which wouldn’t be a terrible thing and might actually help the economy.

Let’s get one thing straight: America is not facing a fiscal crisis.

Yet there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now — except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused.

Meanwhile, there is almost no organized pressure to deal with the terrible thing that is actually happening right now — namely, mass unemployment. Yes, we’ve made progress over the past year. But long-term unemployment remains at levels not seen since the Great Depression: as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year.

When you see numbers like those, bear in mind that we’re looking at millions of human tragedies: at individuals and families whose lives are falling apart because they can’t find work, at savings consumed, homes lost and dreams destroyed. And the longer this goes on, the bigger the tragedy.

There are also huge dollars-and-cents costs to our unmet jobs crisis. When willing workers endure forced idleness, society as a whole suffers from the waste of their efforts and talents. The Congressional Budget Office estimates that what we are actually producing falls short of what we could and should be producing by around 6 percent of G.D.P., or $900 billion a year.

Worse yet, there are good reasons to believe that high unemployment is undermining our future growth as well, as the long-term unemployed come to be considered unemployable, as investment falters in the face of inadequate sales.

So what can be done? The panic over the fiscal cliff has been revelatory. It shows that even the deficit scolds are closet Keynesians. That is, they believe that right now spending cuts and tax hikes would destroy jobs; it’s impossible to make that claim while denying that temporary spending increases and tax cuts would create jobs. Yes, our still-depressed economy needs more fiscal stimulus.

And, to his credit, President Obama did include a modest amount of stimulus in his initial budget offer; the White House, at least, hasn’t completely forgotten about the unemployed. Unfortunately, almost nobody expects those stimulus plans to be included in whatever deal is eventually reached.

So why aren’t we helping the unemployed? It’s not because we can’t afford it. Given those ultralow borrowing costs, plus the damage unemployment is doing to our economy and hence to the tax base, you can make a pretty good case that spending more to create jobs now would actually improve our long-run fiscal position.

Nor, I think, is it really ideology. Even Republicans, when opposing cuts in defense spending, immediately start talking about how such cuts would destroy jobs — and I’m sorry, but weaponized Keynesianism, the assertion that government spending creates jobs, but only if it goes to the military, doesn’t make sense.

No, in the end it’s hard to avoid concluding that it’s about class. Influential people in Washington aren’t worried about losing their jobs; by and large they don’t even know anyone who’s unemployed. The plight of the unemployed simply doesn’t loom large in their minds — and, of course, the unemployed don’t hire lobbyists or make big campaign contributions.

So the unemployment crisis goes on and on, even though we have both the knowledge and the means to solve it. It’s a vast tragedy — and it’s also an outrage.

Our Collapsing Economy and Currency

By: Paul Craig Roberts| December 1, 2012 | 

Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used.

The fiscal cliff is the result of the inability to close the federal budget deficit. The budget deficit cannot be closed because large numbers of US middle class jobs and the GDP and tax base associated with them have been moved offshore, thus reducing federal revenues. The fiscal cliff cannot be closed because of the unfunded liabilities of eleven years of US-initiated wars against a half dozen Muslim countries--wars that have benefited only the profits of the military/security complex and the territorial ambitions of Israel. The budget deficit cannot be closed, because economic policy is focused only on saving banks that wrongful financial deregulation allowed to speculate, to merge, and to become too big to fail, thus requiring public subsidies that vastly dwarf the totality of US welfare spending.

The hoax is the propaganda that the fiscal cliff can be avoided by reneging on promised Social Security and Medicare benefits that people have paid for with the payroll tax and by cutting back all aspects of the social safety net from food stamps to unemployment benefits to Medicaid, to housing subsidies. The right-wing has been trying to get rid of the social safety net ever since Franklin D. Roosevelt constructed it, out of fear or compassion or both, during the Great Depression.

Washington’s response to the fiscal cliff is austerity: spending cuts and tax increases. The Republicans say they will vote for the Democrats’ tax increases if the Democrats vote for the Republican’s assault on the social safety net. What bipartisan compromise means is a double-barreled dose of austerity.

Ever since John Maynard Keynes, economists have understood that tax increases and spending cuts suppress, not stimulate, economic activity. This is especially the case in an economy such as the American one, which is driven by consumer spending. When spending declines, so does the economy. When the economy declines, the budget deficit rises.

This is especially the case when an economy is weak and already in decline. A declining economy means less sales, less employment, less tax revenues. This works against the effort to close the federal budget deficit with austerity measures. Instead of strengthening the economy, the austerity measures weaken it further. To cut unemployment benefits and food stamps when unemployment is high or rising would be to provoke social and political instability.

Some economists, such as Robert Barro at Harvard University, claim that stimulative measures, the opposite of austerity, don’t work, because consumers anticipate the higher taxes that will be needed to cover the budget deficit and, therefore, reduce their spending and increase their saving in order to be able to pay the anticipated higher taxes.

In other words, the Keynesian effort to stimulate spending causes consumers to reduce their spending. I don’t know of any empirical evidence for this claim.

Regardless, the situation on the ground at the present time is that for the majority of people, incomes are stretched to the limit and beyond. Many cannot pay their bills, their mortgages, their car payments, their student loans. They are drowning in debt, and there is nothing that they can cut back in order to save money with which to pay higher taxes.

Many commentators are complaining that Congress will refuse to face the difficult issues and kick the can down the road, leaving the fiscal cliff looming. This would probably be the best outcome. As the fiscal cliff is a result, not a cause, to focus on the fiscal cliff is to focus on the symptoms rather than the disease.

The US economy has two serious diseases, and neither one is too much welfare spending.

One disease is the offshoring of US middle class jobs, both manufacturing jobs and professional service jobs such as engineering, research, design, and information technology, jobs that formerly were filled by US university graduates, but which today are sent abroad or are filled by foreigners brought in on H-1B work visas at two-thirds of the salary.

The other disease is the deregulation, especially the financial deregulation, that caused the ongoing financial crisis and created banks too big to fail, which has prevented capitalism from working and closing down insolvent corporations.

The Federal Reserve’s policy is focused on saving the banks, not on saving the economy. The Federal Reserve is purchasing not only new Treasury bonds issued to finance the more than one trillion dollar annual federal deficit but also the banks’ underwater financial instruments, taking them off the banks’ books and putting them on the Federal Reserve’s books.

Normally, debt monetization of this amount results in rising inflation, but the money that the Federal Reserve is creating in its attempt to manage the public debt and the banks’ private debt is hung up in the banking system as excess reserves and is not finding its way into the economy. The banks are too busted to lend, and consumers are too indebted to borrow.

However, the debt monetization poses a second threat that is capable of biting the US economy and consumer living standards very hard. Foreign central banks, foreign investors in US stocks and financial instruments, and Americans themselves observing the Federal Reserve’s continuous monetization of US debt cannot avoid concern about the dollar’s value as the supply of ever more dollars continues to pour out of the Federal Reserve.

Already there is evidence of central banks and individuals moving out of dollars into gold and silver bullion and into other currencies of countries that are not hemorrhaging debt and money. According to John Williams of Shadowstats.com, the US dollar as a percentage of global holdings of reserve assets has declined from 36.6% in 2006 to 28.7% in 2012. Gold has increased from 10.5% to 12.8% and other foreign currencies except the euro increased from 38.4% to 44.4%.

Russia, China, Brazil, India, and South Africa intend to conduct trade among themselves in their own currencies without use of the dollar as reserve currency. The EU countries conduct their trade with one another in euros, and although not reported in the US media, Asian countries are discussing a new common currency for trade among themselves.

The world is abandoning the use of the dollar to settle international accounts, and the demand for dollars is falling as the Federal Reserve increases the supply of dollars.

This means that the price of the dollar is threatened.

Concern over the dollar means concern over dollar-denominated financial instruments such as stocks and bonds. The Chinese hold some $2 trillion in US financial instruments. The Japanese hold about $1 trillion in US Treasuries. The Saudis and the oil emirates also hold large quantities of US dollar financial instruments. At some point the move away from the dollar also means a move away from US financial instruments. The dumping of US stocks and bonds would destabilize US financial markets and wipe out the remainder of US wealth.

As I have previously written, the Federal Reserve can create new money with which to purchase the dumped financial instruments, thus maintaining their prices. But the Federal Reserve cannot print gold or foreign currencies with which to buy up the dollars that foreigners are paid for their US stocks and bonds. When the dollars in turn are dumped, the exchange value of the dollar will collapse, and US inflation will explode.

The onset of hyperinflation can be as sudden as the collapse of a currency’s exchange value.

The real crisis facing the US is the impending collapse of the US dollar’s foreign exchange value. The US dollar’s value in relation to silver and gold has already collapsed. In the past ten years, gold’s price in US dollars has increased from $250 per ounce to $1,750 per ounce, an increase of $1,500. Silver’s price has risen from $4 per ounce to $34 per ounce. These price rises are not due to a sudden scarcity of gold and silver, but to a flight from the dollar into the two forms of historical money that cannot be created with the printing press.

The price of oil has risen from $20 a barrel ten years ago to as high as $120 per barrel earlier this year and currently $90 a barrel. This price rise has come about despite a weak world economy and without any supply restrictions other than those caused by the attempted US occupation of Iraq, the Western assault on Libya, and the self-harming Western sanctions on Iran, impacts most likely offset by the Saudis, still Washington’s faithful puppet, a country that pumps out its precious life fluid in order to save the West from its own mistakes. The moronic neoconservatives wish to overthrow the Saudi Arabian government, but what more faithful servant has Washington ever had than the Saudi royal house?

What can be done? For a number of years I have pointed out that the problem is the loss of US employment, consumer income, GDP, and tax base to offshoring. The solution is to reverse the outward flow of jobs and to bring them back to the US. This can be done, as Ralph Gomory has made clear, by taxing corporations according to where they add value to their product. If the value is added abroad, corporations would have a high tax rate. If they add value domestically with US labor, they would face a low tax rate. The difference in tax rates can be calculated to offset the benefit of the lower cost of foreign labor.

As all offshored production that is brought to the US to be marketed to Americans counts as imports, relocating the production in the US would decrease the trade deficit, thus strengthening belief in the dollar. The increase in US consumer incomes would raise tax revenues, thus lowering the budget deficit. It is a win-win solution.

The second part to the solution is to end the expensive unfunded wars that have ruined the federal budget for the past 11 years as well as future budgets due to the cost of veterans’ hospital care and benefits. According to ABC World News, “In the decade since the Sept. 11, 2001 terrorist attacks on the World Trade Center, 2,333,972 American military personnel have been deployed to Iraq, Afghanistan or both, as of Aug. 30, 2011 [more than a year ago].” These 2.3 million veterans have rights to various unfunded benefits including life-long health care. Already, according to ABC, 711,986 have used Veterans Administration health care between fiscal year 2002 and the third-quarter of fiscal year 2011. http://abcnews.go.com/Politics/us-veterans-numbers/story?id=14928136#1

The Republicans are determined to continue the gratuitous wars and to make the 99 percent pay for the neoconservatives’ Wars of Hegemony while protecting the 1 percent from tax increases.

The Democrats are little different.

No one in the White House and no more than one dozen members of the 535 member US Congress represents the American people. This is the reason that despite obvious remedies nothing can be done. America is going to crash big time.

And the rest of the world will be thankful. America along with Israel is the world’s most hated country. Don’t expect any foreign bailouts of the failed “superpower.”

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.

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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.

 

America didn’t vote for a “grand bargain” (2 articles)

Just a few short days after the election, and Obama is already going against the wishes of 60% of the elctorate who in exit polls want him to raise taxes on the wealthy and corporations. 60% of voters all over the country. And what is he going to do? Forget about raising taxes, he's going to lower taxes for corporations, against the views of 60% of the people who voted in 2012. Enter the bane of us all: the Grand Bargain.--jef

Thursday, Nov 8, 2012
Listen up, Democrats: Obama didn't win by promising a compromise on entitlement reform. He won despite it
By Rick Perlstein



By 10 p.m. on Tuesday, it was all over but the shouting — the shouting of Karl Rove, incredulous that Fox News’ “decision desk” would dare deploy the best statistical evidence at its disposal to call Ohio for the president; the shouting of wingnuts everywhere that — no fair! — Obama only won because of superstorm Sandy (because demonstrated competence in running the government is no reason to choose someone to … run your government); the shouting of the joyous throngs at McCormick Place waiting to receive their new second-term president. In my Hyde Park apartment just five blocks from the president’s home, soon all around me was jubilation. A second Barack Obama term! I alone seemed to feel the disquiet.

This reelection troubles me. It troubles me because of the signal it may send to some of the people running the Democratic Party, and to Barack Obama, a signal that may threaten the long-term health of the Democratic Party itself.

I heard Dick Durbin, the Illinois senator who is close to Obama, on the radio the next morning boasting that he was one of the Democrats on the Simpson-Bowles Commission to vote for its recommendations — recommendations that included, in addition to changes in the tax code meant to increase revenue (while also cutting tax rates), diminishing eligibility and benefits for Medicare and Social Security. Though the commission failed to reach consensus, making its proposals moot, it was aiming at just the sort of “grand bargain” that Obama has consistently and quietly spoken about as his sort of beau ideal for what a successful presidency would look like. Durbin went on to say he hoped a grand bargain might be wrapped up in the next calendar year, before congressmen and senators became preoccupied with reelection. And maybe it will. As the blogger Lambert Strether impishly put it on Election Day: “I’m betting the Ds, who wouldn’t abolish the filibuster for health care or the stimulus, will abolish it if that’s what it takes to kick the hippies and gut Social Security.”

Fellow Democrats, let’s hope not. Please, please, please, let’s hope not.

The goal, with or without a filibuster reform, would be to “correct” a supposed structural budget crisis that liberal economists like Paul Krugman and Dean Baker convincingly point out doesn’t actually exist. In fact, the increase in the deficit was caused directly by the financial crisis and the housing bubble, and had nothing to do with the middle-class entitlement programs a grand bargain would cut. What’s more, the deficit is perfectly sustainable in any event. As for the record national debt, in fact the rest of the world’s eagerness to lend to America at next to no cost is in fact a glorious opportunity to increase American well-being, something not to be feared but welcomed. (America’s debt to GDP ratio is about 70 percent. Japan’s is over 225 percent — and that island, with the world’s third-largest economy, has not sunk into the sea. In fact, from 2001 to 2010 its economic growth has generally surpassed ours.)

America’s government is not too big. It is not “out of control.” Measured by the number of public sector employees compared to the overall population, in fact, it is at its smallest size since 1968. The Democratic compulsion to take the lead in making it smaller, to “control” it, is in itself a serious historic problem —and a perverse one at that. For it doesn’t work. Bill Clinton tried it in the 1990s, working with Republicans in Congress both to obliterate the deficit caused by Republican budgetary mismanagement, and “end welfare as we know it.”

What happened to the resulting budgetary surplus they created? Republican mismanagement and ideological extremism obliterated it, and the public acted like no miracle save for drastic cuts in middle-class entitlements could ever bring it back; media gatekeepers immediately forgot that Democrats had been “responsible” fiscal stewards, just like much of the populace simply forgot what Clinton did with welfare. After Hurricane Katrina, the story was that black residents of New Orleans had become so enervated by their reliance on welfare checks they were too dumb to get out of the rain. It was as if America’s newly stripped-bare welfare system’s time limits, work requirements and block grants had been thrown down a memory hole — even as, seven years later in our current unemployment crisis, according to the nonpartisan Center for Budget and Policy Priorities, welfare reform now greatly contributes to increased rates of poverty.

A simple historical fact: There is no political payoff for Democrats in presiding over governmental austerity. The evidence goes far back to long before Bill Clinton. In the mid-1970s, the first superstar of the Democratic austerity movement, William Proxmire, a budgetary obsessive whose campaign bumper stickers read “Waste Will Bury Us,” began awarding a monthly “Golden Fleece Award” to the government expenditure he judged the most wasteful — a clown show that frequently had no more effect than making things difficult for scientists doing basic research that frequently led to revolutionary breakthroughs. Austerity was the ideology of Gov. Jerry Brown in California, too — and also the man who beat Brown for the Democratic presidential nominee in 1976, Jimmy Carter, who announced, in his 1978 State of the Union address that “Government cannot eliminate poverty or provide a bountiful economy or reduce inflation or save our cities or provide energy.”

What Carter said wasn’t even true; for instance, he did deploy the power of government to reduce inflation, by appointing a Federal Reserve chairman, Paul Volcker, with a mandate to squeeze the money supply, an act of deliberate austerity that induced the recession that defeated him. Like I said, there was no political payoff: Ronald Reagan, depicting Carter on the campaign trail as just another Democratic spendthrift, defeated him, reappointed Volcker, then harvested the political credit when Volcker’s governmental policies did slay inflation. And then came the amnesia: When, 18 years later, Bill Clinton gave much the same State of the Union address — “The era of big government is over” — people acted like no Democrat had ever said anything like that before.

Now Barack Obama, oblivious, may be barreling into a yet more dangerous austerity dare, perhaps squeezing the two most effective and popular government programs in existence — Social Security and Medicare. Credibly pledging not just to preserve them but to extend them has been how generations of Democratic politicians have turned millions into habitual Democratic voters.

Barack Obama didn’t win by promising a grand bargain to rein them in. He won despite it. Democrats won’t win in the future by “reforming” entitlements. If they do it, they will lose, precisely because of it, and possibly for generations. If he believes things to be otherwise, God help the party of Jefferson and Jackson.

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Thursday, November 8, 2012 by Campaign for America's Future
Voters Didn't Ask for Bi-Partisanship,
They Demanded Good Policies
After the Election, a New Mandate -- and New 'Fiscal Cliff' Math

by Richard Eskow

 

 

President Obama was reportedly planning to reach out to House Majority Leader John Boehner today to begin negotiating a deal to avoid the so-called "fiscal cliff," a series of spending cuts and tax hikes scheduled take effect unless Congress rescinds the law that created it.

That overture is both appropriate and statesmanlike. The public expects its leaders to work together on important issues.

The question is, what kind of deal? Boehner's been acting as intransigent as ever, telling Reuters that Congressional Republicans will have "a mandate to not raise taxes."

Now Boehner's saying he's willing to raise "tax revenue," as long as tax rates are lowered even more. That's a coded way of saying he wants even more tax breaks for millionaires and billionaires, and that Democrats should expect to get that "revenue" by eliminating tax deductions for struggling middle-class Americans. That's likely to mean losing deductions for dependent children and mortgages, and tax changes that will lead to even less health coverage for working Americans. He says he'll also demand cuts to Social Security and Medicare as part of any deal.

But Boehner isn't holding the cards in this situation. The president is. All the numbers say so -- in the election results, the polling data, and even in the stock market, if you read it correctly.

The New Math
As the Democrats were fond of saying this year: It's not politics, it's math. Here's some math that Congressional Republicans -- and austerity-minded Democrats -- are going to have to deal with:

A headline in the New York Times read, "Question for the Victor: How Far Do You Push?" The answer: As far as the voters have asked you to push.

2 to 1: Voters have given Democrats two of three branches of elected government. Two out of three aint' bad. In fact, it's a mandate to govern. Memo to John Boehner from the voters: When you've only got one out of three branches, you may be a partner in the political process -- but you're the junior partner.

12,744,844: Democratic Senatorial candidates got 12,744,844 more votes than Republicans this year. According to my rough calculations, Democratic candidates got 57.44 percent of the popular vote. Republicans only got 41.57 percent.

Harry Reid's been saying all along that he doesn't want to cut Social Security. The voters agree with him. Deal with it, Republicans.

Zero: That's the approximate number of candidates whose embrace for the "Simpson Bowles" austerity plan was a pathway to victory. That plan would cut Social Security and Medicare benefits, and sharply cut into all forms of government spending, while lowering taxes even more for millionaires and corporations. It would almost certainly raise taxes sharply, however, for the middle class.

As Zaid Jilani notes, three highly-visible candidates who openly endorsed the Simpson Bowles plan -- or who were endorsed by one or both gentlemen themselves -- unanimously went down to defeat this week.

On the other hand, Virginia Senate candidate Tim Kaine of Virginia openly rejected the Simpson Bowles plan. He pulled off an upset victory.

303: That's the number of electoral votes President Obama received. He won a decisive victory around the country -- and he won the popular vote, too. You lost, Republicans, fair and square.

And about that whole "fair and square" thing: As the New York Times noted today, the reelection of House Republicans had a lot more to do with gerrymandering, incumbency and big-money corporate campaign financing than it did with any mandate not to cut taxes.
A headline in the New York Times read, "Question for the Victor: How Far Do You Push?" The answer: As far as the voters have asked you to push.

Inside Job
But that process seems to disturb a lot of pundits, press and political insiders. They'd rather things worked out behind closed doors -- "just send your man around to see my man," as J. P. Morgan suggested to Teddy Roosevelt. The president's going to be under a lot of pressure to preemptively surrender on his stated principles.The voters have asked President Obama and his fellow Democrats not to "shirk a fight" over economic issues. 

Americans for Tax Fairness compiled polling data which showed that 60 percent of voters wanted the Bush tax cuts ended for incomes of $250,000 and above. Voters said they wanted to see their Social Security and Medicare benefits protected, and the deficit addressed by increasing the rich instead, and they did so by the overwhelming margin of 64 percent to 17 percent. And 62 percent of those polled said that "the message [they] were trying to send to the next president and Congress with [their] votes this year" was: "We should make sure the wealthy start paying their fair share of taxes."

And yet election-night commentary was filled with talk about the president's need to find "common ground," something we never heard about George W. Bush's two victories -- one of which came without either a popular-vote majority or an unequivocal electoral college win. Expect a lot more of this talk from insiders in the days and weeks to come.

These insiders don't seem to know or care that voters elected the president and his fellow Democrats because of those principles.

Rated X
The morally-compromised "ratings agencies" -- actually for-profit corporations that abused their obligations for years, directly contributing to the financial crisis of 2008 -- wasted no time getting into the act once the votes were counted. Fitch Ratings immediately warned the president that there would be "no fiscal honeymoon," saying that a failure to avoid the "fiscal cliff" would cost the U.S. government its "AAA" rating.

But international investors still love our government. They're essentially paying our Treasury to borrow money. And despite what the fearmongers are saying, the stock market didn't plunge because they're afraid we won't cut spending. While it's true that markets dislike uncertainty, what they really hate are austerity measures that shrink the economy.

Despite the mythology, the stock market didn't fall the last time credit agencies frowned on the the government's credit. It was the deal itself that dealt it a blow:

 You can see that the market began to fall in anticipation of a deficit deal, and fell even further when the deal was done. But it shrugged off a downgrade by S&P, another ratings agency and even climbed slightly. Why? Because investors know that spending cuts in this economic climate are recipe for disaster.

And after all those "agencies" gave all worthless mortgage securities a "AAA" rating -- apparently investors don't rate them very highly.

Stepping Up
At times during his first term, the president appeared to show disdain for ideology, for advocacy for the conflicts that are part of the political process. He sometimes spoke of emulating the compromises reached between Ronald Reagan and House Majority Leader Tip O'Neill, but without offering the fierce advocacy each of those leaders first gave for his own viewpoint.

But it was a newly energized president who addressed supporters on election night, saying "We will disagree, sometimes fiercely, about how to get there."

"I'm not talking about blind optimism," President Obama told the cheering Chicago crowd. "I'm not talking about the wishful idealism that allows us to just sit on the sidelines or shirk from a fight."

That's the process the public needs to see -- the disagreement, the debate, and the conflict, as well as the compromise and the forging of consensus. Voters need to know why they're getting the policies that affect them, and which politicians are pulling for (or against) them.

That's a promising sign. The absence of disagreement and ferocity has sometimes robbed the public of the opportunity to make informed choices in the voting booth. Would voters have given the reins of power back to Boehner and Congressional Republicans if they'd been able to see just how extreme their positions have been for the last two years?

The voters have asked President Obama and his fellow Democrats not to "shirk a fight" over economic issues. We look forward to seeing the democratic process unfold over the coming weeks, months and years, as a much-needed fight against economic injustice is played out in the public arena.

That's not partisanship. It's math.