The Federal Government has reopened. The Giant Panda Cam is back up. The exchanges set up by the Affordable Care Act are working in the states where the governor’s accepted the Medicaid expansion and have spotty participation in some other places. Fox News is back to Benghazi conspiracy theories. Why can’t I get the vision of more icky Grand Bargaining out of my head? Robert Kuttner is right there with me on the worry couch.
What would the latest incarnation of the grand bargain look like? The Republicans, worried about the cuts in Pentagon spending mandated by the sequester (which is still in effect) propose to allow military spending to rise in exchange for cuts in Social Security and Medicare. Excuse me? This is a little like saying, I’ll take your house and in exchange you have to give me your money. Right, we’ll cut Social Security and Medicare in order to increase money for the military. Are you kidding? It gets worse. In exchange for this proposed deal, Republicans are not willing to talk about raising taxes or restoring other social spending or to stop trying to undermine the Affordable Care Act. The only good thing about this proposed bargain is that is should be dead on arrival. Senate Majority Leader Harry Reid immediately declared that he wanted on part of any such deal. But President Obama, who has flirted with grand bargains in the past, was more equivocal. He has already put disguised cuts in Social Security in his own 2014 budget, though a revision of annual cost of living adjustments. The deal to keep the government set a deadline of December 13 for some kind of progress on a grand reform of entitlements and taxes. That’s only eight weeks away. It is preposterous to think that a bargain on taxes, social insurance, and deficits that has eluded the two parties throughout the Obama administration can be struck in less than two months. One has to hope that the deadline comes and goes, and that when Republicans think about shutting down the government again when the continuing resolution expires in January, they will think twice. But that will happen only if Reid, Pelosi, and House and Senate Democrats display the same resolve that they did in the last round. And given his past dalliances with putting Social Security and Medicare on the block, some of that resolve may need to be displayed against their president.
There’s likely to be some pressure because the Republican Party’s right wing still hasn’t given up its demands and will likely cause issues again. This means that way out there Republicans may continue to move the middle ground further toward the right wing. What’s going to happen as some of these incumbents start seeing primary challengers?
The more important intraparty fight will begin playing out chiefly in Senate primaries next year, with the targeting of incumbents like Mr. Cochran; Mitch McConnell, the minority leader; Lindsey Graham of South Carolina; and perhaps Lamar Alexander of Tennessee and Pat Roberts of Kansas. Their perceived roles as moderating drags on Tea Party-inspired senators like Ted Cruz of Texas and Mike Lee of Utah in the shutdown negotiations has galvanized conservative organizations to elect more such Republicans. Mr. DeMint said he thought the power of the establishment and its corporate money was waning. “It’s harder to buy influence in Washington now,” he said. That is certainly true in the House, the bulwark of Tea Party conservatism thanks to the overwhelmingly Republican nature of many of the districts and the less expensive campaigns necessary in them. As the Republican retreat on the shutdown demonstrated, Mr. Cruz and Mr. Lee are very much outnumbered in the Senate. “The lesson is, we need more reinforcements,” said Daniel Horowitz, an official with the Madison Project. Groups like his are more reliant on smaller dollar donations than their rivals. The U.S. Chamber of Commerce and Crossroads, for example, can summon large amounts from donors across the business spectrum, many of whom are expressing concern about the latest turn of events on Capitol Hill and are intent on avoiding nominees like Richard Mourdock of Indiana, who unseated Senator Richard G. Lugar, a longtime veteran, in the primary but lost in the general election after making a damaging comment on rape. “I have seen the problems in some of these primaries where we’ve knocked off some pretty good candidates and it resulted in nothing for us — like Lugar,” said Mel Sembler, a Florida real estate developer and former ambassador who helps Crossroads raise money. Spencer Zwick, the chief fund-raiser for Mr. Romney’s campaign, said individual donors tell him they are eager to help the establishment wing’s cause however they can. “There are a lot of individual donors who were supportive of Mitt’s campaign who are quietly waiting to figure out how they can play, and I think there’s a lot of appetite to make sure that we nominate candidates who can win general elections,” he said. The Tea Party-aligned groups say they have an established record of winning primaries against Republican rivals with deep corporate backing. “We’ve always been outspent by orders of magnitude,” said Matt Kibbe, the president of FreedomWorks. And they do have some big donors, like the multimillionaire investor Foster Friess, who backed a failed primary challenge to Mr. Hatch in Utah last year and indicated in an interview last week that he would consider new “opportunities to put young, dynamic people in.”
With automatic cuts to the militaryset to take effect by January and a separate round of cuts scheduled forMedicare, lawmakers will have to decide who gets hit the hardest. Washington’s lobbying machine — representing older citizens, doctors, educators, military contractors and a wide range of corporate interests — is gearing up to ensure that the slices of federal money for those groups are spared in new negotiations over government spending. It is a debate that almost no one involved wants to have so soon after the nasty fight over the federal budget, which produced the 16-day shutdown and again failed to reverse the automatic cuts resulting from previous disagreements. But Congress managed to reopen the government and extend the nation’s borrowing limit largely by creating a new series of deadlines that run through February, giving special interests several chances to influence the process. So far, the defense industry is likely to be hit the hardest, since the automatic cuts, known as sequestration, set for January would slice an additional $20 billion from the Pentagon’s budget. “It’s fair to say the volume in Washington is going to be deafening,” said Marion Blakey, the chief executive of the Aerospace Industries Association. Republicans on Capitol Hill are determined to mitigate those cuts by spreading them among various social programs, like education and Social Security, bringing dozens of other special-interest groups into the picture. “The perfect storm is coming” is how one health care industry lobbying coalition put it in an advertisement, complete with dark clouds and lightning, that ran the day the shutdown ended. “Tell Washington, no more hospital cuts.” AARP, the giant nonprofit group that represents older citizens, has kicked off a million-dollar radio advertising campaign warning that “seniors are no bargaining chip.”
I’m not sure if you caught the fun stuff that went on last week when billionaire Pete Peterson’s attempt to end social security and medicare as we know it known as the group “Fix the Debt” tried to create a twitter sensation. They got more than they bargained for when the popularity of their ideas got trolled by thousands of twitter users.
When billionaire Pete Peterson’s Fix The Debtdecided to hold a Q&A session on Twitter to sell corporate America’s austerity agenda, they must not have expected to be trolled. First rule of Twitter: always expect the trolls. By the time the whole real-time conversation was called off, the stream for #FixTheDebtQA was 100% opposition. This should be heartening to those of us who would rather see Social Security expanded, not slashed
“Fix the Debt” just felt Twitter’s sweet, trollish wrath. Championed by Alan Simpson and Erskine Bowles, Fix the Debt — which The Nation magazine called a “fearmongering campaign to convince Americans that the deficits the United States has run throughout its history have suddenly metastasized” — held a Twitter live chat this afternoon to discuss next steps in America’s ongoing fiscal squabble. And it didn’t go so well, with the #fixthedebtqa soon teeming with jokesters and those very much against Fix the Debt’s message.
Senate Minority Leader Mitch McConnell (R-Ky.) suggested Sunday that the automatic spending reductions known as the sequester have given his party leverage moving into future budget negotiations. The government-wide cuts, which took effect in March as a result of the Budget Control Act, trim spending by more than $80 billion during this fiscal year alone. They are scheduled to continue for another nine years with deeper cuts unless Congress and the White House agree to an alternative deficit-reduction plan. McConnell said on CBS’s “Face the Nation” that he would not budge on the Budget Control Act’s spending caps when lawmakers and the White House resume negotiations over taxes and expenditures. “The bottom line, when we re-engage early next year, is I don’t want to bust the caps and I don’t want to raise spending, because we are in fact reducing spending, not as much as we need to, but it is a success,” McConnell said, adding that the sequester has lowered government spending “for two years in a row for the first time since right after the Korean War.” The GOP leader also criticized President Obama and congressional Democrats for pushing to raise taxes during previous budget talks. “Every discussion we’ve had about this in the past has had what I would call a ransom attached to it — a trillion-dollars in new tax revenues,” McConnell said. “We don’t have this problem because we tax too little in the country, we have it because we spend too much.”
So, excuse me but I am still paying attention to the men behind the curtains. What’s on your reading and blogging list today?
Thursday Reads: Crisis in Cyprus, The End of the “Creative Class” Dream, the Grand Betrayal, and Other NewsPosted: March 21, 2013
There’s quite a bit of news on the Cyprus crisis this morning. But first, last night Joe Weisenthal posted this assessment of how bad things had already gotten: In Just Days A Modern Economy Has Been Set Back 50 Years, And It May Never Be The Same Again. That’s a quote from Ciaran O’Hagan of Société Générale in Paris. Weisenthal writes:
According to reports, Cyprus will try again tomorrow to cobble together some kind of bank bailout bill that can pass parliament.
Cyprus needs to raise another 5.8 billion euros, which it could do from some combination of deposit taxes, Russian money, and pension nationalization.
None of the options are good, but until it’s done, banks will likely have to remain closed, a situation that can’t go on much longer.
This is a stunning turn of events for a modern Eurozone nation.
This morning, the news broke that the European Central Bank (ECB) has given Cyprus an ultimatum. Bloomberg reports:
The European Central Bank said it will cut Cypriot banks off from emergency funds after March 25 unless the Mediterranean island agrees on a bailout with the European Union and International Monetary Fund.
“The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance, ELA, until Monday, 25 March 2013,” the Frankfurt- based ECB said in an e-mailed statement today. “Thereafter, ELA could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks.”
The Cypriot parliament this week rejected a proposed levy on bank deposits to raise 5.8 billion euros ($7.5 billion), which euro-area finance ministers backed as a condition for the country’s bailout. A bank holiday in Cyprus has been extended to March 25, giving policy makers until Monday to find a compromise to prevent a collapse of the country’s banks.
“With this statement, the ECB put even more pressure on European finance ministers and the Cypriot government to come up with a deal,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “But we’ll have to see whether they’ll actually follow through with their threat if there’s no deal by Monday and policy makers decide to further extend the bank holiday.”
Over the weekend, I came across this amazing story in The Daily Beast, and I just had to share it: An Auschwitz Survivor Searches for His Twin on Facebook. It’s the story of Menachem Bodner who was just four years old when the Nazi prison camp was liberated. He is now 72 and is now trying to find his twin brother whom he last saw when they were being used as experimental subjects by the infamous Josef Mengele.
It’s most likely that Menachem Bodner last saw his identical twin in 1945, in Dr. Josef Mengele’s gruesome Auschwitz laboratory. He was 4 then and doesn’t remember his time in the notorious death camp. But in the 68 years that have followed, Bodner says he’s “always” been certain he was one of a pair. He just didn’t have any proof until this past year. Now, he’s searching for Jeno, a man who probably looks just like him, and who has a distinctive “A-7734” tattoo on his forearm. And 1 million Facebook users are helping him look.
Mengele, known among prisoners as “the Angel of Death,” was deeply fascinated with twins and used them for research experiments in his macabre Auschwitz lab. Thankfully, Bodner, now 72, has no recollection of the cruelty he most certainly endured while undergoing experiments, though he can remember a sense of paralyzing fear. Unfortunately he also has few impressions of his family’s prewar life in a small town east of Munkacs, Hungary, which is now in the Ukraine. But despite the lack of memories from a war-marred childhood, Bodner says that throughout his life he’s felt a deep connection with his twin—and is positive he’s still alive and out there. But where?
Until last May, Bodner didn’t even know that his own name was once Elias Gottesmann. Now he knows that. And he knows for certain that he has a twin—thanks to the Nazis’ dogged, pathological documentation of their crimes. Ayana KimRon, a professional genealogist in Israel, found the evidence, clearly written in a record put together by the organization Candles, of twins who were “identified as having been liberated at Auschwitz or from a subcamp”:
A-7733, Gottesmann, Elias, 4
A-7734, Gottesmann, Jeno, 4
Incredible! As a result of his search, Bodner has already found family members that he never knew were looking for him, but his dream is to find his brother. What a story it would be if they could be reunited!
I don’t know if you have been following the latest episode in the ongoing battle between Joe Scarborough and Paul Krugman. Scarborough somehow got together with Jeffrey Sachs of The Earth Institute at Columbia University to publish an op-ed in the Washington Post last Friday: Deficits Do Matter. In the op-ed, they attacked Paul Krugman by setting up a series of straw men and then knocking them down–mainly the false claim that Krugman thinks deficits are never a problem for governments. Here’s the introductory paragraph:
Dick Cheney and Paul Krugman have declared from opposite sides of the ideological divide that deficits don’t matter, but they simply have it wrong. Reasonable liberals and conservatives can disagree on what role the federal government should play yet still believe that government should resume paying its way.
It has become part of Keynesian lore in recent years that public debt is essentially free, that we needn’t worry about its buildup and that we should devote all of our attention to short-term concerns since, as John Maynard Keynes wrote, “in the long run, we are all dead.” But that crude interpretation of Keynesian economics is deeply misguided; Keynes himself disagreed with it.
However, if you read Krugman piece that Sachs and Scarborough link to, you’ll see that it doesn’t say what they pretend it does. It says that deficits don’t matter in the short term, but it’s not true that they never matter. Krugman in the quoted column from March 2011:
Right now, deficits don’t matter — a point borne out by all the evidence. But there’s a school of thought — the modern monetary theory people — who say that deficits never matter, as long as you have your own currency.
I wish I could agree with that view — and it’s not a fight I especially want, since the clear and present policy danger is from the deficit peacocks of the right. But for the record, it’s just not right.
The key thing to remember is that current conditions — lots of excess capacity in the economy, and a liquidity trap in which short-term government debt carries a roughly zero interest rate — won’t always prevail. As long as those conditions DO prevail, it doesn’t matter how much the Fed increases the monetary base, and it therefore doesn’t matter how much of the deficit is monetized. But this too shall pass, and when it does, things will be very different.
I guess Sachs and Scarborough assumed their WaPo readers wouldn’t bother to click on the link. Anyway, Mark Thoma wrote an epic takedown of the Sachs-Scarborough op-ed at his Economist’s View blog: Crude Sachsism.
Frankly, I doubt that Scarborough had anything to do with writing the op-ed, and I think it would be really hilarious if someone would ask him to explain it on his show. Why is Scarborough so obsessed with proving Krugman wrong? As for Jeffrey Sachs, he is a follower of Milton Friedman and The Chicago School of Economics who is famous for his failed “Millennium Villages” project and his so-called “shock therapy” in Latin America, Russia, and Eastern Europe. Judge for yourself whether you want to buy into his neoliberal, modified supply-side arguments.
I know I’m kind of a weirdo, but I had a blast reading all this stuff over the weekend, including this post by Ryan Coooper (filling in for Ed Kilgore at The Washington Monthly) questioning why Sachs doesn’t even know what was in the stimulus.
Jeff Sachs has long been known as the celebrity-hobnobbing economist with the seriously flawed “shock therapy” plan for economic development. Lately he’s taken a weird turn in the public debate, coauthoring an op-ed piece with Joe Scarborough of all people, attacking Paul Krugman.
Today he’s back with one of the most bizarre pieces of economic analysis I’ve seen, arguing among other things that 1) the stimulus was too focused on short-term stuff like tax cuts which 2) aren’t effective stimulus anyway (huh?) and 3) should have had much more long-term investment.
Wrong again! Read all about it at the link.
The back and forth quieted down yesterday, but today Cooper–who is filling in for Ed Kilgore at The Washington Monthly–brought it up again with this post: How Does Jeffrey Sachs Explain The Great Recession?
I need to read it carefully and follow the links and responses to today–my idea of fun! I guess it’s partly the psychologist in me–I’m fascinated by these human interactions and the verbal battles over important issues of the day.
Continuing the economics theme, Alex Pareene has a great piece at Salon on The competitive advantage of deficit hacks. It’s all about how the media helps the false Village memes and tries to marginalize people like Paul Krugman who actually know something about economics. The gist:
I think a lot about contemporary political debates makes a great deal more sense when you realize that hacks, especially hacks shilling for awful ideas, have a competitive advantage over non-hacks: They do not care if they constantly repeat themselves, even if what they are constantly repeating is wrong.
For a writer or pundit who actually feels some sort of responsibility to inform and/or entertain his or her readers, writing the same damn thing over and over again seems wrong (it is also boring). But bad ideas are constantly being repeated by people who feel absolutely no shame about saying the same things over and over and over again. Indeed, “shamelessness” is in general a defining characteristic of hacks. Also, frequently, people are being paid to repeat the same awful ideas over and over again, and unfortunately usually there’s more money to be made repeating bad ideas than good ones. (Hence: Lanny Davis.)
Arguably, American conservatives are better at sticking to their pet causes in general, as liberals move from fight to fight. Look at how contraception “suddenly” became a matter of national public debate last year, years after liberals thought it a well-settled question. Or look at how long the movement spent trying to roll back the majority of the New Deal, a project that continues to this day!
And on the question of the deficit and the “grand bargain,” Pete Peterson and a few others have spent hundreds of millions of dollars and decades of their lives making the exact same argument, and setting up organizations that pay others to make the exact same argument, until a majority of Beltway centrists internalized the argument and began making it themselves, over and over again. When it comes to centrist pundits, the unsophisticated brainwashing technique that has utterly failed to move the public at large over the last 25 years has worked perfectly. (Because centrist pundits are simple, credulous people, by and large, and also because they will not rely on “entitlements” to survive, when they retire from their very well-compensated jobs.)
Plus— another must read from Alex Pareene: The undead, unnecessary, unhelpful Grand Bargain.
Washington has Grand Bargain fever, again. Thanks to the sequestration, Republican government-shrinking mania and Barack Obama’s apparently sincere desire to get some sort of huge long-term debt deal done, the Grand Bargain is looking more possible than at any point since the heady days of the National Commission on Fiscal Responsibility.
For some reason, the options for dealing with sequestration — a self-inflicted made-up austerity crisis — are being purposefully and pointlessly limited to a) spending cuts, either those in sequestration or different ones, or b) spending cuts and tax increases. “Let’s just not do this, everyone” is rarely presented as a viable option. Instead, the single best end result, according to lots of pundits, Democrats and even Republicans, is tthe Mythical Grand Bargain.
This is awful news, for most people. A “grand bargain” is not going to be good. But after Barack Obama had fancy dinners with some Republicans last week, everyone is again hopeful. The president is hopeful. John Boehner is hopeful. David Gergen is probably hopeful. They can all taste the Bargain. Ooh, it’ll be so great when we get that Bargain!
Read it, and you’ll laugh and cry at the same time!
Now a few more reads that tickled my fancy–in link dump fashion:
Cleveland Plain Dealer: Steubenville rape trial will center on issue of consent
New York Daily News: Mike Bloomberg’s supersized ego does in planned soda ban