Deficit Debacle: Live Blog on the Murder of Middle Class AmericaPosted: August 1, 2011 | |
Everything is on the table. Except taxes. WTF?
I’m watching Bernie Sanders trying defend our precious safety nets right now. The debate over this horrible capitulation to right wing extremists is carried on CSPAN . Sanders is reminding the president that all the polls call for shared sacrifice. He’s saying the proposal is bad and unfair. He’s just announced on the floor he will not vote for the package. What were getting is sacrificed on the alter of greed. At least some one recognizes this.
They’re taking a senate quorum call right now.
Here’s some headlines for you to think about.
From former Biden economic adviser Jared Bernstein: Lousy Negotiation skills are not the problem.
What did we just go through and what does it mean for our national politics, our fiscal and economic policy?
–First, a small but influential group of extreme conservatives are so intent on shrinking the federal government that they would credibly threaten national default;
–Second, Democrats, including the president, do not have a strategy to counteract such extremism, so they accepted a plan far less balanced than they would have liked—the final deal could well turn out to be $3 trillion in spending cuts over ten years, with no revenue increases to offset the cuts.
–Third, and perhaps most importantly, like every debate about the size of government, it’s impossible for normal people, if not the “experts,” to figure out what anyone is really talking about and therefore to judge the deal.
What does it mean to cut $3 trillion in government spending? How will it affect retirement security? Education? Jobs in the short run and investment over the long run? Does it put us on a sustainable fiscal path.
We’re about to agree to cut $1 trillion from something called discretionary spending. That probably sounds great to some folks and bad to others. But what does it mean?
The President bragged on this very point last night, telling America that discretionary spending as a share of the economy will come down to its lowest level since Eisenhower. As if we’ve all been walking around thinking, “if only we could get this budget category down to Ike levels, everything would fall into place.”
In fact, these cuts will hurt our ability to pursue what I view as most positive aspects of the President’s economic agenda—investment in infrastructure, clean energy, research, education. They will pinch programs that are already budget constrained…programs that help low income people with child care, housing, and community services. (One piece to watch for here—defense spending is also in this category, and is supposed to account for about one-third of the cuts…that helps, of course, take pressure of these other parts.)
Then, in part two of the deal, we unleash the gang-of-twelve who are assigned to come up with $1.5 trillion more in deficit savings.
They’ll be hitting the entitlements—Social Security, Mcare, Mcaid—and more defense, but if they deadlock—a non-trivial probability—automatic cuts ensue.
My thought is that the political game has become all important in this negotiation and no one is really thinking about the outcome. The Teabots are insane so they can be discounted, but all of this fall-in by senators and representatives that know what’s going on has got to be the most painful thing I’ve ever watched. Can’t some of them use their brains and consciences for a change instead of checking their labels and owner dog tags?
For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.
Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.
The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.
Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.
And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts.
They are killing any hope we have of a decent recovery. We don’t have one now. The US Manufacturing Index just fell to a two year low. This is one of the first leading indicators to show a looming recession. One of the most telling signs this morning about this is that the stock market is going down and now there is a flight to safety. Oddly enough, the flight to safety is to US Treasury bonds.
“We’ve turned from budget crisis to economic crisis,” said Paul Horrmann, a broker in New York at Tradition Asiel Securities Inc., an interdealer broker. “We’ve gone from worrying about a budget and default to the economy long term. Higher prices are bringing in buyers, not sellers.”
Still, what about the JOB crisis?
It’s a shit sandwich no matter how you look at it. And it’s a shit sandwich in at least two very specific ways: (1) It means we’ll continue to live in a fantasyland that says we don’t need any tax increases even though our population is aging and we’re plainly going to need higher revenues to support this demographic reality; and (2) we’ll continue to live in a fantasyland that says our problems are primarily caused by discretionary spending. This is, of course, exactly the opposite of reality, which means we’re going to screw the poor and do nothing serious about the long-term deficit. Nice work, adults.
Cuts to Social Security and Medicare are also possible within the plan. Representative Emanuel Cleaver (D-MO), the chairman of the Congressional Black Caucus, called the deal a “sugar-coated Satan sandwich,” which itself deserves $1.2 trillion.
We’re seriously f’d on this one folks.
I haven’t seen this many pissed off Democrats since the last time I saw some Democrats. #beenatoughyear
Gene Sperling: Obama ‘didn’t give one inch’ : politico.com/news/stories/0… So Obama’s people say he owns this shit sandwich. Jesus. #Quitdigging
House Dem leaders NOT pressing Dems to vote for the debt deal, potentially complicating passage: http://wapo.st/o3wyDP
nytimes The New York Times
How the Debt Plan Would Work
Read this CBO letter to Congressional Leaders. They’re putting discretionary funding caps on Social Security, Medicare, SCHIP, Medicaid, et. Iraq and Afghanistan are exempt from spending caps. This is AWFUL!!! Worse than I thought … Please read this analysis from the CBO to congress!!!
House DEBATE and vote on package: running here at CSPAN. They are voting on the debate rules right now at 3:30 pm cst. Progressive Caucus leaders talking right now saying they will not support the deal because it’s incredibly wrong and worse than the Reid Compromise. Lynn Woolsey and Barbara Lee announcing they will vote no.
Please report on who you know is voting for or against below so we can keep track of who needs to face a real democrat in a primary,