Captains of Contrived Chaos

Posted: July 27, 2011 | Author: | Filed under: Federal Budget, Federal Budget and Budget deficit | Tags: , , | 19 Comments

Professor Chaos and General Disarray

It’s started.  All you have to do is watch the stock market and you’ll  see it.  The unbelievably contrived debt ceiling nonsense is taking hold.  The republican business big guns are out and they don’t seem to be able to stop a group of very determined crazy, freshmen congressmen that don’t have a clue about government or economics.

Here’s some headlines you may want to check out.

First, it’s obvious Boehner, the Chamber of Commerce, and even Wall Street minions don’t have control over the teabots.

Boehner: ‘A Lot’ Of Republicans Want To Force Default, Create ‘Enough Chaos’ To Pass Balanced Budget Amendment

House Speaker John Boehner (R-OH) said today that some members of his own caucus who are refusing to agree to a compromise debt ceiling deal are hoping to unleash “chaos” and thus force the White House and Senate Democrats to make bigger concessions than they’re already offering. As many as 40 House Republicans, especially Tea Party members and freshmen, have demanded nothing short of changing the Constitution to include a balanced budget amendment before they would vote to raise debt ceiling, even though that has zero chance before the U.S. faces potential default on Aug. 2.

A balanced budget amendment is one of the most insane laws a government can pass.  It lets them spend all they want when revenues come in and create depressions during recessions.  Pretty much what they’ve been doing the last 10 years.  Even John McCain says its crazy.

McCain To ‘Foolish’ Republicans Demanding A Balanced Budget Amendment: ‘It’s Bizarro’

In exchange for not sending the nation into economic ruin, a swath of Republicans are demanding to pass a Balanced Budget Amendment (BBA) to the Constitution. By forcing government to actively slash spending in the face of falling revenues, such an amendment “would greatly damage an already-weak recovery,” “mandate perverse actions in the face of recessions,” and is considered one of the worse ideas in Washington. Nonetheless, as House Speaker John Boehner (R-OH) said today, the fringe contingent of the GOP is aiming to create “enough chaos” to force the Senate and the White House to accept a BBA. Freshman Sen. Mike Lee (R-UT), sponsor of the Senate’s BBA bill, actually wants America’s “house to come down” unless he gets his way. But today on the Senate floor, a more seasoned senator schooled the freshman contingent on economic reality. Though an avid supporter of the BBA, Sen. John McCain (R-AZ) stood amazed that some members actually believed a BBA could pass in the Senate. Such a belief, he said, is “worse than foolish. That is deceiving.” Taking heed of numerous economists’ warning about the Aug. 2 deadline, McCain said that Republicans who are holding out on raising the debt ceiling for an impossible amendment is “unfair” and “bizarro”

Here’s a list of the Republicans and which side they’re on: CIVIL WAR: GOP Coalition Splinters Into Open Conflict Over Debt Ceiling.   Boehner’s signed on The Chamber of Commerce, crotchety old Fred Thompson, Nasty young Cantor, Nutcase Allen West, and the presidential candidates that aren’t Michelle Bachmann.  She’s out in front of creating the end times, as usual.

Margaret Carlson–yeah, i know–is even calling Boehner the Gang of One.

The resistance came from the right. At least 60 House Republicans have declared that they won’t vote for a debt-limit increase — for any reason. Although outside experts were brought in to explain the potential consequences of default, including a “death spiral” in the bond market initiated by a loss of confidence, many of the Tea Party intransigents didn’t bother to attend the lecture. In any case, they preferred a potential catastrophe to a deal that would provide political benefits to the president — even if most of the policy benefits accrued to Republicans.

When Obama called for increasing the revenue component from $800 billion to $1.2 trillion, Boehner had his excuse. He pulled out of negotiations, leaving Obama to complain in an impromptu news conference that he had been left, once again, “at the altar.”

It’s hard to know how much of Obama’s lament was genuine and how much of it was designed to give Boehner bragging rights about how he had bested the president. In any case, it wasn’t enough. Boehner merely gave his colleagues dramatic cuts in spending; what they really want is for Obama to fail, painfully and visibly. For that, higher interest rates, a devalued dollar, cratering stock markets and another recession appear to be a price worth paying. They don’t want to govern; they want to stick it to the man.

It’s obvious today that the markets realize that the confidence fairy ran off with the high priests of voodoo economics.  Things are starting to crumble.  That’s the live link to all the red.  Here’s a mid day recap.  Notice that credit default swaps (argghhhh) are on the rise!

Stocks fell for a third day and Treasuries and commodities slid as a stalemate over the debt ceiling pushed the U.S. closer to default and durable-goods orders unexpectedly dropped. The dollar rallied.

The Standard & Poor’s 500 Index lost 1.7 percent to 1,309.87 at 2:31 p.m. in New York. The cost of insuring against a U.S. default climbed to the highest level since February 2010 and 10-year Treasury note yields climbed four basis points to 2.99 percent. Coffee and oil lost more than 1.5 percent and gold erased earlier gains to drag the S&P GSCI Index down 0.9 percent. The Dollar Index rose 0.8 percent.

The dispute over plans to cut the U.S. federal deficit has stolen investor attention away from an earnings season that has produced higher-than-estimated results at about 81 percent of S&P 500 companies that reported so far. Shares of industrial companies helped lead declines today after a Commerce Department report showed durable goods orders fell 2.1 percent.

“It’s a tug of war between the headline risk of the debt ceiling issue and earnings,” Matthew DiFilippo, who helps manage $1 billion as director of research at Stewart Capital Advisors LLC in Indiana, Pennsylvania, said in telephone interview. “The volatility may create buying opportunities because corporate earnings are coming in strong, and the market does appear to be cheap compared to the underlying earnings power.”

 Wall Street really doesn’t care how we pay are bills.  They only care that we do it.  There are plenty of revenue sources out there.  Most of these guys don’t subscribe to voodoo economics at all.  Republicans and most likely the President think that they’re all supply side-oriented.  Most economists and financiers don’t buy that at all and a lot of them have been calling for increased taxes.  They just want a plan that reduces risk,

What Wall Street, and the ratings agencies are worried about is not whether we can pay–we can–but whether we will.  A lot of Republicans seem to think that we can secure our AAA rating by showing the agencies–and the markets–that we’ve made serious cuts.  But if you achieve this end by holding the debt ceiling hostage, what you’re really demonstrating is not a tough-minded commitment to entitlement reform, but a political system so broken that it has trouble taking even simple, obvious steps to keep the fiscal engine running.  Our AAA is not at risk because our current fiscal path is unsustainable, but because ratings agencies know what many GOP freshman and party activists apparently do not: that doing the unpopular things required to get the budget in balance is going to require both parties to hold hands and jump together.  Otherwise, whoever forces through their unpopular plan (huge tax increases/massive spending cuts) is going to get trounced at the next elections by an opposition party promising to undo whatever it is the party in charge has just done.

We are not broke. We can pay our bills. We can meet our obligations.  It’s just a bunch of nutcases in Washington DC aren’t going on reality.  They’re off playing Professor Chaos and General Disarray with our economy because they hate the Washington Insider Kewl Kids.

Invoke the 14th Amendment. PERIOD.

Posted: July 24, 2011 | Author: | Filed under: Economy, Federal Budget, Federal Budget and Budget deficit | Tags: , | 37 Comments

Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

The first intelligent article suggesting we do that came from The Nation‘s Katrina vanden Heuvel after Timothy Geithner suggested he had folks exploring the option.  I’ve ended several blog posts this month with the call to invoke the 14th and send the insane teabot posse back home with the message that they may want to read up on U.S. The Constitution before they start waving that Gadsden flag in our faces.

Brad Delong fleshes the argument out within this context.  We have a president that’s found lawyers who have said that actions in Libya are not “hostilities”.  I will add that we’ve had several presidents who have found lawyers that have written that “enhanced interrogation techniques” aren’t torture and that it’s okay to assassinate citizens without due process.  Certainly, with a Washington DC that has more word-parsing,  pretzel-logic-precedent-finding, triangulating lawyers per square foot than any place on the planet, the White House can find one that finds Delong’s suggestions below justifiable via Section 4 stated above.

The structure of Tim Geithner’s testimony to Congress defending his additional borrowing is:

  • The Constitution forbids me from even thinking about default.
  • You ordered me to spend.
  • A previous Congress told me not to borrow, but no Congress can bind its successors, and those of you who are in this Congress here now ordered me to spend.
  • I’m just doing what you told me to do–and what the Constitution directly and explicitly tells me to do.

And then we should move on to the people’s business. This episode of kabuki theatre has done nobody any credit. If I had previously had any respect for or confidence in Republicans, this would have shredded it. And each day it continues it further shreds my respect for and confidence in the executive branch.

DeLong argues–and I agree–that this is far better than options outlined by Ezra Klein and ranked by Calculated Risk here.  In the long run, we should probably be looking at eliminating the debt ceiling.  If Congress authorizes the spending and the President signs off on it, there should be absolutely no way that they can renege on bond holders later. Moody’s suggested the same thing last week. The rest of the crap on the table just undoes one promise made to people after another.

It should be obvious by now that Boehner is not in control of his caucus in congress. The tea party has him over a tea barrel.  These are folks that appear to have no clue about anything as illustrated by their ignorant statements last spring that all they had to do was pass a budget and it was law.  They completely forget the role of the President and the Senate. They seem to have no idea or they stubbornly refuse to believe the experts that tell them that what they are doing is basically bringing the country’s economy down.

Meanwhile, there were lingering doubts about Boehner’s ability to rally support for a debt-limit increase of any size or duration. Many House Republicans continue to push their plan to sharply cut spending over the next decade and adopt a constitutional amendment requiring Congress to balance the budget. Such a plan passed the House, but failed Friday in the Senate on a party-line vote.

Freshman Rep. Blake Farenthold (R-Tex.) said Republican leaders remain concerned that even a small increase in the debt limit would fail on the House floor.

“I think their concern about bringing it to the floor is whether they can get 218 [votes] or not,” Farenthold said in an interview. “Everybody wants to only go through this pain once.”

We can’t afford to pass a debt ceiling increase attached to no firm commitments for revenue adjustments.  It’s ridiculous.  There is no way the long term budget problems will ever be solved under these conditions.  Further more, the fall out from the increased interest rates and the impact on the already nasty economy will just drive economy-related revenues down and expenditures up. We’ll exacerbate the very thing we’re trying to alleviate. This is insanity.

If the meetings today look to be more of the same, the President should just get on TV Monday morning and tell Geithner to pay the bills for the spending that the congress authorized and cite the 14th amendment. Again, if you can find a lawyer that says that enhanced interrogation techniques aren’t torture and justify claiming a citizen is an enemy combatant and can be detained indefinitely–or assassinated–without due process, rationalizing this should be easy.  Our country’s economy shouldn’t be subjected to deliberate economic sabotage because a few new congress critterz flunked their middle school American Government and History classes.

If you don’t want to take my word for it, then take former President Clinton’s suggestion. There’s also a list of lawyers there that would tell our constitutional law lecturer President that it’s constitutional.

A few days ago, former President Bill Clinton identified a constitutional escape hatch should President Obama and Congress fail to come to terms on a deficit reduction plan before the government hits its borrowing ceiling.

He pointed to an obscure provision in the 14th Amendment, saying he would unilaterally invoke it “without hesitation” to raise the debt ceiling “and force the courts to stop me.”

Quickie Debt Deal Update

Posted: July 19, 2011 | Author: | Filed under: Federal Budget, Federal Budget and Budget deficit | Tags: , | 12 Comments

Jamie Dupree at the AJC has a nice brief summary of the ‘Gang of Six Details’.  I know you’re as tired of the debt ceiling drama as I am but given that every one seems willing to sell us regular folks out, I think we need to keep on top of it.  That, and I’m getting damned close to cashing out all my money market funds and buying Loonies.  I kid you not.  I’d invest in a nice cash crop at this point if I could.  Pork Bellies any one?

So this is the overriding goals which basically are in keeping with the Cat Food Commission.  These, again, come from the so-called Gang of Six.

* Slash our nation’s deficits by $3.7 trillion/$3.6 trillion over ten years under CBO’s March 2011 baseline, or $4.65 trillion/$4.5 trillion under the original fiscal commission baseline (which used the President’s 2011 budget request as the starting point for discretionary spending).

* Stabilize our publicly-held debt by 2014.

* Reduce our publicly-held debt to roughly 70% of our economy by 2021.

* Impose unprecedented budget enforcement.

Here’s some more strategic principles that include the approach to Social Security.   The so-called spending caps principle is also included.

The plan uses a two-step legislative process: (1) an initial bill that makes immediate cuts; and (2) a process for a second bill to enact comprehensive reform and put our nation on a stable fiscal path. The plan would:

Immediately implement aggressive deficit reduction down payment

* Cut deficits by $500 billion.

Dramatically cut discretionary spending

* Cut nonsecurity and security discretionary spending over 10 years.

* Maintain investments that encourage economic growth, strengthen the safety net for those who truly need it, and preserve a strong national defense.

Carefully strengthen the solvency of our most important entitlement programs

* Spend health care dollars more efficiently in order to strengthen Medicare and Medicaid, while maintaining the basic structure of these critical programs.

* Fully pays for SGR (the “doc fix”) over 10 years.

Fundamentally reform our tax code

* Reduce marginal income tax rates and abolish the $1.7 trillion Alternative Minimum Tax.

* Encourage greater economic growth.

* Enhance the competitiveness of American businesses and workers against global competition.

* Reform spending through the tax code to eliminate investment distortions and tax gaming.

* Change the debate about taxes in America from rate levels and carve outs to competitiveness, fairness and growth.

* If CBO scored this plan, it would find net tax relief of approximately $1.5 trillion.

Strictly tighten the government’s budget processes

* Impose spending caps and security/nonsecurity firewalls.

* Sequester accounts at the end of the year to recoup any excessive spending by Congress.

* Restrict the use of emergency designations that circumvent the spending caps.

* Prevent Congress from exceeding the caps by requiring a stand-alone resolution subject to a 67-vote threshold, in order to isolate that vote to increase the deficit from any other policy items.

Reform Social Security for future generations

* Ensure 75-year solvency of Social Security and provide for a decennial review of the program to ensure it remains solvent.

* Reform Social Security on a separate track, isolated from deficit reduction – any savings from the program must go towards solvency.

There’s more bullet points over there that you may want to check out.  I agree that Social Security Reform should be kept on a separate track.  Right now, it’s not the priority problem at all.  The rest are just broad strategical approaches.  The detailed plan follows these.  The details are called an ‘aggressive’ plan and you’ll see that’s exactly so.

Here’s some of the details on Social Security.

* Consider Social Security reform, if and only if the comprehensive deficit reduction bill has already received 60 votes.

* Reform must ensure 75-year solvency of the program and provide for a decennial review to ensure it remains solvent. Any savings from the program must go towards solvency, not deficit reduction.

* If Finance fails to report Social Security reform meeting the instructions, allow a group of at least five senators from each party to introduce a resolution with recommendations that meet the committee’s instructions.

* Bar substitute amendments that worsen the solvency of Social Security.

* Combine any qualifying Social Security reform bill that receives 60 votes on final passage to the comprehensive bill at the desk before being sent to the House as a single bill.

* Vitiate the vote on the deficit-reduction bill if the Social Security reform bill does not receive 60 votes.

Here’s some of the highlights from the deficit reduction plan.  I am putting another one that impacts Social Security first. You can find information on the chained-CPI in my previous post here.

* Shift to the chained-CPI (a more accurate measure of inflation) government-wide  starting in 2012, along with the following specifications for Social Security: (1) exempt SSI from the shift for five years, and then phase in the shift over the next five years; and (2) provide a minimum benefit equal to 125% of the poverty line for five years. (According to CBO, the shift to chained-CPI would result in the annual adjustment growing, on average, about 0.25 percentage points per year slower than the current CPI.)

Here’s some of the discretionary spending cuts to departments.

* Finance would permanently reform or replace the Medicare Sustainable Growth Rate formula ($298 billion) and fully offset the cost with health savings, would find an additional $202 billion/$85 billion in health savings, and would maintain the essential health care services that the poor and elderly rely upon.

* Armed Services would find $80 billion.

* Health, Education, Labor, and Pensions would find $70 billion.

* Homeland Security and Government Affairs would find $65 billion.

* Agriculture would find $11 billion while protecting the Supplemental Nutrition Assistance Program.

* Commerce would find $11 billion.

* Energy would find $6 billion and may propose additional policies to generate savings that would be applied to the infrastructure deficit or to reduce the deficit.

* Judiciary would find an unspecified amount through medical malpractice reform.

* Require the Finance Committee to report tax reform within six months that would deliver real deficit savings by broadening the tax base, lowering tax rates, and generating economic growth as follows:

* Simplify the tax code by reducing the number of tax expenditures and reducing individual tax rates, by establishing three tax brackets with rates of 8–12 percent, 14–22 percent, and 23–29 percent.

* Permanently repeal the $1.7 trillion Alternative Minimum Tax.

* Tax reform must be projected to stimulate economic growth, leading to increased revenue.

* Tax reform must be estimated to provide $1 trillion in additional revenue to meet plan targets and generate an additional $133 billion by 2021, without raising the federal gas tax, to ensure improved solvency for the Highway Trust Fund.

There’s more details on the cuts over at the AJC article.  I think it looks like tax reform is a major part of this.  Please note that the top bracket is being adjusted downward and would be extremely generous to rich people.  Even if the Bush tax cuts sunset, this really reduces the progressivity of our tax system and I have a major problem with that.  Rich people use up more government services than normal people and these days, most of their money comes from nonproductive sources like capital gains from wherever and whatever activities. Certainly, earning money off of products that cause lung cancer or companies that go abroad and set up production in plants where suicide by workers is the norm isn’t exactly a productive use of capital.  If they feel morally unaffected by those investment decisions, that’s all well and good, but I don’t think the US treasury needs to subsidize people who create extraordinarily high social costs. It’s estimated that one pack of cigarettes creates between $40 -$70 of public health costs that are borne by tax payers, just as an example. Again,I don’t think we should be subsidizing investments in businesses with huge costs to society.

Look for more information as the details are released.

Can you charge the country’s top elected officials with Treason?

Posted: July 12, 2011 | Author: | Filed under: Federal Budget, Federal Budget and Budget deficit | Tags: , | 27 Comments

It seems as though our nation’s “leaders” are looking to bring down our country.  It’s the only explanation that I have. Also, I’m at the point where I think Joe Biden is the only sane one in the room.  Pinch me!  Please!

Headlines of note to prove my case:

Boehner Says The Debt Limit Increase Is Obama’s Problem

Speaker of the House John Boehner introduced a new argument to the debt ceiling and deficit reduction talks Tuesday, saying raising the borrowing limit is Republicans’ concession in the negotiations.”This debt limit increase is [Obama’s] problem,” he said.

Boehner is trying to force a deficit reduction package entirely based on spending cuts, saying Obama’s demands for new revenues would only be considered if Obama accepted deep cuts to entitlements.

My guess is that Boehner has absolutely no control over the Republicans in the House.  Some one from Wall Street needs to take a few of them to the wood shed.   Meanwhile, Mitch McConnell appears to be interested in nothing but political play.   Some senate Republicans would obviously join the president but it appears that will happen over McConnell’s dead mind and conscious.  McConnell still  refuses to admit the Republicans lost the White House 3 years ago.  He’s become some kind of Captain Queeg who gets in front of the press then rattles ball bearings in his fist while muttering “one term president, strawberries, one term president, it’s the strawberries, I tell you …” repeatedly.

McConnell: Obama can’t deliver major deficit-reduction deal

Senate Republican Leader Mitch McConnell (Ky.) on Tuesday said a comprehensive deficit-reduction deal is not attainable as long as Barack Obama is president.

McConnell declared that deficit-reduction talks have come to an unsolvable deadlock.

“After years of discussions and months of negotiations, I have little question that as long as this president is in the Oval Office, a real solution is unattainable,” he said.McConnell has called for reforms to curb the future growth of Social Security and Medicare since taking over as Republican leader at the end of 2006.

So, what’s the response of the leader of the free world?  Would you call this riling up or scaring seniors?

Obama says he cannot guarantee Social Security checks will go out on August 3

President Obama on Tuesday said he cannot guarantee that retirees will receive their Social Security checks August 3 if Democrats and Republicans in Washington do not reach an agreement on reducing the deficit in the coming weeks.

“I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it,” Mr. Obama said in an interview with CBS Evening News anchor Scott Pelley, according to excerpts released by CBS News.

The Obama administration and many economists have warned of economic catastrophe if the United States does not raise the amount it is legally allowed to borrow by August 2.

This is insane.  No one’s made any sense in this discussion since Joe Biden told his gang of six to get real. Meanwhile, we’re beginning to see financial economists question this game of chicken.This extremely good analysis is written by Jeffrey Frankel the James W. Harpel Professor of Capital Formation and Growth at Harvard’s Kennedy School.

In the 1955 movie Rebel Without a Cause, James Dean and a teenage rival race two cars to the edge of a cliff in a game of chicken.  Both intend to jump out at the last moment.  But the other guy miscalculates, and goes over the cliff with the car.

This is the game that is being played out in Washington this month over the debt ceiling.  The chance is at least 1/4 that the result will be similarly disastrous.

It is amazing that the financial markets continue to view the standoff with equanimity.   Interest rates on US treasury bonds remain very low, barely above 3% at the ten-year maturity.   Evidently it is still considered a sign of sophistication to say “This is just politics as usual.  They will come to an agreement in the end.”  Probably they will.  But maybe not.   (I’d put a ½ probability on an agreement that raises the debt limit, but just muddles through in terms of the genuine long term fiscal problem.  That leaves at most a ¼ probability of a genuine long-term solution of the sort that President Obama apparently proposed last week – described as worth $4 trillion over ten years.)

My advice to investors is to shift immediately out of US treasuries and into high-rated corporate bonds.  If the worst happens, you will probably save yourself from a big capital loss within the next month.  If not, there is no harm done.

The game is not symmetric.  The Republicans are the ones who are miscalculating.   Evidently they are confident of prevailing:  they rejected the President’s offer, even though he was willing to cut entitlement programs.

The situation is complicated because there are a number of different people crammed into the Republican car.    There is one guy who is obsessed with the theory that, come August 3, the federal government could retain its top credit rating if it continued to service its debt by ceasing payment on its other bills.  But this would mean failing to honor legal obligations that have already been incurred (paying suppliers for paper clips that have already been bought, paying soldiers their wages for last month’s service, sending social security recipients their checks, etc.).  This is like observing that the cliff is not a 90 degree drop-off, but only 110 degrees.   It doesn’t matter: the car would still go crashing into the ocean far below.   The government’s credit would still be downgraded and global investors would still demand higher interest rates to hold US treasuries, probably on a long-term basis.

There are other guys (and gals) in the car who are even more delusional.   They are dead set on a policy of immediately eliminating the budget deficit (e.g., those opposed to raising the debt ceiling no matter what, or those campaigning for a balanced budget amendment), and doing it primarily by cutting nondefense discretionary spending.  This is literally impossible, arithmetically.  But they honestly don’t know this.   It is as if they were insisting that the car can fly.   Sometimes it can be a good bargaining position to adopt a very extreme position.  But if you are demanding that the car flies, you are not going to get your way no matter how determined you are.

What we have here are a group of rebels with self-serving causes.   Again, the President should just invoke the 14th amendment,pay the bills, and send the DOJ after the many folks here that appear to be willing to tank our country for their personal political gain.  Threatening seniors’ social security is not leadership. It’s just a matter of time before the financial markets start noticing these folks are not acting in the best interest of our country, our economy, or our ability to deal with our economic challenges.   We’re lucky that they still think this is the chicken dance right now instead of a chicken race.  It’s going to be a lot harder to pay off the debt with the interest rates that go along with junk bonds. This is not the place for political grandstanding.

update: Okay, this is weird … what’s McConnell up to now?

The Big Blink? McConnell Proposes Giving Obama Authority To Raise Debt Limit Alone

Senate Minority Leader Mitch McConnell (R-KY) has proposed a sort of escape hatch for Congressional Republicans, who have threatened not to raise the national debt limit — and trigger a default — if Democrats don’t agree to trillions of dollars in cuts to popular social programs.

The plan is designed to give President Obama the power to raise the debt limit through the end of his first term on his own, but to force Democrats to take a series of votes on the debt limit vote in the months leading up to the election.

This still leaves me wondering if Boehner can deliver enough Republican votes to actually head off a purposeful debt default.

President Hornswoggle and the Debted Hallows

Posted: July 7, 2011 | Author: | Filed under: Barack Obama, Catfood Commission, Democratic Politics, Economy, Federal Budget, Federal Budget and Budget deficit, Global Financial Crisis, John Birch Society in Charge, legislation, Psychopaths in charge, Surreality, The Great Recession, U.S. Economy, voodoo economics | Tags: , , , , , , , , | 39 Comments

So, you know me.  I’m out looking for exactly how bad this debt ‘deal’ is going to austere our economy in to the Great Recession Redux.   BostonBoomer has been writing about President Hornswoggle putting Medicare, Medicaid, and Social Security–not even part of the federal budget–on the table.  I’ve searched and searched and can’t find the details on the great American Give Away other than a few articles showing a beaming Boehner saying we’re at a 50-50 chance of reaching a deal now.   If Boehner is beaming, all but the richest among us should be holding on to our personal liberties and wallets.

We know that the President has caved on a bunch of things during both the HRC negotiations and the extension of the Dubya Tax Breaks for Billionaires pogrom.  However, the Democratic leadership was aware of this, grumbled some, and backed his usurpation of responsibility for our future.  Imagine my surprise when I watched Chuck Schumer on Andrea Mitchell say that he had no idea about the details of the current deal so he couldn’t really comment on it.  The most noticeable detail was his face that said “I’ve got a sick tummy, mommy”.  Senator Schumer is on the Senate  Committee on Finance that handles all of these things and is supposedly a key person on the budget deal.   You would think he would know.  But, he doesn’t and neither does any other Democratic Senator or Congressman.  It appears the press told them what Obama was handing over to the Republicans.

Senate Democrats reacted angrily Thursday to a report that President Obama has proposed significant cuts to Medicare and Social Security in closed-door talks with GOP leaders.

Democratic lawmakers said they were dismayed to read about Obama’s offer in the press rather than hearing it from the president himself. Their frustration is exacerbated by Obama’s snub of their invitation to speak to the Senate Democratic caucus Wednesday.

Instead, Obama is meeting with Democratic and Republican leaders from both chambers Thursday morning.

“We would have preferred to hear it from the president instead of from the press,” said Sen. Barbara Mikulski (Md.), a senior member of the Senate Democratic conference. “We first have to go after tax earmarks.”

Mikulski said cuts to Medicare and Social Security should be a solution of last resort. She said closing tax loopholes and pulling back from Libya should be considered before entitlement cuts.

She said Obama should not assume Democratic support for a deficit reduction plan that cuts entitlements.

I now fully expect President Cave-in to hand the keys to the nation over to a bunch of punch-drunk Republicans.  What I don’t get is why the Democratic members of Congress continue to let him get away with it.  They are the very face of “sound and fury signifying nothing”.  Let me ask you if you’d want to be a congress member from some solid Democratic district facing re-election by having to defend a Democratic President that’s happy to cut Medicare and Social Security?  Social Security doesn’t even need to be on the table.  He’s just offered it up for some reason that I can’t fathom. How on earth could you face your electorate and back such a  deal?

Let me remind you, all of the economic data gathered in the last 80 years tells us that this austerity agenda is just going to tank the economy. We continue t0 enact the very same crap that put us in the worst economic position we’ve seen since the Great Depression.  Why oh why are they doing this to us?  Here’s a taste of Noble Prize winning Joseph Stiglitz for some perspective.

A decade ago, in the midst of an economic boom, the United States faced a surplus so large that it threatened to eliminate the national debt. Unaffordable tax cuts and wars, a major recession, and soaring health care costs—fueled in part by the commitment of George W. Bush’s administration to giving drug companies free rein in setting prices, even with government money at stake—quickly transformed a huge surplus into record peacetime deficits.

The remedies to the U.S. deficit follow immediately from this diagnosis: Put America back to work by stimulating the economy; end the mindless wars; rein in military and drug costs; and raise taxes, at least on the very rich. But the right will have none of this, and instead is pushing for even more tax cuts for corporations and the wealthy, together with expenditure cuts in investments and social protection that put the future of the U.S. economy in peril and that shred what remains of the social contract. Meanwhile, the U.S. financial sector has been lobbying hard to free itself of regulations, so that it can return to its previous, disastrously carefree, ways.

Here’s a thorough, peer-reviewed, strong methodology-based  IMF study–cited by Paul Krugman–that provides evidence that austerity programs are recessionary and bring on worse budget problems.

The paper corrects this by using the historical record to identify true examples of deliberate austerity — and it turns out that they are contractionary. The multiplier is less than one, but that may reflect the fact that these austerity programs did not take place in the face of a zero lower bound, so they were partly offset by monetary expansion.

The paper also provides a tentative answer to the apparent tendency of spending cuts to be less contractionary than tax increases: it looks as if central banks take more aggressive action to offset spending cuts than tax hikes, reflecting some combination of inflation concerns, belief that spending cuts are more durable, and (the paper doesn’t say this) bankerly ideology.

If we were discussing a politically neutral subject, the evidence here would long since have been considered definitive: expansionary austerity is a doctrine that failed. But since we’re in the political realm, of course, such a convenient doctrine can’t be abandoned. On the contrary, it now seems to be the official doctrine of both the GOP and the White House.

Also, let me remind you that Medicare, Medicaid, and Social Security are very successful programs.  They have successfully stopped the elderly from being the poorest segment of society.  Just as an example, the majority of single, elderly women would be in poverty without Social Security.

Elderly unmarried women — including widows — get 51 percent of their total income from Social Security. Unmarried elderly men get 39 percent, while elderly married couples get 36 percent of their income from Social Security. For 25 percent of unmarried women, Social Security is their only source of income, compared to 9 percent of married couples and 20 percent of unmarried men. Without Social Security benefits, the elderly poverty rate among women would have been 52.2 percent and among widows would have been 60.6 percent.

Here’s a recent,  powerful, academic study showing the benefits of providing Health Insurance for the poor.

When poor people are given medical insurance, they not only find regular doctors and see doctors more often but they also feel better, are less depressed and are better able to maintain financial stability, according to a new, large-scale study that provides the first rigorously controlled assessment of the impact of Medicaid.

While the findings may seem obvious, health economists and policy makers have long questioned whether it would make any difference to provide health insurance to poor people.

It has become part of the debate on Medicaid, at a time when states are cutting back on this insurance program for the poor. In fact, the only reason the study could be done was that Oregon was running out of money and had to choose some people to get insurance and exclude others, providing groups for comparison.

I continually feel as though we’ve all been drug down the rabbit hole. It is like the President is purposefully enabling  joblessness, poverty, and public health problems.  No amount of research, historical data, and polls appear to be able to penetrate the Washington, D.C. group think these day. The biggest issue is that the President himself believes in the confidence fairy, the bipartisan elves, and the high priests of voodoo economics.  He’s not just part of the problem, he is THE problem.  Can  just one or two members of the Democratic caucus please stand up to this man and his notion that bipartisanship that surrenders the country to right wing reality-deniers is better than any form of principled leadership?   Can at least one of the please be brave and start talking some sense and representing the will of the people for a change?

Invoke the 14th Amendment and end the damned sell outs now!

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