Deficit Debacle: Live Blog on the Murder of Middle Class America

Posted: August 1, 2011 | Author: | Filed under: Economy, Federal Budget, Federal Budget and Budget deficit, Medicaid, Medicare, Social Security, Surreality, The Great Recession, U.S. Economy, U.S. Politics, voodoo economics, We are so F'd | Tags: , , , , , , , , , , | 35 Comments

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?

Paul Krugman: The President Surrenders

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?

Kevin Drum at MOJO: Why the Debit Ceiling Deal Sucks

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.

Easy-to-Hate Debt-Ceiling Compromise Called “Sugar-Coated Satan Sandwich” By Some

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.

Notable tweets:

daveweigel

I haven’t seen this many pissed off Democrats since the last time I saw some Democrats. #beenatoughyear
tbogg

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

SatanSandwichSugar Coated
The moment I convinced President Obama of the virtues of austerity: bit.ly/nbv5C6 #FYEAH
ThePlumLineGSGreg Sargent

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,

The Latest Version of the Debt Ceiling/Austerity Bill

Posted: July 31, 2011 | Author: | Filed under: U.S. Economy, U.S. Politics, voodoo economics, We are so F'd | Tags: , , , , , | 44 Comments

Some details are out on the debt bill that Harry Reid signed onto this afternoon. This plan apparently was worked out between the White House and Mitch McConnell–no Democrats involved. It doesn’t sound as extreme as previous versions, but we won’t know until everything plays out, I guess. Reid is hoping to hold a vote tonight so the House will have time to respond tomorrow.

Here is how the deal will work, reported by Brian Beutler:

It guarantees the debt limit will be hiked by $2.4 trillion. Immediately upon enactment of the plan, the Treasury will be granted $400 billion of new borrowing authority, after which President Obama will be allowed to extend the debt limit by $500 billion, subject to a vote of disapproval by Congress.

That initial $900 billion will be paired with $900 billion of discretionary spending cuts, first identified in a weeks-old bipartisan working group led by Vice President Joe Biden, which will be spread out over 10 years.

Obama will later be able to raise the debt limit by $1.5 trillion, again subject to a vote of disapproval by Congress.

That will be paired with the formation of a Congressional committee tasked with reducing deficits by a minimum of $1.2 trillion. That reduction can come from spending cuts, tax increases or a mixture thereof.

So McConnell has accepted the possibility of tax increases. I doubt if that is going to go over very well with Boehner and his Tea Party nutbags. The trigger is still in the bill.

If the committee fails to reach $1.2 trillion, it will trigger an automatic across the board spending cut, half from domestic spending, half from defense spending, of $1.5 trillion. The domestic cuts come from Medicare providers, but Medicaid and Social Security would be exempted. The enforcement mechanism carves out programs that help the poor and veterans as well.

Politico reports that at 7PM, John Boehner finally announced a conference call with House Republicans at 8:30, so it should be starting as I write this. Says Politico:

A quick strong Senate vote for the deal would add to the pressure on Boehner, and Reid went so far as to suggest that the Senate could even vote Sunday night: “Hope so” was his answer to reporters after meeting with Pelosi. But from the administration’s standpoint, no deal is meaningful without assurance of Republican support in the House, and that remained a big question mark going into the evening.

Boehner’s office insisted that it was simply waiting to hear back from the White House on some “bottom-line” provisions, and indeed details were still being resolved. But administration officials said privately that pro-defense House lawmakers were putting pressure on the speaker over the Pentagon’s share of reduced 2012 appropriations as well as further threatened defense cuts if the deficit-reduction targets are not met.

So there you have it, but what does it all mean? My immediate reaction to the smaller numbers and the assurances on Social Security and Medicaid is that it’s some kind of trick to get us thinking the austerity psychosis in the White House is letting up a bit. But they still have the “committee” AKA Catfood Commission II to fall back on.

I’ll update in the comments if I hear anything more. Please do likewise if you’re surfing around.

Live Blog: Negotiating with Tea Party Terrorists

Posted: July 31, 2011 | Author: | Filed under: U.S. Economy, U.S. Politics, voodoo economics, We are so F'd, WE TOLD THEM SO | Tags: , , , , | 41 Comments

And the worst Tea Party Terrorists are in the White House “negotiating” with themselves. The only explanation for the way Obama is acting is that he doesn’t want a second term. I just don’t see how he can think he’s going to be reelected either way–whether the U.S. defaults on its debts or Congresses passes one of the austerity plans, Obama is toast.

I guess he can’t wait to start raking in the millions he’ll get from the sitting on bank boards after this is all over. I used to think he was looking forward to making big bucks on the lecture circuit, but who will want to hear him speak about how he destroyed the social safety net and brought down the U.S. economy?

I thought I’d put up a post for those of us who want to keep tabs on what the Senate is doing this afternoon. I’ll have more info shortly, but feel free to document the ongoing slow-motion nightmare in the comments while I set up my laptop in front of the TV and turn on C-span.

———————————————–

The Reid plan failed to achieve cloture in the Senate, so it’s looking like whatever McConnell, Boehner, and Obama are cooking up is what we’ll get stuck with. Here is what is known about the plan that is on the table right now.

If Democratic and GOP leaders finalize a deal, they would still face the tough task of convincing their rank and file to swallow a compromise. Fervent liberals and conservatives could scuttle any deal between the White House and congressional leaders. Here are the details of the tentative pact, according to several sources who spoke to NJ on condition that they not be identified:

•$2.8 trillion in deficit reduction with $1 trillion locked in through discretionary spending caps over 10 years and the remainder determined by a so-called “Super Committee.”
•The Super Committee must report precise deficit-reduction proposals by Thanksgiving.
•The Super Committee would have to propose $1.8 trillion in spending cuts to achieve that amount of deficit reduction over 10 years.
•If the Super Committee fails, Congress must send a balanced-budget amendment to the states for ratification. If that doesn’t happen, across-the-board spending cuts would go into effect and could touch Medicare and defense spending.
•No net new tax revenue would be part of the special committee’s deliberation.
That last item remained a potential sticking point. Obama’s advisers insisted on the Sunday talk shows that the president expected tax increases to be part of the Super Committee’s plan. “I think any long-term deficit-reduction is going to include revenues,” Obama adviser David Plouffe told ABC’s This Week.

Yet Plouffe was unwilling to commit that revenue increases would automatically kick in — along with spending cuts — if the Super Committee doesn’t hit the $1.8 trillion target. McConnell bluntly said that “job-killing tax increases” are off the table.

The ever-hopeful Ezra Klein says Dems will lose now but could win later.

Democrats are going to lose this one. The first stage of the emerging deal doesn’t include revenue, doesn’t include stimulus, and lets Republicans pocket a trillion dollars or more in cuts without offering anything to Democrats in return.

The second stage convenes a congressional “Supercommittee” to recommend up to $2 trillion in further cuts, and if their plan doesn’t pass Congress, there’s an enforcement mechanism that begins making automatic, across-the-board cuts to almost all categories of spending. So heads Democrats lose, tails Republicans win.

It’s difficult to see how it could have ended otherwise. Virtually no Democrats are willing to go past Aug. 2 without raising the debt ceiling. Plenty of Republicans are prepared to blow through the deadline. That’s not a dynamic that lends itself to a deal. That’s a dynamic that lends itself to a ransom.

But Democrats will have their turn. On Dec. 31, 2012, three weeks before the end of President Barack Obama’s current term in office, the Bush tax cuts expire. Income tax rates will return to their Clinton-era levels. That amounts to a $3.6 trillion tax increase over 10 years, three or four times the $800 billion to $1.2 trillion in revenue increases that Obama and Speaker John Boehner were kicking around. And all Democrats need to do to secure that deal is…nothing.

The only thing that can prevent increased revenue, says Klein, is the Obama administration. That’s pretty pathetic. Even Klein isn’t sure Obama will let the Bush tax cuts expire.

For more background, see my and and Dakinikat’s posts from last night.

I’ll put further updates in the comments.

Capital on fire

Saturday Night Live Blog: Debt Ceiling Watch

Posted: July 30, 2011 | Author: | Filed under: Democratic Politics, Republican politics, U.S. Economy, U.S. Politics, voodoo economics, We are so F'd | Tags: , , , , , , , , | 32 Comments

Hello Sky Dancers! If you don’t have a hot date, join us in documenting the atrocities as the Senate the Congressional food fight continues–building up to the crucial vote on Harry Reid’s debt ceiling/deficit reduction bill at 1AM.

I haven’t been watching it, but Dakinikat says it’s been really wild. Here’s a link to watch Harry Reid and Mitch McConnell “spar” over whether there has been progress on an agreement based on McConnell’s meetings with Obama.

It seems that McConnell and Boehner are betting the farm that President Obama will cave, and stab Reid and Pelosi in the back. I just can’t imagine that Obama would agree to the Boehner bill though–not with the spending caps and the balanced budget amendment in there. But with President Pushover, you just never can tell how low he will go.

The most interesting news I’ve seen tonight was that earlier tonight, according to ABC News,

Tom Harkin made a plea on the Senate floor Saturday evening for President Obama to invoke the 14th Amendment to raise the debt ceiling if Congress fails to strike a deal before the Aug. 2 default deadline.

“If the Congress through inaction, through inaction or action, tries to destroy or alter those obligations I believe it is incumbent on the chief executive to exercise his authority to make sure the full faith and credit of the United States is not jeopardized. The president should use his authority to do so,” Harkin said.

Harkin joins a growing number of Democrats who have called on the president to broadly interpret a section of the 14th Amendment which says “the validity of the public debt… shall not be questioned” as justification for him to authorize continued borrowing if Congress fails to raise the debt ceiling.

In addition, Huffpo is reporting that according to an unnamed Congressperson, Nancy Pelosi is privately supporting the notion of Obama invoking the 14th amendment.

“Nancy clearly wants it,” said the lawmaker, who requested anonymity. “Publicly? No. Privately? She thinks the president should do it. Period.”

Several top Democrats have endorsed the idea in recent days as an eleventh hour solution: House Minority Whip Steny Hoyer (D-Md.) backed the option on Wednesday, and House Democratic Caucus chairman John Larson (D-Conn.) and Assistant Minority Leader James Clyburn (D-S.C.) emerged from a Monday Caucus meeting announcing their support for the idea as well.

But Pelosi, the highest-ranking House Democrat, has been mum. One possible reason is that she has to preserve the image that Congress will reach a deal before the situation even gets to that point.

Josh Marshall says he’s heard “rumblings” about the 14th amendment idea, but he’ll believe it when he sees it.

Well, what does he know? If he could predict the future, he probably wouldn’t have supported Obama in 2008.

I’m going to try to stay up until the vote. Those of you in other times zones will have an easier time of it. You can watch the Senate debate on C-span. MSNBC has broken into their usual weekend prison break fare and are following the debate. I’m listening to that on satellite radio. Dak is going to watch C-Span and provide updates. So join us if you dare! And if you have ideas for drinking games, throw put them out there.

This can only mean one thing … President Cave-in Strikes Again

Posted: July 30, 2011 | Author: | Filed under: Federal Budget, Federal Budget and Budget deficit, voodoo economics, Voter Ignorance, We are so F'd | Tags: , , , , , | 14 Comments

If you haven’t been watching live coverage of the leader on leader snit fit on the senate floor, you’re missing the clash of two realities.  For all intents and purposes, Senate minority leader McConnell appears to be engaged in a filibuster of the Reid Plan in full expectation that he can make a deal with President Cave-in.  The earlier speeches on the House floor were more raucous than the backbenchers in parliament.  Representative Nancy Pelosi received applause, hoots, catcalls and boos.  The acting speaker clearly lost control of house decorum.

GOP leaders appear to have been encouraged enough in behind closed doors White House meetings they held a press conference suggesting the stand off might be near an end.  Senator Reid took to the senate floor to tell McConnell and Boehner they were sorely mistaken. You can see the coverage of the Boehner/McConnell Presser here.

“We are now fully engaged” with the White House said Senate Minority Leader Mitch McConnell in a joint appearance with House Speaker John Boehner. “It should be clear … that Senator McConnell and I believe that we are going to be able to come to some sort of agreement,” Boehner said.

Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi met alone with Obama and Biden, both the president and vice president have been in conversations with Boehner and McConnell.

Indeed, McConnell has been most insistent on this point, leading to some acerbic, amusing exchanges with Reid earlier in the day.

“He called the White House and said `Mr. President, let us do the deal,” Reid said of McConnell. “And now he’s telling the president he wants the president to do the deal.”

“We cannot reach a deal without the president. We tried that,” McConnell answered. “I’ll concede the point…but it makes my point that there’s no way under the constitutional system for my friend and I to work this out we have to have the president at the table.”

The biggest two outstanding issues are the Republicans’ insistence on “dollar-for-dollar” deficit reductions –without new tax revenues—to match any increase in the Treasury’s borrowing authority. And second, what enforcement mechanism is best to ensure that a new joint House-Senate committee will be able to come up with an estimated $1.6 trillion in savings by the end of this year.

Reid’s response is covered here.

The Republican leaders in Congress signalled that they were close to reaching a deal with President Barack Obama to raise the US borrowing limit and stave off a devastating default, a breakthrough that would relieve markets – and ordinary Americans – if it were to happen.

But in a sign of the confusion on Capitol Hill about how parties would end the impasse, Harry Reid, the Democratic leader in the Senate, said Republican claims of new progress on a debt ceiling deal are “not true”.

But “the process has not been moved forward,” Mr Reid said.

 As I mentioned before, Pelosi’s speech turned the floor of the House into chaos as she insisted that Boehner had gone over to the “dark side“.

Pelosi pulled out a Star Wars reference on the House floor, saying that Speaker John Boehner “chose to go to the dark side” and court the most conservative members of his conference, rather than work on a bipartisan compromise.

“It’s time for us to end this theater of the absurd,” she said. “It’s time for us to get real.”

The House struck down the Democratic measure, 173-246, in a vote that was designed to fail. Boehner brought the measure up under a special rule that required a two-third majority for passage.

“This thing is not on the level,” Pelosi said before the vote.

Boehner’s office said Saturday morning that the vote on Senate Majority Leader Harry Reid’s legislation would show that the Nevada Democrat’s plan can’t pass the House, dismissing it as a “pointless political exercise.”

 That last comment from Boehner was incredibly hypocritical as we saw the speaker go through the same pointless political exercise with his bill yesterday that was destined for failure in the senate. 

Despite the House’s pre-emptive rejection of the Reid plan, Senate Democrats say they are moving forward with its consideration. The Senate is tentatively scheduled to take up Reid’s proposal beginning at 1 a.m. ET on Sunday — part of that chamber’s arcane procedural path required to get something passed before the Treasury runs out of funds.

Any proposal put forward by Reid will ultimately need the support of at least seven Senate Republicans in order to reach the 60-vote margin required to overcome a certain GOP filibuster.

Forty-three of the Senate’s 47 Republicans sent a letter to Reid Saturday promising to oppose his plan as currently drafted. Maine’s Olympia Snowe and Susan Collins, Massachusetts’ Scott Brown, and Alaska’s Lisa Murkowski declined to sign it.

McConnell urged Reid early Saturday afternoon to hold a quick vote on his bill in order to clear the way for new talks.

Your plan “will not pass the Senate. It will not pass the House It is simply a nonstarter,” McConnell told Reid on the Senate floor. “Hold the vote here and now” and let’s “not waste another minute of the nation’s time.”

Reid responded by accusing the Republicans of wasting time on the Boehner plan, and criticized the Senate GOP for not allowing his plan to be considered with a simple majority vote.

“The two parties must work together to forge an agreement that preserves this nation’s economy,” Reid said. “My door is still open.”

It’s getting pretty obvious what the dynamic is now.  The Republican leadership in Congress has absolutely no control over its rogue teabot faction which appears to be made up of people that cannot be reasoned with, have no clue about how the constitution sets up the passage of laws, and never cracked a book on finance or economics in their lives. The Democratic leadership are about to have the legs knocked out from under them again by President Cave-In.  The Republicans are stalling until President Cave-In forces Democrats to fully give in to Republican demands.  Get ready for the next recession. It’s on its way . From my vantage point, the teabots are terrorists and the President and the Republican leadership are in negotiations with them.

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