Republicans are insistent that the Bush Tax cuts be made permanent. With that stroke of lunacy, we have the imminent and predictable meltdown of the super committee. So, what happens when the minority party doesn’t get it’s way on everything? It either holds the economy hostage or changes the rule. Republicans in Congress are playing Calvin Ball to avoid the cuts that super committee failure is supposed to bring to the defense budget. They’re changing their own rules, yet again.
Plus, we’re getting another contradictory argument on taxes. Let the Bush tax cuts expire is “raising taxes”. Letting the payroll tax holiday expire is not raising taxes. How do these folks get through the day without a complete synaptic breakdown? Here’s some details from Reuters. The Murray quoted here is Senator Patty Murray from Washington State.
Murray said Republicans want to extend tax cuts that lowered individual rates — reductions that originated under former Republican President George W. Bush. Those tax cuts run out at the end of 2012.
Republicans have pushed for a permanent extension. Democrats want the tax cuts for the rich to expire.
“In Washington, there are folks who will not cut a dollar unless we raise taxes,” said Kyl, sparking an exasperated reaction from Kerry who noted that Congress has cut about $1 trillion from the budget without any tax hikes.
Republicans want Democrats to agree to do more to find long-term savings in the growing costs of government retirement and healthcare programs.
If no deal is reached by a simple majority of the super committee, automatic spending cuts would start in 2013 — two months after presidential and congressional elections.
Those cuts would be evenly divided between domestic and defense programs. Some Republican members of Congress already are talking about dismantling the automatic cuts to protect the Defense Department from deep reductions.
No serious discussion on deficits can occur without ending the Bush Tax cuts and seriously putting the Pentagon budget on the table. Representatives of the super committe were out full force on the Sunday Morning Talk Show. John Avlon at The Daily Beast points to the political posturing that’s likely still the root of the entire problem. No Republican is willing to compromise any more. Democrats and the President continue to grant many concessions on social programs that leave little left for continuing battle. No where is this more noticeable when the congress passed the old John Chaffee/Bob Dole Republican Health plan under the guise of ObamaCare. The contentious mandate originally came from the Republican side of the aisle from the American Heritage Institute. The twist of facts into partisan narratives has never been worse.
But pervasive hyperpartisan positional bargaining seems to have carried the day. Pessimism has clouded late-inning negotiations. Supercommittee Democrats have offered to put entitlement reforms on the table, but offered few specifics. Republicans have offered limited revenue increases, but tied those to the cutting the top tax rate to 28 percent from 35 percent and permanently extending the contentious Bush tax cuts. Distrust and brinksmanship pollutes the process.
Ironically, but perhaps appropriately, the dysfunctional debate seems to be based around what the term “fair and balanced” actually means.
For Democrats it means a 1-to-1 ratio of tax hikes to spending cuts. For bipartisan groups like the Gang of Six and Bowles Simpson, it means a 3-to-1 ratio. But for too many Republicans, “fair and balanced” means no tax revenues raised at all—a handful of loopholes closed as concessions, like $3 billion from private jets, and the rest collected from spending cuts. The basic dynamic of both sides being willing to slaughter sacred cows is missing despite an avalanche of “more bipartisan than thou” press releases.
The core problem comes from antitax pledges that have dislodged the basic nature of balance sheets in the collective conservative mind—it is all spending, no revenue. Fiscal responsibility has been replaced by fiscal conservatism. Reducing the deficits and debts is no longer the overriding goal, despite Tea Party rhetoric about generational theft or even the balanced-budget-amendment attempt this past week. Instead, keeping tax cuts in place is the one true grail—ignoring the overwhelming popularity of provisions like raising the top rate on people making more than a million dollars a year.
Sane people continue to ask what type of Svengali powers the insane Grover Norquist holds over Republicans? If you want to learn about “The Billionaire’s Best Friend” who “hijacked the Republican party on behalf of the rich”, go no further than TIm Dickinson’s article in this month’s Rolling Stone. This man continues to hold sway over the Republican congress critterz despite overwhelming public polls that show even Republicans and Independent rank and file don’t support his agenda. Norquest comes from two Republican institutions. He was originally in the Chamber of Commerce which is one organization that has no problem seeing lies and half baked arguments printed in newspapers around the country. Ronald Reagan used him to push his tax reform measures. It’s been one power grab after another backed by nothing more than dogma and a huge budget since then.
Over the past 25 years, Norquist has received funding from many of America’s wealthiest corporations, including Philip Morris, Pfizer and Microsoft. To build a farm team of anti-tax conservatives, Norquist shrewdly took the pledge to state legislatures across the country, pressuring up-and- coming Republicans to make it a core issue before they’re called up to the big leagues. “We’re branding the whole party that way,” Norquist says. “The people who are going to be running for Congress in 10 or 20 years are coming out of state legislatures with a history with the pledge.”
Norquist also built the anti-tax pledge into the DNA of the GOP by hosting weekly Wednesday meetings that enable activist groups representing everyone from gun nuts to home-schoolers to mix with top business lobbyists and conservative officials. The meetings, which began shortly after Bill Clinton was elected, turned Norquist into the Republican Party’s foremost power broker – and gave him a forum to enforce the no-new-taxes pledge as the centerpiece of the GOP’s strategy. “The tax issue,” he says, “is the one thing everyone agrees on.”
Norquist cemented his influence by forging an early alliance with Karl Rove and setting himself up as a gatekeeper to George W. Bush’s inner circle. Then, after Obama was elected, this ultimate Washington insider positioned himself as a leader of the anti-establishment Tea Party, complete with financial support from the billionaire Koch brothers. “These Tea Party people, in effect, take their orders from him,” says Bruce Bartlett, an architect of the Reagan tax cuts. “He decides: This is a permissible tax action, or this is not a permissible tax action. And of course, anything that cuts taxes is per se OK.”
Today, GOP politicians who have signed Norquist’s anti-tax pledge include every top Republican running for president, 13 governors, 1,300 state lawmakers, 40 of the 47 Republicans in the Senate, and 236 of the 242 Republicans in the House. What’s more, the GOP’s Tea Party foot soldiers are marshaled by House Majority Leader Eric Cantor – a veteran of Norquist’s farm team, who first signed the pledge as an ambitious member of the Virginia legislature. Under Cantor’s leadership, Norquist’s anti-tax pledge was directly responsible for last summer’s debt-ceiling standoff that wrecked the nation’s credit rating by leading the nation to the brink of default. “Congress was willing to cause severe economic damage to the entire population,” marvels Paul O’Neill, Bush’s former Treasury secretary, “simply because they were slaves to an idiot’s idea of how the world works.”
Yup. Bush’s former Treasury secretary thinks Norquist has congress hostage to the point that they are “willing to cause severe economic damage to the entire population simply because they were slaves to an idiot’s idea of how the world works.” The result of the work of Norquist and the Republican party has been staggering income inequality.
“The Republican Party has totally abdicated its job in our democracy, which is to act as the guardian of fiscal discipline and responsibility,” says David Stockman, who served as budget director under Reagan. “They’re on an anti-tax jihad – one that benefits the prosperous classes.”
Notice here that I’m quoting Republicans that have had extensive experience in economics, finance, and policy. Funny thing is that the most of these folks aren’t really worried about tanking the economy. What they are worried about is this. If you haven’t read Cannonfire today, you should. First, Cannon points to this. MSNBC got a hold of a memo from a lobbying firm spelling out its plan to use any propaganda means necessary to destroy OWS. The lobbying firm is associated with the American Banker’s Association.
CLGC’s memo proposes that the ABA pay CLGC $850,000 to conduct “opposition research” on Occupy Wall Street in order to construct “negative narratives” about the protests and allied politicians. The memo also asserts that Democratic victories in 2012 would be detrimental for Wall Street and targets specific races in which it says Wall Street would benefit by electing Republicans instead.
According to the memo, if Democrats embrace OWS, “This would mean more than just short-term political discomfort for Wall Street. … It has the potential to have very long-lasting political, policy and financial impacts on the companies in the center of the bullseye.”
The memo also suggests that Democratic victories in 2012 should not be the ABA’s biggest concern. “… (T)he bigger concern,” the memo says, “should be that Republicans will no longer defend Wall Street companies.”
Two of the memo’s authors, partners Sam Geduldig and Jay Cranford, previously worked for House Speaker John Boehner, R-Ohio. Geduldig joined CLGC before Boehner became speaker; Cranford joined CLGC this year after serving as the speaker’s assistant for policy. A third partner, Steve Clark, is reportedly “tight” with Boehner, according to a story by Roll Call that CLGC features on its website.
Another interesting association is noted in the memo.
The CLGC memo raises another issue that it says should be of concern to the financial industry — that OWS might find common cause with the Tea Party. “Well-known Wall Street companies stand at the nexus of where OWS protestors and the Tea Party overlap on angered populism,” the memo says. “…This combination has the potential to be explosive later in the year when media reports cover the next round of bonuses and contrast it with stories of millions of Americans making do with less this holiday season.”
Yup, it’s the divide and conquer strategy again. Since Wall Street can’t make the case, it’s going to use proxies like the Tea Party to do its dirty work. This should be no problem given the astroturf leadership put in place by folks like Dick Armey and Matt Kibbe. These guys are longstanding Republican Beltway insiders. The interesting thing comes in some of the rumors coming out from the committee itself. Supposedly, Boehner had actually agreed to put revenues on the table and provide cover to Republicans that feared Norquist and the Tea Party. Some Democrats never really engaged, some republicans refused to even discuss anything that didn’t include making the Bush Tax cuts permanent for every one, and there was some feeling that the next election would give some indication of which way the wind blows.
A Democratic aide had this eulogy for the supercommittee: “The worm has turned a little bit. The national conversation now is about income inequality and about jobs, and it’s not really about cutting the size of government anymore or cutting spending. 2010 gave one answer to that question. But 2012 will give another, and we’ve got to see what it is.”
I still think economist Jeffrey Sachs has the best take on what the real role of Congress should be in an schizophrenic economy like ours. This is what OWS is trying to point out but is getting blasted for by concentrated efforts in corporate media to publish propaganda. (I have quoted this before, but I’m quoting Sachs again.)
The big political lie of the Super-Committee is that the deficit must be closed mainly by cutting government spending rather than by raising taxes on corporations and the super-rich. Both parties are complicit. The Republicans want to close the deficit entirely by cutting spending; Obama has brandished the formula of $3 of cuts for every $1 of tax revenues. On either approach, the poor and middle class would suffer grievously while the rich and powerful would win yet again (at least until the social pressures boil over).
The key to understanding the U.S. economy is to understand that we have two economies, not one. The economy of rich Americans is booming. Salaries are high. Profits are soaring. Luxury brands and upscale restaurants are packed. There is no recession.
The economy of the middle-class and poor is in crisis. Poverty and near-poverty are spreading. Unemployment is rampant. Household incomes have been falling sharply. Millions of discouraged workers have dropped out of the labor force entirely. The poor work at minimum wages to provide services for the rich.
Until we have some realization that laws put into place for the last 30 years have created markets that are distorted, functional only for a few, and not the least bit reflective of anything remotely “free market”, a portion of the public is going to be willing to vote for people that spread lies. This is why the credibility of any one associated with OWS must be destroyed. The minute a huge portion of us wake up to the lies–much like what happened after publication of the Pentagon Papers and the invasion of Cambodia after Nixonian promises of winding the Vietnam War down–we’re not going to get the policy we need to put things right again. We desperately need to put things right again.
As far as I can tell, if corporations and the top 1% paid anything like a fair share of taxes, budget problems would melt away.
I feel a bit like the recent physicists who seemed to find faster-than-light neutrinos in their data. (There’s the big difference that I’m an amateur at taxes, and they’re anything but amateurs at physics.) But, like them, I’m so boggled by the results that I want to throw it out there for people to pick apart.
Let’s begin at the beginning. The current US deficit is around $1.5 trillion per year. Current US GDP is around $14 trillion per year. Current yearly tax revenues are near $1.1 trillion (IRS pdf, 2008 numbers). In better years revenue is higher, deficits are lower.
An aside: Those numbers are smaller than the multiple trillions of cuts the Super Committee throws around. That’s because they say they need to come up with money for ballooning future costs of social insurance. (The powers-that-be didn’t seem to be worried about the future when tax cuts were implemented.) I don’t consider those future costs a real issue. Social Security doesn’t have any real problems. National health care costs could be cut in half with Medicare for All, based on the evidence from all the industrialized countries that do have national health care systems. (Link is to Congressional Research Service, 2004, pdf. See e.e Table 1, Fig. 1, Fig. 2.) So Medicare for All is the place to start for anyone who is actually concerned about future costs, and not some other agenda.
Further, a healthy deficit level is said to be around 2% of yearly GDP. In addition to other considerations, the ability to buy US Treasury bonds and bills is an important factor in global finance. Zero deficit means the end of that whole asset class, which is not a Good Thing. One wants a sustainable and easily carryable deficit, and 2% is a conservative estimate of that level. Two percent of $14 trillion is $280 billion. (I saw this most clearly expressed somewhere in Krugman’s writing, but all I can find right now is a passing reference here.)
So the yearly shortfall, in round numbers, is $1.2 trillion ($1.5T deficit – 0.280T healthy deficit).
If Fortune 500 corporations actually paid tax on their corporate profits, there’d be much less freeloading from that end. When even Marketwatch headlines “Big Profits, Zero Taxes” you know it’s not a small issue. It’s hard (for me) to find unequivocal numbers on how much difference that would make to revenue, but there are fairly clear data on corporate tax payments as a share of GDP. It’s now at a recent all-time low of 1% of GDP. Moving that back to 4%, about where it was in the 1960s would bring in an extra $480 billion (1% of GDP = $160B, 3% = 480B).
That would entail ending all the corporate loopholes, such as income-shifting in transnationals to whichever tax haven suits them that year, as well as ending special tax breaks for wildly profitable industries such as oil and finance. It would involve adding necessary new taxes, such as a financial transaction tax that would have other beneficial social consequences by slowing down market trading velocity. And it would involve raising rates on large corporations. (Update from comments below: 25 CEOs received more in compensation than their companies paid in taxes. Just mindboggling.)
Then, the other task is to raise taxes on the top 1%. According to the IRS (pdf), in 2008 the top 1% was composed of households making an average of $1.2 million per year. Their effective tax rate is 20% ±5% (CBO pdf, Table 3), and at that rate they contributed well over $350 billion in tax revenue. (For instance, in 2009 the top 1% contributed 36.7% of total income taxes. That proportion is typical during the last decade, plus or minus a few percent. Total income tax revenue in 2008, the last year for which I could find complete IRS data, was $1.081 trillion. 36% of 1.081T = $389 billion.) If their tax rates went to 60%, there would be an extra $700 billion revenue.
So, $700 billion plus $480 billion approaches $1.2 trillion, pretty much the entire yearly shortfall of $1.2 trillion.
That doesn’t pay down the debt. Nor does it provide funds for essential projects such as switching to clean, sustainable energy. But those are one-time charges, as it were, not permanent features of fiscal balance, which I gather is what the Super Committee is worrying about.
Raising taxes on the megarich is not the same as taxing the middle class. It’s not even taxing the upper middle class, such as the heart surgeons and mid-size successful business owners. It involves only having the massively wealthy corporations and households pay something vaguely like their fair share. What’s more, it wouldn’t make a bit of difference to their lifestyles. For an income of $1.2 million per year, that tax increase would drop them from living on $80,000 per month to living on $40,000 per month. They could still jet to Paris for the weekend. Anybody who feels deprived living on $40,000 per month needs therapy, not tax breaks.
All this is something to think about while the news covers the new super ways the Super Committee has found to shred the safety net. Nor is this just a classic “Don’t tax him, don’t tax me. Tax the fellow behind the tree.” The fellow behind the tree has been tax cheating for far too long, and it’s time to rebalance. If the megarich paid their fair share, we could have a future that was more than collapsing bridges and work on their plantations.
Crossposted to Acid Test
As Dakinikat has explained again and again and again and again, the problem our economy faces is that millions of Americans don’t have any money to spend because they don’t have jobs. Our economy runs on consumer spending. When people don’t have jobs, they don’t have money to spend on consumer items. That hurts our economy. It’s pretty simple, really.
But President Obama doesn’t understand simple basic economics. He’s already decided that high levels of unemployment are “structural.” He thinks our problem is that the government is spending too much money. Yesterday Obama gave another big ol’ nothingburger of a speech on how he’s
giving away the store to negotiating with the Republicans in Congress.
Now, I’ve heard reports that there may be some in Congress who want to do just enough to make sure that America avoids defaulting on our debt in the short term, but then wants to kick the can down the road when it comes to solving the larger problem of our deficit. I don’t share that view. I don’t think the American people sent us here to avoid tough problems. That’s, in fact, what drives them nuts about Washington, when both parties simply take the path of least resistance. And I don’t want to do that here.
No, Mr. President, what is driving Americans “nuts” about Washington is that you and your Republican pals seem to be determined to crash the economy. Another thing that drives American’s “nuts” is that you haven’t lifted a finger to do anything about jobs since you took office. All you’ve done is take care of your superrich pals so they’ll donate to your next campaign.
I’ll bet you don’t even know that the latest PPP Poll shows that most Americans want to raise taxes on higher income people.
Poll data by the Democratic-aligned Public Policy Polling released Wednesday said voters in Ohio, Missouri, Montana and Minnesota back hiking taxes on the wealthy — even for people with incomes as low as $150,000.
The respondents were asked: “In order to reduce the national debt, would you support or oppose raising taxes on those with incomes over $1,000,000 a year?”
Nearly 80 percent of voters in the four states backed the idea.
And, BTW, Senator Reid, I’m pretty sure these voters want real tax increases, not phoney “sense of the Senate” resolutions. Back to Obama’s mealy-mouthed speech:
I believe that right now we’ve got a unique opportunity to do something big — to tackle our deficit in a way that forces our government to live within its means, that puts our economy on a stronger footing for the future, and still allows us to invest in that future.
Most of us already agree that to truly solve our deficit problem, we need to find trillions in savings over the next decade, and significantly more in the decades that follow. That’s what the bipartisan fiscal commission said, that’s the amount that I put forward in the framework I announced a few months ago, and that’s around the same amount that Republicans have put forward in their own plans. And that’s the kind of substantial progress that we should be aiming for here.
And on and on, bla bla bla…
I don’t know who you mean by “most of us” Mr. O, but I’m pretty sure most of us citizens don’t support the findings of your
right wing cat food commission bipartisan fiscal commission.
President Obama just doesn’t get it. He might be able to learn a little bit about economics if he would just hire a few actual economists to advise him. But the big O thinks he already learned all he needs to know by listening to Ronald Reagan back in the ’80s. All of his economics advisers have
left the sinking ship resigned, because Mr. O thought he knew better than they did. Remember this quote?
In his biography of Obama, “The Bridge,” David Remnick, editor of The New Yorker, quotes White House senior adviser and longtime Obama friend Valerie Jarrett: “I think Barack knew that he had God-given talents that were extraordinary. He knows exactly how smart he is. … He knows how perceptive he is. He knows what a good reader of people he is. And he knows that he has the ability — the extraordinary, uncanny ability — to take a thousand different perspectives, digest them and make sense out of them, and I think that he has never really been challenged intellectually. … So what I sensed in him was not just a restless spirit but somebody with such extraordinary talents that had to be really taxed in order for him to be happy. … He’s been bored to death his whole life. He’s just too talented to do what ordinary people do.”
You need to snap out of it, Mr. President; because our country is in big big trouble right now, and you’re really not as smart as you think you are.
Paul Krugman is an actual economist, and his hair is on fire. He can’t figure out what the President has against Keynesian economics.
I’m not alone in marveling at the extent to which Obama has thrown his rhetorical weight behind anti-Keynesian economics; Ryan Avent is equally amazed, as are many others. And now he’s endorsing the structural unemployment story too.
To those defending Obama on the grounds that he’s saying what he has to politically, I have two answers. First, words matter — as people who rallied around Obama in the first place because of his eloquence should know. Yes, he has to make compromises on policy grounds — but that doesn’t mean he has to adopt the right’s rhetoric and arguments. The effect of his intellectual capitulation is that we now have only one side in the national argument.
Second, since Obama keeps talking nonsense about economics, at what point do we stop giving him credit for actually knowing better? Maybe at some point we have to accept that he believes what he’s saying.
Why is Obama doing this, Krugman wants to know. It can’t be because he’s just stupid, can it? (That’s me, not Krugman)
Anyway, now Obama is handling the decisions about the economy all by himself. He’s even decided to “take the lead” in the budget talks with the Republicans–probably because he didn’t think VP Biden was caving quickly enough to Republican demands. Today,
CBS News reported that Obama wants to give the Republicans twice as much as they were originally asking for.
Two Democratic officials familiar with the negotiations over a deal to raise the debt limit said Wednesday that President Obama wants the final deal to be bigger than the $2 trillion deal that has been the focus of negotiations so far.
In fact, they said, Mr. Obama wants the deal to save the government as close to $4 trillion as possible.
Mr. Obama said Tuesday that lawmakers have “a unique opportunity to do something big,” and a deal to save the federal government $4 trillion would certainly qualify. The officials said the president believes “these moments come around at most once a decade” and that “you can’t run away from an opportunity like this.”
According to the officials, Mr. Obama believes that a larger deal would actually be easier to get through Congress. His thinking, they indicated, is this: Any major deal, whether it’s for $2 trillion in cuts or $4 trillion in cuts, will cause significant pain for both parties. But a larger deal allows backers to argue that despite their misgivings, they’ve taken a major step toward dealing with the deficit and debt problem.
Doesn’t Obama understand that cutting that much government spending is going to create even more unemployment? Is this man insane? No, he’s just a right wing Republican. Actually, maybe that does mean he’s insane.
We have a republic and a lot of people have sacrificed a lot over the last several centuries to keep it. Too bad most of our politicians aren’t in that number. They can’t see past their next elections.
It seems that two senators– McCain and Corynyn–say they’re open to tax increases as a way to solve the budget stand off. Guess there are a few of them left that would prefer not to tank our economy. Let’s hope this starts some real negotiations instead of the usual Republican hostage taking and Democratic cave-in that’s been politics as usual the last dozen years or so.
One of the senators, John Cornyn of Texas, said he would consider eliminating some tax breaks and corporate subsidies in the context of changes in the tax code, provided there was not an overall increase in taxes.
“I think it’s clear that the Republicans are opposed to any tax hikes, particularly during a fragile economic recovery,” Mr. Cornyn said on “Fox News Sunday.” “Now, do we believe tax reform is necessary? I would say absolutely.”
But he insisted that any changes in taxes be “revenue neutral,” meaning that the government would not take in any more money from individuals or businesses than it does now.
The other senator, John McCain of Arizona, said he would be willing to consider some “revenue raisers” as part of a broad deal, but he refused to name specific measures.
Mr. Cornyn, a member of the Senate leadership, also said that Republicans would be open to a short-term deal on the debt ceiling to provide more time for a comprehensive agreement.
Let’s also hope that more reasonable and less ideological heads prevail on the right and that the left stands up for what’s right for a change. Former President Clinton had a words of policy advice over the weekend. His advice to President Obama is “not to blink”.
Former President Bill Clinton Saturday night urged President Obama not to “blink” at Republican demands to exclude revenue increases from any agreement to extend the government’s debt ceiling.
If Republicans maintain their opposition to revenue increases, Clinton said, Obama should pursue a short-term deal to extend the debt ceiling based on spending cuts both sides have already accepted in the negotiations between the administration and Congressional leaders from both parties.
“I hope they will make a mini-deal,” Clinton said in an interview conducted with him at the Aspen Ideas Festival here.
The White House and Congressional negotiators from both parties are attempting to assemble a deficit reduction package that could win support in Congress for legislation to extend the nation’s debt ceiling, which the Treasury says the government will reach on August 2. The talks have foundered amid demands from Congressional Republicans to exclude any revenue increases from that prospective deficit reduction package.
Asked what the administration could do if GOP leaders hold to that posture, Clinton replied: “First the White House could blink. I hope that won’t happen. I don’t think they should blink.”
If Republicans will not accept revenues in a package to lift the debt ceiling by August 2, Clinton said, Obama should pursue a short-term agreement based on the spending reductions both sides have already accepted.
“There are some spending cuts they agree on …and he can take those and [get] an extension of the debt ceiling for six or eight months,” Clinton said.
Clinton also called on a package of reforms to US tax policy that includes a corporate tax cut if special interest tax loops are closed. This is something Obama has also supported.
“It made sense when I did it. It doesn’t make sense anymore – we’ve got an uncompetitive rate. We tax at 35 percent of income, although we only take about 23 percent. So, we SHOULD cut the rate to 25 percent, or whatever’s competitive, and eliminate a lot of the deductions so that we still get a FAIR amount, and there’s not so much variance in what the corporations pay. But how can they do that by Aug. 2?”
Clinton also said Grover Norquist, who as president of Americans for Tax Reform is the GOP’s unofficial enforcer of no-new-taxes pledges, has a “chilling” hold on the nation’s lawmaking.
The former president said it has seemed like Republicans need any revenue concessions need to be “approved in advance by Grover Norquist.”
“You’re laughing,” he told the crowd of 800. “But he was quoted in the paper the other day saying he gave Republican senators PERMISSION … on getting rid of the ethanol subsidies. I thought, ‘My GOD, what has this country come to when one person has to give you permission to do what’s best for the country.’ It was chilling.
There’s an extremely interesting piece at The Atlantic Wire on “What Really Happened at Fukushima”. It includes interviews with workers that have been inside the crippled nuclear plant.
Throughout the months of lies and misinformation, one story has stuck: “The earthquake knocked out the plant’s electric power, halting cooling to its reactors,” as the government spokesman Yukio Edano said at a March 15 press conference in Tokyo. The story, which has been repeated again and again, boils down to this: “after the earthquake, the tsunami – a unique, unforeseeable [the Japanese word is soteigai] event – then washed out the plant’s back-up generators, shutting down all cooling and starting the chain of events that would cause the world’s first triple meltdown to occur.”
But what if recirculation pipes and cooling pipes, burst, snapped, leaked, and broke completely after the earthquake — long before the tidal wave reached the facilities, long before the electricity went out? This would surprise few people familiar with the 40-year-old Unit 1, the grandfather of the nuclear reactors still operating in Japan.
The authors have spoken to several workers at the plant who recite the same story: Serious damage to piping and at least one of the reactors before the tsunami hit. All have requested anonymity because they are still working at the plant or are connected with TEPCO. One worker, a 27-year-old maintenance engineer who was at the Fukushima complex on March 11, recalls hissing and leaking pipes. “I personally saw pipes that came apart and I assume that there were many more that had been broken throughout the plant. There’s no doubt that the earthquake did a lot of damage inside the plant,” he said. “There were definitely leaking pipes, but we don’t know which pipes – that has to be investigated. I also saw that part of the wall of the turbine building for Unit 1 had come away. That crack might have affected the reactor.”
The reactor walls of the reactor are quite fragile, he notes. “If the walls are too rigid, they can crack under the slightest pressure from inside so they have to be breakable because if the pressure is kept inside and there is a buildup of pressure, it can damage the equipment inside the walls so it needs to be allowed to escape. It’s designed to give during a crisis, if not it could be worse – that might be shocking to others, but to us it’s common sense.”
Here’s some frightening news on the disaster in Japan. Radioactive Cesium has been found in Tokyo’s water supply.
Radioactive cesium-137 was found in Tokyo’s tap water for the first time since April as Japan grapples with the worst nuclear disaster in 25 years.
Cesium-137 concentration registered at 0.14 becquerels per kilogram in the city’s Shinjuku ward on July 2, compared with 0.21 becquerels on April 22, according to the Tokyo Metropolitan Institute of Public Health. No cesium-134 or iodine-131 was detected, the agency said on its website.
The Nuclear Safety Commission of Japan sets a safety limit of 200 becquerels per kilogram for cesium-134 and cesium-137. The limit for iodine-131 consumption is 300 becquerels per kilogram.
Japan is battling radiation leaks into the air, soil and water after an earthquake and tsunami on March 11 knocked out cooling systems at Tokyo Electric Power Co.’s Fukushima Dai- Ichi nuclear station, resulting in the meltdown of three of the six reactors at the plant.
The UK Guardian lists an interesting set of Greek public assets for sale. Many have no buyers. Bobby Jindal is putting up a lot of Louisiana assets for sale too. I wonder if this is going to be the new way to raise money. The Kochs already rent a big chunk of Yellowstone. Let’s hope we don’t have to put our national treasures on the chopping block.
Up for sale are 39 airports, 850 ports, railways, motorways, sewage works, a couple of energy companies, banks, defence groups, thousands of acres of land for development, casinos and Greece’s national lottery. George Christodoulakis, Greece’s special secretary for asset restructuring and privatisations, said the sell-off would raise €50bn (£44bn) to help pay back the country’s €110bn bailout debt.
The private equity bosses gathered in the hotel’s ballroom for the parade of Greece’s national treasures showed little interest in buying anything.
Nikos Stathopoulous, managing partner of BC Partners, which has invested more than €3.5bn in Greece, said investors are put off by bureaucracy, strong unions, corruption and a lack of transparency. “Even in the good times Greece is not a country that attracts investment. Foreign investors don’t want to invest in a country where there is no flexibility in hiring and firing people,” he said. “You don’t want to invest in a country in which you wake up and a new law has been passed which totally undermines and destroys the value of the investment you’ve just made.”
Stathopoulous said investors were finding it very hard to assess the risk of investing into Greece, which means assets “will be priced at lower than they are worth, lower than the Greek government, and even the European Union, expects”.
Here’s a compelling argument for getting the shadow banking sector into a more regulated, transparent, and standardized order. It’s written by Henry Tabe who is a Founding Partner of Sequoia Investment Management Company Ltd. It particularly addresses the use of the Structured Investment Vehicle (SIV). Complex, nonstandard, and unregulated markets make pricing assets difficult and introduce unnecessary risk and volatility.
Risk management requires identification, measurement, aggregation, and effective management of risks. It should help businesses allocate sufficient capital for survival and growth. The SIV’s extinction highlights risk management failures by the vehicles, their sponsors, rating agencies, policymakers, and regulators.
Financial regulators permitted bank, insurance company, pension, and hedge-fund sponsors to establish SIV “mini-banks” without ensuring that they maintain sufficient capital or back-stop liquidity in the event of a run. Policymakers also seemed unaware of the knock-on effects of the SIV’s demise on the securitisation and global credit markets. The Financial Security Authority’s call for regulators to incorporate sectoral analytical capabilities in their micro-prudential policies should help close the knowledge gap and ensure that timely solutions can be implemented to avert collapses that engender significantly more stress on the financial system (FSA 2009).
Lessons learned include the tightening of regulation governing the sponsorship of off-balance-sheet structures and the sizing of their capital and liquidity needs. These require that regulators adopt a more proactive, dampening role in the wild swings from exuberance to despair that are so characteristic of the financial markets. Discussions around contingent capital and similar products suggest regulators have embraced that dampening role and moved away from the prevailing pre-crisis philosophy of minimal regulation.
Lessons learned also include closer supervision of shadow banks, more skin-in-the-game for their sponsors, in-house retention of risk-analytics capabilities by investors, and less reliance on credit-rating agencies. The agencies themselves are more tightly supervised in order to reduce ratings shopping by issuers and inherent conflicts of interest in the business model (CESR 2009). Tighter regulation will also help to ensure that the agencies improve the monitoring of analyst performance, qualifications, and experience (Dodd-Frank 2010).
These measures should help restore confidence in rating agencies and the global financial system, an outcome more urgently required given on-going turmoil in the sovereign debt market.
So, there’s some wonky goodness to keep you entertained if you’re inside today. Be sure to let us know what you’re reading and blogging! Hope your Fourth of July is a happy one!
Bloomberg is reporting that “Boehner’s Views on Economy Contradicted by Studies”. It’s about time some business magazine did this. Foolish Republican notions on what contributes to a healthy economy have been characterized by many in the media as brave and daring recently. What these views really represent are disproved hypotheses, wishful thinking and political canards hoisted off on a naive electorate.
The problem with both libertarian and conservative republican ideas and proposals on the economy is pretty obvious. They have no basis in fact or data what-so-ever.
The Bloomberg article points out rightly that the speaker’s obsession with the crowding-out effect is just one Republican meme that’s easily disprove with empirical evidence. Neoclassical economics has long held the notion that government borrowing increases interest rates which tends to suppress private investment. Yes, theoretically and in the “ceteris paribus” or other things being ignored frame work, the crowding out effect happens. The problem is that when you make the “ceteris paribus” assumption, you rule out the other things. The other things are what’s important here. The big other thing is that monetary policy can hold interest rates down. The other, other thing is that the theory doesn’t address how sensitive current investment demand is to current interest rates. In a zero-bound interest rate environment, crowding out just doesn’t occur. Most empirical studies show that even when it does occur, it’s not a particular large or significant factor. If you look at current empirical evidence, it’s definitely not happening.
Boehner said in his May 9 speech to the Economic Club of New York that government borrowing was crowding out private investment, the 2009 economic-stimulus package hurt job creation, and a Republican plan to privatize Medicare will give future recipients the “same kinds of options” lawmakers have.
With Democrats and Republicans sparring over legislation to extend the government’s $14.29 trillion debt limit and trim budget deficits, negotiations are being complicated by disputes over basic economic facts.
“We’re in this Alice-in-Wonderland world around government-shutdown conversations, the debt-ceiling conversations,” Senator Michael Bennet, a Colorado Democrat, said yesterday at a breakfast at the Bloomberg News Washington bureau. The debate “has not established a shared understanding of the facts” about the nation’s economic problems, he said.
Boehner’s statement in his Wall Street speech that government spending “is crowding out private investment and threatening the availability of capital” runs counter to the behavior of credit markets.
Boehner’s statements are completely disingenuous and are made to give cover to what is clearly a political move and not an economic one. Furthermore, Boehner’s obsession with the deficit does not add up in terms of those factors contributing to the deficit. Ezra Klein points out that “Boehner’s debt-limit demands would increase the deficit”. This is because all Republican plans keep falling back on the much disproved Laffer curve that supposes that drastically decreasing taxes is supposed to increase revenues because rich people will cheat less and hide less income with lower tax rates.
John Boehner’s new line on the deficit negotiations is that raising taxes — by which he appears to also mean closing tax expenditures — “is off the table. But everything else is on the table.” This is a bit like telling your doctor, who’s worried that you’ve gained weight and are out-of-shape, that exercise is off the table, but everything else is on the table. Well, it’s nice that you’re prepared to diet, but you need to exercise, too. Otherwise, you’re not going to get where you need to go.
And without revenue, we’re not going to get where we need to go — at least if you think where we need to go is towards a balanced budget. Over the past 10 years, the Bush tax cuts have increased the deficit by about $1.3 trillion. They’re the single largest policy contributor to our recent deficits. Due to the growth of the economy and the creep of the alternative minimum tax, they’ll cost the Treasury closer to $4 trillion over the next 10 years. They’re the single largest policy contributor to our projected deficits.
Extending the Bush tax cuts over the next 10 years, which Boehner favors, will increase the deficit by twice as much as the $2 trillion in spending cuts he’s calling for will reduce the deficit. Conversely, adding the revenue increases in the Simpson-Bowles plan to his spending cuts would bring the deficit reduction to more $3 trillion. But Boehner isn’t using the debt-ceiling vote to reduce the debt. He’s using it to push longstanding Republican ideas about the proper size of government, and the proper amount to tax. This has been clear for awhile, of course, Remember CutGo? But it’s worth being straightforward about it. Boehner’s plan doesn’t get our finances back in shape. He wants us to spend less, but he also wants us to cut taxes by more. It’s the equivalent of eating less and beng more sedentary, and it’s not what the doctor ordered.
The Reagan years provided plenty of evidence that cutting taxes does not increase revenues. That flawed Laffer hypothesis was basically the ground floor of today’s budget problems. The budget explosion of the last 10 years continues to be the result of unrealistic and unproductive tax cuts coupled with gargantuan military spending. Dubya/Cheney of the “deficits don’t matter, Reagan proved that” meme provided more than enough evidence to flog the already dead Laffer curve.
Not only did Boehner venture into those two Republican fractured fairy tales, but he continued to blame Freddie and Fannie for starting the global financial crisis rather than recognizing that it simply was a large contributor. Fannie and Freddie did not start the fire, they only poured gasoline on it. This oversight allows Republicans to gloss over the real instigators.
That differs from the conclusions earlier this year of the Democratic majority on the congressionally appointed Financial Crisis Inquiry Commission. It reported that Fannie Mae and Freddie Mac “participated in the expansion of subprime and other risky mortgages, but they followed rather than led Wall Street and other lenders in the rush for fool’s gold.”
Three of the panel’s four Republicans, while faulting Fannie and Freddie, didn’t place the blame squarely on the two mortgage giants.
“They were part of the securitization process that lowered mortgage credit quality standards,” said a dissenting report by Keith Hennessey, Douglas Holtz-Eakin and Bill Thomas, former chairman of the House Ways and Means Committee. In a Wall Street Journal essay, the three said laying primary blame on government intervention is “misleading” and cited 10 reasons, taken together, for the crisis.
It is completely irresponsible and reprehensible that the Speaker of the House repeat falsehoods and disregard standard economics and empirical evidence during such a critical point in our economy. We have a jobs crisis. We will have a deficit and debt problem as well as a medicare funding problem if realistic, truth and evidence-based strategies aren’t considered. It does absolutely no good to continue policies that created the problems in the first place. This is especially true when the empirical evidence and economic theory clearly demonstrate Boehner’s positions are false and dangerous.
Here’s an example of the data rather than the meme.
The speaker didn’t mention a 1993 tax increase that raised the top individual marginal rate to 39.6 percent, where it stood until 2001. In 1998, the government recorded its first budget surplus in almost 30 years.
The U.S. economy grew at an annual rate of 4.1 percent in 1994, the year after Congress passed the second tax increase of the decade. The growth rate dropped to 2.5 percent in 1995, and thereafter rose to 3.7 percent in 1996. The economy grew more than 4 percent a year from 1997 through 2000.
Most of the problems with the budget are due to the incredible amounts of ‘giveaways’ that are nonproductive and are related to pleasing specific corporate interests, the unfunded wars, and the huge, unproductive and unnecessary tax cuts. Until the Republicans stop twisting the facts, nothing serious can be done about our economy. Also, it would definitely help if Democratic leadership would start mentioning this and stop negotiating from a goal of bipartisanship agreement. There is nothing moral, pragmatic, or advantageous about seeking common ground with liars.