Deficit

Here Is A Budget That Works

Dave Johnson — Fri, 10 Feb 2012 11:23:52 -0500

President Obama is preparing to roll out his 2013 budget. If he wants a budget that gets rid of the deficit, meets human needs and does the things that polls show the public overwhelmingly wants done, The People's Budget Is The Template! This is the budget proposal from the Congressional Progressive Caucus.

The following is directly from the post, The People's Budget Is The Template:

The People's Budget

The Progressive Caucus -- a group of progressives in the Congress -- have put together a budget that fixes the deficit and grows the economy, providing jobs. It is called The PEOPLE'S Budget Plan.

Read the plan at: Congressional Progressive Caucus : FY2012 Progressive Budget,

The CPC proposal:

• Eliminates the deficits and creates a surplus by 2021
• Puts America back to work with a “Make it in America” jobs program
• Protects the social safety net
• Ends the wars in Afghanistan and Iraq
• Is FAIR (Fixing America’s Inequality Responsibly)

What the proposal accomplishes:

• Primary budget balance by 2014.
• Budget surplus by 2021.
• Reduces public debt as a share of GDP to 64.1% by 2021, down 16.5 percentage points from a baseline fully adjusted for both the doc fix and the AMT patch.
• Reduces deficits by $5.6 trillion over 2012-21, relative to this adjusted baseline.
• Outlays equal to 22.2% of GDP and revenue equal 22.3% of GDP by 2021.

Rep. Mike Honda and Rep. Raúl M. Grijalva explain, in The Only Real Democratic Budget: Why Progressives Have the Answer to What the American Public Wants,

Budgets are more than collections of numbers. They are a statement of our values. The Congressional Progressive Caucus Budget is a reflection of the values and priorities of America's working families. The "People's Budget" charts a path that keeps America exceptional in the 21st century, while addressing the most pressing problems facing the nation today. Our Budget eliminates the deficit, stabilizes the debt, puts Americans back to work, and restores our economic competiveness.

[. . .]

Our Budget listens to what the American people are telling us. It does all of the above in a fiscally responsible way that dramatically reduces our borrowing from banks and foreign governments and ensures our long-term economic competitiveness.
...
Our Budget Eliminates the Deficit by 2021: The CPC budget eliminates the deficit in a way that does not devastate what Americans want preserved, specifically, Medicare, Medicaid and Social Security. ...

Our Budget Puts America Back to Work & Restores America's Competitiveness: The CPC budget rebuilds America and makes it competitive again. We put America back to work. We rebuild our roads and bridges, ensuring that those who use it help pay for it. ...

Our Budget's Fair Tax System: The CPC budget implements a fair tax system, based on the American notion that fairness and equality are integral to our society. ...

Our Budget Brings Our Troops Home: The CPC budget responsibly ends our wars, currently paid for by American taxpayer dollars we do not have. ...

Our Budget's Bottom Line (Over 10 year Window)

• Deficit reduction of $5.6 trillion
• Primary spending cuts of $869 billion
• Net interest savings of $856 billion
• Total spending cuts: $1.7 trillion
• Revenue increase of $3.9 trillion
• Public investment of $1.7 trillion
• Budget surplus of $30.7 billion in 2021, debt at 64.1% of GDP.

See research and analysis on how The People's Budget affects middle-class households at TheMiddleClass.org.

Also see the CAF series, The Progressive Path To Deficit Reduction

Myths, Scares, Lies, and Deadly Innocent Frauds, Updated: Part One

Joseph M. Firestone — Tue, 20 Dec 2011 23:54:33 -0500

(Author's Note: This post updates Part One of a series reviewing Warren Mosler's book: The 7 Deadly Innocent Frauds of Economic Policy. The updating is prompted by a post by Hannah at DailyKos offering a “. . . a Review Sort of” of Warren's book.

Hannah's post begins by stating Warren's “deadly innocent frauds” (DIFs), and then goes on to point out that they are not innocent and then to make a number of claims about Warren's beliefs which clearly indicate that she neither read his book, nor researched his actual positions stated frequently on his web site, nor bothered to note Warren's economic truths that his book counterposes to his DIFs. My point here is not to beat up on Hannah for a careless treatment of Warren Mosler's views, but rather to point out that his actual views were given very short shrift in her piece which also gave no hint of how important they are to progressives and to economics. My original three post review of his book tried to convey the significance of his work, and so I thought it would be appropriate to update these posts now, and remind people of the full scope and importance of what Warren has to say in this easily accessible book.)

One characteristic of modern political and economic discourse is frequent asserting of beliefs about economics and money that have been variously described by some observers as 'myths', 'scares', 'lies', 'innocent frauds', and 'deadly innocent frauds'. 'Innocent frauds' was the courteous labeling of such beliefs by John Kenneth Galbraith in his last book, The Economics of Innocent Fraud. Warren Mosler, an economist, presidential candidate, and sometime co-author of James Galbraith, has added the modifier “deadly” to Galbraith the elder's name for this belief. Mosler's label is particularly relevant today because, given the various problems and crises currently faced by the United States, and the way it has faced them since the Fall of 2008, acceptance of these beliefs or “deadly innocent frauds,” could well doom the United States and its people to a bleak future of economic, political, social, and cultural instability.

The once proud land of opportunity could well be reduced to a gray land of despair and submergence of most of its people in a wholly unnecessary age of lost hope and increasing despair for American parents as well as their children. We see this age taking shape through the economic policies of the Obama Administration and their impact, and through the reaction of the Occupy Wall Street (OWS) movement to economic events. We can now see clearly, in a way that we perhaps could not in early 2009, that America and its dreams could well be sacrificed to a harsh fiscal and economic discipline based wholly on deadly innocent frauds, scares, myths, and outright lies. I'll now, following Warren Mosler's treatment, examine some of the most influential of these, and also rely in part on the earlier work of Cavanaugh, Boettger, and Eisner.

Our Sovereign Fiat Currency System and Our Inability to Involuntarily Run out of Money

First, all the DIFs are frauds in light of the changeover of the United States to a fiat money system during the Nixon Administration. As Warren describes it:

Historically, there have been three categories of money: commodity, credit, and fiat. Commodity money consists of some durable material of intrinsic value, typically gold or silver coin, which has some value other than as a medium of exchange. Gold and silver have industrial uses as well as an aesthetic value as jewelry. Credit money refers to the liability of some individual or firm, usually a checkable bank deposit. Fiat money is a tax credit not backed by any tangible asset. In 1971 the Nixon administration abandoned the gold standard and adopted a fiat monetary system, substantially altering what looked like the same currency. Under a fiat monetary system, money is an accepted medium of exchange only because the government requires it for tax payments. Government fiat money necessarily means that federal spending need not be based on revenue. The federal government has no more money at its disposal when the federal budget is in surplus, than when the budget is in deficit. Total federal expense is whatever the federal government chooses it to be. There is no inherent financial limit. The amount of federal spending, taxing and borrowing influence inflation, interest rates, capital formation, and other real economic phenomena, but the amount of money available to the federal government is independent of tax revenues and independent of federal debt. Consequently, the concept of a federal trust fund under a fiat monetary system is an anachronism. The government is no more able to spend money when there is a trust fund than when no such fund exists. The only financial constraints, under a fiat monetary system, are self imposed.

Mosler identifies 7 DIFs, all of which are related to the basic idea of fiat money or “soft currency.” The first of these is the idea that in order to spend money, the Government must first raise it through taxation, or borrow it. This is based on the idea that money is either a material thing or backed by a material thing having intrinsic value, which the Government possesses in limited quantities and may run short of.

However, fiat money is not like this. Put simply, the Government (encompassing the combination of the Congress, the Executive, and the Board of Governors of the Federal Reserve system) declares it into existence, in whatever quantity it likes. It can print it! It can credit some entity's account with as much of it as it likes! And it can withdraw it from circulation by taxing, charging fees, or confiscating it according to law. From the Government's point of view, the money it causes to exist is legal tender and all entities under its authority must accept it as legal tender in return for all goods and services for sale in the US, and as repayment for all debts incurred by the Government. The status of money as legal tender is backed by the Government's authority under the Constitution and ultimately by its legal monopoly of the instruments of physical coercion within the borders of the State.

Since the Government has unlimited authority to create its own non-convertible currency that has a floating exchange rate in international markets, it is obviously false to say that it is, or must be constrained in its spending, by its ability either to tax or to borrow. It can impose such constraints on itself if it wants to, of course. And, as it happens the United States foolishly does that, as do other nations sovereign in their own currencies, because they are still laboring under old conceptions of the nature of money, appropriate for a commodity rather than a fiat monetary system. Nevertheless, the belief that the Government is so constrained is the first of Mosler's 7 deadly innocent frauds, because the truth is that:

“Government Spending is NOT operationally limited or in any way constrained by taxing or borrowing.”

Now, if one can but accept this truth, it has many implications. One implication is that the Government never can have any solvency problem with respect to repaying debts it has incurred in its own currency.

It doesn't matter how large those debts are.

It doesn't matter how large its obligations are.

It doesn't matter, from the viewpoint of solvency, how frequently it has to fulfill obligations, or how much money it has to create to pay its obligations.

It never has to run out of money as long as it is willing to create it, and not to “obey” any constraints it has imposed on itself. The simple fact is:

it always has the capability to create the money it wants or needs to spend..

Another implication is that:

it never need be short of money to do or spend for things it either wants to do, or wants to facilitate, or cause or encourage to be done.

It is never true that “we don't have enough money to do x, or y, or z,” when “we” is the Government or the Nation. Rather, it is only true either that we don't 1) fully understand our power to create money or 2) want to do the things that people are asking us to do for reasons we don't want to talk about, so we use the excuse that money is limited instead.

Importance of the First Fraud

This first deadly innocent fraud is of great importance in our present political context. For example, why did President Obama limit the stimulus bill to around $800 Billion in size? And why did he take Medicare for All off the table, at the beginning of the health care reform process? I'm sure there were many reasons for both, but in both cases the idea that greater spending would create much larger federal deficits, and that in the face of these deficits he would either have to raise taxes or borrow more money, may have been a very important consideration.

Or, if he did understand that Federal spending is not limited by taxes or borrowing, he perhaps felt that he might not be able to escape the cultural influence of the first deadly innocent fraud, and explain to the American people that the increased deficit was nothing they had to worry about. Whatever the reason, Obama let Congress know that the "health care reform" bill had to be limited to less than $1 trillion in Federal Government expenditures over 10 years, a level that would have been dwarfed by Medicare for All, but also dwarfed by the amount of money the private sector would have saved if the Conyers-Kucinich Medicare for All bill, HR 676 had passed. He also let Congress know that the bill would have to pay for itself over 10 years according to CBO projections.

Why did Obama decide to limit the size of the stimulus package to roughly $800 billion, when some of the best macro-economists were telling him it needed to be at least twice that size? The answer, again, is either that he believed himself that government spending was ultimately limited by what the Government could raise by taxing or borrowing, or he thought that he couldn't explain to others that this is not true, and therefore also that he wouldn't have been able to defend himself politically against charges of irresponsible deficit spending coming from the Republicans and, perhaps, the blue dog Democrats.

More generally, why has President Obama, except in the case of the War and the financial system bailouts, approached other legislation from the viewpoint of deficit neutrality? Why has he applied that lens to reinventing the energy foundation of the American Economy, to legislation aimed at climate change and environmental protection, to infrastructure spending, to education, to new legislation aimed at creating jobs and lowering unemployment, and to temporary extensions of payroll tax cuts? It is either because he, himself believes in the first deadly innocent fraud, or it is because he thinks that the belief in it is so deeply ingrained in others, that he can't educate people to the truth about our soft currency money system, and can't defend himself or the Democrats against the old-time budget balancing religion, that past generations of Democrats thought they had overcome a long time ago.

Whatever the reason for Obama's adoption of the deficit neutrality point of view, we know now (see his speech at Brookings early on and his actions since) that he was fixing to apply it during the remainder of his Administration, with the exception of the wars, and bank bailouts. The Administration has been making noises about “entitlement reform” for a long time now, as well as continuing to express its fealty to the ideas of deficit neutrality in program spending, or "paying for" what it wants to do, and also long-term deficit reduction.

The MSM has responded with a constant drumbeat of articles and analyses raising the issue of the size of the deficits, the national debts, and the possibility that purchasers of US Securities will raise interest rates creating a burden the Government cannot handle. For more than two years now these predictions of higher interest rates in the US have proven false again and again, though this hasn't stopped columnists from such outlets as the Washington Post, CNN, the Wall Street Journal and numerous others from echoing the economic.fiscal world view and arguments advanced by Peter Peterson, David Walker and the Fiscal Times advocating fiscal austerity to counter the inevitability of inflation or even hyperinflation.

The MSM also often says things like: “It's unlikely that the nation will ever default, but neither is that any longer unthinkable,” a statement that, of course is based on belief in the deadly innocent fraud that the Government's resources are limited to what it can raise by taxing and borrowing, since if the Press understood that the Government's fiat money can be created in whatever quantity the Government needs (see here and here for example), it would clearly see that there never is any possibility of default, unless the Government has been captured by the belief in the deadly innocent fraud itself, and declares a default, when all it really has to do is to make the money needed and repay its debts in its own fiat currency.

Conclusions

And so the first deadly innocent fraud maintains its destructive grip on American society, economy, and politics. The old-time religion, represented by people like Mike Spence, Olympia Snowe, Paul Ryan, Ben Nelson, Max Baucus, Peter Peterson, David Walker, and yes, evidently, Barack Obama, expects us to reinvent out economy and its foundations and to adapt to the new challenges of the 21st century, while refusing steadfastly to use the tools we can apply under our fiat monetary system. In fact, it expects us to ignore that we have such a system, and to act instead according to the economic principles that governed us when we were still on the gold standard.

It expects us to seek a budgetary surplus relative to our fiat currency, and to forget about evaluating a particular Government expenditure by the proper standard of whether its balance of benefits to costs in the value or non-monetary sense is positive for us and American society. If we persist in obeying the dictates of this first deadly innocent fraud, American prosperity will never be re-captured. The American Dream will die, and Democracy in America will, increasingly, be replaced by plutocracy, a process that has now been going on for 33 years since President Jimmy Carter initiated it.

In the next installment in this series, I'll discuss some other deadly innocent frauds analyzed in Warren Mosler's book, and also their implications for current issues.

The 1 Percent Indifferent to Their Indebtedness

Leo Gerard — Tue, 29 Nov 2011 07:56:21 -0500

Most Americans, the 99 percent, feel the pressure of indebtedness. When they owe a friend a buck, their conscience bothers them until they’re square. They pay their bills, working second jobs if necessary. They meet mortgage obligations even when underwater.

That’s why there was a deficit Super Committee. Americans don’t like debt, including bills owed by their government. It weighs on them, even when it’s borrowing by Washington to create jobs and speed recovery.

But for the majority of millionaires – the 1 percent -- incurring debt does not evoke anxiety. They’re numb to the feeling of responsibility that indebtedness induces in the 99 percent. They believe they owe nothing to their country or society despite all they’ve gained. They feel no duty to repay America for creating the environment that enabled them to amass all that wealth.

Thus the Super Committee failed.

The committee was searching for $1.2 trillion over 10 years. The Bush tax cuts, which disproportionately benefitted the rich, cost $2.8 trillion over the past decade. But the 1 percent obstructed a return to the pre-Bush-balanced-budget-era tax rates and would sneer at the mere suggestion that they pay the much higher marginal rates the wealthy accepted after World War II to settle those government debts. In fact, Republicans on the Super Committee actually proposed additional tax cuts for the rich.

More breaks for the wealthy would require slashing social safety net programs for the 99 percent -- Social Security, Medicare, Medicaid, Head Start, child nutrition. It would mean no funds to create jobs and boost the economy. The result would be less money to build highways, refurbish bridges and renovate schools.

That’s okay with the 1 percent because they feel no obligation for those social responsibilities.

Elizabeth Warren, the former Harvard Law Professor and Special Advisor for the U. S Consumer Financial Protection Bureau, tried to explain debt to the super-rich:

“There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you!

But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea — God bless. Keep a big hunk of it.

But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

In addition to paying forward, the 1 percent also is obliged to pay back. That’s because the tax break Bush handed them contributed significantly to the national debt that the Super Committee failed to resolve.

The rich didn’t create the entire federal deficit. And the 99 percent are ready to pay their part, just like they feel compelled to meet their personal debts.

The behavior of the 99 percent during the mortgage crisis best illustrates their morality on the issue of repayment generally.

In the midst of the recession near the end of 2009, as home values relentlessly declined, more than third of all mortgage holders found themselves underwater – meaning that they owed more on their houses than they were worth.

Although financial advisors told mortgage holders who were underwater by hundreds of thousands of dollars that they should walk away from their houses in their own economic self-interest, only a tiny number, estimated at less than 5 percent, chose to deliberately default and dump the loss on the bank.

University of Arizona law professor Brent T. White, writing about this phenomena, said the high moral standard of the average American mortgage holder is key to this. In a law review article, he cited a study that found more than 80 percent of homeowners regard the act of strategically walking away from a mortgage contract as unprincipled. White contrasted the values of individual homeowners with those of the big banks:

“Unlike lenders who seek to maximize profits irrespective of concerns about morality or social responsibility, individual homeowners are encouraged to behave in accordance with social and moral norms that require individuals keep promises and honor financial obligations.”

Political, social, media and financial institutions all convey a clear message to home owners, White said, that it is a borrower’s moral responsibility to pay his debts.

That message is not, however, as clearly directed to the 1 percent. Some of them have gotten it. The 200 who signed on as Patriotic Millionaires for Fiscal Strength and who asked Congress and the Super Committee to increase their taxes understand they have a debt to America and seek to honor it.

The debt-shirking remainder, though, and the purchased politicians who support them, are as unseemly, unethical and dishonorable as deadbeat parents.

Super Committee Out Of Way - Now Back To Reality?

Dave Johnson — Tue, 22 Nov 2011 14:53:36 -0500

Let's hope that the failure of the "super committee" quest to take money out of the economy clears the media mist for a minute, so people can focus on real issues that matter to real people. What are the chances of that? Will our government now focus on creating jobs, reducing inequality, fighting climate change, providing health care, increasing justice, balancing trade, increasing education, enabling small business to compete against the multinational?

Real Issues

People are in the streets across the country, demanding that the government start addressing real issues that matter to real people. But the increasingly irrelevant Congress has instead focused on things like blocking the government from making school lunches more nutritious.

Create Jobs

We have millions of people out of work. And we have millions of jobs that we have been putting off getting done.

And, guess what, as of today we can get the money to hire those millions of people to do those millions of need-to-get-done jobs for the lowest cost in history. That's right, the US government can borrow money at the lowest rates ever. Marketwatch: U.S. sells 5-year debt at record-low yield,

The Treasury Department sold $35 billion in 5-year notes on Tuesday at a yield of 0.937%, the lowest level on record and below where traders expected the sale to come.

That just puts the lie to any claim that the world is concerned about our deficits, and that we "don't have the money" to spend on maintaining and modernizing our infrastructure. "The markets" are so confident in the US that they are offering to lend money at the lowest rate ever.

Climate

Maybe it isn't in the news like it was, but the problem of global warming and resulting climate change is just getting worse and worse, and may be reaching the "tipping point." AP: Greenhouse gases soar; no signs warming is slowed,

Heat-trapping greenhouse gases in the atmosphere are building up so high, so fast, that some scientists now think the world can no longer limit global warming to the level world leaders have agreed upon as safe.

New figures from the U.N. weather agency Monday showed that the three biggest greenhouse gases not only reached record levels last year but were increasing at an ever-faster rate, despite efforts by many countries to reduce emissions.

Did you get that? It turns out that the worst-case scenarios we heard about, back when we were hearing about it, were not as bad as what it turns out is really happening. The operative words here: really happening.

That is reality. So where is the government? Where is the media?

Captured

Why can't we get anything done for the people of the country anymore? Because our Congress and government is almost completely "captured." Watch this segment of 60 Minutes, in which convicted Congress-briber Jack Abramoff explains how it's done, Jack Abramoff: The lobbyist's playbook - 60 Minutes - CBS News

You let a Congressional staffer, or agency regulator, or even a member of Congress know that there is a "job" waiting for them later, and you get what you want.

Regular people don't have this kind of money to dangle in front of government and elected officials. It isn't just campaign contributions, it's lucrative jobs after you leave government, that is corrupting our system. It is corporate money, being used to enrich the 1% at the expense of the rest of us. The solution is not just to ban corporate money from our politics, it is to ban the use of corporate money for any purpose other than running the corporation. Otherwise it will just leak out and be used to corrupt the system -- and us.

I'm sounding like a broken record.

No Super Committee Deal. Good. Now Focus on Jobs—Best Way to Lower Deficit

Roger Hickey — Mon, 21 Nov 2011 22:50:51 -0500

The reason members of the Super Committee didn’t reach an agreement is that Republican members insisted on damaging cuts to Social Security, Medicare, and Medicare – AND they wouldn’t budge from their refusal to roll back tax cuts for the richest 1% of Americans.

If the so-called “Super Committee” had made a bipartisan deal based on the announced negotiating positions of the Republicans and Democrats on that panel, the result would have been higher unemployment, serious damage to the social safety net -- and worsening deficits.

Super Committee Democrats, concerned about being seen as blocking a deal, clearly offered Social Security and Medicare benefit cuts in return for a pitifully small increase in taxes and large and damaging spending cuts in the middle of a struggling economy.

The deal on the table – whose failure is much lamented by beltway pundits – would have seriously harmed the economy, without significantly reducing deficits. In fact, it might have made it worse.
Luckily, the progressive base – and the Democratic Caucus in the House and Senate – convinced those negotiators that a bad deal is worse than no deal.

Democrats should have been guided by the message of the September 6th press conference at which Super Committee appointee Rep. Chris Van Hollen, standing with former Speaker Nancy Pelosi, declared “Job growth will contribute to deficit reduction,” according to the Washington Post coverage:

Van Hollen, who made the remarks at a news conference with House Minority Leader Nancy Pelosi (D-Calif.), Minority Whip Steny Hoyer (D-Md.) and other members of the Democratic leadership, argued that the most recent Congressional Budget Office report states that for every 1/10 of one percentage point increase in the U.S. gross domestic product, the deficit is reduced by $310 billion.

“Now, they project over the next 10 years that average GDP, average growth of the economy will be about 2.9 percent,” he said. “What those numbers tell you is that if you got that growth rate up by half of one percent, you would actually reduce the deficit by $1.5 trillion, which is the target laid out in the legislation before us.”

Clearly, this is what all progressives believe: the weak economy should not be allowed to fall backward into another recession – which could happen if we cut spending too fast or too deeply. And action to get the economy growing robustly would be the most effective thing we could do to bring down the Federal deficit.

Progressives will therefore push for public investment to create jobs and create consumer demand, which is the missing factor preventing American business from investing in expanded production and growing employment. All of the elements of President Obama’s American Jobs Act should now be taken up by everyone in Congress who professes to be concerned about the deficit. As progressives, we will work with our allies and partners in the American Dream movement to push for extended unemployment benefits and other stimulus spending programs that both Democrats and Republicans have supported in the past.

In this post-Super Committee period, you can be sure that the Campaign for America’s Future will be fighting for policies that will spur growth and create enough jobs to bring down our chronically high unemployment. We will fight to get Congress to let the Bush tax cuts for the 1% expire. We will fight for reductions in the military budget. And we will remind all Americans that job creation (and long term health reform to control health costs) are the most effective things we can do to reduce the deficit.

A Quick Word About Deficits

Dave Johnson — Mon, 21 Nov 2011 12:30:19 -0500

I just wanted to say a few quick things about deficits and the "super committee."

1) Never forget that 11 years ago we had a huge budget surplus and were on track to pay off the entire debt in 10 years. Then came the Bush tax cuts for the rich and a huge military spending boost. And we didn't have these deficits and this huge debt at all before Reagan cut taxes for the rich, and his huge military spending boost. That should always, always be the first thing understood about our deficit "emergency." If you honestly want to do something about the deficits, do something about the CAUSE of the deficits and put top tax rates back where they were before Reagan, and cut the military budget back to what it was when we were threatened by the Soviet Union, even though they're gone and we don't have any threats remotely as bad.

2) If the stock market is really dropping because of the failure to reach a deal, doesn't that just mean that the geniuses in the market believed before today that the super committee was going to reach a deal? Nobody else did. That says a lot more about the geniuses in the stock market than it does about the super committee.

3) Doesn't this just activate the "trigger" and the same amount of money will be taken out of the economy anyway? So for those who wanted all of this money taken out of the economy, why are they complaining? Teachers will be fired, infrastructure will be neglected - that's how you wanted to "fix the economy" and that's what you're going to get. What's the problem?

Get the money from where the money went.

With People In Streets, Mubarak Congress Focused On Taking Money Out Of Economy

Dave Johnson — Fri, 04 Nov 2011 13:46:40 -0400

This situation of crony government protecting the connected rich while people are in the streets demanding change is more and more reminiscent of Egypt under Mubarak. In the real world tens of thousands are in the streets around the country demanding taxes on the rich and an end to corporate rule, as a new report lists profitable companies that pay no taxes at all. Today's jobs report is not enough to even keep up. But in the Congress Senate Republicans filibuster another jobs bill and the "super committee" is looking at how much to take out of the economy and out of the things We the People do for each other -- in order to keep taxes low for the rich and their giant corporations.

Filibustering Jobs

Yesterday Senate Republicans again filibustered a jobs bill - a plan to hire people to repair our country's infrastructure. This is work that has to be done, and right now millions of people need work. But Republicans filibustered this bill. The corporate-owned mainstream media, however, largely refused to tell the public what is happening, instead blaming "the Senate." The Washington Post headlined, Senate blocks $60 billion infrastructure plan, another part of Obama jobs bill. Politico blamed "both parties," with Both parties block jobs bills. MSNBC: Senate blocks $60B part of Obama jobs plan. CNN: Competing infrastructure spending measures fail in Senate.

So the big-corporate media leads the public to blame "the Senate" and government, providing few clues that tell people where to apply the pressure that makes representative democracy function.

Big Corps Paying No Taxes, Not Just Low Taxes

From Citizens for Tax Justice report: Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010,

280 Most Profitable U.S. Corporations Shelter Half Their Profits from Taxes.

“These 280 corporations received a total of nearly $224 billion in tax subsidies,” said Robert McIntyre, Director at Citizens for Tax Justice and the report’s lead author. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”

30 Companies average less than zero tax bill in the last three Years, 78 had at least one no-tax year.
Financial services received the largest share of all federal tax subsidies over the last three years. More than half the tax subsidies for companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas & pipelines.
U.S. corporations with significant foreign profits paid tax rates to foreign countries that were almost a third higher than they paid to the IRS on their domestic profits.

Who Are "The Markets?"

Who are we talking about, when we talk about "corporate taxes?" Just who do we mean when we talk about "the markets?" See for yourself why the #occupy movement talks about the 1% vs the 99%.

When you hear about corporations and "the markets," think about how that connects to this chart:

People In The Streets

Yesterday, in the post, Oakland Occupied -- Will Washington Listen At Last?, I wrote about the large demonstrations that are spreading and growing: spreading to more and more cities, and growing with larger numbers in each city. I warned that this is starting to look like Egypt with the people in the streets protesting Mubarak's cronyism:

A Warning Shot At Washington's Increasing Irrelevance

As I said, this public protest is spreading and growing. People have had enough and are taking to the streets in increasing numbers. But Washington continues to ignore the public, debating a national motto, as Repubicans block jobs and an elitist "super committee" debates cutting the things government does for the 99%.

Poll after poll shows the public overwhelmingly supports increasing taxes on the wealthy, bringing corporations under control, and reigning in trade agreements that suck our jobs, factories, companies and industries out of the country. People do not want Medicare, Social Security and other essential government programs cut, they want the rich and corporations and Wall Street to start paying their share.

The public wants something done about these problems. They want jobs, they want something done about the increasing

If Congress continues to ignore the people of the country it will not be long before the situation is like Mubarak pretending he is still in charge of Egypt, while the people of the country are in the streets planning how they will run the country without him and his cronies.

Super Committee To Take Money Out Of The Economy

A representative democracy serves the 99%, a plutocracy serves the 1%. Currently in Washington Congress' elite "super committee" represents the 1%, looking at ways to take more money out of the economy, discussing cutting Social Security at a time when many people have lost their pensions and savings. They are discussing cutting Medicare and other health services at a time when more and more people are in need. They are discussing cuts and cuts and cuts, when working people are falling behind and behind and behind.

But the actual causes of the deficits that have Congress so concerned are ignored. Reagan and the Bushes cut taxes on the rich and increased military spending, and the deficits and resulting debt soared. It is right there in front of our faces. But even with such "concern" about deficits the tax cuts for the rich continue and the huge increases in military spending are left alone. Instead Congress discusses austerity - making the 99% pay for the benefits and bailouts for the 1%.

People are fed up, and rightly so. Poll after poll shows that the public wants taxes on the rich increased to pay for the deficit, infrastructure, education, health care, retirement and the rest of the things We, the People need. But our captured government is only serving the top few when they talk about cutting these things in order to keep taxes low at the top. The 1% would be well-advised to pay attention to what has happened in other countries where government ignores the people and takes care only of the connected rich.

Raising Medicare Eligibility Age Erodes Social Security, New Study Shows

Daniel Marans — Thu, 03 Nov 2011 18:09:29 -0400

A proposal to increase the Medicare eligibility age, which the Super Committee is considering, would drive up health care costs to the point where they would consume almost half of the Social Security check of a middle-class retiree, according to a new analysis by Social Security Works.

In his testimony before the Super Committee yesterday, Erskine Bowles, a Morgan Stanley executive and co-chair of the President’s Fiscal Commission, recommended raising the Medicare eligibility age to 67 as a way to bridge the differences between Democrats and Republicans on the Super Committee.

Bowles explained his support for the policy on the grounds that the Affordable Care Act (ACA) made “other coverage available” to 65- and 66-year-olds, by providing subsidies to purchase health care in the private sector.

Bowles’ testimony in favor of raising the age comes on the heels of public endorsements by the American Hospital Association, the leading trade association for the nation’s for-profit hospitals, and the Healthcare Leadership Consortium, a consortium of health insurance companies, pharmaceutical companies, and other medical providers.

The Center on Budget & Policy Priorities, a center-left think tank, criticized Bowles’ compromise for being “to the right of Boehner’s offer to Obama in July.” They dismissed, in particular, Bowles’ reliance on the ACA to justify raising the Medicare eligibility age. Robert Greenstein, the Center’s President, wrote that without assurance that ACA will withstand overwhelming Republican political and legal opposition, Bowles’ proposal to raise the Medicare eligibility age “would risk leaving many 65- and 66-year-olds with no insurance at all at the very time of life when they are developing more medical conditions and problems due to their age.”

Even if ACA is successfully implemented, however, many experts believe raising the Medicare eligibility age would be poor policy. A study by the Kaiser Family Foundation found that raising the Medicare eligibility age to 67 would increase health care costs across the economy, saving the government little money. What money the government would save, the Kaiser study found, would come from shifting the costs of care onto patients—especially, but not only, individuals aged 65 and 66, who would no longer be eligible for Medicare.

A new analysis of the Kaiser study by Social Security Works shows that the increase in out-of-pocket costs for 3.3 million people aged 65 and 66 would take a large bite out of affected seniors’ already modest Social Security checks.

From Social Security Works' analysis:

Of the 3.3 million people aged 65 and 66 who would pay more out-of-pocket for health care if they were no longer eligible for Medicare, the following two groups would be hit especially hard:

Out-of-pocket health care costs would increase, on average, by $4,300 in 2014 for 960,000 people aged 65 and 66 who purchase coverage through a health insurance exchange and have incomes exceeding 400 percent of the federal poverty level ($43,560), making them ineligible for subsidies available to exchange participants with lower incomes. Under current law, these 65- and 66-year-old retirees’ average out-of-pocket costs would be $6,800 in 2014, out of a total Social Security benefit of $24,469. If forced out of Medicare and onto the health insurance exchanges, their average out-of-pocket health care costs would grow to $11,100, out of a total Social Security benefit of $24,469. [Figure 1] As a result, if the Medicare eligibility age is raised, out-of-pocket health care costs would go from consuming 28 percent to 45 percent of those 65- and 66-year-old retirees’ Social Security check.

Sources: Social Security Works analysis of estimates from Social Security Trustees, 2011, and Kaiser Family Foundation, 2011.

Out-of-pocket costs would increase, on average, by $1,200 for 240,000 people aged 65 and 66 who purchase coverage through a health insurance exchange and have incomes between 300 and 400 percent of the federal poverty level ($32,670-$43,560). Under current law, these 65- and 66-year-old retirees’ average out-of-pocket costs would be $4,800 in 2014, out of a total Social Security benefit of $18,464. If forced out of Medicare and onto the health insurance exchanges, their average out-of-pocket health care costs would grow to $6,000, out of a total Social Security benefit of $18,464. As a result, if the Medicare eligibility age is raised, out-of-pocket health care costs would go from consuming 26 percent to 32 percent of those 65- and 66-year-old retirees’ Social Security check.

Costs to Social Security beneficiaries could be substantially higher than estimated here. The out-of-pocket costs discussed in Social Security Works’ analysis do not include the cost of medical services that are not covered by Medicare at all, including dental care and most kinds of long-term care, such as permanent residency in a nursing home. Accounting for these medical services would not have any bearing on the amount that out-of-pocket costs would increase if the Medicare eligibility were raised to 67. It would, however, show average out-of-pocket costs to be considerably larger under both current law and if the Medicare eligibility were raised to 67.

Perry’s Social Security Plan: A “Monstrous Lie”

Daniel Marans — Wed, 26 Oct 2011 12:39:11 -0400

A few weeks after calling Social Security a “Ponzi scheme,” Rick Perry claims he has just the plan to save the program. That is nothing but a monstrous lie.

In fact, Perry’s Social Security plan is a smorgasbord of awful Social Security ideas that conservatives have proposed over the years. It is George W. Bush meets Paul Ryan meets Alan Simpson.

While Perry leaves the specifics fuzzy, broadly speaking, here’s what his plan does:

Privatizes Social Security. Perry would allow workers to divert a portion of their payroll tax contributions into private accounts. But the recent financial crisis has completely discredited privatization. Americans do not want to see their savings gambled in the casinos of Wall Street. If Social Security had been private in 2008, when private pensions and 401(k) plans lost 37 percent of their value, millions more people would have lost their livelihoods than already did. What’s more, private accounts are less financially efficient. Social Security has 1 percent overhead costs; the administrative costs 401(k)’s are always much higher.
Slashes benefits for middle-class workers. Perry’s plan uses a technical change known as “progressive price indexing” to dramatically reduce benefits for all but the poorest beneficiaries. The details are unclear, but past progressive price indexing proposals, like that of Paul Ryan, cut benefits for all those making more than about $28,000. For example, a 65-year-old worker retiring in 2050 with average pre-retirement earnings ($43,518 in 2011), who is scheduled to receive a $15,156 benefit under current law, would see his benefits reduced $2,577 (17 percent) to $12,579 if price indexing were adopted.
Raises the retirement age. Increasing the retirement age two years from 67 to 69 would be a 13 percent across-the-board benefit cut at whatever age a person retires. What’s the rationale for such a massive cut? Perry claims people are living 14 -15 years longer than they were in 1940. But he fudges the numbers, using gains in life expectancy at birth since 1940, which are larger due to the high rates of infant and child mortality at the time. Life expectancy at age 65 has only increased about 6 years since 1940. And even these gains have been unevenly distributed, with men and women in the lower half of the earnings distribution seeing little or no gains in the past thirty years.
Allows state employees to opt out of Social Security. Perry holds up the county of Galveston, Texas, which opted out of Social Security in 1981, as a successful model for local retirement management. But the Galveston plan is already a proven failure. It provides smaller benefits than Social Security for all but the highest paid workers; it does not provide guaranteed lifetime benefits, so beneficiaries risk outliving their benefits; it does not automatically provide spouse’s and children’s benefits; and its benefits are not adjusted for inflation . Luring state employees out of Social Security with false promises will both jeopardize the economic security of millions of Americans, and undermine Social Security for those who retain its coverage.
Eliminates income taxes on Social Security benefits. This may sound like a nice idea. But income from other pension plans is taxed, so why should Social Security benefits be treated any differently? More to the point, the money has to come from somewhere. Revenue from income taxes paid on Social Security benefits provided 3 percent of the trust fund’s income in 2010. These taxes are a fair, progressive way to pay a small part of Social Security’s costs. The benefits of lower-income beneficiaries are exempt from the tax altogether, and people in higher income tax brackets pay more into the program.

Worse than Perry’s ideas though, are the lengths to which he goes to mischaracterize Social Security in its current form to make his plan more appetizing. Perry hits all of the classic canards:

There are not enough workers to support today’s generation of retirees. Perry repeats the oft-cited myth that because there were 42 workers for every retiree in 1940, but many fewer now, the program is unsustainable. In reality, the reason for the current shortfall has virtually nothing to do with the worker-to-retiree ratio. Social Security, like pension plans of all kinds, had high worker-retiree ratios when it first started. That is because the first generations of retired workers are essentially given credit for prior years of service, despite not having paid into the program for as many years as subsequent generations of workers. But increases in Social Security’s tax rate and tax base have offset these start-up costs. In addition, as the economy grows and technological innovation increases, fewer workers are needed to generate the same and higher levels of economic productivity. Currently, there are three workers for every beneficiary, and Social Security has a $2.7 trillion surplus.
The trust fund has been raided. Perry actually treats “protecting the Social Security trust fund” as a provision of his plan. But it cannot really be considered a reform, since it tries to solve a problem that doesn’t exist. Contrary to Perry’s apparent beliefs, Social Security’s $2.7 trillion surplus is invested in United States Treasury bonds, backed by the full faith and credit of the United States government. It has not been “raided.” The bonds can only be redeemed to pay for Social Security benefits and associated costs. Taking Social Security’s income out of Treasury bonds—where by definition, they are being borrowed by the government—as Perry seems to be proposing, would either mean putting them in a riskier investment vehicle, or letting them decline in value due to inflation.
Social Security has an unfunded liability of $17.9 trillion. This statistic refers to the unfunded liability from 1935 through the “infinite horizon”—an absurd benchmark. That means from the program’s inception out to an unknown date in the distant future—possibly billions of years from now when the sun has burned out. For the more manageable 75-year horizon that most experts look at, Social Security can be restored to long-range actuarial balance very easily.

Perry has proven unable, or unwilling, to understand Social Security’s basic structure, goals and history. Perhaps that is why his proposals to reform Social Security are so poor.

Views expressed are the author's own, and do not necessarily reflect the views of Social Security Works or the Strengthen Social Security Campaign.

Five Super-Congress Debt-Cutting Myths

Dave Johnson — Mon, 19 Sep 2011 07:52:12 -0400

Ten years ago the country was on track to pay off the entire national debt in ... ten years. But then... So President Bush left behind a $1.4 trillion budget deficit, and now under President Obama the same Republicans who created the deficits are all terribly, terribly concerned about the deficits they created.

The country just went through the "debt ceiling" fight. Republicans threatened to force the country to default on its debts, forcing Democrats to agree to a "Super Congress" tasked with taking trillions of dollars out of the economy. But the very things that caused the borrowing -- tax cuts for the rich, doubling the military budget, financial collapse and resulting lack of good-paying jobs -- are largely "off the table" in the discussion of how to fix the borrowing.

So as this Politburo meets we will be hearing all kinds of myths designed to sway us to support one or another scheme to hand even more money to a wealthy few at the top of America's pyramid.

Myths You Should Know About The Deficit And The "Supercongress"

1. America is "broke." Republicans endlessly repeat that we can't spend money hiring people to fix our infrastructure, can't spend money to keep teachers and firefighters and police from being laid off, can't even spend money to help states recover after natural disasters, because "America is broke." But haven't you read recently that corporate profits are at the highest levels ever? That they are sitting on huge amounts of cash? That the "income inequality" gap between rich and poor in the US is the highest ever?

Michael Moore explains that America Is Not Broke

The country is awash in wealth and cash. It's just that it's not in your hands. It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the uber-rich.

Today just 400 Americans have more wealth than half of all Americans combined.

Watch this great video where Van Jones explains that America is not broke: (and sign up to join the American Dream Movement)

Watch the video. America is not "broke." Not by a long shot.

2. Entitlements are out of control. This is another one that is repeated endlessly. They say that entitlements -- the things we are entitled to because we live in a democracy and have paid for all of our lives -- are the cause of our budget woes. Not the trillion-plus spent on Iraq, not the huge tax cuts given to the wealthy and corporations, not the doubling of the "defense" budget which is more than all of the rest of the countries on earth combined, not the financial collapse caused by deregulation and refusal to enforce laws against fraud and corruption. No, they say the cause of our woes is We, the People taking care of the sick and elderly and each other.

The thing about cutting entitlements is that cutting government spending is not really cutting, it is shifting those costs to other parts of the economy. For example, if Medicare is cut, that doesn't mean the elderly's health problems somehow magically disappear, it only means that paying the bills shifts from government to other parts of the economy. And in fact it means that these costs to the economy will actually increase because the economy-of-scale and the regulation and protection offered by having government do this goes away.

3. The deficit has to be cut now. Deficit and debt alarmists -- a phenomenon that was nonexistent in the Bush deficit-creation years -- say that the country will go bankrupt and the economy will collapse if we don't immediately take action (as long as we don't raise taxes on the rich, cut military spending, tax Wall Street speculators or grow the economy by rebuilding our infrastructure). However, our country's debt is all in dollars, and the country is able to just "print" dollars to pay off the debt if it needs to, so it is literally impossible for the country to go bankrupt. But there is no long-term debt problem except from the effect of rising costs of health care with an aging population. That problem can be addressed by controlling costs, but not by cost-shifting on to other parts of the economy.

4. Cutting spending will grow the economy and create jobs. Over and over again they repeat the slogans: "Cut spending to grow the economy" and Cutting spending will create jobs and Eric Cantor: Cutting spending will grow the economy, and Economy Suffers as Congress Refuses to Cut Deficit and and and... It is difficult to understand just how laying off teachers and firefighters will create jobs, or how taking money out of the economy will grow the economy.

Conservatives argue that cutting spending will help the economy because government spending "crowds out" private spending. The idea is that since the tax cuts government spending necessarily means borrowing, making it harder for businesses to borrow. But currently interest rates are extremely low, so no "crowding out" is occurring. Another "crowding out" argument claims that businesses fear taxes will have to be raised to cover the deficits, and this "uncertainty" makes them not want to hire -- not because of lack of demand for what the companies make or do. Even others claim that the reason people are not spending money is not because their pay is down, or they are afraid of losing their jobs, or have lost their jobs, but because government spending ... something. They claim that the solution is to lay off teacher and firefighters and not repair schools and bridges and roads and airports, and then there will be more people working. Or something.

Europe has been cutting government spending -- "austerity." The result of taking money out of the economy by cutting spending has been ... well, they took money out of the economy and the economy shrank. What did they think would happen?

5. Taxes this, taxes that...

5a. Republicans follow an economic belief known as "trickle down." They say If you raise taxes on the rich, they won't "create jobs." The idea is that rich people "create jobs" so the more money that is channeled to the wealthiest few, the more jobs these "job creators' will create. The Bush-era tax cuts for the rich demonstrated the effect that giving ever more money to the wealthy actually didn't create more jobs -- in fact job growth slowed dramatically after those tax cuts. So now Republicans believe that since it didn't work we obviously need to do more of it.

5b. Cutting taxes increases economic growth. Conservatives believe that lowering taxes on the wealthy stimulates the economy. But the historical evidence doesn't show this. The country's highest periods of economic growth correspond to the times when we had the highest tax rates on high incomes. Other studies show little relationship between tax rates and economic growth. Most recently, after Clinton's

5c. America is overtaxed. Taxes are now at the lowest share of GDP in 60 years, even with the GDP lower due to recession -- income taxes on people and corporations in particular.

5d. The rich pay most of the taxes. The rich have most of the income and almost all of the wealth. The top 1% now receive more than 20% of all income. The top 20% get more than 60% of all income. (And then there is the lower tax rate for capital gains...) Also, the top 1% reaped most of the income gains in the last expansion.

5e. Taxes are theft - (this slogan is always a right-wing favorite.) Actually, tax cuts are theft.

"Shared Sacrifice"

"Shared sacrifice" is another phrase that is repeated a lot lately. They are saying that because we have this deficit that was caused by giving huge tax cuts to the wealthy, doubling military spending, giving a ton of money to bail out the big banks, and the loss of tax revenue and increase in government "safety-net" programs resulting from Wall Street's actions, therefore we all need to sacrifice to pay off the resulting debt. As long as it doesn't involve asking the wealthy to pay more taxes, cuts in military spending, taxing Wall Street speculation and capital gains, investing in infrastructure to create gains and grow the economy.

Shared sacrifice is a not sharing when the rewards are not shared. Democracy is the only economics that works. The rewards of our democracy are good jobs with good wages, equal opportunity, the chance to get a good education, workplace safety and dignity, and a society that takes care of and watches out for each other. This is what we should all share, because of the sacrifice made by those who worked so hard and for so long to build our democracy. We should understand that and fight to keep it.