social security

GOP Threat: Cut Social Security and Medicare or we'll kill the economy. Americans say NO to both.

Roger Hickey — Sun, 06 Jan 2013 19:25:51 -0500

Here we go again. Republicans are very clear about their latest extortion threat to the American people: Unless you cut Social Security and Medicare benefits, within the next two months we will throw the US economy back into recession - by refusing to allow the US raise the debt ceiling and pay our bills - or by pushing the economy over another fiscal cliff of deep spending cuts and tax increases - or by shutting down the government by refusing to pass a continuing budget resolution.

But it is very important for progressives and politicians to remember that most Americans hate what the Republicans are doing here. Who but Right Wing terrorists could support pushing the economy back into recession, throwing millions of Americans out of work? That's what Republicans are threatening. And huge majorities also hate the price Republicans are demanding to prevent their threat of manufactured chaos: the idea of cutting Social Security and Medicare benefits.

Republicans can get their way only if Democrats fail to realize they have the American people on our side. And once Republicans are clear about their proposals, Americans turn against them.

During the election, Paul Ryan's plan to turn Medicare into a voucher was so unpopular that candidate Mitt Romney ran away from his Vice Presidential nominee's proposal. Democrats won the election.

Now, Tennessee Republican Senators Bob Corker and Lamar Alexander have dared to unveil a proposal (called their "dollar-for-dollar plan") that would only allow the debt ceiling to be raised by the amount we allow them to cut what they term "entitlements." How many Americans would embrace these changes?:

They would privatize Medicare by creating competing private options giving seniors greater choice of healthcare plans. Shades of the plan Mitt Romney endorsed and then ran from.
They would also give states more flexibility to cut Medicaid programs.
And they would gradually raise the Social Security retirement age and immediately impose the "chained CPI" formula to cost-of-living adjustments - a cut to retirement benefits of today's seniors.

"Unfortunately for America, the next line in the sand is going to be the debt ceiling," Corker told The Hill, laying out his leverage strategy for negotiations with Democrats. These guys couldn't be more explicit

Over the next two months, everyone who loves our country must rise up and say NO to this Republican nihilistic extortion. We must isolate them, ridicule and shame them. And we must force the Democrats to have the backbone to stand with us and reject Republican extortion and economic terrorism.

President Obama campaigned for reelection on his pledge to repeal the Bush tax cuts for people making more than $250,000, but he backed down and agreed to raise taxes only on people making more than $400,000. In return, he got an extension of unemployment benefits and important low income tax provisions. But he could only get Republicans to postpone for two months the Fiscal Cliff tax increases and spending cuts known as "sequestration." And he failed to get them to give up the threat to destroy the full faith and credit of the United States that their refusal to raise the debt limit ceiling would bring on. Their refusal to support the once-routine legislation insuring we can pay our debts is already causing the Treasury Department to juggle accounts and will reach crisis stage by the end of February.

President Obama has pledged that he will not bow to Republican extortion over the debt limit:

"I will not compromise over ... whether or not Congress should pay the tab for a bill they've already racked up. If Congress refuses to give the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic. The last time Congress threatened this course of action, our entire economy suffered for it. Our families and our businesses cannot afford that dangerous game again."

But remember that President Obama did negotiate the last time Republicans threatened to crash the economy by refusing to raise the debt limit, in September 2011. Obama was willing to offer up Social Security benefit cuts (in the form of a new "chained CPI") and a change in the Medicare eligibility age (from 65, when many people are forcibly retired, to 67). It was only because Republicans refused to accept tax increases that Obama's dangerous offer was not accepted. Instead, in return for Republican votes to lift that last debt ceiling, the draconian fiscal cliff sequestration budget cuts scheme was created (now postponed until early March).

So while President Obama may refuse to negotiate with Republicans over their latest manufactured debt limit crisis, he could end up negotiating to avoid the threat of sequestration. And Social Security and Medicare cuts could be on that table.

A Powerful Coalition Reminding Democrats What Americans Want - And Don't Want.

President Obama and other Democrats need to listen to the voices of the groups who helped get them elected in 2012 - unions, community organizations, groups representing women, African Americans and Hispanics, and online activist groups like MoveOn and the Campaign for America's Future.

On November 8, many of these groups placed an ad in the Washington Post making a set of demands on the President and Congress. These demands have served as unifying principles for a powerful organizing and outreach coalition. Signed by organizations including the AFL-CIO, SEIU, Center for Community Change, Leadership Conference on Civil Rights, and the Campaign for America's Future, the ad was accompanied by an open letter to the White House and Congress signed by 146 national organizations.

If the President and the Democrats in Congress listen to these principles - and to these groups who have been communicating with them before and after the election - they will refuse to cut Medicare and Social Security in response to the Republicans' threat reject the debt ceiling and tank the economy. And they will discover they have the vast majority of Americans on their side.

Here what the ad said, in part:

To the President and The Congress.

As you face urgent budget decisions, you must keep the election results in mind and resist budget cuts that slow our economy and hurt families. The best way to reduce the deficit is to put people back to work and get our economy going again. That's why we are calling on national leaders from both parties to stand up for the middle class and demand that any budget agreement:

Asks all Americans to pay their fair share of taxes.

Prioritizes job creation first. It's time to grow--not slow--the economy.

Does not cut Medicare, Medicaid, or Social Security benefits and does not shift costs to beneficiaries or the states. Voters loudly and clearly spoke up for these programs.

Protects the safety net and vital services for low-income people.

Stops the sequester. The scheduled automatic budget cuts threaten our fragile recovery and put huge numbers of people out of work while cutting education, child care, job training and dozens of vital services people and communities need.

The groups involved have helped the American Majority of working families communicate these demands to the President and the Congress. So far, we have kept Social Security, Medicare and Medicaid off the chopping block. We are redoubling our efforts to prevent Democrats from capitulating to Republican hostage-taking and extortion. And we are turning our campaign to opposing conservative austerity - and fighting for jobs and robust economic growth.

Richard Eskow Asks: Which Side Are You On?

Joseph M. Firestone — Sun, 23 Dec 2012 01:26:14 -0500

Richard Eskow of the Center for the American Future, posted a very good one a couple of days ago. He used the old union meme “which side are you on” to beat up the President and Congress about Social Security being placed on the negotiating table. I thought his writing on it was striking. Here's some of it:

“This is a moment of moral clarity. Right now there are only two sides in the Social Security debate: the side that says it’s acceptable to cut benefits – in a way that raises taxes for all income except the highest – and the side that says it isn’t.

“It’s time to ask our leaders – and ourselves – a simple question: Which side are you on?”

"Nancy Pelosi says she can convince most Congressional Democrats to “stick with the President” as he pursues his gratuitous and callous plan to cut Social Security benefits as part of a deficit deal – even though Social Security does not contribute to the deficit.”

I certainly hope that Nancy Pelosi cannot convince most Democrats to risk their seats and prepare the way for a Republican sweep in 2014 by voting to cut SS. The Republicans will respond to this by casting themselves as the protectors of SS, and while this is ridiculous, the Democrats will not be credible in claiming that they are its protectors, and they will lose their identity as the protectors of the safety net, a very high price to pay for the sake of raising taxes on the rich by an amount that is insignificant in the greater scheme of things. Eskow goes on:

“Excuse me: Stick with the President? What about sticking with our seniors and our veterans? What about sticking with our disabled fellow Americans? What What about sticking with the more than 4,000 children on Social Security who lost a parent in the Iraq War?

“If you want to “stick with” Americans on Social Security, it’s time to call everybody who represents you in Washington – your Representative, your Senator, your President – and tell them that they’ll lose your support if they do this deal.

“It’s time for an end to the Orwellian doublespeak. Cutting benefits won’t “strengthen” Social Security, as Nancy Pelosi claims. Cuts of 6.5 percent for a 75 year old and 9.2 percent for a 95 year old aren’t so small that “folks won’t even notice ‘em,” as President Obama claimed. They’re not a “technical” adjustment, as his press secretary argued, nor do “most economists believe … this about getting a proper measure of inflation.

“The smart economists know that even today’s cost of living formula isn’t enough. It undercounts the things older and disabled people use the most, like health care and public transportation. Some other people know the formula’s inadequate, too: Seniors. They live with the costs every day.

“So let’s stop all the double-talk and get down to the real question at hand: Which side are you on?”

The framing is “which side are you on”? Will you stick with the President and the people, who will do a deal at any costs, or will you stick with seniors and the American people. This reminds me of the frame Randy Wray recently used in one of his posts on re-framing MMT. That framing came from Bruce Springsteen:

We take care of our own
We take care of our own
Wherever this flag’s flown
We take care of our own

And it's amplified by Randy Wray this way:

“. . . We don’t let old folks sleep on the street. We take care of our own. We don’t let children go hungry. We take care of our own. We don’t exclude the 47%. We take care of our own.

“We’re all stakeholders in this great nation. We take care of our own. White, black, brown, yellow and red, we take care of our own. Young or old, healthy or sick, we take care of our own. . . .

“We need a good government to help us take care of our own. We need good public services and infrastructure to keep our country strong so that we can take care of our own. Our government spends to keep our country strong so that we can take care of our own. . . .

“Sovereign government cannot be forced into involuntary insolvency. It can always afford to make all payments as they come due. It can always afford to buy anything that is for sale for its own currency. It can always financially afford any spending that is in the public interest. It can always afford to take care of its own.

“Anything that is technologically feasible is financially affordable for the sovereign issuer of the currency. It comes down to technology, resources, and political will. We’ve got the technology to take care of our own. We’ve got the resources to take care of our own. All that is missing is the political will.”

So, which side are you on? Are you on the side of most of us who want to take care of our own, wherever our flag's flown; or are you on the side of people who believe that the US Government's fiat money financial resources are necessarily constrained, so that we must choose between taking care of our own and making sure that our wealthy people and large corporations don't have to risk any of their wealth by giving their due to our country?

Don't get me wrong, I know the Federal Government doesn't need tax revenue from the wealthy or anyone to fund anything, because it's false that the Federal Government must spend only after it taxes or borrows. But there are still at least three good reasons to tax. First, the value of our fiat money is driven by the need to have enough to pay taxes. Second, taxing is needed to regulate and manage inflation. And third, taxing is needed to lessen economic inequality so that political inequality does not become so extreme that it poses a danger to democracy. All three reasons are ultimately about taking care of our own.

Eskow ends with:

“Tell the President you’re against the chained CPI. Tell your Senators and your Representative to declare their unequivocal opposition to it like Grijalva and Ellison and the others did, and to vote accordingly.

“And ask them that simple question: Which side are you on?”

I agree, and I'd also add:

Tell them that SS, Medicare, and Medicaid are litmus tests for them. Vote to cut them and you're gone after the next election. It will be “Bye Bye Marjorie” or whatever your name happens to be, for you!

More and more of us know the dirty big secret that there is no debt/deficit crisis. That the Government isn't constrained in the amount of fiat financial resources it can create.

So, we know that we can afford the cost of the social safety net, and even a lot more generous one than we have today. We also know that the Government has the financial capability to underwrite full employment, Medicare for All, a first class educational system, alternative energy development, infrastructure reinvention, programs to counter and reverse climate change, and whatever else we need to do to solve our problems.

So, don't you go telling us any longer about the fiscal constraints that excuse your not doing your jobs. We know those don't exist. We know you have no excuses.

So, get off it, and represent us! Help us take care of our own and each other, or resign from public office!

And that goes for the most junior Congressperson and also for the President of the United States! If you're not on our side and you don't want to help us take care of our own, then get out of our way and give somebody else a chance who's patriotic enough to serve!

(Cross-posted from New Economic Perspectives.)

Let's Defend SS and Other Entitlements With the 2nd Bill Of Rights

Joseph M. Firestone — Tue, 27 Nov 2012 17:48:50 -0500

The favorite defense of Social Security by progressives harkens back to Franklin Roosevelt who famously said:

”I guess you’re right on the economics. They are politics all the way through. We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”

So, today progressives echo this even though the SS Tax is a regressive tax, and anything but progressive in its impact on the economy. With the development of the MMT approach to economics, and its emphasis on the government's ability to spend without a solvency constraint on the Federal Budget, it's now clear that SS doesn't need to be funded by a regressive payroll tax; but can be funded out of general revenues and also guaranteed by a provision in law providing for automatic annual funding. Some government “trust funds” are funded this way, including parts of Social Security and Medicare, so there's no economic reason why the primary funding for both programs couldn't be provided for these programs.

But a friend, in an echo of FDR's view, recently said to me in correspondence:

"It seems to me that it is a lot easier to make the case that people are entitled to a government benefit if they have been paying a dedicated tax for 45 years that is described as funding that benefit."

And I replied in the following way.

It is easier; but it's still not easy as we now see; and, on the downside, to defend it that way we have to:

1) support the view that people are entitled to government payments only when they pay for them;

2) then defend against the attack that the entitlement payout greatly exceeds the amount paid in, and has no relationship to what is paid in;

3) accept the idea that SS and Medicare must be self-funding like any business, while also ensuring that they are "solvent" as much as 50 years out unlike any business (that is people are upset now because questionable long term fiscal projections show that full coverage of SS spending can only be projected out for 21 years to 2033, so they are calling for fixes to extend that projected “full solvency” period out to 2075 or 2080);

4) always have a very hard time justifying any increases to entitlements for current recipients, because those oppose entitlements always cry out that the Government is running out of money, and would have to raise SS taxes to pay for it;

5) never bring into the argument the fact that things are very different now than they were when SS was first passed, because we now have a fiat money system which makes many things possible now that weren't possible back then, because THERE IS NO SOLVENCY PROBLEM; and

6) ignore the great argument that our entitlements are the embodiment of an economic bill of rights that ought to apply to all Americans which, of course was outlined by the same FDR in 1944.

In my view, the protestant ethic defense that we're entitled to SS, because we worked for it isn't worth the candle. It makes things easier in the short-run, but it reinforces a skin-flintism which is wholly inappropriate to our modern economy, with its monetarily sovereign fiat currency system, and is largely responsible for the rapidly increasing inequality we've been experiencing over the years, which has now reached a ridiculous and anti-democratic pass.

We can't look at SS and our other entitlements in isolation. We have to fight and win the battle for FDR's economic bill of rights, and for an expansion of all the entitlements in the American social safety net; now the stingiest, most inadequate safety net among modern industrial nations!

FDR's strategy for justifying SS was great for the 1930s, when we were still on the gold standard. But nearly 80 years later it's time to move on to his economic bill of rights as our justification for entitlements, and stop reinforcing the idea that it's only an entitlement if one pays for it. It's time to stand on the over-riding moral argument! It's time to say that when a nation like the United States can afford to implement these rights, as the United States has been able to do at least since 1971, they then are human rights that must be implemented as part of the public purpose. Let us have a Green New Deal with a much stronger social safety net including greatly increased payments for SS and Medicare for All, and a Federal Job Guarantee emphasizing Green Jobs!

Let's fight for that and implement it economically using Modern Money Theory (MMT)-based fiscal policies!

(Cross-posted from New Economic Perspectives.)

"Town Hall" Debate: Will Voters Ask the Medicare and Social Security Questions Reporters Haven't?

Richard Eskow — Sun, 14 Oct 2012 18:23:11 -0400

If you support strong and effective government, then the unfamiliar glow you felt after last Thursday's debate was the satisfaction of seeing your opinions forcefully defended by a national candidate. There hasn't been much of that going on lately. But a deceptive question was asked in the Vice Presidential debate, while other important ones still haven't been asked of any national candidate.

The President's been undercutting his own party's best message and keeps threatening to cut benefits for its signature programs. As for Mitt Romney and his running mate, there's little left to be said: They're both determined to undermine Medicare and Social Security. Even if they're retreating from their most radical ideas now, you know those ideas will be back once they're in office.

If what follows focuses more on the President than on his challenger, its because the Republicans are beyond redemption on this issue. But both candidates need to answer some direct questions on this topic.

This Tuesday the Presidential candidates will meet with voters face-to-face for a town-hall style debate. Let's hope the voters will ask the questions the media haven't.

Joe in the Flow

What you saw that night was a candidate on the Democratic national ticket doing something we haven't seen in a while: representing "the Democratic wing of the Democratic party." It was a pleasure to watch a gifted politician in the 'zone,' that state of maximum achievement sometimes called the "flow state."

But there were shadows over Biden as he spoke his stirring words about these two programs. First there was the shadow of Martha Raddatz's deceptive and scaremongering characterization of these programs, when she posed her question by stating that Medicare and Social Security are "going broke." That statement's simply false, a untruth that's been spoon-fed to careless reporters by billionaire-funded think tanks with a mission to undermine these programs. (And they eat every morsel.)

Hopefully good journalists like Raddatz will eventually be scrupulous enough to review the evidence and stop saying things like that. But either way it's too late to correct the misconception she reinforced in last week's debate.

The President's Promise is Missing

The second shadow was Biden's own equivocation on substance: will a second Obama/Biden Administration program defend these programs from needless cuts or won't it? Biden didn't repeat the unequivocal defense of these Social Security benefits he offered last month. Biden told voters in the Coffee Break Cafe in Stuart, Virginia that he could "flat guarantee" there would be no changes to Social Security if he and the President were re-elected.

But when Raddatz posed her deceptive question last week, the once-resolute Biden tried distraction rather than clarity. He used the same technique employed by other Democrats on the Social Security hotseat: "We will not -- we will not privatize it." That wasn't the question.

Biden's shift can be explained by the third shadow: The President's apparent to throw away the enormous political advantage Democrats can still win for themselves if they stand firm in defense of benefits for seniors. Instead, when he was asked to differentiate himself from Romney on this issue he said this:

"You know, I suspect that on Social Security, we’ve got a somewhat similar position. Social Security is structurally sound. It’s going to have to be tweaked ..."

With those words Obama all but threw away one of his party's greatest assets: its once-reliable reputation as the defender of Medicare and Social Security. Democrats better hope he gets it back - if not for his sake, than for the sake of candidates further down the ticket.

The Fourth Shadow

And overarching all of it is the greatest shadow of all: The President's apparent support for a 'bipartisan' benefit-cutting agenda driven by Wall Street firms and individual billionaires.

The President may still be determined to cut these programs as part of a "Grand Bargain." If so, voters deserve to know that. If they did, chances are they would force him to make a commitment to back down from that idea before they go to the polls. That's exactly what the country needs.

It's also what his party needs. Nobody should be pressuring the President more on this issue than his fellow Democrats. Recent polling shows that the party has regained the advantage on this issue that it lost in 2010 - a decisive factor in its loss of Congress - at least among seniors who trust Democrats more than Republicans by an 18-point margin. But the President himself has a 7-point deficit on this topic.

President Obama's talk of benefit cuts has been wounding him in the polls for for well over a year, and his equivocation in the last debate didn't help him or his party.

Voters Must Do the Reporters' Job For Them

Biden's forceful - and startingly direct - defense of Social Security got almost no coverage last month. Not a single reporter considered it important enough to ask the President whether he agreed with his Vice President about an issue that is personally critical to millions of Americans.

Tuesday's Presidential debate will take place in a Town Hall format. That's a relief, since moderator Candy Crowley has a long history of repeating shallow and unfounded cliche criticisms of "latte-drinking" Democrats. The only questions she might be counted on to ask would be as misinformed and misleading as Raddatz's.

Let's hope these voters will do what the White House press corps hasn't troubled itself to do: ask the President and his challenger some direct questions about Social Security and Medicare. It's not as if the public isn't interested. It is. And it's not as if they don't want these programs' benefits protected: They do, by overwhelming margins.

This is an opportunity for voters to penetrate the media bubble and ask both candidates some real questions about Social Security and Medicare - not about whether they're "going broke," but about whether they'll defend them.

Questions Voters Want Answered

Mr. President: Will you agree with your Vice President that there will be absolutely no changes to Social Security benefits while you are in office?

Mr. Romney: You have retreated from your party's original plan to dismantle Medicare as we know it. But what do you say to studies which show that we would wind up paying much more for health care out of our own pockets under your plan, and that it would put too much of our money in private insurance company's hands?

Mr. President and Gov. Romney: Health care in our country costs much more than it does anywhere else. That, and not benefits, is what's driving Medicare's future cost problems. What are you planning to do about it?

Mr. Romney: Your former company, Bain Capital, bought several companies that then began cheating the Medicare system. Isn't Bain-style high-pressure financing one of the things that's driving our medical costs sky-high? What will you do to fix it?

Mr. President: What will you do to fix our real cost problem, the Bain-style greed factor in our health care system?

Mr. President: When you ran in 2008 you promised us that people under 65 years of age would be able to purchase Medicare (the so-called 'public option'), and that we wouldn't be forced to purchase for-profit insurance under your plan. What happened to that promise, and what will you do to fulfill it in your second term?

Mr. President and Gov. Romney: We've heard all this talk about Social Security "going broke," yet it will continue to collect hundreds of billions every year. Isn't it more accurate to say it will need additional funds sometime in the 2030's? What do you think of this scaremongering, and why aren't we being told the truth?

Mr. President and Gov. Romney: Polls show that most Americans - including most Republicans and most Tea Party members - are against cuts to Medicare and Social Security. Will you promise us - with no ifs, ands, or buts - that there will be no cuts? Will you raise the payroll tax cap instead and ensure that millionaires and billionaires pay their fair share?

If a Commitment Falls in a Coffee Shop and Nobody Hears It, Does It Make a Sound?

The President traded away the Democrats' best issue in the first debate when he said that he and Romney had "essentially the same position" about "tweaking" Social Security. For seniors who rely on these programs, those "tweaks" would feel more like body blows.

Biden says of the GOP, "These guys haven't been big on Medicare from the beginning. And they've always been about (doing for) Social Security as little as you can do."

He's right. Democrats created both programs. They've winning elections for seventy-five years on Social Security, and for fifty years on Medicare. It's time somebody asked the President as his party's leader whether Democrats will "dance with the ones that brung ya" by defending them now.

Tuesday's night's audience will consist of undecided voters, a majority of whom have consistently told pollsters they oppose cutting benefits for these programs. That makes them the perfect folks to ask the questions that our national news media apparently won't.

"Trust your instincts," Biden advises voters. But until the President and Mr. Romney are asked some direct questions, "trust" - and a couple of quarters - will buy you a cup of coffee at the Coffee Break Cafe in Stuart, Virginia.

No Plan B?

Joseph M. Firestone — Thu, 13 Sep 2012 00:50:23 -0400

Bob Woodward's releasing a new book, so we are now seeing articles based on it. A few days back, The Washington Post published the ”Inside story of Obama’s struggle to keep Congress from controlling outcome of debt ceiling crisis.” This account is a pretty downbeat one of how our political leaders and President Obama handled the debt ceiling crisis of the summer of 2011. I want to comment on what for me was the most salient point: that during the crisis, the President had no “Plan B” to get around the debt ceiling beyond negotiating a deal with Congress.

According to Woodward, the President asked his Senior staff to come up with a Plan B, because the compromise Congressional leaders first proposed to him would have required a two-step increase in the debt limit, with the second step coming near the time of the 2012 election, opening the possibility that the House Republicans would be able to hold the country and the financial world hostage in the run-up to the election. The President rejected the deal, and sent Harry Reid and his Chief of Staff David Krone back to get another that would not require the hostage taking two-step. Meanwhile, Obama's staff tried to put together a Plan B.

But when Harry Reid couldn't get a deal from John Boehner, and the House Republicans passed a two-step plan on July 29th, the President again called for more options. Woodward reports none except for accepting the Republican deal, which Geithner favored, and vetoing the House Bill if Harry Reid “folded” and the Senate passed it, which the President favored. The President, concerned about the likely continuance of Republican blackmail and hostage taking, and believing that he was out of options, indicated that he would veto a two-step deal even if the Democrats folded. However:

”Obama never had to confront the veto question. A few days later, House Republicans dropped their insistence on the two-step plan. The final plan accepted a debt limit increase that would take the country through the 2012 presidential contest. It also postponed $2.4 trillion in spending cuts until early 2013.”

So, the President, and according Geithner, the world financial markets, survived that confrontation because the Republicans folded. But, if Woodward is right, if the Republicans had stood firm, Obama would have vetoed the bill, because no other options had been developed by the White House staff.

Yet there were at least four other options that were offered in the blogosphere and the news media at the time, three of them at CNN, that a well-informed White House might have been expected to know about. So, the obvious question is why is there no indication in Woodward's account that the White House was aware of other options except a veto or surrender to the House Republicans to handle the crisis? The four options were:

1. a selective default strategy by the Executive, prioritizing not paying for things that Congress needed, and perhaps not paying debt to the Fed when it falls due and working with the Fed to get the $1.6 Trillion in bonds that it was holding canceled;

2. an exploding option involving selling a 90-day option to the Fed for purchasing some Federal property for $ 2 Trillion. Then when Congress lifts the debt ceiling, the Treasury could buy back the option for one dollar, or the Fed could simply let the option expire;

3. using the authority of a 1996 law to mint proof platinum coins with arbitrary face values in the trillions of dollars to fill the Treasury General Account (TGA) with enough money to cease issuing debt instruments, and even enough to pay off the existing debt; and

4. using the authority of the 14th Amendment to keep issuing debt in defiance of the debt ceiling, while declaring that the debt ceiling legislation was unconstitutional because it violated the 14th Amendment in the context of Congressional appropriations passed after the debt ceiling mandating deficit spending.

Since, the summer of 2011, beowulf has offered a fifth option for getting around the debt ceiling by issuing consols. Consols are debt instruments that pay a fixed rate on interest in perpetuity, but never promise principal repayment at a maturity date. The debt ceiling law is written in such a way that what counts against the ceiling is the principal repayment guaranteed by the instrument. Since consols provide no principal repayment, one can have unlimited consol issuance without increasing the debt-subject-to-the-limit.

The links above provide explanations of the various options, so I won't describe them in more detail than I've already done here. But I do want to note a couple of points.

First, if Woodward is right that none of these options was part of the internal deliberations of the Administration about a Plan B that the President might have fallen back on, if he had to veto a Congressional Bill that would have required a two-step debt ceiling process, then what's wrong with a White House staff and a Treasury Secretary that evidently weren't watching the web blogosphere and cable media closely enough to know that these “Plan B” options existed? It seems to me that between the staff and the Treasury, they should have known about all of these Plan B options and presented them to the President for consideration. So, if Woodward is right, then this White House staff and his Treasury Secretary both need to upgrade their advisory capabilities significantly before the next crisis hits, so that the President has a Plan B, C,and even D, that might succeed in defusing a renewed Republican attempt to blackmail the Administration into making deals it really would rather not make.

On the other hand, perhaps the President did know about all of these options, or at least all of them except consols, but Bob Woodward just missed their presence in Administration deliberations, and the Administration itself just decided not to use any of them in a viable Plan B for reasons unknown to him. If this last alternative is true, then Woodward missed an important part of the story of the debt ceiling crisis, and perhaps should go back and see if he can find out whether there were, in fact, other options that entered the deliberation and decision processes of the White House.

Yves Smith, in an interview with Paul Jay, after describing three of the options, opines that the Administration may have been actually seeking a Government shutdown with Congress in the summer of 2011, because it would have created the atmosphere of crisis that the President wanted to negotiate his grand bargain with Congress, then. Unfortunately, for him, if this view is true, the Republicans and Democrats in Congress failed to oblige him by “forcing” a veto of their two-step debt ceiling bill on him. And so they avoided the crisis, temporarily, but now we will have the sequestration crisis upon us at the end of the year, or perhaps an effort to defuse it in the lame duck.

If that happens, will the President still be talking about austerity and deficit reduction? Will he still be willing to place entitlement cuts on the table? We'll have to wait until the election is over and perhaps later to find out for sure?

(Cross-posted from New Economic Perspectives.)

Obama, Yes. And Win the House Too.

Roger Hickey — Sun, 09 Sep 2012 18:37:57 -0400

President Obama is enjoying a post-convention bump in job approval (Gallup says 7 percentage points – from 45 to 52 percent) after the negative and divisive Republican convention, followed by the energetic populism of the Democrats in Charlotte. With large leads among women and people of color, and the stark contrast on economic issues building movement toward Obama even among white males in key states, the prospects for Obama winning a second term are starting to look pretty good.

But what about the House? Prospects for Democrats keeping the Senate are looking better, but if the House of Representatives stays in Republican hands, even if President Obama is re-elected his second term will be crippled. Obama can still name good Supreme Court justices, and he can veto terrible legislation – both good reasons to vote for him – but, in the face of Republican obstructionism, he will be virtually powerless to pass economic recovery laws aimed at creating jobs and getting the economy growing and not shrinking.

Obama has repeatedly told voters they have the opportunity to "break the current stalemate in Washington between two fundamentally different ideas on how to create strong, sustained economic growth," – as he said in Cleveland on June 14. A few days later he told a campaign crowd, "What's holding us back is a stalemate in Washington between two fundamentally different visions on which direction we should go, and this election is your chance to break that stalemate."

Obama is right, of course, but only if the voters reelect him AND sweep into office at least 25 Democrats to seats now held by Republicans. You didn't hear much about taking back the House as a goal of Democrats at the Charlotte convention – an indication that they don't want to look like failures if they fall short. But for the same reasons Obama now looks like a winner, Democrats and independent activists now have the possibility of "nationalizing" contests for the House and turning this election into an historic wave election that can truly "break the stalemate" and put the nation on a course of decisive change. How do we do that?

1. Tell voters Republican economics won't just fail--they will kill jobs and plunge us back into recession.
Too many Democrats describe the Mitt Romney-Paul Ryan-Republican economic plans as taking us back to "the failed Bush policies." But they are much worse than that – because they would not only cut taxes for the rich, THEY WOULD KILL JOBS AND PUSH AMERICA BACK INTO RECESSION. Republican candidates Romney and Ryan (and every House member who voted for the Ryan budget) would cut public spending so drastically they would destroy our struggling recovery and throw millions more Americans onto the unemployment rolls. Republicans have voted repeatedly for this kind of European-style austerity. Democratic challengers should call them what they are: job killers. And challenge incumbent Republican Members of Congress to repudiate their votes for the Ryan budget.

2. Oppose outrageously unfair tax cuts for the wealthy.
House Republicans think making the Bush tax cuts for millionaires permanent is very popular with voters – but they are very wrong. All but four House Republicans voted for the Ryan budget containing these tax provisions. Many of them were committing political suicide – if Democrats take them on. Every tax provision in the Ryan budget is wildly unpopular in the minds of the majority of voters who reject the idea of more tax cuts for the super-rich. A June 2012 Peter Hart and Associates poll of likely voters for Americans for Tax Fairness found:

72 percent favor increasing tax rates on household income above $250,000 (rolling back the Bush tax cuts).
68 percent favor ending tax breaks for corporations shipping jobs overseas.
64 percent want to ensure large corporations pay their fair share of taxes.
And 46 percent want to end the low (capital gains) tax rate on income from stocks and bonds.

The take-away: Americans hate the idea of tax cuts for the wealthy – on fairness grounds alone. But Republicans claim tax cuts for the rich are the best way they will create jobs, so the unpopularity of their tax plan (if we expose it) undercuts the entire GOP (so-called) jobs and growth plan as well.

3. Stand up for Social Security, Medicare and Medicaid – and expose all GOP incumbents who have voted to destroy those popular programs.
A large number of House Republicans are on record calling for cuts to Social Security benefits or increases in the retirement age. And many support the kind of privatization of Social Security that Ryan called for in his 2010 Roadmap for America's Future, embraced by most of the House Republican caucus. If Democratic challengers are bold enough to declare opposition to Social Security benefit cuts and attack the idea of privatization, they will find they can put their Republican opponents on the defensive, as these damaging changes to America's most important retirement program are unpopular, even to members of the Tea Party.

All but four House Republican incumbents voted for the 2012 Ryan budget, which passed the House only to be defeated in the Senate. Denounced by the U.S. Catholic bishops for its very large cuts to programs aimed at reducing poverty, including Medicaid, the Ryan budget was described by the bishops as "failing to meet the moral test." And the "Nuns on the Bus" have been touring the country, rallying voters against Medicaid cuts.

The Ryan budget would also turn Medicare into a voucher system, which would cost seniors a larger and larger portion of their incomes, as the value of vouchers fail to keep up with the cost of health care. And it would force older Americans to deal with a confusing array of private insurance plans in their retirement years. This Medicare voucher plan, embraced by Romney, is very, very unpopular with seniors and Americans of all ages. Aggressive defense of Medicare by Democratic challengers can turn many a contest into an upset.

For those who doubt Dems can win in tough races, consider the 2011 special election victory of Rep Kathy Hochul, a Democrat running in Jack Kemp's old upstate district, New York 26 – which hadn't elected a Democrat in four decades. A Washington Post article attributed her victory to her opposition to the "House Republicans' budget plan authored by Wisconsin Rep. Paul Ryan – and, in particular, his proposal to turn Medicare into a voucher program." Hochul's winning message could win almost anywhere this year: "I won't to let them cut Social Security benefits and end Medicare as we know it while giving more tax cuts to the rich." That was, and is, a winning message. Add a plan for jobs, and your opponent is on the ropes by Election Day.

4. Fight for JOBS FIRST--and go after every incumbent who opposed Obama's American Jobs Act.
Republicans won the House in 2010 by pointing to high unemployment and charging the Democratic economic program had failed. At that point Democrats had no new jobs plan to run on. A year ago, President Obama stopped talking about deficit reduction and put the American Jobs Act on the table. Every Democrat running for a House seat this year can accuse the Republican incumbent of blocking that jobs plan, which independent experts have estimated would have produced 1.9 million jobs by rebuilding America's infrastructure and schools and helping states hire, not lay off, teachers and cops and firefighters. Democrats need to campaign as a party with a popular plan to put people to work, grow the economy, and get the private sector growing faster. And it would be great if President Obama would campaign a little bit more like Harry Truman, denouncing Republicans in the House (what Truman called the "do nothing Republicans") for their obstructionism in blocking passage of his jobs bill.

Democratic candidates for the House also need remind voters that the (Romney-Ryan) Republican plan to slash public spending will kill jobs and throw the US back into recession – just as similar radical austerity regimes in Britain and Ireland and Spain and other European countries have caused recession to sweep the continent. We have to expose the Republicans' post-election plans to cut taxes for the wealthy (which won't stimulate the economy) and their plans to slash public investment, which will kill economic growth and increase joblessness.
While acknowledging that we have to get deficits under control in the long term, Democrats must insist that America's first priority must be to get unemployment down and economic growth up. And that means getting voters educated and alerted to Republican plans to impose draconian austerity if they manage to keep the House. In the next 60 days, Democrats must be the champions of full-employment, and get the voters to see Republicans as the job killers that they are.

5. Charge up the Democratic base voters--and give them a reason to get out and vote.
The spectacle of Republicans in Tampa attacking women, welfare-baiting minorities, and doubling-down on tax cuts for the rich has fired up Democratic base voters – even among progressives, who may have problems with Obama, but who know letting Romney and a Republican Congress run the country would be a disaster. The Charlotte convention helped as well: showing off Democrats as both diverse and united – and fighting for a much more progressive vision of our economic future.

President Obama is right when he says this election offers us the opportunity to "break the current stalemate in Washington between two fundamentally different ideas on how to create strong, sustained economic growth." But we all have to work to get him to go beyond a pitch for his own re-election. He should ask voters to "send to Washington a new group of Congressional leaders who will work with me to break that stalemate." As he gets more confident in his own re-election, I hope we can get him to call for throwing out the obstructionists.

However, as we've learned, we can't wait for Obama. It's our country, and we need to save it. So it's our job to get to work in every Congressional district that might produce that swing of 25 seats. We've got to teach the Democratic candidates how to campaign – against the Romney-Ryan job-killing plan, for Social Security, Medicare and Medicaid, against unfair tax cuts for the wealthy, and for the Democratic plan for jobs.

As I write this, MoveOn is sending around Nate Silver's new analysis in the NY Times that finds "Obama's chance of victory would be an amazing 91% if everyone who's registered actually votes this year." MoveOn asks for your contribution to raise $600,000 this week to create (with the AFL-CIO's Workers' Voice) the largest independent get-out-the-vote operation in the country. This kind of thing is doable, and you can contribute here, because getting out the Democratic base vote – and giving them good reasons to vote – is going to be crucial in the next two months.

Here's another encouraging sign: Political scientists Jacob Hacker and Nate Loewentheil recently published a paper that summarizes in accessible (and non-political) language, the first four points above. After a blogger conference call to discuss A New Strategy for Prosperity, the legendary Digby and colleagues got the document to progressive House candidates they are supporting, and 16 of them have endorsed the ideas and are running under the banner of Americans for Real Prosperity.

The old optimism from 2008 is coming back – tempered by the realities of the last four years. We should all work for the re-election of Barack Obama, but we should also work to make sure he has a Congress that can help him carry out the big changes that America needs. And we've got to make sure that after the election there is a powerful progressive movement pushing President Obama and the new Congress to do what needs to be done.

No, Barack, It Just Ain't Gonna Happen!

Joseph M. Firestone — Sun, 09 Sep 2012 18:04:41 -0400

Who else thinks the President's speech didn't include any plans to create the 29 million full-time jobs for the dis-employed? Please raise your hand!

About jobs he said:

”We can help big factories and small businesses double their exports, and if we choose this path, we can create a million new manufacturing jobs in the next four years.”

”If you choose this path, we can cut our oil imports in half by 2020 and support more than 600,000 new jobs in natural gas alone.”

And, except to say he wants time to finish the job, that's it! Over the next 4 years the economy will probably need another 4 million jobs just to employ new entrants into the job market, and not even to reduce that 29 million dis-employment figure. So he needs 33 million new full-time jobs to get to full employment, and he's talking about 1.6 million in his acceptance speech. What planet is he living on?

Maybe, like Herbert Hoover, if he keeps saying prosperity is just around the corner, and does almost nothing to make it happen, then he thinks his beloved private sector will quit generating profits from financial manipulation and start creating jobs at a living wage. I think we've seen this movie; and it doesn't end happily for working Americans.

The President had a lot more to say about deficits, then about jobs; showing that he lives in a fantasy world of faux problems:

”You can choose a future where we reduce our deficit without sticking it to the middle class. Independent experts say that my plan would cut our deficits by $4 trillion. And last summer, I worked with Republicans in Congress to cut billions in spending because those of us who believe government can be a force for good should work harder than anyone to reform it, so that it’s leaner, and more efficient, and more responsive to the American people.”

But why reduce our deficit at all? Have we got an inflation problem? Does either the level of our debt at $16 T, or our debt-to-GDP ratio of more than 100 percent either impair our ability to deficit spend in the future, or to pay off the debt without either taxing or borrowing? The answers to these questions are: There's no reason to do it; No, and No! Here's more from O:

“I want to reform the tax code so that it’s simple, fair, and asks the wealthiest households to pay higher taxes on incomes over $250,000, the same rate we had when Bill Clinton was president; the same rate we had when our economy created nearly 23 million new jobs, the biggest surplus in history, and a whole lot of millionaires to boot.

I love higher taxes on the wealthy, as much as the next person. I wouldn't mind going back to the marginal tax rates of World War II and the inheritance tax rates of Harry Truman's times. But does anyone really think that the same tax rates we had under Bill Clinton really caused the 23 million new jobs during his Administration; so that if we want to have that kind of job growth again, we really must have Clinton's tax rates? Give me a break!

We know that the prosperity of the 1990s was primarily fueled by debt bubbles, and had little to do with Clinton's higher tax rates. In fact, his surpluses, coupled with the Internet bust, produced the recession he bequeathed to Bush 43, a recession that was ameliorated, but never really ended for most working people by Bush's deficit spending.

“Now, I’m still eager to reach an agreement based on the principles of my bipartisan debt commission. No party has a monopoly on wisdom. No democracy works without compromise. I want to get this done, and we can get it done. But when Governor Romney and his friends in Congress tell us we can somehow lower our deficits by spending trillions more on new tax breaks for the wealthy, well, what’d Bill Clinton call it? You do the arithmetic, you do the math.”

The problem, Mr. President, is that there's more than arithmetic involved here, which is why the Bill Clinton/Jack Lew surpluses produced that recession at the end of their term, the one that played a part in Al Gore's defeat. The economy is dynamic. If you try to cut deficit spending or run surpluses by raising taxes and cutting Government spending, then you had better estimate what impact that's going to have on non-Government, including private, savings and investment, and the trade balance; because cutting deficit spending can lead to a net reduction or elimination in net savings and investment, as well as a reduction in the trade deficit.

Then the President told us what he wouldn't do to cut the deficit:

“I refuse to go along with that. And as long as I’m President, I never will.

“I refuse to ask middle class families to give up their deductions for owning a home or raising their kids just to pay for another millionaire’s tax cut.

“I refuse to ask students to pay more for college; or kick children out of Head Start programs, to eliminate health insurance for millions of Americans who are poor, and elderly, or disabled, all so those with the most can pay less.

“I’m not going along with that.

“And I will -- I will never turn Medicare into a voucher.

“No American should ever have to spend their golden years at the mercy of insurance companies. They should retire with the care and the dignity they have earned. Yes, we will reform and strengthen Medicare for the long haul, but we’ll do it by reducing the cost of health care, not by asking seniors to pay thousands of dollars more. And we will keep the promise of Social Security by taking the responsible steps to strengthen it, not by turning it over to Wall Street.”

I'm glad for all these refusals and lines in the sand. He's told us what he won't do to make things even easier for the wealthy; but as Digby says, that doesn't mean he won't trade some or all of these things, for tax hikes on the wealthy. Tax hikes on the rich will please people wanting greater fairness; but that will be cold comfort for people whose safety net benefits are traded away for a smidgeon of greater fairness.

There's also another thing he hasn't told us. Maybe someone will make him do it in the debates. And that is what he plans to do to solve that 29 million jobs problem. That question is a really interesting one considering that he plans for the US Government to average $400 Billion in deficit reduction over the next 10 years. That is really, really a bad idea, because in doing that he's pretty much condemning the US to a stagnant economy with perpetually high unemployment for the next 10 years, giving us a 14 year period of high unemployment, Obama's “new normal” legacy to future generations.

Why do I say that? Well let's look at some basic macroeconomics from Bill Mitchell:

”The basic income-expenditure model in macroeconomics can be viewed in (at least) two ways: (a) from the perspective of the sources of spending; and (b) from the perspective of the uses of the income produced. Bringing these two perspectives (of the same thing) together generates the sectoral balances.

“From the sources perspective we write:

GDP = C + I + G + (X – M)

which says that total national income (GDP) is the sum of total final consumption spending (C), total private investment (I), total government spending (G) and net exports (X – M).”

That is, X is exports and M is imports. So, if X is greater than M, we have what is colloquially called a “trade surplus”; but if M is greater than X then we have a “trade deficit,” which is what the United States has enjoyed for many years. I say enjoyed, because people in other nations send us goods, real wealth, and we send them electronic bits of information called US Dollar electronic credits. Seems like we'd have the better of that kind of deal, if we had sense enough to employ the people put out of work by our persistent trade deficit on things that are valuable for people living here in the United States.

However, that aside, we should note that the US seems to be running a trade deficit of 4% of GDP right now. We'll see shortly the importance of this number. Bill continues:

“From the uses perspective, national income (GDP) can be used for:

GDP = C + S + T

which says that GDP (income) ultimately comes back to households who consume (C), save (S) or pay taxes (T) with it once all the distributions are made.

Equating these two perspectives we get:

C + S + T = GDP = C + I + G + (X – M)

So after simplification (but obeying the equation) we get the sectoral balances view of the national accounts.

(I – S) + (G – T) + (X – M) = 0

That is, the three balances have to sum to zero.”

So, we have an investment/savings balance, a Government spending/tax balance, and a foreign trade (exports/imports) balance. The sum of these balances must equal zero, and this is true by definition alone. It is what economists call “an accounting identity.” Are accounting identities always “true”?

They are always “true” in the sense that they are logically valid. But reasoning from them can result in false conclusions, because 1) the wrong data is correlated to the one or more of the terms of the identity, or 2) further reasoning about the causal relations among the terms in an identity may give false conclusions, and/or 3) reasoning about the dynamics relating the terms in an identity over time may be in error.

If we want the private sector to collectively save, then S must be greater than I, and we must have an investment/savings balance deficit, or, in other words the private sector as a whole must be accumulating nominal financial wealth within some time period.

If we want to import more than we export, then M must be greater than X, and we must have a “trade deficit”, which means that US entities as a whole must be accumulating more goods and services from abroad and must be sending more dollars into accounts at the Federal Reserve owned by foreign entities than they are receiving from them in return for our own exports.

Notice here, that the USD provided to foreign nations when we run a trade deficit, go into their accounts at the Federal Reserve. They never do leave this country. So, don't listen to people who constantly tell you that our trading dollars are going overseas. They're not. They're in our own central bank.

Lastly, according to the model, if we want the private sector to collectively save, and if we want it to collectively spend more on foreign goods and services than it receives in nominal financial wealth for our goods and services, then the Government sector will have to spend more than it taxes. That is, it will have to run a deficit in the Government balance to accommodate the savings and import desires of the private sector by replacing the leakage in aggregate demand that savings and more imports than export represent. But just how much of a deficit will the Government sector need to make sure that the balance called for in the model happens without decreasing savings or reducing the size of our trade deficit?

Well, I said earlier that we're running roughly a 4% of GDP trade deficit in the US. We also know that the private sector needs to save to repair household balance sheets after the disaster of the financial crisis of 2008, coupled with the housing crash. Let's say that US private savings desires are currently 6% of GDP, a reasonable estimate given behavior over the past few years.

Then, we're saying that we want (I – S) to be – 6% of GDP and (X-M ) to be - 4% of GDP, which implies that we also want (G – T), the Government balance to be positive and equal to 10% of GDP. In other words, we're saying that the Government ought to be running a budget deficit of $1.6 Trillion this fiscal year, which judging from how things are going is approximately $400 Billion more than we will actually be spending.

So, it should be clear that the Federal Government, far from running too large a deficit, is now running a deficit that is $400 Billion smaller than it should be to accommodate the desires of the private sector to import and save, and to replace the aggregate demand lost to savings and more imports than exports. Do you suppose this shortfall in the Government deficit spending we need could have anything to do with our stubbornly high unemployment rates?

Now, let's say the Obama Administration compromises on a deficit reduction bill specifying $4 Trillion in Government deficit spending reductions over 10 years phased something like this: 8%; 8%, 6%, 6%, 6%, 4%, 4%, 3%, 3% and 2%, where the percents refer to the deficit spending levels as a percent of GDP. Then, there will be increasingly less space for private savings and imports.

No doubt the President would like to see a shrinking percentage of GDP spent on imports over the next decade because that means that the budget deficit can be smaller if private savings stay the same. But, it's pretty clear that in the next two years, we won't be able to shrink the trade deficit by even 1% of GDP or roughly $160 - $170 B annually.

So, that means that if we follow the plan for deficits I just stated, then the savings desires of the private sector can't be accommodated at 6%, and household balance sheets won't continue to build. As, deficits move down to 6% in 2015 – 17, imports will be squeezed further, as will savings. By the second half of the decade, both imports and savings will be subjected to very high downward pressure.

The result will be that our trading partners will resist efforts to re-balance trade. They will lower prices of their goods and services in an effort to maintain the balance. We, in turn, will also have to lower costs, and that probably means lower wages – a race to the bottom to continue to increase our levels of exports. That will feed back to domestic private savings, and also to aggregate demand here, which will both decrease; though maybe not by as much as demand will increase from the decrease in imports. Causality moves in conflicting directions and without rigorous modeling we can say what the overall increase in demand outcome will be.

In addition, the decreased space for savings will result in people seeking to save more and in increased economic conflict in the private sector with people and classes fighting over a shrinking pie. In the US currently, political power is arranged in such a way that an increasingly small group is able to direct nominal financial income its way by using the political system to its advantage.

So, austerity will mean that a very few wealthy people will grab the shrinking pie of savings, and more people will be faced with the choice of maintaining their consumption levels by going into debt, or maintaining their rate of savings by cutting back on consumption. This developing situation will be unsustainable; and the second half of the decade, after a period of a stagnating economy, will surely see a deepening depression, and a strengthened economic and political oligarchy.

That's the scenario if things go smoothly with austerity policies being planned by the elite led by Peter G. Peterson and the President of the United States. However, it is likely that things will not go according to plan and that the politicians will not be able to maintain the deficit targets in any long-term deficit reduction plan. The reason is that if demand flags because people try to buck the program by imposing strict spending discipline on themselves, or if foreign demand for our exports flags so that export industries must cut employees, causing a weakening of demand here; then rising unemployment here will impact the automatic stabilizers like unemployment insurance food stamp benefits, and Medicaid, driving up deficits beyond the levels in the deficit reduction plan.

The experience of Europe tells us that ideological neo-liberal austerians will not then admit that they were wrong about austerity and the possibility of implementing a deficit reduction plan successfully. But that, instead, they will double-down on it, shrinking aggregate demand even more, and driving the economy down even further, as they have in every European nation where austerity is being tried.

What if the President, or Mr. Romney succeeds in making the “grand bargain” to raise a few taxes, and cut 3 times as much spending, including entitlements in the process of passing a long-term deficit reduction plan, and what happens if in the first three years the plan fails to meet its targets and also creates a new recession in our fragile economy?

Will the austerians then admit they were wrong and start paying attention to the sectoral balances and people's needs? Or will political necessity prevent them from admitting error and force them to double- down on austerity because that is the only viable political choice? We know what they will do, because no politician ever admits they were wrong, until perhaps they're thrown out of office, and not very frequently even then.

Look at Obama himself, it was apparent by the Fall of 2009, that his ARRA was too small to do the job of creating a full recovery. Did he and the Democrats admit it? Did they pull out all the stops to pass a jobs bills in the rest of 2009 and take care of their unfinished business? Or did they double-down on insisting that the stimulus worked, and move on increasingly to a health care bill that bailed out the insurance companies, and burned all their political capital, that coupled with the tepid recovery, lost them the election of 2010?

I think we know what will happen if President O wins on his “austerity grand bargain.” First, it will never succeed because it is inconsistent with what the sectoral balances tell us. And, second, when it doesn't he will double-down and then plunge us into a worse recession than ever, and in 2016 an impoverished population will face at least four more years of looting by the 1%, and increasing poverty from the other corporatist party of the emerging plutocracy. So, planned and targeted deficit reduction, along with full employment and full economy recovery? It just ain't gonna happen.

(Cross-posted from New Economic Perspectives.)

Are Republicans 'Crazy?' Not If You Follow the Money

Richard Eskow — Thu, 30 Aug 2012 11:17:37 -0400

Their opponents shouldn't be too quick to call Republicans "crazy." It makes more sense to employ that time-honored investigative principle: Follow the money. Sure, they've said crazy things -- in their speeches and in their official platform. But crazy?

Like a fox.

Take that "we built it" theme. Sure, they're lying about a selectively-edited phrase for political advantage. But why this particular phrase? Because the President was defending government's role in building America's infrastructure, educating its children, and improving its technology.

They don't want those things anymore. The argument fell on deaf ears because GOP isn't really the "party of business." It's the the party of mega-business, of globalized multinational corporations. Those corporations don't need America any more. They don't need its roads, they don't need its technology, and they certainly don't need its educated middle-class workforce.

(See "An Old Industrial Era": GOP Platform Mocks Blue-Collar America, Declares It Dead.)

It's time to follow the money.

Money Source: Bankers

The rapid rise in the abuse of (c)(4) organization has allowed corporations and the mega-wealthy to inject hundreds of millions of dollars into election campaigns without revealing their identity. The Romney campaign has refused to follow Obama's lead by revealing the names of its "bundlers." But thanks to the efforts of the Sunlight Foundation, USA Today and others we know that 25 percent of them are Wall Street types who include:

Steve Schwarzman, who notoriously compared taxing bilionaire hedge funders like himself the same way we tax teachers or firefighters to Hitler's invasion of Poland -- an invasion which resulted in the deaths of men, women and children in concentration camps;

Daniel Loeb, the self-entitled whiner we called the "Robespierre of the hedge fund revolution" after he issued an "investor letter" in which he described hedge fund billionaires as exploited "labor," a persecuted minority, and the victims of socialist-style wealth distribution -- which, as he fails to mentioned, somehow resulted in increased wealth inequity;

Bill Harrison, who engineered the creation of too-big-to-fail JPMorgan Chase and recently made an inept attempt to defend megabanks like his own Frankensteinian creation;

Executives from repeat corporate lawbreakers like JPMorgan Chase and Goldman Sachs, along with representatives from morally compromised and scandal-ridden accounting firms. (See When Accountants Go Bad: Scandal-Plagued Firms Turn Out For Romney); and,

An executive from Barclays, the bank which has now admitted to illegal rate-fixing in the LIBOR scandal.

Their Money's Worth: The Bankers

Are these bankers and their fellow-travelers getting their money's worth?

A Republican President appointed Republican economist Ben Bernanke to run the Federal Reserve, only to have the Fed double down on policy that makes the rich richer at everyone else's expense. (Yes, Obama reappointed Bernanke. We'll get to that during their convention.)

The "financial sector" -- that is, Wall Street -- had a great recovery from the Great Recession, thanks to the American people, while the rest of the country remains mired in an ongoing depression which Wall Street created. And it's once again capturing a greater share of this nation's profits, squeezing out productive businesses that create jobs:

(via Business Insider)

Looks like something's working. Bankers contribute to both parties, but lately most of their love is going one way: to the GOP.

Money Source: Billionaires

Non-banking billionaires contributed to the war-chest too.New GOP-backed bills -- and more importantly, GOP-appointed judges - have allowed billionaires to keep on giving enormous sums of money to their cause once they've reached the official limit for campaign contributions. So far SuperPACs have raised nearly a quarter of a billion dollars from wealthy individuals for this year's election. And nearly 60 percent of that money came from just 47 people.

It's the finest election money can buy.

Big billionaire donors include Sheldon Adelson, Bob Perry, the Crow brothers, and assorted members of the Marriott family.

And for those of you who were worried that the bankers and billionaires might have been inconvenienced by God's wrath toward the GOP convention, you'll be relieved to know that the bundlers all got together for a nice yacht party.

Like they say down South: They're just folks.

Their Money's Worth: Billionaires

Are they getting their money's worth? Take a look at this table from William Domhoff:

The richest Americans have most of their wealth in business assets, financial securities, trusts, stocks and mutual funds, and non-home real estate. The vast majority of the population has its assets in bank accounts, home value, and pension accounts.

This table shows clearly that the Republican Party (along with a number of Democrats) is pushng policies that increase the assets of the wealthy, while at the same time fighting laws or regulations that protect everyone else's. They're fighting to keep capital gains taxes low and reduce even them further when it's now been proven that these cuts don't create jobs.

In any given year the country's 400 highest-income households earn between four and nine times as much of their income from capital gains as they do from salaries. They, along with other wealthy GOP backers, are benefiting from tax policies on everything from inherited wealth to unearned income.

And all those "hawkish" cuts avoid harming the business interests that make the wealthy even wealthier. They're targeted toward Medicare, assistance for low-income households, and anything else that can lighten the 1 percent's tax load without cutting into its profits.

Money Source: Big Corporations

In addition, every big corporation in the country has one, as do most corporate special interests, and SuperPACs collect from a variety of high-income sources.

High-dollar bankrollers for the GOP include the defense industry (surprisingly exempt from its supposed "hawkish" anti-spending stance), drug companies, and outsourcing corporations.

Then there's the US Chamber of Commerce, which receives preferential (c)(6) tax treatment while boasting that it provides political cover to unpopular corporate causes. The ugly causes it supports include bribery (through its attacks on the Foreign Corrupt Practices Act), child labor (through its promotion of Uzbek cotton sales and other goods), totalitarian Communist workforces (through its Shanghai and other chapters), and environmental destruction (through its defense against the authority of Ecuadorian courts).

If Evil ever forms its own corporation, it will know where to go for lobbying.

The Chamber overwhelmingly supports Republicans. (It endorsed only one Democrat in 2010, and didn't give him any money.) The New York Times reports that it spent nearly $90 million on lobbying, employing 98 internal lobbyists and 90 others through outside firms. It's also closely allied with the anti-democratic, anti-union organization known as "ALEC." The Chamber gets most of its funding from a few sources, and overwhelmingly from large corporations. Its positions on a variety of issues are routinely described as "extremist" -- and it has enormous influence on the GOP.

This year outside sources have already been responsible for $167.5 million in campaign spending, as of last report, of which $12.7 million was "secret" or "dark" money that can't be traced to its source.

(No wonder Republicans killed a law that would have required more transparency in campaign finance.)

Their Money's Worth: Corporations

The GOP is the ultra-large-business party. It uses rhetoric about "small entrepreneurs" and "individual initiative" to disguise the fact that is policies support the giant corporations which are crushing individual entrepreneurs, Mom and Pop operations, and start-up companies.

In fact, when President Obama offered to cut $28 million from the Small Business Administration (wrongly, in our opinion) that wasn't enough for the GOP. House Speaker John Boehner immediately demanded another $100 billion in cuts.

The big-corporation bias explains language which says that "regulation should be a helpful guide, not a punitive threat." That'll stop the outlaws! There's even stranger language which speaks of "lawmaking agencies," the "overcriminalization of behavior," and the "Federalization of offenses."

Translation: They want the Federal government stripped of its ability to regulate business or punish rogue corporations. They want to roll back the Administrative Procedure Act of 1946 which gave modern agencies their powers, leaving the Federal government powerless to protect us from the depredations of the GOP's corporate sponsors.

Romney's proposed oil and gas policies are following the money from that industry, too.

Meanwhile, new loopholes and tax breaks are leaving corporations paying less of their fair share than at any time in modern memory:

You can call all of this disgusting, or venal, or corrupt. But crazy? Not on your life. Critics should stop describing it that way and start calling it what it really is: the prostitution of democracy to the highest bidder.

Insecurity Separates Middle Class from Romney, Ryan

Leo Gerard — Tue, 28 Aug 2012 11:28:09 -0400

The rich, those born sucking silver spoons like Mitt Romney and Paul Ryan, really are different from the middle class. The wealthy grow up and live their lives wrapped in security. That’s what gives them the arrogance to organize a posse to hold down a fellow prep school student and chop off his hair, mock NASCAR fans’ clothes and ridicule cookies offered by supporters. No matter what, Romney and Ryan will remain rich and secure.

By contrast, those born into poverty or the middle class live lives nagged by insecurity. They know their jobs could be off-shored at any moment. They know their employers may raid their pensions in bankruptcy. Their major asset in life, their home, may have lost a third of its value when the Wall Street-inflated housing bubble burst. Rich would be great, but those born without trust funds work hardest just to attain a little security.

Last week, the Pew Research Center issued a report detailing how insecurity has increased for the middle class since 2000. The non-partisan Congressional Budget Office (CBO) published a report predicting increased insecurity for the middle class if Congress takes no action on taxes and budget cuts within the next four months. A third report released last week, called Prosperity Economics, describes how to revive the economy and broaden security.

A true democratic republic, where the majority rules, would reverse the past decade’s trend against the middle class, forestall the CBO prediction, and increase security for the masses. The silver spooners seeking the Oval Office have given no indication, however, that they intend to ease the uncertainty of the plastic spooners.

The Pew Research Center looked at how the middle class fared since 2000. In a word, it’s badly. This is what Pew called its findings: “The Lost Decade of the Middle Class: Fewer, Poorer, Gloomier.” Here’s how the center sums it up:

“Since 2000, the middle class has shrunk in size, fallen backward in income and wealth, and shed some – but by no means all – of its characteristic faith in the future.”

Over the past 40 years, the percentage of adults in the middle class shrank from 61 to 51. Also, the rich seized a greater portion of the nation’s household income. Their cut rose from 29 percent to 46. Almost all of that came from the middle class, whose share fell from 62 percent to 45.

Similarly, the middle class suffered a 28 percent drop in wealth over the past decade, much of that in housing value.

The losses intensified middle-class insecurity. Those interviewed by the Pew researchers expressed pessimism. For America, which sees itself as the land of opportunity, this survey result is dispiriting: 29 percent of the middle class said hard work and determination no longer guarantee success for most people. The American Dream is dying.

Middle-class insecurity and gloom will worsen if Congress allows the country to fall off the fiscal cliff – if it fails to renew at least some tax cuts set to expire at year’s end or temper scheduled budget cuts. The CBO, in its Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022, said if Congress does not change its current tax and spending plan, the United States will descend into recession again next year and unemployment will rise to 9 percent.

The budget cuts were demanded last year by House Republicans, led by Ryan, who refused to raise the nation’s debt ceiling until they got a deal guaranteeing the budget slashing. President Obama has repeatedly sought money for infrastructure improvement and other job-creating projects to relieve unemployment and prevent a double dip recession, but Republicans have rebuffed him. They also have rejected his plan to renew middle class tax breaks while terminating the massively larger breaks for the rich.

Republicans like Ryan have decided relieving the deficit is more important than relieving uncertainty for the middle class. The perfect symbol of that is Ryan’s plan to voucherize Medicare. Social Security and Medicare are beloved by the middle class because of the security they provide in retirement. Ryan’s vouchers would end that security because they would dramatically increase costs for senior citizens. Ryan and his followers demand austerity for the middle class and tax cuts for the rich.

Austerity is not necessary, according to two Yale researchers. They offer an alternative, Prosperity Economics.

Jacob Hacker, a Yale professor and director of the Institution for Social and Policy Studies, and Nate Loewentheil, a Yale law student, describe how to create a dynamic economy and foster a society “marked by greater health, broader security, increased equality of opportunity, and more broadly distributed growth.”

They believe in resurrecting the American Dream. While the middle class is losing faith, Hacker and Loewentheil say it doesn’t have to be that way.

In their plan, everyone benefits, not just the silver spooners. It’s not, however, a strategy likely to be adopted by austerity advocates Romney and Ryan, who have never experienced the pain of economic insecurity suffered by the plastic spoon class.

One Simple Measure That Would Save Social Security and More

Joseph M. Firestone — Tue, 21 Aug 2012 14:38:11 -0400

The Fiscal Times is a digital rag funded by Peter G. Peterson to propagandize the ideology of neoliberal austerity. Yesterday, a post by Josh Boak highlighted the proposal of “fixing” Social Security by lifting the cap on payroll taxes.

”Social Security already appears to be running aground, just two decades before the program — which accounts for about 20 percent of federal spending — is projected to crash into insolvency.

“The program launched during the Great Depression — keeping millions of senior citizens from sliding into poverty — has steadily been paying out more in benefits than it collects in taxes, relying on the interest earned on federal bond holdings to help bridge the difference. Social Security costs are estimated to total $789 billion this year, paid for by $623 billion in payroll taxes.

“There’s an easy repair, but it involves drastically hiking taxes, so voters aren’t hearing about it on the campaign trail. Under federal law, millionaires and billionaires get to dodge payroll taxes on a substantial percentage of their salaries. Employers and workers are charged payroll taxes on salaries up to $110,100 a year, meaning anything above that — a category that includes some of the middle class — is payroll-tax free. Simply lifting that cap would cover about 90 percent of the projected shortfall over 75 years, according to forecasts by the Social Security Administration.”

Boak then goes on to point out other difficulties with, as well as benefits of, the proposal.

Even though this proposal is very simple; there is an even simpler solution the problem, without the drawbacks. Stephanie Kelton outlines it this way:

“Every year, the Trustees of Social Security and Medicare issue an annual report that examines the financial status of the various “trust funds” that purportedly sustain these vital programs. Social Security’s (OASI) and (DI) Trust Funds, as well as Medicare’s (HI) Trust Fund all face chronic problems, some in the not-too-distant future. In contrast, Medicare’s (SMI) Trust Fund always receives a clean bill of health. Why is that?

“The answer is so simple it apparently escapes notice, but here it is, straight from the annual report:

“The Hospital Insurance (HI) Trust Fund is expected to remain solvent until 2029. The Disability Insurance (DI) fund is projected to become exhausted in 2018. And the Old-Age and Survivors Insurance (OASI) Trust Fund is considered adequately financed until 2040. In contrast:

“Part B of Supplemental Medical Insurance (SMI), which pays for doctors’ bills and other outpatient expenses, and Part D, which pays for access to prescription drug coverage, are both projected to remain adequately financed into the indefinite future because current law automatically provides financing each year to meet the next year’s expected costs.”

“In other words, it is sustainable — INDEFINITELY — because the government is committed to making the payments. Indefinitely.

“And, as we have argued many times on this site (and elsewhere), the same commitment can easily be made to sustain Social Security (OASI and DI) and Medicare (HI) in their current form. There is no economic justification for cuts to either program. The decision is entirely political.”

So, the simple solution to the Social Security solvency “problem” (if something with such a simple solution can be called a “problem”) is for Congress to make the financing for Social Security (OASI and DI) automatic.

Of course, the first thing anyone will say about this simple solution for Social Security is that it's not really a solution to the SS solvency problem because it just transfers the financing problem from payroll taxes to general tax revenues, and the solvency problem from SS alone to the whole Federal Government. However, as I've been at pains to point out in many, many posts in the past, for example, here, here, and here, there is no solvency problem for a Government like the US with a non-convertible fiat currency, a floating exchange rate, and no debts payable in currencies it doesn't issue. For example, here's how automatic financing of SS by Congress could easily be managed.

First, the President should use the authority provided by a 1996 law to mint a $60 Trillion coin and deposit it at the Federal Reserve.

Second, Congress should make SS funding automatic.

Third, Congress should also provide for imposition of the payroll tax at the discretion of the President, with the maximum payroll tax set at what it is today, but with the payroll tax salary cap removed to at least reduce the regressive character of the payroll tax.

Fourth, the President should reduce the payroll tax to zero for both employers and employees, until full full-time employment is reached. At that point he or she can use the authority provided by the Congress to gradually re-impose the tax, if and when inflation reaches 3%.

The effect of these changes would be to immediately add $625 Billion plus to the Federal deficit, but not to the Federal debt because the increased deficit spending would be covered by credits issued by the Federal Reserve to the Treasury upon depositing the $60 T coin. This increase in the Federal deficit will move the economy forward, since we know that most SS recipients would just spend the additional money, and since the Federal deficit is projected at about $1.2 - $1.3 Trillion right now, which is at least 3% of GDP UNDER where the macroeconomic sectoral financial balances model says it should be for full employment, assuming that the trade deficit will be about 4% of GDP and savings will be at 6% of GDP. I say, at least, because so much of deficit spending is tied to subsidies for well-off corporations and individuals and so has low fiscal multipliers, providing more space than otherwise for even higher deficits before demand-pull inflation becomes a problem.

Apart from the extra stimulus provided by using deficit sending to finance SS, the changes I've proposed would provide an additional automatic stabilizer to the economy. SS would contribute much more stimulus to the economy on a continuing basis to the economy than it does now. But in addition, and unlike the situation from the 1980s until very recently, SS would provide a fiscal drag on the economy, only when a fiscal drag was needed to fight inflation. Otherwise it would provide only continuing stimulus.

So, there we are, a simple solution for SS solvency, and an accompanying answer for those who are worried about “how we gonna pay for that?” In both cases, there really is no “problem.” Just a few simple things to do to change a “problem” into an “opportunity!”

(Cross-posted from Correntewire.com.)