The Republican’s Debt and Deficit Blackmail

Tuesday, December 18th, 2012
GOP blackmail

(By The Pragmatic Pundit)

Republicans have been using debt and deficit blackmail as a bargaining strategy since the days of Ronald Reagan.Reagan’s brand of politics was successful at promoting the notion that federal government spending on social programs is mostly wasted on pointless handouts to lazy recipients. He carefully cultivated the impression that “government spending” meant “free money” for people who were nothing more than moochers.  Sound familiar?

Ronald Reagan was swept into office on the same Republican fearmongering-propaganda that grips the country today…”spending is out of control, the country is going bankrupt and government is too big.”

There is no denying Reagan inherited an economy that was in a deep recession, but his response to the debt crisis was far different than Republicans would have us believe.

Despite his “small government” rhetoric, Reagan expanded the federal government by 7%, employing a larger federal workforce (those greedy public employees) than any President in history other than Johnson who presided over the Vietnam War.

He did enact a huge tax cut, but then raised taxes eleven times; increased defense spending; ballooned the federal deficit to the largest peacetime deficit in history; raised the debt ceiling 17 times and accumulated a debt burden that equaled the previous 200 years of American history, turning the United States from a creditor nation into a debtor nation.  For the first time in the history of the nation, the United States borrowed in order to cover federal budget deficits.

David Stockman, Reagan’s economic wizard and the architect of the trickle-down budgets wrote:

“The Reagan deficits were intentional, designed to cut revenue as a way of pressuring Congress to cut programs Republicans wanted to destroy….The plan… was to have a strategic deficit that would give you an argument for cutting back the programs that weren’t desired….”

The “small government” mantra and “debt and deficit” narrative continued after Reagan left office and another Republican, Bush (41)  took the helm.

Daily News 1990:  Legislators Say There’s No Money.

During the tenure of these two Republicans, deregulation and imprudent real estate lending contributed to a Savings and Loan crisis and quite possibly the stock market crash.  Between 1980 and 1994, more than 1600 banks were closed or received financial assistance from the FDIC.  Over 1,000 banks with total assets of over $500 billion failed.  The number of savings and loans declined from 3,234 to 1,645.Taxpayers assumed the bill for a $124 billion bailout, while corporate scandals and bankruptcies made matters worse. Enron represented the biggest corporate scandal in history, while Worldcom MCI filed the largest bankruptcy in history.

That was the economy Republicans left for Bill Clinton and they were singing the same song: “spending is out of control and the country is going bankrupt.”  
 
CNN – 1995
Americans blame GOP for budget mess

Buffalo News 1995
GOP FRESHMEN AREN’T COMPROMISINGTHIS OUTRAGEOUSLY PHONY BUDGET CRISIS

Then as now, Republicans focused solely on cutting the social safety net and entitlement programs.  Remember welfare reform?  Republicans take credit for Clinton’s 1993 deficit-cutting package, but the truth is the balanced budget passed without a single GOP vote in either house of Congress.   By the time Clinton left office, there was a surplus.Bush/Cheney inherited the Clinton budget surplus and immediately began turning it into a deficit.

Despite their opposition to entitlements, Republicans passed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 expanding the program (can’t privatize it, figure other ways for private corporations to extract money from the program).  After being debated and negotiated for several months, the bill finally came to a vote  on a November morning at 3 am while America slept.  Among other things, the bill prohibits the federal government from negotiating discounts with drug companies.  Read the curious legislative history.

Bush launched wars with Iraq and Afghanistan and introduced tax-cuts that primarily benefited the rich.  None of these expenditures were offset and they all were kept off the books, giving the illusion that the country was in a much stronger fiscal position than it was.  Republicans admit under Bush they  “spent like drunken sailors”,   but when the spending was taking place, not a single Republican rebelled.  Remember, running up debt and deficits is a strategy.  
 
Six weeks before President Obama was sworn in, the economy collapsed and the Republicans began their familiar chant…“spending is out of control and the country is going bankrupt.” 
 
Newly installed Governors cut the federal workforce; remember, Reagan ( the man Republicans credit with economic problem-solving) increased the federal workforce to one of the largest in history.  They cut employee pay and pensions, while they delivered more tax cuts to the wealthy.  They busted unions, destroying employees last firewall between workers and employers.  All of these acts redistribute the treasury from the middle class and working poor to the wealthy.

It isn’t ideology that drives the Republican insistence on spending cuts, it’s a strategy.  Think about it…the Republicans controlled the House, the Senate and the White House for four consecutive years.  They could have fixed Medicare and Social Security, but for some reason, there’s never a problem unless a Democrat is in the White House.Listen to how fervently they defend cuts to defense.  Why?  Afterall, defense workers are unionized public employees.  Because there isn’t a department that shifts more taxpayer money to the private sector than the Defense Department.  There is no other federal vehicle that allows the wealthy to extract more money from the treasury, convert more taxpayer revenue to the private sector than the Defense Department.

Throughout history, since 1783, tax cuts for the wealthy and increased defense spending and union busting have increased the gap between the revenues and the expenditures. Shareholders and those on Wall Street have enjoyed inflated returns, while the wages for workers have taken a beating.   It’s a 21st century Gilded Age.

In the final analysis, the real targets are Social Security, Medicare, Medicaid; any program that supports the less fortunate.   Republicans have a long-standing, deeply-held  antipathy for both Social Security and Medicare. Not only did Reagan advocate that Social Security should be privatized, he was at the forefront of a coalition against Medicare with the same arguments we hear today.

How did the public ever buy the idea that Republicans are good stewards of the economy?   Studies have been done comparing every phase of economic growth, during Democratic and Republican presidencies and congresses, and they all show stunningly better performance when Democrats are in power.

The trickle down miracle never worked because lower taxes don’t generate more revenue, they generate deficits.  It is a fact that is so mathematically  basic, it borders on common sense.

Weekend Reading List

Sunday, December 16th, 2012

 

For this weekend’s reading list, we have articles on guns, criminal background checks, Japan’s miniscule rate of firearm killings, the Congressional Progressive Caucus’ Deal for All budgetary proposal, and always low wages at McDonald’s.

More Guns, More Mass Shootings – Coincidence? – Mother Jones’ investigation of the links between the proliferation of guns and the high number of mass killings in the US

Fatal Gaps – a report about the substantial gaps in the federal criminal background checking system for firearm purchases, and proposals on how those gaps can be closed

A Land Without Guns – an essay on how Japan has as few as two firearm killings per year in part because almost all guns are banned.

The Deal for All - a detailed accounting of the Congressional Progressive Caucus’s budgetary proposal, which seeks to protect earned benefits programs, increase revenue mostly through increased taxes on billionaires and big corporations, reduce military spending, and stimulate economic growth through investments in infrastructure and education

McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap – a story on the economic and other struggles of McDonald’s employees, and how many of those employees would have to work for 1 million hours to earn the amount of money that McDonald’s CEO takes home in a single year.

The GOP Crazy Train Keeps Chugging Along

Sunday, December 9th, 2012

Of the many factors that contributed to the GOP’s substantial losses in the 2012 elections, perhaps the most significant are that today’s GOP is focused on obstructionism and denying reality, rather than on making a serious effort to address the serious economic, social, and foreign policy challenges facing our nation.  The GOP’s obstructionism has led to, among other things, an inability to fully address the impacts of the 2008 recession, the downgrading of the nation’s credit rating due to the debt ceiling fight, and growing levels of vacancies on the federal judiciary. And far too much of the GOP has been focused on climate denial, rejecting evolution, birtherism, anti-immigrant nativism, death panels, Black Panthers, the myth of voter fraud, “creeping” Sharia law, denying that rape can lead to pregnancy, and other ridiculousness, rather than on serious issues like jobs and economic growth.  Faced with the choice of steady and pragmatic Democratic leadership versus a Republican Party that has gone off the deep end, it is not surprising that voters chose the Democrats.

The results of the 2012 elections have led some Republicans to suggest that the party has learned its lesson and is already moderating its approach by, for example, reaching out to Latino voters, being more open to compromise, and prioritizing jobs and the economy.  But the reality is that there is virtually no evidence that the GOP is offering anything more than meaningless talk on these issues.

If you want to get a sense of just how empty the purported efforts by the GOP to return to sanity are, check out David Brooks’ recent column in the New York Times, titled The Republican Glasnost.  Brooks claims that:

Over the past month, the Republican Party has changed far more than I expected. First, the people at the ideological extremes of the party have begun to self-ghettoize. The Tea Party movement attracted many people who are drawn to black and white certainties and lock-step unity. People like that have a tendency to migrate from mainstream politics, which is inevitably messy and impure, to ever more marginal oases of purity.

. . . . .

Second, politics is being reborn. For a time, Republican candidates like Richard Mourdock of Indiana proudly declared that they didn’t believe in compromise. Political activists spent more time purging deviationists than in trying to attract new converts.

But that mania has passed.

. . . . .

Finally, there has even been some shifting of economic values, or at least in how the party presents those values.

And what does Brooks offer as proof of these alleged major changes in the GOP?  The primary “evidence” that he points to is speeches by Senator Marco Rubio (R-FL) and Rep. Paul Ryan (R-WI) at last week’s Jack Kemp Leadership Foundation Award dinner in which the two offered some positive rhetoric about economic opportunity, reducing poverty, and immigration.  This is weak tea to say the least.  While Rubio and Ryan’s speeches included some nice-sounding, though vague, platitudes, they offered little in the way of policies to support such platitudes or to moderate the core Republican strategy of providing tax giveaways to the wealthy, increasing military spending, eviscerating Medicare and Social Security, and demolishing the safety net.  While Rubio and Ryan may be offering some nice talk to try to mask their policy goals and make themselves appear more palatable to the media as they gear up for likely Presidential candidacies in 2016, unless those policy goals change there is little reason to think that the GOP itself is changing.

More importantly, a look at Republican actions since the election demonstrates that the GOP crazy train is continuing to chug along virtually unabated.  For example, any claim that the GOP is returning to reality is belied by the Senate Republicans’ absolutely disgusting vote last week against ratifying the UN Convention on the Rights of Persons With Disabilities. As described at this FAQ:

The Convention on the Rights of Persons with Disabilities (CRPD) is a treaty that describes the obligations of ratifying countries to promote, protect, fulfill, and ensure the rights of persons with disabilities.  The treaty embodies the American ideals that form the basis of the Americans with Disabilities Act (ADA): empowering persons with disabilities to be independent and productive citizens

Ratifying the treaty would have put the US in a leadership role in helping to advance the cause of equality for persons with disabilities throughout the world, would have helped equalize employment standards regarding disabilities throughout the world, and would have assisted Americans living abroad who have disabilities.  Ratification of the Convention was endorsed by the US Chamber of Commerce and every major veterans organization, and former Senator Bob Dole, who has a disability as the result of his military service in World War II, made a special trip to the US Senate to encourage his fellow Republicans to vote for the Convention. Yet ratification went down to defeat in the Senate because all but eight Republican Senators voted against it.  And why did they do so?  Because Rick Santorum (R-13th Century) and Glenn Beck raised blatantly false conspiracy theories about the Convention threatening US sovereignty and letting the United Nations dictate how people raise their children. Such conspiracy theories are typically limited to the tin-foil hat crowd, but in today’s Republican Senate caucus, they trump common sense and disabled WWII veterans like Bob Dole.

Other evidence that the GOP has not changed abounds.  For example, last week Senator Mitch McConnell (R-KY), who has been in charge of the Senate Republicans’ obstructionism strategy for the past four years, took obstructionism to new heights when he filibustered legislation that he himself had proposed.  Over in the House, the GOP has selected only white males as chairs of the nineteen major committees, and the House Committee on Science, Space, and Technology is to be headed by a climate skeptic, Lamar Smith (R-TX).

Finally, Brooks suggests that there are “increasing signs that House Republicans are willing to unite behind Speaker John Boehner so he can cut a deal to avert the ‘fiscal cliff.’”  It is true that House Republicans are realizing that they have no real bargaining power because, without a deal, taxes will go up for everyone next year and the American people will hold the GOP responsible for that result.  And yet, Boehner and the rest of the House Republican leadership have not really put a serious proposal on the table.  Instead, they are demanding lower tax rates, combined with closure of unidentified loopholes, that would purportedly provide increased revenue only due to the mythical growth that allegedly would result from such tax changes.   And Boehner has made it clear that he plans to hold our economy hostage each time there is a need to increase the debt ceiling.  In short, there is little sign that the GOP believes more in compromise today than it did before the 2012 elections.

Brooks is a GOP apologist who make lots of money pretending to be a “reasonable” centrist.  As such, it is understandable that he needs to keep telling himself that the GOP is changing so that he can feel better about continuing to support a party that is riding a crazy train to nowhere. But, as the actions of Republicans over the past months have shown, it is going to take a lot more than a couple of speeches full of platitudes for the Republican Party to free itself of the crazy that has taken over what used to be the party of Lincoln, Teddy Roosevelt, and Eisenhower.

The Reason the Debt Panic is a Fluke

Saturday, December 1st, 2012

(By the Pragmatic Pundit)

The deficit is determined by the amount of money the government spends and the amount of revenues it collects in taxes. Both income and revenue are affected by the state of the economy and both are affected by the tax and spending policies made in the federal budget process.

During difficult economic times, government spending automatically increases because of an increase in the number of people eligible for need-based programs like food stamps and unemployment benefits.  At the same time, tax revenues tend to decrease because fewer people are employed and therefore pay less in taxes. Corporations also earn less profit, and they too pay less in taxes.

Spending and Revenues

Spending can be divided into three groups:

Mandatory spending is what everyone calls “entitlement programs”. The amount of money spent is determined by how many people apply and are eligible for benefits.  So the increase or decrease in these programs is not determined by Congress, but largely by the state of the economy and population.  

Discretionary spending goes through an annual appropriations process  that allows Congress to increase or decrease spending in a given year.  The discretionary budget is usually around one-third of total federal spending.

Interest on the debt that the government pays on its accumulated debt.

 Revenues come from three major sources:

1.   Individual income taxes – 47 percent of tax revenues are spent during the annual appropriations process. More than 100 million American households file a federal tax return each year, making up the federal government’s single largest revenue source. While, the wealthy are meant to pay a larger percentage of their earnings than middle- or low-income earners,  this is not the way it works out.

2.   Payroll taxes – paid jointly by workers and employers become trust funds used to pay for specific programs like Social Security and Medicare.  Established as payroll deductions (FICA), employees and employers each pay 6.2 percent of wages into Social Security and 1.45 percent into Medicare. Clearly, Social Security and Medicare are not “entitlements”, but earned benefits. There is also a contribution for unemployment insurance.

3.   Corporate income taxes paid by businesses receive the same designation as income taxes paid by individuals. They pay a tax rate from 15 to 35 percent.

When you hear Republicans bellyaching about the effects of a tax increase on small businesses, keep in mind that the 35 percent rate applies to taxable income over $18.3 million.  Even then, the percentage varies because of  “loopholes” , deductions, tax credits and tax havens to avoid tax liability.

There are also smaller sources of revenue, like taxes on imports and taxes levied on specific goods, like gasoline. In 2011, individual income taxes made up 47% (there’s that 47 percent, again), while corporations contributed 7.8% of all federal tax revenues.

The Debt to GDP

Politicians, pundits and economist talk a lot about the debt to GDP or gross domestic product.  Simply put, it is a measure of the debt compared to the total output of the economy.  According to the CIA World Factbook, at the end of 2011 the United States had a public debt to GDP of  67.8%.

I concentrate on public debt because it includes Treasury securities held by investors outside the federal government; individuals, corporations, the Federal Reserve System and foreign, state and local governments. Think about that…67.8% of our debt is considered public debt, but only 47% of that total public debt is owned by international investors, which means foreign investors only really account for about 32% of our total indebtedness.  The rest is held by State and local governments, individuals and corporations.  I’m not even certain it should be called debt, but all other obligations are intra-government or debt the federal government has borrowed from itself . These are loans from surpluses  owned by trust funds, such as Social Security, Medicare and the Civil Service Retirement Trust Fund.

Confused?

One-third of the federal debt is held by our own federal accounts, while two-thirds is held by the public.  When you buy a Treasury bond, you are effectively loaning money to the federal government. There are many different kinds of Treasury bonds, but they all represent a loan to the U.S. government. The greatest percentage of our debt is actually money that we owe to ourselves!  What do you suppose would happen if the government failed to repay itself?  Would Treasury foreclose on the White House and repossess Air Force One?

When you include debt held in government accounts (Social Security, Medicare, etc.), the debt to GDP is approximately 105%.  In simple terms, our indebtedness exceeds the total worth of of our assets by 5%.  Don’t panic.  We’ve been here before.  After World War II in 1945, the debt to GDP reached 122.7%.  How did we overcome?  It didn’t require trimming expenditures, revamping Medicare or Social Security.  The answer was jobs.  People went to work…remember “Rosie the Riveter”?

Enough Preemptive Freakouts

Friday, November 30th, 2012

(By NCrissie B)

The Preemptive Freakout du Jour is, of course, whether President Obama is about to “cave” in tax and budget negotiations with House Republicans. Last weekend, senior White House advisor David Plouffe said that successful negotiations would require concessions from both Republicans and Democrats:

The only way that gets done is for Republicans again to step back and get mercilessly criticized by Grover Norquist and the Right, and it means that Democrats are going to have to do some tough things on spending and entitlements that means that they’ll criticized on by their left.

Cue the Angst Mongers:

Okay. Deep breath.

Note the speculative scare words, such as “could be a raw deal for the middle class,” and “We have a lot of questions here about where this is going to end up, don’t we?”

Never mind that President Obama has plainly stated that Social Security is “off limits” in these negotiations. Never mind that the math is the math and, despite the chart Ed Schultz showed about the current deficit, a new report by the Congressional Budget Office shows that our long-term deficit is driven almost entirely by rising health care costs for seniors:

The aging of the baby-boom generation portends a significant and sustained increase in coming years in the share of the population that will receive benefits from Social Security and Medicare and long-term care services financed through Medicaid. Moreover, per capita spending on health care is likely to continue to grow faster than per capita spending on other goods and services for many years.

If progressives criticize conservatives for ignoring data they don’t like – and we should – then we can’t ignore data we don’t like … and the CBO’s data are very solid.

To solve our long-term deficit problem, we must flatten the growth curve on health care costs, and President Obama began working on that with the American Recovery and Reinvestment Act, which included funding for computerized medical records and comparative studies of treatment outcomes. The Affordable Care Act also includes provisions to reduce Medicare costs, but Christina Romer – former head of President Obama’s Council of Economic Advisers – wrote in June that Obamacare was only the first step in addressing the health care cost curve:

A natural approach is to strengthen measures already enacted. Once the payment advisory board has a track record, for example, perhaps it could be empowered to suggest changes in benefits or in how Medicare services are provided – say, along the lines of successful demonstration projects.

Likewise, the Bowles-Simpson bipartisan fiscal commission recommended, as part of overall tax reform, limiting the amount of health insurance benefits excluded from taxation. Like the excise tax on high-priced plans, this change would probably increase pressure to keep costs down.

Even larger departures from the current system may be needed. The law creates health insurance exchanges where individuals and small businesses can buy coverage. Including a reasonably priced public plan as an option could exert downward pressure on the price of private health insurance policies by increasing competition.

Yet Dr. Romer did not expect progress anytime soon, concluding:

Sadly, serious debate over further cost-savings measures may be a long way off. Some Republicans seem more interested in just limiting the government’s share of health care expenditures than in slowing overall spending. And some Democrats seem more interested in just preserving existing government programs than in making the entire health care system more efficient.

For the sake of the nation’s fiscal health, and the health and economic security of American families, it’s time to embrace cost containment in health care as the next great legislative challenge.

These are real challenges that demand serious discussions of alternatives and their benefits, costs, risks, and tradeoffs. President Obama and leaders in Congress will debate those. I don’t like all of the options currently on the table. I may or may not like all of the solutions eventually adopted. It’s too soon to know.

But it’s a whole lot more entertaining to have a Preemptive Freakout because … well … President Obama always caves in to Republicans anyway, right? Except he doesn’t:

In policy terms, Obama clearly had gotten the better deal. The trouble was that the political world and the public had been conditioned to see this episode as primarily a clash over the top-tier tax cuts – and on that Obama had not gotten what he wanted. Consequently, the media depicted the compromise as a loss for Obama, and progressive Democrats squawked mightily about the continuation of the tax cuts.

As Corn concludes:

In a recent White House meeting with labor leaders and progressive activists, Obama signaled he is ready to fight the GOPers – and this time dare the Republicans to block continuing the tax cuts for the middle class. But no one ought to forget that Obama, a progressive in his policy preferences, remains a pragmatist. What happened two years ago is not an indication that Obama is likely to yield in the new face-off, but that he will be assessing the political dynamics in gridlocked Washington and be willing to bargain hard for a good deal with true benefits. That’s not caving in. It’s governing.

Yes, it’s governing. But governing is messy, and full of compromises and deals that look icky as we watch them happen. As John Godfrey Saxe famously said: “Laws, like sausages, cease to inspire respect in proportion as we know how they are made.”

Or Saxe would have famously said that, if so many people didn’t wrongly attribute his quote to Otto von Bismark and Mark Twain. Those mistakes happen when people substitute ‘sounds true’ rumors for actual facts. Just sayin’.

And yes, Ed Schultz, I’m sayin’ it to you, and the others who are busy with their Premptive Freakout. Enough. Go climb a tree and nibble on a macadamia. It’s a lot better for your blood pressure. And mine.

(Crossposted from Blogistan Polytechnic Institute (BPICampus.com))

I Don’t Give a Tinker’s Damn about the Fiscal Cliff

Wednesday, November 28th, 2012

(By The Pragmatic Pundit)

The so-called Fiscal Cliff is a political creation…the cousin to Starve the Beast.  I don’t know why they think everyone is so dumb.  We print our own currency, set the interest rate and owe a third of the debt to ourselves.  Can I rant a little?

Every time I hear politicians say the approach to solving the deficit should be “fair and balanced”, I want to spit.  There was absolutely nothing fair and balanced about its accumulation.  The rich made out like bandits, while the Middle Class struggled.

But, you hear it all the time…”everyone has to sacrifice”.  Really?  Well, the Middle Class has been sacrificing for decades.  Now, all of a sudden, it is fair for “everyone” to feel the pinch?  I don’t think so!  The Middle Class has been slapped, punched and kicked long enough.

The rich have extracted the national treasury and refused to invest in the country and the Middle Class owes them something more?  The so-called job creators, created no jobs.  They just took their tax-cuts and ran.  Not because they are uncertain…because they are greedy, heartless and unpatriotic.

The Middle Class stood in unemployment lines, suffered the humiliation of food stamps and food pantries, dropped out of college or couldn’t go, moved back home, suffered through illness without medical care, watched the value of our homes diminish, moved into our cars and onto the streets.  We already went over the cliff.  We are broke and we should sacrifice more?

I don’t think so.

To whom much is given, much is expected; and that is as it should be.  The rich reaped all the benefits of the downturn, so let them finance the upturn.  Raise taxes on the rich and give the Middle Class the tax cuts for a change.  Raise the minimum wage to $12.00 an hour, so anyone working can earn a living wage. Give everyone access to healthcare and an education.  After a few decades, like the rich had, then we can talk about “fair and balanced”.  Until then, leave the Middle Class alone!

It’s our turn!