August 9, 2011
The Debt Ceiling "Deal"
This is a continuation of last week's post
about the debt ceiling fiasco. I wanted to make a few points about the final1) John Boehner: "I got 98 percent of what I wanted."
So
It certainly won't be the Republican's fault. You can be sure of that.
On a related note, right or wrong, S&P has now downgraded America's credit rating.
Hmmm....what was it that John Boehner said? "I got 98 percent of what I wanted." So let me guess. The downgrade will also be Obama's and the Democrat's fault and not the GOP's .
Yup, that didn't take long.
Jed Lewison of Daily Kos:
I guess their logic goes like this: We're going to destroy the economy if you don't give us what we want. And when you do capitulate, and things go to shit, we're going to blame you for the consequences of your capitulation. Just because we held you hostage doesn't mean you shouldn't get blamed.
Republicans are wrong again, this time about the balanced budget amendment, here, proving yet again they're not just always wrong, but can't be more wrong.
2) Mitch McConnell admits taking hostages works.
3) Congress has tried to address the deficit before. And there was always a balance of spending cuts and tax increases. This time was no different. Obama said he would A) only sign a bill that included both spending cuts and tax increases on the super rich that included the closing of corporate tax loopholes, and B) was willing to have a split of 75% spending cuts and 25% tax increases. Republicans countered with an 85/15 split.
What Obama finally agreed to was a 100/0. I don't think I have to tell you which is the 100 and which is the zero (Chris Hayes explains all this here).
That would be like a car salesman taking a few bucks off the sticker price of a new car, but after further negotiations you wind up paying sticker price.
Um, Mr. President, when you negotiate a deal, you're supposed to get something in return.
And no, raising the debt ceiling is not "something."
4) After every one one of these partisan battles, Obama always believes that the Republicans learned their lesson and will "play nice" next time. But they never do (it's Lucy, Charlie Brown and the football every single time). So you can be certain that Republicans didn't learn any lessons from the debt ceiling "negotiations," except of course that taking hostages and demanding a high price in ransom works (see the McConnell link above).
With that in mind, if this "Super Congress" doesn't agree on specific spending cuts and tax increases by late this year, it will automatically trigger drastic spending cuts that neither party likes, including from the sacred defense budget. But these triggered cuts will not change GOP behavior. Heck, it's all set up to be another long, dragged out partisan fight with Democrats, which is exactly what Republicans need to keep their moronic base in that perpetual state of anger, at Democrats. And they're not about to miss an opportunity like that. So next Thanksgiving, Republicans will be taking us over the cliff once again.
My guess is Republicans will follow the same pattern. They won't agree to any tax increase or the closing of a single corporate tax loophole, will demand more and more cuts to domestic spending, won't give an inch on anything - firing up their base in the process - and force the triggered cuts, which wouldn't kick in until 2013. And in 2012, pass a defense spending bill in the House that replaces most, if not all, of whatever was cut by the trigger. And when Obama and the Democrats oppose it, Republicans will run TV ads saying, "Obama and the Democrats are soft on defense," which they would have run anyway.
Also, defense spending could include foreign aid which Republicans despise so they'll gladly let that go.
So there's ways around defense cuts, and with "Democrats" are firmly on the Republican's side, you can be sure the GOP will find them. So don't worry, one way or another, Republicans will get the cuts they want, with Democrats getting nothing in return. As usual.
5) Oh my God, what have they done?
All this GOP-manufactured panic over the debt and deficit forced Washington into this mode of austerity and budget cutting. And it took this horrible deal for Wall Street to finally realize that not only was growth more important then the deficit, and the S&P downgrade, but that only the government can come to the economy's rescue:
Where was growth supposed to come from? Consumers, still burdened by the debt that they ran up during the housing bubble, aren’t ready to spend. Businesses see no reason to expand given the lack of consumer demand. And thanks to that deficit obsession, government, which could and should be supporting the economy in its time of need, has been pulling back.
All we've been hearing since the debt ceiling "deal" went through last week is, "what can the government do now to create jobs and grow the economy?" Um, it's a little late for that. Why wasn't that question being asked in 2009 and 2010?
When Obama took office, the economy was on lying on its back in intensive care needing round the clock attention. But after he got the too small and too boring stimulus through, he thought he was done and basically said, "Okay, now that that's over, let's address the deficit." So he turned his back on the depressed economy and those who lost their jobs and homes. Meanwhile, the bailed out banks and Wall Street firms who caused the economic meltdown were not only made whole by the taxpayer, but resumed making billions in profits.
So how's that austerity, no-strings-attached corporate welfare and non-prosecuted corporate fraud working out for ya?
And now with the credit downgrade, it's just another excuse for the right to call for more spending cuts. So we keep repeating the same destructive cycle.
Had government spending increased the last couple of years, and we invested in America, the economy would have grown, and therefore, lowered the deficit over the long run. But all this austerity and cuts in spending will just increase the deficit short and long term. All you have to do is learn from history.
David Woolner of Salon:
Just under three quarters of a century ago, a group of conservative economic advisers close to Franklin Roosevelt informed the President that they were worried about the rapid rate of growth in the US economy. Since 1933, when FDR took over at the height of the Great Depression, the economy had been expanding steadily, at an average rate of 14 percent per year. Schooled as most of these advisors were in the tenets of economic orthodoxy (which called for cuts in spending during an economic downturn), and unsure of the effects of the Keynesian-style deficit spending that the administration had been engaged in under the terms of the early New Deal, the President was advised to cut the budget, reduce deficit spending and tighten the money supply as a means to stave off inflation. Heeding their word (and no economist himself), FDR did just that.
The results were an unmitigated disaster.
Whatever Obama does now will be too little too late. He had his chance. Forget putting a chip on his shoulder and daring the GOP to knock it off. He's such a sap that he and his Treasury Secretary not only avoid blaming Republicans for this debt ceiling fiasco, but blamed it on - good grief - "both sides."
Obama's listened to Republicans, appeased Republicans and capitulated to Republicans, while giving liberals the finger, the back of his hand and toe of his shoe. And now we're stuck. But by all means, let's keep listening to Republicans.
August 12 insert: Paul Krugman sums up the last couple of years perfectly.
...there’s another emotion you should feel: anger. For what we’re seeing now is what happens when influential people exploit a crisis rather than try to solve it.
For more than a year and a half ...we’ve had a public conversation that has been dominated by budget concerns, while almost ignoring unemployment. The supposedly urgent need to reduce deficits has so dominated the discourse that on Monday, in the midst of a market panic, Mr. Obama devoted most of his remarks to the deficit rather than to the clear and present danger of renewed recession...
What the market was saying — almost shouting — was, "We’re not worried about the deficit! We’re worried about the weak economy!"...
So how did Washington discourse come to be dominated by the wrong issue?
Hard-line Republicans have, of course, played a role. Although they don’t seem to truly care about deficits — try suggesting any rise in taxes on the rich — they have found harping on deficits a useful way to attack government programs...
Check out the opinion page of any major newspaper, or listen to any news-discussion program, and you’re likely to encounter some self-proclaimed centrist declaring that there are no short-run fixes for our economic difficulties, that the responsible thing is to focus on long-run solutions and, in particular, on “entitlement reform” — that is, cuts in Social Security and Medicare. And when you do encounter such a person, you should be aware that people like that are a major reason we’re in so much trouble...
...So when the crisis struck and led to big budget deficits — because that’s what happens when the economy shrinks and revenue plunges — many members of our policy elite were all too eager to seize on those deficits as an excuse to change the subject from jobs to their favorite hobbyhorse. And the economy continued to bleed.
What would a real response to our problems involve? First of all, it would involve more, not less, government spending for the time being — with mass unemployment and incredibly low borrowing costs, we should be rebuilding our schools, our roads, our water systems and more. It would involve aggressive moves to reduce household debt via mortgage forgiveness and refinancing. And it would involve an all-out effort by the Federal Reserve to get the economy moving, with the deliberate goal of generating higher inflation to help alleviate debt problems.
The usual suspects will, of course, denounce such ideas as irresponsible. But you know what’s really irresponsible? Hijacking the debate over a crisis to push for the same things you were advocating before the crisis, and letting the economy continue to bleed.
6) For the last week, I've heard the left lamenting the fact that Democrats didn't get an extension of the one-year Social Security payroll tax holiday. Republicans wouldn't go for it, mainly because it's not a tax cut for the wealthy. (August 27 insert: And because Obama's for it.)
But Democrats crack me up. They've always said that tax cuts don't stimulate the economy; and they don't, at least not as much as repairing bridges would. So why is the left so upset about this not being part of the final deal? Besides, this the best idea Democrats can come up with?
But you see how things work these days? Now Democrats think tax that cuts stimulate the economy too. The next time Republicans agree with Democrats on a real jobs program anything, it'll be the first time.
Anyway, Obama got this temporary payroll tax holiday as part last December's budget "deal" capitulation. It was unprecedented. Never before had the funding source for Social Security been shifted.
The government is supposed to replace all that lost money to the Social Security trust fund. But my guess is, it won't, and why Obama wants to extend the holiday. Because with the trust fund "losing" more and more money, it will force - you got it - cuts to Social Security.
See how things work?
Tax holidays - especially corporate tax holidays - are not holidays. While some tax cuts are better the others, such as tax credits for installing solar or wind power, income tax cuts don't stimulate the economy all that much. They also explode the deficit and balloon the debt, they don't create enough jobs (if any) to make them worthwhile and just force cuts to Social Security, Medicare, Medicaid, education, infrastructure, transportation, aid to the states, etc. (everything but defense spending), which is exactly what Republicans and Obama want.
7) For some reason, self-identified Democrats approve of this destructive debt ceiling deal by an amazing 63/32 clip. What deal are they looking at? I'd hate to think of the deal Obama would have had to cut for Democrats to overwhelmingly oppose it.
By contrast, Republicans who "got 98 percent" of what the Speaker "wanted" approved it 35/58.
Incredible.
8) Liberals and the left have to stop making excuses and admit it: Obama's a conservative Republican! How much proof do you need?
9) Comedian George Carlin saw this thirty year assault on the middle class in 2005. I strongly, strongly recommend watching it, here (NSFW).
August 13 insert: Not to toot my own horn, but in 2005 I wrote:
So I was right - The Truth Behind George W. Bush - this is the GOP's strategy: Cut taxes, borrow and spend, start an unnecessary war, ignore the country's infrastructure, including the levees around New Orleans, so one way or another - by war and/or a natural disaster and refusing to raise taxes to pay for them - it'll put the country on the brink of bankruptcy. And the only way out is to make drastic cuts in Social Security and Medicare, thus fulfilling the GOP's goal of dismantling those nasty "big government" social programs; a process which they compassionately call "starving the beast."
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