President Obama

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.

Obama’s Extended Federal Family Responds to Sandy

Leo Gerard — Tue, 06 Nov 2012 07:40:15 -0500

In New Jersey, as Barack Obama and Chris Christie met last week to survey the devastation Hurricane Sandy caused, the President placed a reassuring hand on the heartsick governor’s shoulder. Later, the President embraced storm victim Donna Vanzant in Brigantine, N.J., and told her and all East Coast residents that he and the nation “are here for you.”

Here for you means the federal government would muster all its resources to help Americans devastated by a deadly hurricane to restore some sense of normalcy to their upturned lives and to help rebuild their homes and communities.

Americans unfailingly rally to the aid of those in need. A youngster helps grandma across the street. A community builds a wheelchair ramp for an injured veteran. Sometimes, though, the tragedy is too massive for the scale of help that families and neighborhoods can provide. Then Americans turn to the federal government to help them deliver safety and solace. This is among the most profound and basic duties of government. Barack Obama has insisted that it be performed well because he believes government can be – and must be – a force for good.
President Barack Obama greets New Jersey Gov. Chris Christie on arriving in Atlantic City after Hurricane Sandy. (AP Photo/Pablo Martinez Monsivais)

It’s not a matter of big government or small government. Although, frankly, a government small enough to drown in a bathtub, as Republican lobbyist Grover Norquist seeks, would not be large enough to respond to catastrophes such as Sandy’s destruction across 15 states or to the 750 tornadoes that ripped through the South and Midwest, including Joplin, Mo., in April and May last year. And a federal government that fobbed off responsibility for emergency management to the states or to private enterprise, as Republican presidential candidate Mitt Romney said he wanted to do during the GOP primary debates, would not be prepared to respond adequately to American catastrophes.

Romney has walked back those statements now, contending after Sandy hit that he wouldn’t eliminate the Federal Emergency Management Agency (FEMA). But the nation has seen what happens when a president is careless about the federal government helping Americans during emergencies. That would be, specifically, former President Bush’s reaction to Hurricane Katrina.

First, Bush chose patronage over qualifications in naming a FEMA director, appointing to the post an Arabian Horse Association functionary who had absolutely no experience or training in emergency management. Then when Katrina hit, the administration virtually ignored it – failing to respond to pleas for help from desperate governors and mayors; failing to cut short vacations, or even meals, to work on hurricane response, failing to provide available federal resources as Americans died in the Superdome.

In stark contrast, Obama demanded credentials when he selected his FEMA director. He went so far as to ignore party affiliation – appointing William Craig Fugate, a Republican. Fugate, who began his career as a firefighter and paramedic, was director of the Florida emergency management agency – a position that exposed him to rigors of responding to disasters, particularly hurricanes.

Even before Sandy struck the East Coast, Obama and Fugate began planning and coordinating a response. Proactively, the President called 20 governors and mayors to offer help and arrange expedited disaster declarations. He called Christie several times during the storm and gave the governor his personal phone number so Christie could reach him directly. He ordered FEMA and other federal officials to respond to calls from political leaders within 15 minutes. Everyone focused on the impending calamity.

Before the hurricane made landfall, FEMA organized search and rescue teams, sent 139 ambulances to New York, and established support centers with supplies like generators and blankets in New Jersey and Massachusetts. By Monday evening, when the storm hit New Jersey with winds of 80 miles an hour, FEMA had already delivered hundreds of thousands of ready-to-eat meals and bottled water for New Jersey residents who might need it. There would be no Superdome fiasco in New Jersey or New York.

By Wednesday, President Obama joined Christie in New Jersey to assess the devastation in person. A clearly exhausted Christie, who had previously been a vocal critic of the President, expressed strong support for Obama’s response to the storm, saying:

“The president has been all over this, and he deserves great credit.”

President Barack Obama embraces Donna Vanzant, owner of a New Jersey marina damaged by Hurricane Sandy. (AP Photo/Pablo Martinez Monsivais)

When tragedy occurs, we all naturally turn to our families first, brothers and sisters, parents and cousins, aunts and uncles who we know we can depend on, who we know will give us comfort and relief.

Obama sees government as an extended family. He referred to the federal agencies he collected to respond to Hurricane Sandy as a federal family. We all have immediate biological families, but we all also belong to the American family. We share American experiences and values, privileges and responsibilities.

President Obama has said many times that he believes we all are our brothers’ and sisters’ keepers. Here’s what he says in his speeches:

“Yes, our road is longer, but we travel it together. We don’t turn back. We leave no one behind. We pull each other up.”

That is what he sees American family members doing for each other. That is how Americans pull together to help fellow Americans struck by tragedy. And when the tragedy is of gargantuan proportions, Obama believes that to respond effectively, the federal family must be more than competent. It must be good to do good.

In addition to providing the bottled water and rescue teams, the federal family must, just as any good family member would, just as President Obama did in New Jersey, wrap consoling arms around the traumatized.

Pragmatism Tempered By Vision and Justice

Joseph M. Firestone — Thu, 01 Nov 2012 12:03:28 -0400

In this good post, Jared Bernstein, who is one of the few prominent writers in economics who is often close to being right, asks “How Did Things Get So Screwed Up?” he answers that it's money, ideology, and a rejection of fact-based policy analysis. He thinks that more pragmatism and willingness to accept facts would really help our politics.

But pragmatism is a vague term, and we have to be careful about what we mean by it. Few politicians have been more pragmatic than President Obama in the sense that he is willing to compromise principles to get something done. In being so pragmatic, I think he has damaged his presidency.

He never took the big banks into resolution when they were insolvent; but instead continued the bailouts and left control of lending and credit to the banks to the detriment of small business and people. In not taking them into resolution, he also left the overweening power of Wall Street and the big banks in place, a big mistake having consequences for the rest of his presidency.

In doing this, he also opened the way to those big obscene bonuses based on fictitious profits which the bank traders have enjoyed since 2009, and which so angered the American people. In passing the recovery act, he compromised its size and effectiveness for a few Republican votes, resulting in too small a stimulus, years of continuing high unemployment, and a major threat to his presidency and his re-election chances.

His approach to health care was so "pragmatic" that the ACA became an insurance company bailout whose full benefits can't be demonstrated until 2014, and which became a target leading to Republican control of the House and a near policy stalemate for the past two years. In addition, the bill is far from a solution to the problem of fatalities occurring due to lack of insurance coverage.

His approach to financial regulation has produced two inadequate bills First, the Credit Card Reform Act, which by failing to regulate credit card interest rates still allows CC interest at usurious levels as high as 30%, and this in a time when the cost of money to the banks is close to 0%. And second, the FINREG bill which fails to solve the main problem it was supposed to address, namely the ability of the big banks and their traders to crash the global financial system.

In addition, President Obama has allowed pragmatism to supercede justice in a number of areas. One of these is in the mortgage fraud area, where there have been only very few and trivial prosecutions bringing those who committed fraud to account. And the banks that were at the basis of these control frauds, have been allowed to negotiate very small settlements that are little more than slaps on the wrist when measured against the Trillions of Dollars of fraud they've committed.

A second area is in Government assistance to those harmed by the crash. The President's pragmatism seemed to him to dictate that he bail out the banking system, AIG, and the auto industry. But he evidently didn't feel a pragmatic need to bailout small business, working people, and student loan recipients, to help them cope with the effects of the Great Recession; and the Administration's programs for helping homeowners with mortgage difficulties have been laughable in their negligible impact on the mortgage market.

Another area in which pragmatism has superceded justice has been in national security. Look at the drone program and its results in killing uninvolved civilians. Look at the killings of American citizens without trial. Look at the President's claims that he has the authority to serve as judge, jury, and executioner, when it comes to deciding which American citizens are to be killed because he judges them to be enemy combatants.

I could go on and on with these examples, and none of this should be taken as a reason for voting for Romney rather than the President, or for voting for Jill Stein rather than the President, if you live in a swing state. But the point I am making is that when pragmatism supercedes justice, or when it is used to pass legislation that fails to solve problems so that politicians can then point to "accomplishments" which actually accomplish very little, then I think it is the wrong kind of pragmatism, a pragmatism we don't need and should avoid.

"Always look forward, never look backward" wasn't the right way to go, because not investigating prosecuting, and punishing crimes creates a double standard of law and poisons the future. Until we can serve the needs of justice arising out of the Great Financial Crash, the Housing crisis and the decade following 9/11, we won't be America again. We'll only be a failing democracy, and an emerging plutocracy and a sad, shadow of the Land of the Free and the Home of the Brave!

So, to right things, I think we need more than fact-based pragmatism, Jared. We need pragmatism tempered by vision and justice. It is this kind of pragmatism, the pragmatism of Dewey, FDR, Harry Truman, and Jack Kennedy, which is absent from American politics today!

(Cross-posted from New Economic Perspectives.)

Romney Willing to Win Without Honor

Leo Gerard — Tue, 30 Oct 2012 09:39:03 -0400

Mitt Romney kept quiet last week when the subject was rape and God’s will. He remained silent the week before when the news was all about Illinois factory workers pleading with him to stop his alma mater Bain Capital from offshoring their jobs.

At no time this year did Mitt denounce Republican employers who threatened their workers if President Obama is re-elected or condemn repeated Republican legislative attempts to suppress Democratic votes.

Throughout the campaign, Mitt Romney confronted numerous George Washington moments -- opportunities to establish an aura of honor. It takes moxie to tell fellow Republicans that voter suppression is un-American. Only a guy with strongly held principles would stand up to the firm he founded and insist they stop the morally bankrupt practice of offshoring jobs from profit-making American factories. At every turn, Romney chose the ignoble path. He kept his mouth shut rather than speak up for what’s right.

Just last week, an opportunity for righteousness landed in Romney’s lap. It happened when the Republican candidate for U.S. Senate in Indiana, Richard E. Mourdock, said he opposed all abortions, even in cases of rape, and suggested that God intends rape to happen. Here’s what Mourdock said:

“Even when life begins in that horrible situation of rape, it is something that God intended to happen.”

Romney could have specifically renounced this view – that God intends women to be raped and become pregnant as a result. And he could have underscored that position by ending television ads in which he endorses Mourdock.

But he didn’t. A campaign spokeswoman said Mitt “disagreed” with Mourdock on that rape thing, but still supports him. Since then, Mitt has refused to answer questions about Mourdock. And he’s kept airing his Mourdock endorsement ads.

Clearly, Mitt values a Republican-controlled U.S. Senate over a decent stand on rape.

Just the week before, heightened news coverage of the plight of workers at the Sensata factory in Freeport, Ill. gave Romney another opportunity to do the right thing.

He chose to do nothing.

The 170 workers at Sensata will lose their jobs at year’s end when Bain Capital finishes shipping the car sensor factory lock, stock and machinery to China. The workers have repeatedly petitioned Romney to intervene with Bain, a firm he created and still profits from, to stop the offshoring.

Romney stiffed them. The candidate who claims he would create 12 million jobs if elected president failed to make an attempt to save the jobs of these 170 workers at a successful, money-making American factory. He didn’t send the workers his condolences for personally profiting from their calamity. He has never even acknowledged the Sensata workers’ existence.

At virtually any moment as he ran for president over the past two years, Romney could have very publically deplored Republican attempts to suppress Democratic votes. That’s because virtually continuously over that time, Republican-controlled legislatures, Republican governors and other GOP officials have concocted a variety of measures to wrest from Democrats their right to vote. These include passing onerous photo ID requirements, limiting early balloting and aggressively purging voter rolls.

These measures disproportionately affect minority, poor, disabled, elderly and women voters, all of whom tend to vote Democrat. Among the most egregious examples occurred in Ohio where the secretary of state tried to limit poll hours in Democratic-dominated counties and extend them in Republican-controlled counties.

At any time during the massive publicity over any one of these incidents across the country – from Maine to Montana and Florida to Arizona – Romney could have stood up and spoken for fairness. He never did – not even after the Republican National Committee was forced to fire a shady voter registration firm that was caught in September submitting hundreds of fraudulent registration forms in Florida or after a Republican operative in Virginia was criminally charged in October with throwing completed voter registration forms in a Dumpster.

A simple statement from Romney would have sufficed: winning by means of voter suppression and registration fraud is craven and beneath the dignity of anyone seeking public office. But he said nothing.

Similar to voter suppression is the attempt at voter coercion that has been made by numerous employers this year. Just this past week, Mike White, owner of Rite-Hite, a Milwaukee industrial equipment manufacturer, threatened his workers with “personal consequences” if President Obama is re-elected. Earlier this month, timeshare mogul David Siegel, who is building himself a 90,000-square-foot, $100 million home, threatened to lay off his workers if President Obama is re-elected. Arthur Allen of ASG Software Solutions and the Koch brothers of Georgia Pacific, told their tens of thousands of workers they’d suffer fallout if Romney loses.

Romney could have acted as a shield for workers by condemning this intimidation. Instead, in a June conference call with business owners, Romney encouraged bullying. He told the business owners:

"I hope you make it very clear to your employees what you believe is in the best interest of your enterprise and therefore their job and their future in the upcoming elections.”

What Americans want is a president like George Washington. The general’s appeal is not the quirky wooden teeth or odd half-finished portrait. It’s the never-tell-a-lie, step-down-from-power nobility of the guy. Romney, by contrast, has shown he’s willing to win without honor. He doesn’t seem to know Americans won’t elect a candidate they believe lacks nobility.

Romney Loves American Cars; Obama Loves American Car Workers

Leo Gerard — Tue, 25 Sep 2012 09:17:49 -0400

GOP presidential nominee Mitt Romney, son of an American Motors CEO, naturally says he loves American cars. His wife, as he put it, “drives a couple of Cadillacs.” He’s installing an elevator in his beach mansion just for his cars. Though a millionaire, he rejected flying his five sons to a vacation destination, instead packing them into a car, then strapping their dog Seamus’ carrier to the car roof for a ride that, shall we say, challenged the canine’s intestinal fortitude.

President Barack Obama, by contrast, has given some love to American car companies and American car workers. He rescued Chrysler and General Motors, preserving the American icon companies and hundreds of thousands of American car manufacturing jobs. He imposed sanctions on Chinese tires that received improper export subsidies, a move that saved thousands of U.S. tire-building jobs. And now he’s challenging illegally-subsidized Chinese auto parts to sustain American companies and workers.

Romney has blasted Obama every auto-manufacturing-job-preserving step of the way. On the auto bailout, Romney admonished, “Let Detroit go bankrupt.” He condemned the tariffs on Chinese tires. Romney claims he loves American cars. But the actions of his private equity firm, Bain Capital, in buying companies that were “pioneers” in offshoring American jobs, suggest he’s fine with American firms making cars and car parts overseas. Obama, by contrast, took the action necessary to ensure American cars are made in America by American companies employing American workers.

Here’s what Romney actually said about his adoration for cars:

“I love cars. I love American cars. And long may they rule the world.”

When it came to helping them continue to rule the world, however, Romney dissed Detroit.

President Obama embraced Detroit. He took money from the Wall Street bailout fund and used it to help GM and Chrysler continue to rule the world. GM regained the title of world’s largest car company in January and hundreds of thousands of auto and auto part manufacturing workers retained their jobs.

Similarly, in September of 2009, President Obama imposed duties on unfairly traded Chinese tires. My union, the United Steelworkers (USW), filed the trade case that led to those duties. The sanctions saved thousands of tire-making jobs in the United States and contributed to creation of 1,000 more.

Earlier this year, the USW, the Alliance for American Manufacturing and 189 members of Congress urged Obama to take yet another trade action, this one to protect American auto parts manufacturers and their workers. The request followed publication of four reports detailing China’s illegal export subsidies to its auto parts sector. Nations may subsidize manufacturing for internal consumption, but international law prohibits subsidizing products to be exported because it distorts the market, causing the bankruptcy of manufacturers in countries where the artificially cheap products are sold.

The auto parts complaint says that forbidden export subsidies, including cash grants, preferential tax treatment and other perks valued at $1 billion over the past three years enabled China to jump from 16^th largest producer of auto parts in 2002, when it exported $7 billion in parts, to 5^th largest last year when it exported $70 billion.

The upshot is that imports of auto parts from China increased seven fold, contributing to the loss of nearly half of all U.S. auto parts jobs – 400,000 – since 2000. An example is Olymco, Inc. a Canton, Ohio, metal-plating company where 100 workers, members of the USW, once made auto parts. Now, mainly as a result of subsidized Chinese competition, only 11 workers remain.

The predatory Chinese practices encourage U.S. auto parts makers to offshore manufacturing, and now some of the largest U.S. auto parts companies produce in China.

Sensata, a car parts manufacturer in Freeport, Ill. is among those on the way to China. The 145 workers in Freeport, who make sensors and controls, are training their Chinese replacements.

These workers may return to China to join many there who are packed into dormitories that rival turn of the 20^th Century U.S. tenements for slum conditions. Romney described workers in a Chinese appliance factory he visited:

“working, working, working as hard as they could, at rates of roughly 50 cents an hour. They cared about their jobs; they wouldn’t even look up as we walked by.”

That’s right. These exploited workers kept their heads down. These 50-cent-an-hour laborers feared they’d be fired for the audacity of looking at a quarter billionaire American visitor.

Sensata is owned by Bain Capital, the company Romney founded in 1984, the private equity firm that Romney claims he left in 1999, even though it continued to pay him millions for a decade afterward. The workers at Sensata have publically begged Romney to intervene with Bain on their behalf to keep the factory in the United States. They’ve collected 35,000 signatures supporting their cause. They’ve got the backing of the Freeport City Council, U.S. Rep. Jan Schakowsky and Illinois Gov. Pat Quinn. They’re camping outside the factory in a tent city called Bainport. But Romney hasn’t responded. No word from the candidate who claims to love American cars.

He loves owning ‘em. He relishes riding them up and down on elevators. But when it comes to showing a little love for car businesses and car workers, Romney’s frigid. Just ask the workers cooling their heels at Bainport.

The auto parts case is Obama’s ninth trade action against China. The Washington Post wrote:

“The Obama administration has steadily amped up its enforcement actions against China at the WTO.”

Obama has repeatedly confronted countries whose illegal trade practices threaten American companies and workers, filing twice as many cases in one term as Bush did in two. He has tangibly demonstrated his love for American cars and American car workers.

Romney, Ryan, GOP Demand Obama Stop Strengthening Welfare Work Mandate

Leo Gerard — Tue, 18 Sep 2012 10:34:15 -0400

Republicans in two Congressional committees voted last week to press forward with legislation that would deny states the flexibility they requested to help more welfare recipients get jobs.

That’s right.

Not only that, Rep. Paul Ryan, the GOP vice presidential candidate, said last week he is eager to return to Washington this week for a floor vote on the Republican measure prohibiting the Obama administration from, as the Department of Health and Human Services (HHS) described it:

“encouraging states to consider new, more effective ways to meet the goals of TANF (welfare), particularly helping parents successfully prepare for, find and retain employment.”

That’s right.

Republicans don’t want the Obama administration to help states get welfare recipients off the dole and into jobs. In July, Republican presidential candidate Mitt Romney launched an attack on the administration’s offer to meet a demand from states for more flexibility so states could move more people to work instead of pushing more paper around. Now, Republicans in Congress are taking up the cause of thwarting Obama’s plan to grant states’ request for flexibility. Historically, Republicans supported moving welfare recipients off the federal rolls and onto private pay rolls. But they’re not going to let Obama get credit for accomplishing that.

This dispute began with an attempt by the Obama administration to reduce regulatory burdens. Here’s what President Obama wrote Feb. 28, 2011 in the Administrative Flexibility memo:

“I am instructing agencies to work closely with state, local, and tribal governments to identify administrative, regulatory, and legislative barriers in federally funded programs that currently prevent states, localities, and tribes, from efficiently using tax dollars to achieve the best results for their constituents.”

The Department of Health and Human Services (HHS) took the directive seriously and asked states for suggestions. Some state officials complained about burdensome welfare reform paperwork requirements and asked if HHS would provide flexibility. Among them were Utah and Nevada, both of which have Republican governors. Utah also has a Republican supermajority in its legislature.
HHS responded with a memo to states issued on July 12. It offers states a chance to achieve flexibility through waiver of some welfare rules if states conduct HHS-approved pilot programs that move additional welfare recipients to work in measureable ways.

The memo states at least 10 times that the goal is increased employment. For example, there’s this:

“HHS will only consider approving waivers relating to the work participation requirements that make changes intended to lead to more effective means of meeting the work goals of TANF (welfare).

“Moreover, HHS is committed to ensuring that any demonstration projects approved under this authority will be focused on improving employment outcomes and contributing to the evidence base for effective programs; therefore, terms and conditions will require a federally-approved evaluation plan designed to build our knowledge base.”

In a letter that accompanied the memo, HHS repeats incessantly that all proposals must fulfill the goal of increased employment. Of the 21 sentences, at least 10 specify that less welfare and more work is mandated by the law, is important and will be required for waiver. For example, there’s this:

“The (HHS) Secretary is only interested in approving waivers if the state can explain in a compelling fashion why the proposed approach may be a more efficient or effective means to promote employment entry, retention, advancement, or access to jobs that offer opportunities for earnings and advancement that will allow participants to avoid dependence on government benefits.”

Despite all that, Mitt Romney began condemning the waiver offer immediately after it was issued. Congressional Republicans hope this week to bludgeon it to death with legislation forbidding HHS from providing the flexibility requested by governors, including Republicans Gary Herbert of Utah and Brian Sandoval of Nevada. Herbert’s state department of HHS wrote the federal HHS in 2011 seeking flexibility:

“Nevada is very interested in working with your staff to explore program waivers. . .”

Like welfare-to-work, Republicans have long supported “flexibility” for states in implementing federal mandates. For example, in 2005 every Republican governor in the nation – 29 of them – wrote Congress to support a bill that would have allowed waivers to welfare reform law requirements. The governors told Congress they wanted “flexibility to manage their TANF (welfare) programs.” The letter said:

“Increased waiver authority, allowable work activities, availability of partial work credit and the ability to coordinate state programs are all important aspects of moving recipients from welfare to work.”

Mitt Romney signed that letter. He was among the 29 governors seeking flexibility through waivers to manage welfare.

That’s right. The same Mitt Romney who now is denouncing the Obama administration’s effort to provide flexibility.

Now, Romney despises flexibility. Now, he hates waivers. Now, he’s demanding an end to the effort by HHS to give states the ability to experiment with pilot programs to increase the employment of welfare recipients.

It’s yet another Romney flipflop, another Romney Etch-A-Sketch moment. Said it once, erase it now. Romney figures GOP inconsistency doesn’t matter as long as it hurts President Obama somehow.

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.)

Better Off? Hell Yes!

Leo Gerard — Tue, 11 Sep 2012 10:24:32 -0400

Damn right America is better off than it was four years ago.

Four years ago was September 2008. George W. Bush was president and Wall Street giant Lehman Brothers was collapsing. It was a time of fear. It was a time of panic about the future. Recalling that anxiety is unsettling. But it’s important for comparison sake.

Lehman filed for bankruptcy this week four years ago – Sept. 15, 2008. Global financial markets spun into a panic. Credit markets froze worldwide. The stock market plunged. GM and Chrysler fell into crisis. Foreclosures were spiking and housing prices plummeting. Main Street shops and factories couldn’t get ordinary loans essential to sustain routine business. Nearly half a million workers lost their jobs that month. It was the ninth consecutive month of massive job losses. The Bush administration had converted a vibrant economy and budget surplus it had inherited from former President Bill Clinton into the Great Recession and massive deficits. America was still mired in two wars, including one Bush started on false pretenses.

Now, in September 2012, global financial markets have stabilized. Credit is available to Main Street. GM and Chrysler are building cars and creating jobs. Unemployment is declining as the private sector has added jobs to the economy every month for the past 30. The value of housing is rising once again, creating wealth for the middle class. Now there’s a financial reform law to prevent another Wall Street bailout. There’s Obamacare to help families retain and secure health insurance. The war in Iraq is over and Osama bin Laden is dead. Is America better off than it was four years ago? Hell, yes it is!

September 2012 can’t be described as boom times. But it’s sure not the dread-filled days of September 2008. As former President Clinton so eloquently said last week in his convention speech, describing the Republican attitude toward President Obama:

“We left him a total mess. He hasn’t cleaned it up fast enough. So fire him and put us back in.”

Republicans want Americans to put them back in charge. Their presidential nominee, Mitt Romney, has promised to “restore” America, to return the country to the days before President Obama.

The Romney plan to “restore” America involves repealing, revoking and rejecting every advance President Obama has achieved, including health insurance reform and Wall Street regulation. As Andy Borowitz suggested, if Romney could, he’d revive Osama bin Laden and kill Detroit. Anything to take America back(wards).

Luckily, Romney wouldn’t be able to undo President Obama’s auto bailout – although he opposed it from day one, urging “Let Detroit Go Bankrupt.” He wrote:

“If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye.”

Well, GM and Chrysler got bailouts, and both are doing fine, thank you, Mr. Romney. In fact, in January GM reclaimed for a few months the title of world’s largest car manufacturer. Both companies are repaying the government loans and 1.45 million people are working as a direct result of the bailout, according to the nonpartisan Center for Automotive Research.

Would America be better off without GM and Chrysler? No, it would not. That according to 1.45 million employed people.

Also luckily, Romney couldn’t undo President Obama’s stimulus. He’d like to, though. His campaign is repeating the false GOP meme that the money was wasted.

The non-partisan Congressional Budget Office estimates that the stimulus created or saved as many as 3.3 million jobs. Romney would have preferred no stimulus. He’d have abandoned those workers – your father-in-law, your kid, your neighbor – rendering them unable to pay their mortgages, unable to support their families, unable to imagine a future.

Would America be better off without the stimulus? No, it would not. That according to 3.3 million employed people.

A President Romney could, however, reverse the financial and health insurance reform measures. And he’s pledged to do that “on day one.” Without financial reform, Wall Street could resume, unfettered, the same risky betting that plunged the country into the Great Recession.

Without the health reform law, insurance companies would immediately cancel coverage for millions of young adults now on their parents’ plans and cut off untold millions of Americans with pre-existing conditions and those who have exceeded the now-banned lifetime caps. In addition, senior citizens would have to pay more for prescription drugs and preventative care.

Would America be better off without the financial and health insurance reforms? No, it would not. That according to Americans who would be sicker and poorer and at greater economic risk without the laws.

Romney also promises to restore America to the Bush days of special deals for the rich and up the ante by giving the 1 percent additional tax reductions. Bush didn’t pay for his tax cuts, resulting in massive deficits, and Romney hasn’t specified how he would either.

Would the country be better off if the rich paid even less in taxes? No, it would not. That according to the 99 percent and President Obama. He pledges to end the Bush tax cuts for those making over a quarter million and begin paying down the nation’s debts.

President Obama plans to take the country forward, to create a better tomorrow.

As former President Clinton walked onto the convention floor last week, the Fleetwood Mac song “Don’t Stop” played in the background. This is the refrain:

“Don't stop, thinking about tomorrow,
Don't stop, it'll soon be here,
It'll be, better than before,
Yesterday's gone, yesterday's gone.”

Yesterday’s gone. Thank goodness because America is much better off than it was four years ago. Don’t stop thinking about tomorrow.

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.)

Labor Day: Team America, Including Workers, Built That

Leo Gerard — Tue, 04 Sep 2012 09:14:07 -0400

The GOP, the party of exclusion – no gays seeking marriage allowed, also no Hispanics, no black people, no poor people who are on or ever were on welfare, and no women who are on or ever were on birth control – yeah, that private party spent last week taking sole credit for America's greatness, saying in speeches, announcing on signs and even chanting: We built it.

Republicans did it all, they said. The GOP accomplished that exclusively, they contended.

Ann Romney adopted the braggadocio, assigning to her husband all credit for the success of private equity firm Bain Capital. She said of GOP nominee Mitt Romney:

“I can tell you Mitt Romney was not handed success. He built it.”

No help from anyone, not Bain & Co. founder Bill Bain, not Romney’s fellow Bain workers, not the Bain investors, certainly not the government that Romney considers so evil but that he wants to run. He built Bain all by himself.

This is a new week though. It’s a week that begins with Labor Day. For that reason, it’s a time when Republicans will be falling all over themselves to compliment American workers – well, except unionized workers, who Republicans hate and who Republicans would like to exclude from their party, along with those gays, poor people and women using birth control. This week, Republicans will ever so briefly share some credit for the greatness of America with white, male, non-union, blue collar workers – the ones Republicans believe they can convince to vote for the quarter billionaire they’ve nominated for president. Next week, however, the GOP will be back to claiming Republicans built it all by themselves.

A couple of weeks ago, President Obama said he believes America’s success was forged by the talent and hard work of innovators, risk takers, researchers, hard laborers, skilled workers and government leaders mixed with community support, faith and hope. He explained that no one person can take credit for the greatness of America, no individual built that. He said:

“If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet. The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.”

Republicans, have been pounding President Obama about that ever since. They contend one person did build that. No help provided or needed. If Bain was successful, then Romney did it all by himself. He gets all the credit.

Well, that might be right except for the credit that local, state and federal government should get. And that credit, of course, goes to citizens because they provided the government with the tax money that politicians handed Bain companies.

Yeah, that’s right. Bain companies took corporate welfare. One of ’em even required a new tax!

In the mid-1990s, Bain invested in a start-up mill, Steel Dynamics, that was to be constructed for $385 million in DeKalb County, Ind. The mill got built with $37 million in subsidies and grants from Indiana and DeKalb County. In addition, DeKalb County levied a new quarter-percent income tax on residents to pay for infrastructure improvements such as roads and railroad exchanges that benefited Steel Dynamics.

Bain put $18.2 million into the project, less than half of what Indiana residents did, and the private equity firm took out $104 million when it sold its share five years later. Romney, of course, contends he built that all by himself.

Similarly, California taxpayers built a conveyor bridge between two Bain company buildings. New York taxpayers gave Bain tax breaks and lower energy bills so it wouldn’t move a company to New Jersey. South Carolina taxpayers gave Bain company Holson $200,000 in utility support and a $5 million construction bond. Maryland taxpayers gave Bain company Staples $2.3 million in grants and low-interest loans. And there’s more government help for Bain companies Sealy, Steam International, Alliance Laundry Systems, Burger King. . .

But, you know, Romney did it all by himself.

Then there’s the 2002 Salt Lake City Olympics that Romney claims to have saved all by himself. Right. Except for that quarter billion dollars that American taxpayers donated in the form of federal subsidies to rescue the games.

Other GOP members who spoke on the special “Republicans built it” day at the convention were Phil Archuletta, owner of P&M Signs, and Sher Valenzuela, who owns an upholstery business. Both received government aid to build their businesses. Archuletta complained that his business didn’t get enough tax dollars out of the federal stimulus package – only $340,000. Valenzuela got $2 million in loans from the Small Business Administration and $15 million in government contracts, some noncompetitive. But, you know, they did it all by themselves.

Last week, while Republicans claimed credit for building by themselves everything that’s great in America, President Obama upped the ante on his contention that many achievements are a result of group efforts. The President told 6,500 students at the University of Virginia that securing a tax credit for college tuition, increasing tuition grants and extending low interest interest federal student loans, were all possible “because of you.”

President Obama made no claim that he built that by himself. On Labor Day, he recognizes the contributions union and non-union workers made to building this great country.

All Americans built that.

***

(Now some may say Republicans love black people and Hispanics. Both Former Secretary of State Condi Rice and Sen. Marco Rubio spoke at the convention. But here’s the thing, Ann Romney last week referred to Hispanics at a Latino Coalition luncheon as “you people,” and two GOP Convention delegates threw peanuts at a black CNN camerawoman and yelled, “This is how we feed the animals.”)