Republican Party

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

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

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

Like a fox.

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

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

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

It's time to follow the money.

Money Source: Bankers

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

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

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

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

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

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

Their Money's Worth: The Bankers

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

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

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

(via Business Insider)

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

Money Source: Billionaires

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

It's the finest election money can buy.

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

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

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

Their Money's Worth: Billionaires

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

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

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

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

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

Money Source: Big Corporations

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

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

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

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

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

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

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

Their Money's Worth: Corporations

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

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

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

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

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

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

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

Ryan's Follies: Back to Liberty

Joseph M. Firestone — Thu, 16 Aug 2012 22:38:19 -0400

More on liberty from Ryan's reply to the President's 2011 SOTU. These are about that old Republican hypocritical favorite, “small government.”

”The President and the Democratic Leadership have shown, by their actions, that they believe government needs to increase its size and its reach, its price tag and its power.”

What planet does Congressman Ryan live on? The Democrats have done very little to increase the size of Government. The measure of that is that the average annual growth in Federal Government spending is the lowest it's been in the period since Dwight Eisenhower became President. In addition, Federal spending as a percent of GDP is still extremely low compared to National Government expenditures by the nations mentioned in my last post, and has only risen about 5 percentage points from Bush Administration levels, in response to the economic crisis, which, remember, was caused by policies avidly supported by Paul Ryan and conservative Republicans.

In addition, the President, much to his discredit, has done all he could to keep Government expenditures revenue neutral or revenue positive, beyond expenditures for defense, the stimulus, and increases in social safety net expenditures resulting from the recession. His health care reform bill is a disgraceful attempt to bailout the insurance companies without taking them over, because he would not entertain Medicare for All, since it wasn't “revenue neutral.” Never mind that enhanced Medicare for All would have saved the private sector $900 Billion per year in Medical Costs, and that the stimulus involved in an additional $800 Billion of Federal deficit spending would probably have created an addition 2 million jobs, at least.

”We believe a renewed commitment to limited government will unshackle our economy and create millions of new jobs and opportunities for all people, of every background, to succeed and prosper. Under this approach, the spirit of initiative – not political clout – determines who succeeds.

“Millions of families have fallen on hard times not because of our ideals of free enterprise – but because our leaders failed to live up to those ideals; because of poor decisions made in Washington and Wall Street that caused a financial crisis, squandered our savings, broke our trust, and crippled our economy.”

The history of America is largely the history of extending initiative from the economic sector to politics and gaining advantage in both sectors. We've seen that with the railroads, the steel and oil industries (including Paul Ryan's sponsors, the Koch brothers), coal, the mass media, telecommunications, the software industry, the FIRE sector, and most other industries that have scaled the economic heights in this country. There is no way to separate economic initiative from its extension into politics. The idea that these two can be separated is a myth to persuade Americans without much power that what is happening to them is due to impersonal economic forces, rather than the use of previously accumulated wealth and political power to rig the context of the economic system so that the already wealthy can reap even greater rewards in the future.

So, unfortunately, as much as we would like to believe that a company's success in America has nothing to do with politics. It, most often, is intertwined with either favorable political conditions, political influence, or both. Congressman Ryan knows that very well because he, and his Republican and Democratic colleagues, are the recipients of attempts to "fix" the political system, so that certain private sector businesses can profit.

So, I don't know whether Congressman Ryan thinks that's the “spirit of initiative” or not. But I think it's just as much, if not more, about buying political clout than it is about economic initiative, innovation, and '”free enterprise.”

Ryan goes on to blame Washington and Wall Street for decisions that caused the financial crisis. I certainly agree; But I also think that the wrong decisions made by Washington include de-regulating Wall Street, so that the spirit of “free enterprise” and the influence of the FIRE and energy sectors reigned supreme.

That happened during the Clinton Administration under the influence of Robert Rubin and Larry Summers, and then the Bush Administration saw to it that the SEC would not enforce the inadequate regulations that still remained. Unregulated “free enterprise” produced unprecedented accounting control frauds and bubbles in the Real Estate markets which eventually led to the crash of 2008. Then the Obama Administration bailed out the banksters/fraudsters and until now has refused to investigate and prosecute the perpetrators, while moaning about how we have to look forward and not backward.

Meanwhile, Paul Ryan, along with Mitt Romney, are responding to all this by telling us that we need to back off regulation of the private sector, and that will make everything all right. But anyone with an ounce of common sense knows that the only thing that will clean up the banking system, and restore public faith in it, is cleaning up the frauds and punishing the people responsible.

Why isn't Paul Ryan calling for that if he wants people to have faith in “free enterprise” again? He needs to keep in mind that there's no freedom without responsibility and accountability, and that his prescription, and that of the Republicans is to put responsibility and accountability aside, and to let working people bear the burden of the failings of the Wall Street FIRE sector and the corrupt Congresses and Administrations that failed, and still fail, to regulate them.

Finally, Congressman Ryan's plea for a return to limited Government would be far more credible if he were as much concerned about limitations on the size and intrusiveness of Government when it comes to privacy, a woman's reproductive rights, civil liberties, rights of habeas corpus, protections against torture, and the right to a speedy trial, as he is about the non-existent rights of businessmen to subvert markets through fraudulent activity hiding beneath the skirts of the ideal of “free enterprise. He would also be much more credible in his concern for liberty, if he were concerned that “necessitous men, are not free men,” and were willing, in the interests of liberty, to strengthen, instead of weaken, the social safety net by making its provisions as generous as the safety net in other civilized nations. He would, further, be still more credible, if his concern for liberty were great enough that he would support Medicare for All, so that employees in the United States would no longer be tied to jobs that they don't like, and were free to move to other employment without having to worry about interrupting or degrading their health care coverage, and risking their lives in the process.

He would, further, be even more credible, if his concern for liberty extended to providing a Federal Job Guarantee (see posts 42-50) to everyone who wanted to work, so that they had the freedom to do so. And he would, finally, be even more credible that that, if he recognized that liberty is not about small sized Government or big Government, but is, instead, about Government that is the right size, to do those things that will maximize the liberty of as many people as possible in our nation.

It's about recognizing that the liberty of individuals is often in conflict with the liberty of other individuals, and that you can't maximize liberty across all individuals by giving some people (big business people and FIRE sector people) complete economic liberty from any reasonable rules, when that means removing or restricting the liberty of many or most of the other people in the United States, by chaining them to the wheel of extreme economic insecurity.

Joe Biden just famously accused Romney of wanting to “let the big banks once again write their own rules. "Unchain Wall Street!” And then continued: “They gonna put y'all back in chains." Biden was right.

For most of American history, farmers and small businessmen have been chained to the banks. The New Deal ended that. But the banks are back, more powerful than ever, and they do want to chain most of us to the wheel of economic insecurity for their own profit. Ryan, Romney, the Republicans, and too many Democrats are their agents in this. They must be stopped!

Government does need to be limited, but only a simpleton can fail to recognize that its limits have less to do with its size, and much more to do with its having processes that are just and fair and maximize liberty, rather than processes which enshrine arbitrariness, favoritism, exposure to political influence, and special favors for one group, placing them above the law.

Does Congressman Ryan understand that it is not about size, but about justice and activities that maximize liberty? If he does, and if he were really interested in justice and liberty, then he would be worth listening to when he talks about limited Government, and his Party would gain the trust and honor among the American people that it has not had since the time of Teddy Roosevelt, and before that Abraham Lincoln.

But don't hold your breath waiting for either that interest in justice and liberty, or that understanding about size to happen. It's just not in the DNA of the 21st Century Republican Party, the party of injustice and of serfdom for the 99%.

(Cross-posted from Correntewire.com.)

Ryan's Follies: Limited Government, Liberty, and Effective Government

Joseph M. Firestone — Wed, 15 Aug 2012 23:55:59 -0400

More Ryan's follies from his answer to the President's 2011 SOTU. These are about that old Republican hypocritical favorite, “small government.”

”So I’d like to share with you the principles that guide us. They are anchored in the wisdom of the founders; in the spirit of the Declaration of Independence; and in the words of the American Constitution.

They have to do with the importance of limited government; and with the blessing of self-government. . . .

We believe, as our founders did, that “the pursuit of happiness” depends upon individual liberty; and individual liberty requires limited government.”

I find myself in general agreement with this position; but I think it raises a very big issue, and that issue is: in exactly what ways ought the Government to be limited? Unfortunately, the Constitution doesn't tell us that in a completely clear way. It leaves it up to us to figure it out. It isn't so much that individual liberty requires limited government; but that it requires government that is limited in the right ways. So let's see what Congressman Ryan thinks about this issue.

”Limited government also means effective government. When government takes on too many tasks, it usually doesn’t do any of them very well. It’s no coincidence that trust in government is at an all-time low now that the size of government is at an all-time high.”

Well, suddenly we've moved away from “liberty” to talking about effective government, trust, and the size of government. OK. Let's talk about that!

There are a lot of factors that determine the effectiveness of Government. It's pretty clear that Government won't be effective if it's badly led and managed. So, since 1981 we've seen that Government wasn't very effective in many of its functions when managed by Ronald Reagan and the two Bushes. I wonder why. Could it be that these Republican Presidents wanted Government to be ineffective in the various areas of Government activity established by legislation they disapproved of?

It's also clear, that Government won't be effective if the people chosen to lead it by our presidents intend for it to perform poorly. So, when presidents have appointed Secretaries of Labor who were anti-labor, it's not surprising that the Labor Department performed poorly. Nor is it surprising that when they appointed people to head the FCC, or the Equal Employment Opportunity Commission that the work of these agencies suffered. And how about their record of appointments to the SEC, or the Treasury or the Fed. If presidents appoint people to these agencies that look the other way, and refuse to regulate accounting control fraud, then you get accounting control fraud run rampant. Or take the EPA, the Republicans keep appointing EPA Directors who are opposed to environmental regulation. Clearly, they are there to stop the Government from performing not, to manage its enforcing the law.

As to the Government having too many tasks to do anything very well, it's quite clear that the size of the Government is not as important as the size of the units of Government performing the tasks they need to perform, and as the communications among units that need to coordinate to perform tasks well. Also, whether units perform well is a function of the resources available to them to perform particular tasks.

For years Republicans and, to a lesser degree, Democrats, as well,have been trying to shrink the Government (because small government is better, don'cha know?), so that much of its work, has to be contracted out to the private sector. Of course, this introduces incentive problems in doing the contracted out government work, and also communication problems, between the private contractors and the government supervisors, which interfere with both efficiency and effectiveness.

After 30 years of this, there is no evidence that the policy of shrinking Government's permanent civil service employees, and contracting out government work to the private sector has been either less expensive for the Government, or more effective than Government operations of the 1950s and 1960s, which used many more civil service employees, and fewer private contractors to perform Government's work. In fact, it's likely that contracting out has been far more expensive and less effective than the old way of doing things, because private contractors have a tendency to stretch out work, and continue it as long as they can, so that their billings are extended.

In any event, the size of the Government doesn't necessarily correlate with effective performance. We can see this by comparing national governments across the World. Many nations spent more, and some far more, as a percentage of GDP than the 34.6% the United States spent on Federal, State, and local Government in 2007; for example: France; Sweden, Denmark, Sweden, Belgium, Norway, The Netherlands, Austria, Finland, the UK, Germany, Canada, New Zealand, Australia, and Switzerland. Arguably all of these Governments performed more effectively than the US Government in that year. But, even if you don't believe that, it's hard to deny that they performed at least as well.

On the other hand, many nations that spent more on Government as a percent of GDP than the US, performed much more poorly than we did. My point is that there is no clear, strong, correlation between nations whose Governments are obviously effective, and nations with a particular size of Government, and certainly there is no empirical evidence that smaller Governments work better than larger ones.

Finally, the size of Government, viewed in terms of Government spending as a percent of GDP, is not at an all time high relative to the rest of the economy. It was larger in WWII for one thing. For another, its recent increase is due to the effects of the recession and additional Government expenditures made to combat it. Nor does this increase take into account Government spending at the State and local levels. At these levels, Government spending has been cut drastically inhibiting economic recovery by introducing fiscal drag, exactly when we needed the Government sector to step up and inject funding into the private sector.

Trust in the Government may be at or near an all time low, but that is due to the failures of the Bush and Obama Administrations, the crash of 2008, the Federal bailout of the banks without a corresponding bailout of Main Street, and the actions of a Congress paralyzed by deficit hawkism and small government ideology. That is, the Federal Government hasn't performed very well, in large part due to the role of the Republicans, including Congressman Ryan, in opposing the passage of Government spending sufficient to create full employment, and in supporting the continued bailout of the banks, the payment of undeserved bonuses to FIRE sector personnel. And also in taking Federal spending hostage through paralyzing the Federal budget process and using the debt ceiling to force spending cuts, and block income tax increases on the wealthy, and in opposing investigations of the mortgage and accounting control frauds that have put so many out of their homes.

This lack of trust, isn't due to too much Government action, except perhaps in the areas of trans-vaginal ultrasound procedures and onerous voter ID laws, and won't be fixed by Mr. Ryan's preferred policies of ineffective, or no regulation of the FIRE sector and fiscal austerity. On the other hand, it may well be fixed by:

-- an effective Federal Job Guarantee program,

-- a Federal Revenue Sharing program restoring and saving state and local government jobs,

-- a full payroll tax holiday for employers and employees including Federal reimbursement of the Social Security account,

-- ending the wars in the Middle East completely,

-- passing an enhanced Medicare for All bill,

-- forgiving student loan debt,

-- prosecuting accounting control frauds in the FIRE sector, and

-- doubling Social Security benefits.

In other words, if the Government starts doing some things that actually benefit the majority of the population, then it's very likely that people will trust it a lot more. That's not rocket science, is it?

(Cross-posted from Correntewire.com.)

Ryan's Follies: Bureaucracy, Austerity, and Depression

Joseph M. Firestone — Tue, 14 Aug 2012 23:33:19 -0400

Here's the next group of Ryan's follies from his answer to the President's 2011 SOTU.

On bureaucracy and innovation:

”Depending on bureaucracy to foster innovation, competitiveness, and wise consumer choices has never worked – and it won’t work now.”

That may be. But depending on the big banks and big US corporations to either get lending going again, or to bring innovation and jobs to the United States also won't work. What will work is for the Government to increase aggregate demand by deficit spending in areas of the economy we want to grow.

“Bureaucracy” is just a scare term. The big corporations that Ryan, the Republicans, and many Democratic Congresspeople serve are all just as bureaucratic, and in the case of the health insurance companies, even more bureaucratic than the Government. The dirty little secret of the social sciences is that bureaucracy comes with large size whether we're talking about private or public organizations. So, unless Ryan has plans to break up the large banks, insurance companies, pharmaceutical companies, telecommunications companies, and exporters he loves so much, he really ought to shut up about “bureaucracy,” because his precious private sector has absolutely nothing to crow about when it comes to that feature of large organizations.

If we don't like bureaucracy, then what we need is regulation that will break up large organizations, making them illegal beyond a certain size. Then perhaps we might create functioning markets and be able to shrink the Federal government too. But this kind of solution is off the table for Ryan and Romney since regulation is a no-no from the standpoint of their ideology.

On other nations acting soon enough when they rising debts:

”Just take a look at what’s happening to Greece, Ireland, the United Kingdom and other nations in Europe. They didn’t act soon enough; and now their governments have been forced to impose painful austerity measures: large benefit cuts to seniors and huge tax increases on everybody.”

First, I've heard just about enough of the mindless comparisons of Greece and Ireland to the United States and other nations that are sovereign in their own currency. Greece and Ireland use the Eurozone's currency, so they have solvency risk not shared by nations like the United States. They can be driven into insolvency by the bond markets. Currency-wise Euro nations are like the states of the United States, and not like the Federal Government which is the creator of US currency. These cannot avoid insolvency by simply creating Euros, because they have given up their power to issue currency. We, on the other hand, can spend dollars, and in the act of spending create high-powered money in private sector accounts.

Second, Ryan may say that the British Government was forced into its austerity measures. But this is nonsense, no one forced it into its austerity moves. It just decided to follow the policies that Ryan wants for us here. And what's happened to Britain since they introduced austerity policies should be a lesson learned for every other nation in full control of its currency that decides to ape Euro austerity.

Contrary to Ryan's neoliberal economic theory, austerity has created economic contraction in the UK, since the fourth quarter of 2010. The UK National Accounts show a decline of 0.5% in real GDP growth in that quarter, a little over 6 months after the new coalition took office and passed its austerity program. That decline was prior to the implementation of some of the heaviest austerity measures, and reflected the attempts of UK households to anticipate the bite of austerity. The UK VAT was then increased by 2.5%. And its impact has been another decline in GDP caused by the Government's removal of private sector financial assets through the increase in the VAT, and its spending cut policies since the Spring of 2011.

Everyone in America should be watching Europe very carefully. Ireland and Greece had the choice of austerity or withdrawing from the Eurozone. They chose austerity. Both economies continue to struggle with Greece on the brink of collapse, and Ireland still mired deep in depression. In addition, Spain, Italy, and Portugal are also choosing austerity, and all of them are in trouble as the Euro crisis treated with austerity policy, gradually kills the economy.

In the UK, the British public is suffering from the stubborn Tory-liberal experiment in austerity, with the ruling parties continuing to deny facts obvious to everyone about how their experiment is working out. Let's hope that the deficit hawks and doves in this country watch that carefully, so that they can see that austerity won't work, before they subject Americans to one of their variety of unnecessary long-term deficit reduction plans.

On endless borrowing and spending cuts:

”We believe the days of business as usual must come to an end. We hold to a couple of simple convictions: Endless borrowing is not a strategy; spending cuts have to come first.”

I believe that business as usual has to end too. For the past 30 years or more we've heard nothing but economic theory that confuses the Government with a household or other economic units that cannot create their own currency. And we've heard all through that time that we cannot keep borrowing, and that spending cuts must come first, while we've kept borrowing largely to provide lower tax rates for wealthy people, in the hopes that greater disposable income for them would trickle down. Ryan and Romney are giving us that same ideology again.

If endless borrowing is really not a strategy, than why won't Ryan work to restore the marginal tax rates of the 1960s and close all loopholes? We all know why; because he doesn't believe in shared sacrifice; only in sacrifices by the poor and the middle class so he can further enrich his supporters. Congressman Ryan, the Republican's young guru is exactly the same as their old gurus. His one prescription for everything is to leave the poor little rich people alone, so they can, out of the goodness of their hearts, leave the rest of us a few scraps.

Apart from this however, while ending borrowing and cutting spending may increase the well-being of a private sector household, if everyone does that in the private sector, then there will be rapidly declining demand, and as surely as night follows day there will be a double-dip recession harming everyone, unless Government spending takes up the demand slack coming from the private sector.

The Government can borrow endlessly if it wants to, as long as its accompanying Government spending doesn't cause demand-pull inflation. Or, alternatively, if Ryan and Romney are as bothered by the debt as they claim, then they can work to repeal the Congressional mandate forcing the Treasury to issue new debt when it deficit spends. That way, the debt will gradually be reduced to zero as time passes and they won't have to worry about it anymore.

Even better, if Ryan and Romney hate the debt so much, they can propose that the Executive cause the US Mint to issue a $60 Trillion proof platinum coin, deposit it at the Fed in return for electronic credits which will end up in the Treasury General Account. With the $60 T in credits, the debt subject to the limit can be paid off entirely as it falls due, leaving $44 T in credits to use for deficit spending over the next 15 years or so. Romney and Ryan will never do this however, since if they did and also implemented this plan, then they'd have no excuse for cutting Federal spending that benefits the poor and the middle class.

The more important point is that cutting the level of Government deficit spending is not what ought to be done when we have an economy that is operating so far below its full capacity. If we do that and move to balance the budget as Ryan/Romney want us to do, then we will take financial assets out of the private sector, reduce aggregate demand and further decrease our use of the economy's productive capacity. That is, we'll have greater unemployment, greater suffering, and much less growth.

That's because Government deficit spending, other things equal, increases net financial assets in the private sector; while Government surpluses decrease net financial assets. There's just no getting around that macroeconomic identity. So, spending cuts and budget balancing are a strategy that won't effect the Government's capacity to spend at all, but it will impoverish the private sector.

If that's really what Ryan, Romney, the Republicans, and a variety of Democrats, as well, want to do, then let them try to do it. But I guarantee that sooner or later the American public will have its revenge for their bringing back Herbert Hoover's nightmare.

(Cross-posted from Correntewire.com.)

Ryan's Follies: Health Care Reform, Bankruptcy, and Tipping Points

Joseph M. Firestone — Tue, 14 Aug 2012 19:24:42 -0400

Still more Ryan's follies from his answer to the President's 2011 SOTU.

On the Affordable Care Act (ACA)

”Then the President and his party made matters even worse, by creating a new open-ended health care entitlement.

“What we already know about the President’s health care law is this: Costs are going up, premiums are rising, and millions of people will lose the coverage they currently have. Job creation is being stifled by all of its taxes, penalties, mandates and fees.”

Well, Congressman Ryan's right about most of this. The ACA doesn't contain direct measures to prevent insurance companies from raising premiums, but relies on exchanges that won't be fully operative until 2014, by which time insurance companies will have raised rates far higher than they were when the ACA was passed in 2010. On the other hand, Paul Ryan and the Republicans wouldn't support any cost-cutting measure that would be effective anyway, such as, for example, prohibiting increases in premium costs greater than the rate of inflation in the rest of the economy, because the Republicans and Ryan himself, along with many Democrats are bought and paid for by the health insurance companies and big Pharma.

Ryan's claim that job creation is being stifled by the ACA bill, is currently unsupported by evidence. And his claim about job creation is pure theory, especially since most of the bill isn't operational yet and its impact can't be assessed. One thing's certain, however, and that is that there's no way that either the ACA, or alternatives based on the free competition and confidence fairy theories Ryan favors will produce the 2.5 million new jobs predicted by the California Nurses Association study if the Democrats had rid themselves of the filibuster in January of 2009 and passed Medicare for All, rather than collaborate with the Republicans and the Blue Dogs to cut the heart out of health care reform.

On the ACA and bankruptcy:

”Businesses and unions from around the country are asking the Obama Administration for waivers from the mandates. Washington should not be in the business of picking winners and losers. The President mentioned the need for regulatory reform to ease the burden on American businesses. We agree – and we think his health care law would be a great place to start.

“Health care spending is driving the explosive growth of our debt. And the President’s law is accelerating our country toward bankruptcy.”

Health care spending is driving the explosive growth of debt, both public and private, but as we saw in my first Ryan's Follies post, the public debt accompanying health care deficit spending is reducing debt in the private sector and also increasing demand. Unfortunately, the explosive growth of private debt from health care costs visited upon individuals is causing great suffering in the form of bankruptcies and foreclosures. In addition, these costs result in deaths when people can no longer afford co-pays and decide to forgo treatment they need before illnesses or injuries cause serious damage.

I don't believe that Ryan is right that “the President's Law” is accelerating the Government towards bankruptcy, because it has no risk of “bankruptcy,” unless Congressman Ryan and his colleagues decide to force insolvency by not using their constitutional authority to appropriate Government spending or to raise the debt limit. The “explosive growth” of the public debt is, for reasons stated in my first Ryan's Follies post, of little or no concern. However, I do believe that the growth of private sector debt due to health care costs is a major issue, as is the portion of the US GDP spent on the health care sector, which is way out of line with other industrial nations, and which at the same time produces much worse outcomes for too many Americans whether they have insurance “coverage,” or not.

Of course, the Congressman is not concerned about these real problems, but only about his imagined “problem” of the Government becoming insolvent due to excessive spending. That is, one of the reasons, why, I suppose, he opposes Medicare for All. If he and his Republicans were to join with Democrats to pass that, it would relieve both the increasing private sector debt problem, and also reduce the GDP proportion of health care spending by perhaps one-third. But, I guess we should just expect this kind of public service out of someone who proposes to return the United States to 19th century economic rules and behavior.

Congressman Ryan, criticizes the waiver process, by saying that Washington should not be in the business of picking winners and losers. But, this is one of the most hypocritical remarks in the history of politics coming from Congressman Ryan, since he has gone out of his way to see to it that lack of regulation would ensure that the health insurance companies, big Pharma, the FIRE sector, and businesses in his and other Congressional Districts that wanted to move jobs to other nations would be big winners while American workers and people needing Medical insurance would be big losers. The Congressman has always picked winners and losers.

Unfortunately, for America, however, he has never picked them in the public interest; but only to benefit his own political career. And this has meant, when it comes to jobs, that he has picked foreign winners and American losers while always wrapping himself in the flag.

And back to public debt:

”Our debt is out of control. What was a fiscal challenge is now a fiscal crisis.

"We cannot deny it; instead we must, as Americans, confront it responsibly.

“If we act soon, and if we act responsibly, people in and near retirement will be protected.”

As shown in my first Follies post, the national debt isn't out of control at all. But Ryan is right to think that we have a fiscal crisis that we have to confront responsibly. That crisis is that the Government including Congress, the Federal Reserve, and the Executive Branch isn't using activist fiscal policy to achieve the public purpose, even though there is no solvency risk and little inflation risk in the United States doing so. The United States has so many problems right now that letting these problems go unsolved, by kicking them down the road is the real meaning of fiscal irresponsibility.

When it comes to fiscal irresponsibility no one is better described by that term than Paul Ryan. Of course, he has a lot of company in Peter G. Peterson, the Koch brothers, and all the advocates of balanced budget amendments, Republicans and Democrats who think it's responsible to manage the US Government's spending as though it were a household or still on the gold standard. These people, who have, apparently been joined by Barack Obama, will destroy the economic foundations of the United States, and create a nation where everyday life is “nasty, brutish, and short,” and the sick “die quickly.”

And, of course, “tipping points” into dependency:

”Our nation is approaching a tipping point.

“We are at a moment, where if government’s growth is left unchecked and unchallenged, America’s best century will be considered our past century. This is a future in which we will transform our social safety net into a hammock, which lulls able-bodied people into lives of complacency and dependency.”

Anyone who has experienced unemployment, or living on Social Security alone, or Medicare, not supplemented by other medical insurance, knows that the social safety net is no hammock, and that it is not nearly as generous as social safety nets in other modern industrial nations. Our social safety net is the most stingy and mean of all these, and also the one most immersed in false economies that undercut demand and prevent the social safety net from doing its job of making recessions less punishing for poor people, people out of work, the sick, and most of the 99%.

Congressman Ryan makes Mr. Potter, the banker in “It's a Wonderful Life,” look like a generous man, for he means to drain America of real wealth so he can serve the job exporters he loves so well better. If he has his way, the social safety net will become a bed of nails. If we simply leave it where it is, there's no danger of hammocks anytime soon. And even if we were to extend it by passing enhanced Medicare for All, and say, doubling Social Security payments in recognition of the fact that the financial sector of the economy has, by now, nearly destroyed both the savings, and the pension legs of the proverbial three-legged retirement stool for a very large percentage of the middle class, there is no way that even that would tip us all over into “hammocks.”

A strong, generous, social safety net is not a social invention that will make people dependent. Instead, it is an invention to make them more free. FDR wisely said that “necessitous men are not free men.” What angers me so much about Romney, Ryan, the Koch Brothers, Peter G. Peterson, and all who follow him, is that they want to make most of us “necessitous” while they lack for nothing!

(Cross-posted from Correntewire.com.)

Ryan's Follies: Oy! Taxes, Decline, and Austerity

Joseph M. Firestone — Sun, 12 Aug 2012 21:36:18 -0400

More on Ryan's follies and the overall quality of thinking we find in this young “guru”! Here's more from his answer to the President's 2011 SOTU.

”On this current path, when my three children – who are now 6, 7, and 8 years old – are raising their own children, the Federal government will double in size, and so will the taxes they pay.”

It will be roughly 19 years until Ryan's children are raising their own children, and guess what? GDP will be between two and three times what it is now, and, as we've already seen there's no reason why taxes should be any higher as a percentage of income for most people, unless of course, people like Ryan keep lowering taxes for the rich and raising them for everyone else in order to achieve a damaging budgetary surplus.

Hopefully, the tax rates for the top 2% of the population will be far higher than they are now, and estate taxes will return to their levels in the 1950s, so that gentlemen like Congressman Ryan can begin to pay their fair share again, and the United States can once again have a wealth distribution that is more equal than the likes of Russia, China, Turkey, and Jordan.

I recently blogged on some Credit Suisse data related to the inequality problem. My analysis showed that the US was 24th in the world on Median wealth per Adult. Our Median Wealth per Adult was about $53,000. The nation that ranked first, Australia, had a Median Wealth per Adult of about $223,000 or 4.2 times ours. Also the ratio of the Mean to the Median Wealth per Adult, an even better measure of inequality, was 4.71 for us, and 1.79 for the Australians. One thing's for sure it won't be very good for most of our grandchildren if Romney/Ryan tax policies, which will make this situation even worse, are inflicted on us in 2013. Four years of that and we could very well see that Median Wealth number go down to $46,000 or so and that ratio up to 6 to 1. The political and social unrest that will cause here is anybody's guess. Here's another folly:

”The next generation will inherit a stagnant economy and a diminished country.”

That depends on Congressman Ryan, the Republicans, President Obama, and other Democrats who think we have a deficit/debt problem, which must be treated with Government austerity and tax cuts for the rich. That's a sure recipe for condemning the United States to a stagnant economy and a diminished country. We're seeing the results of such policies now in Europe and in the UK, which is fast becoming the laboratory case illustrating why austerity isn't the thing to do to a down economy.

How do these exponents of Hooverian crackpot economics expect the economy to grow when they are going to drastically lower the aggregate demand provided by Government deficits? By blowing more private sector debt bubbles leading to a new collapse produced by lack of regulation and corporate account control fraud, he further impoverishment of the American Middle Class, and then more lemon socialist bailout?

That's sarcasm, of course. But that kind of pattern is probably a feature, rather than a bug of the Romney/Ryan plan. Their grand design isn't morning in America. It's the New Serfdom with themselves and others like them as our new feudal lords.

”Unfortunately, instead of restoring the fundamentals of economic growth, he engaged in a stimulus spending spree that not only failed to deliver on its promise to create jobs, but also plunged us even deeper into debt.”

The Democrats have failed to end the recession, at least for most Americans; but Paul Ryan's austerity policies, if followed in 2009, would never have restored “the fundamentals of economic growth.” Balanced budgets at the Federal level would only have depressed demand to such a degree that we'd be in a second Great Hooverian Depression right now. Really, Ryan's version of economic science is at the very least 115 years old. Some whiz kid! Between he and Eric Cantor, they'd have the economy flat on its back for the next 100 years.

”The facts are clear: Since taking office, President Obama has signed into law spending increases of nearly 25% for domestic government agencies – an 84% increase when you include the failed stimulus.”

Much of this “spending” is a result of the operation of the automatic stabilizers in the safety net helping people get through the recession, created by the FIRE sector and its control frauds -- spending over which the Obama Administration had no control that was also necessary. And much of it was due to Homeland Security and its expenditures, “domestic spending,” which I'm quite sure Ryan would be opposed to cutting? In any case, numbers like the ones just above don't mean anything, unless one thinks these expenses increase the solvency risk of the Government. Since we've already seen that they don't, these "facts" of Ryan's are of little or no importance.

”All of this new government spending was sold as “investment.” Yet after two years, the unemployment rate remains above 9% and government has added over $3 trillion to our debt.”

Of course it's now 3.5 years, 8.3%, and more like $5 Trillion in additional debt, otherwise known as world savings of USD in the form of Treasuries. As I said in my last post, the addition to debt doesn't matter. And, again, much of the new Government spending was due to the response of the automatic stabilizers to the crash of 2008, and wasn't “sold as 'investment'” at all.

As for the stimulus package, only a relatively small part of it was justified as “investment,” as Paul Ryan very well knows. By the time the Republicans, the Blue Dogs, and the President got through with the ARRA, the tax cuts in the package and spending geared toward maintaining the States, ate up more than half the stimulus over a two year period, and were in no way "investment."

The stimulus itself was also only one-half as large as it needed to be in volume of spending to end the recession (as many asserted, including myself, at the time), and was less stimulative than it should have been, due to the fact that low-multiplier tax cuts were such an important component of it. So, it wasn't any surprise to many of us that it failed to lower unemployment below 8.3%, or that the deficit remained high, since the primary cause of big deficits was the combination of high unemployment and the operation of the social safety net.

Congressman Ryan is a rising star in the Republican Party, and is often characterized as their foremost policy wonk and budgetary guru. But his performance over the past two years, indicates that if he's their guru, and if the Republicans remain in charge of the House, then we'll all be in trouble; because while Paul Ryan may be better at adding and subtracting than most of his colleagues, there are very important things that he apparently fails to understand, or at least to heed, about Macroeconomics and its relation to fiscal policy.

In particular, Congressman Ryan, seems to have no clue about the sectoral balance model of macroeconomics. One of the things that model implies is that if the US is running a negative trade balance (imports exceed exports), and the private sector needs to save to pay back debt, the Government budget deficit must be equal to the value of the trade deficit plus the value of private sector savings. If the Government tries to work against the dynamic implied by this model, by taking active steps to reduce that deficit, as Paul Ryan and the Republicans so vigorously advocate, then the private sector is going to have to reduce its imports, its savings, or, most likely, both, because a reduced Government deficit will lessen demand in the private sector.

So, Government austerity is not going to create private sector prosperity as Ryan, and sometimes, President Obama and many Democrats, suggest, but private sector privation, instead. Less private sector savings, less real wealth, and a stagnating economy. Paul Ryan may actually want that, and the President may too, so he can say that he left a legacy of hard and courageous decision making, but most of the rest of us don't.

We wish that our political parties and their leaders would leave that legacy of courage and sacrifice that they, their families, their friends, and the wealthy people and corporations they deal with daily, are calling for, to themselves and their families; while leaving us with things like enhancements of the social safety net including Medicare for All, and greatly increased Social Security payments, as well as with a Job Guarantee program. After 30 some-odd years of policies promoting extreme wealth for them, and stagnation for the rest of us; it's time for them to make the sacrifices, and for us to get our share of the productivity gains in the form of a Green New Deal.

So, let's have some really hard decisions from them. Decisions that involve their giving up some of the extreme wealth they've accumulated, very often through political influence and manipulation, and sometimes control frauds, rather than from honest work. Decisions that recognize that an America that is unusually unequal among the world's wealthy nations cannot long stand without civil strife for everyone. Let those who have benefited disproportionately from the past 35 years not continue tempting fate. There must be a peaceful return to social and economic justice and fairness in America now, before we go any further down the road to plutocracy and the new serfdom. The alternative is too terrible to contemplate.

(Cross-posted from Correntewire.com.)

Ryan's Follies: A Crushing Burden of Public Debt

Joseph M. Firestone — Sun, 12 Aug 2012 00:53:44 -0400

In celebration of Paul Ryan's nomination, and in consideration of his reputation among Washington, DC villagers as a fiscal guru, I thought it might be fun to do a series of posts, of which this is the first, critiquing examples of Ryan's past wisdom. Here's the first example:

”We face a crushing burden of debt. The debt will soon eclipse our entire economy, and grow to catastrophic levels in the years ahead.”

The debt referred to here by the Congressman is the accounting construct of the national debt subject to the limit, or the face value of the debt instruments the Government has yet to redeem. But just why the “burden of debt” is so crushing, or even a burden at all to you and I really needs to be explained carefully by Ryan and the other deficit hawks to the rest of us.

I don't see any public debt burden on myself or any American people at all either at present or in the future. Why? Because a burdensome debt is one that you and I will personally have to pay back, and we just won't ever have to pay the public debt of the US back from taxes that we are asked to pay to the Government. That is, we won't unless Congress and people who believe the things Mr. Ryan believes, decide to pay the debt by levying taxes, cutting Government spending, and running Government surpluses until it is paid.

That was done once in American history during Andrew Jackson's Administration, when the public debt was paid by raising more taxes than spending. The result was that Martin Van Buren, Jackson's successor became a one-term President, following the panic and very serious depression of 1837. That depression was caused, in great part, by a shrinking of private demand caused by Government austerity, the successful pay back of the debt, and the continuing policy of balancing the budget. In addition, every sustained attempt in American history to run budget surpluses was followed by either a depression or a recession. A summary of the depressing record is here.

Vice-Presidential candidate Ryan either believes himself, or wants you to believe, that the “crushing debt” will have to be paid for out of taxes levied on you and I. But there are a number of different ways to handle the national debt that don't place any burden on us at all.

First, there's the way we've been handling it up to now, namely by rolling over previous debt and paying interest on it as it comes due. We'll always be able to do that because a debt instrument is the functional equivalent of a savings account, and frequently those who hold USD including foreign nations have the effective choice of keeping their USD in a reserve account, or buying a debt instrument that pays higher inerest. They'd rather buy the debt instruments, of course. However, low the rate of interest is, it's better than the rate they'll get on reserves.

Can our national debt increase indefinitely? The short answer is: yes it can. The reason is that a Government like the United States with a fiat non-convertible currency, a floating exchange rate, and no debts in any other nation''s currency, has no solvency risk because it can always create money to pay its obligations. Its debt instruments are therefore nearly risk-free. So, they're a safe harbor for investors who'd rather earn a better return on the USD they hold than interest on reserves or no interest at all.

Second, in lieu of simply rolling over our debt and increasing it, as needed, Congress can decide to get rid of all the public debt, by simply removing its mandate forcing the Treasury to issue new debt when it deficit spends. Congress needs to replace it by granting authority to the Treasury to spend Congressional appropriations by directly marking up private sector bank accounts, or if it continues to spend through its Federal Reserve Accounts, Congress will have to give it authority to mark up its Federal Reserve accounts when it wants to deficit spend Congressional appropriations. If this is done, then Treasury will be able to make all its debt payments when they become due, and most of the public debt will be gone within 10 years, except outstanding longer-term instruments. If Congresspersons like Paul Ryan think the debt problem is so burdensome, then there is nothing preventing them from giving Treasury the above authority and getting rid of the debt. is there?

In fact, the reason why any public debt at all exists right now is because Congress mandates that new debt be issued when the Government deficit spends. So, Congress wants the Treasury to manage the debt through the roll over method, and it is Congress's own fault that the United States has any public debt today, or it would be except for the following.

Third, another way the Treasury can pay back the national debt, if it wants to, and without increasing taxes, is for it to use Proof Platinum Coin Seigniorage (PPCS). Since passing some obscure legislation in 1996, Congress allows the US Mint to produce coins of arbitrary face value using Platinum. A coin with face value $1 Trillion could be minted and deposited in Mint's account at the New York Fed. The coin would be legal tender, so the Fed would have to accept the deposit and mark up the Mint's account. The profit (the face value – the cost of making the coin) can be swept by the Treasury into its own account, and then used to mark up private sector accounts in Government spending, including repayment of debt instruments when they come due. Enough coins can be produced from time-to-time to both eliminate the gap between taxes and spending (the deficit), and also to redeem debt instruments. Or, alternatively, for example, the Mint could produce a single proof platinum coin with a face value high enough to cover complete repayment of the public debt and likely deficit spending for a number of years as in this $60 Trillion plan.

So, there are least three ways to manage the public debt, two of them allowing it to be paid off, which don't involve increasing taxes. That's why the burden of that debt is illusory, and that's why our new Vice-Presidential candidate Paul Ryan is telling us all a fairy tale when he says we face a crushing burden of debt.

What about his remark that the debt will soon eclipse our whole economy? I suppose he means that its size will soon match our annual GDP, which is true, because as of this writing it is near $16 Trillion. But that comparison is a silly one, as is the debt-to-GDP ratio derived from that kind of thinking.

The GDP is an annual statistic. The debt (roughly) is the accumulation of deficits since Andrew Jackson last paid it off in January of 1835. So a fair comparison, if Ryan wanted to make it, would be the national debt compared to the sum of the annual GDP since 1835. I won't calculate that sum, but a back of the napkin calculation indicates that the close to $16 Trillion national debt is about 8% of the cumulative GDP during the past 20 years. Isn't it funny, how the severity of the debt picture can be greatly affected by the denominator one uses in one's debt-to-GDP ratio?

To tell the truth though, neither the size of the national debt, nor the debt-to-GDP ratio, whatever the denominator used, are relevant to the capacity of the Government to spend either in the present, or in the future, because their size has nothing to do with the Constitutional authority of the US Government to issue currency and create money, and also has nothing to do with the solvency of the United States Government, which is guaranteed by the US non-convertible fiat currency, accompanied by a freely floating exchange rate, and external debts denominated in any other currency than the dollars our government has the unlimited constitutional authority to create. So, not only is Ryan's comparison inappropriate, but it's also irrelevant to the real issue being raised which is the continued solvency of the Government.

In my next post, I'll discuss more of Ryan's follies. But before I do that it's only fair to note that the so-called “debt problem” isn't a construct confined to Congressman Ryan, or even he and his boss, Mitt. It's a “problem” that has also been spoken of in similar terms by President Obama, and one of his favorite appointees to his Fiscal Commission, and his reputed favorite to succeed Tim Geithner as the next Treasury Secretary, Erskine Bowles. So, the particular Ryan folly we've considered here is far from his and the Republicans alone, but also is well-represented in the highest reaches of the Democratic ranks. That's why more and more people, contemplating the current political scene in the United States, are concluding that the American people are about to be screwed real good and proper by their political elites, and their utterly counter-productive, utterly stupid, and utterly immoral policy of more tax cuts for the very rich and austerity for the rest of us!

(Cross-posted from Correntewire.com.)

The Democrats' Jobs Dilemma: Celebration vs. Call to Action

Richard Eskow — Mon, 12 Mar 2012 04:15:22 -0400

Perhaps my reaction to the latest unemployment statistics is colored by the fact that I'm reading them in Africa, far from the comfortable familiarity of Washington, New York, and California. There's nothing like the songs of unfamiliar birds as the sun rises over the hills of Pretoria to accentuate the strangeness of conventional Beltway wisdom.

But no matter where you are, it should always be disorienting to see the the words "8.3 percent unemployment" alongside phrases like "good news" and "economic recovery."

Barack Obama and his fellow Democrats are in an unenviable position: If they celebrate the tepid revival of jobs growth they run the risk of being seen as out of touch with the ongoing pain of many Americans and the reduced prospects for many others. If they acknowledge the ongoing misery that has abandoned millions of Americans to long-term joblessness, and millions of others to wage stagnation, they're giving ammunition to their own opponents.

The President hasn't struck the right balance yet.

"The economy is getting stronger," President Obama said on Friday. "When I come to places like this and I see the work that's being done, it gives me confidence there are better days ahead. I would bet on American workers and American know-how any day of the week."

But the rosy picture is filled with fracture lines: The pace of growth still isn't enough to bring unemployment down to reasonable and historical levels in the next several years. We're not creating the right kind of jobs. Even this tepid recovery is fragile, and could collapse at any moment because of events beyond the President's control.

Let's put the latest employment figures into perspective:

We've had three consecutive months with jobs growth of more than two hundred thousand. That's an improvement, of course, but it still leaves more than twenty million people un- or under-employed. And the fastest growing category of employment is in temp work, followed by health care (mainly low-level caretaker jobs) and "leisure" - which is described as consisting primarily of "food service and drinking places."

If it's "morning again in America," at least we know somebody's been hired to pour the coffee.

But we also know that this is not a sustainable path forward. If you want to revive the economy you need to provide well-paying jobs, which isn't happening. In fact, we're barely denting the long-term unemployment problem.

The Democrats seem to be searching for the formula that will carry them to victory. How about the truth? The truth is this: The stimulus measures worked, but we need more action. Without it the long-term reality for millions of Americans will be one of perpetual economic recession or depression.

The President could say "Our stimulus measures worked, but we compromised with Congress and didn't get enough. That means we need more of the same, because we need to improve on these successes by helping millions of people join in the recovery - which will help all of us."

Is that what he will say? There are no crystal balls in the immediate vicinity, so we don't know. But if he doesn't, he's leaving his fate in the hands of forces beyond his control - and leaving millions of Americans with no one to speak for them.

Elder Poverty and a GOP Sucker Punch - NOW Will Democrats Pledge to Defend Social Security?

Richard Eskow — Fri, 09 Dec 2011 00:20:39 -0500

Here are three things to consider:

Nearly one American in six over the age of 65 lives in poverty. A newly progressivized Barack Obama is rocking the populist bandwagon from Osawatomie to the Oval Office. And the Republicans have started attacking Democrats on Social Security - from the left.

This would be a good time for the President and other 'centrist' Democrats to offer the country a firm pledge not to cut Social Security benefits in any way, now or in the future.

Seniors in Poverty

Research teams working with the U.S. Census Bureau recently improved the government's approach to tracking poverty. They began including income from government programs - a request made by conservatives, but not an unreasonable one - adjusting for regional cost differences, and including medical care and other items that often get overlooked into their calculations.

The revised figures showed that poverty in this country is greater than previously believed. And they showed that nearly twice as many Americans over 65 live in poverty than earlier figures had suggested - more than 15%, rather than the previously reported figure of 9%.

Seniors are especially hard-hit by medical costs, despite the existence of Medicare. A study conducted by the Center for Retirement Research at Boston College showed that the average couple reaching age 65 in 2009 could expect to pay nearly $197,000 in out-of-pocket medical expenses.

Medical care costs are rising much faster than general inflation. So are other costs, like transportation, that affect seniors and the disabled, Social Security's biggest pools of beneficiaries. That means elder poverty figures are likely to keep rising as these costs soar - and as the current cost of living adjustment for Social Security lags behind their actual living expenses.

The Cut of a Thousand Deaths

So why would so many Democrats, from Barack Obama to Dick Durbin, push a Social Security benefit reduction that would lower that cost of living adjustment even more? The " chained-CPI" is a terrible idea, a back-door cut to Social Security that would be both economically tragic for seniors and politically disastrous for anyone who supported it.

Social Security Works calculated that under the chained-CPI "the average earner at age 45 who begins receiving disability benefits would get a $333 benefit cut at age 55, and a nearly $700 cut by age 65. By age 75 ... that person faces a loss of over $1,000, an 8.1 percent cut." The President said of this change, "Most folks would hardly notice."

(You can get a sense of how much you'd lose under this proposal here, and then decide whether you'd notice.)

Some of these Dems have also suggested raising the retirement age even further than it's scheduled to be raised. That's a benefit cut, too.

Democratic Benefit Cutters

Daniel Marans has been keeping score. He tracked the Democratic Social Security benefit-cutting action that began with the presidentially-appointed Deficit Commission,and picked up speed when Co-Chairs Alan Simpson and Erskine Bowles proposed benefit cuts of up to 41.5%. Then Democratic Senator Dick Durbin backed those cuts, 14 Democratic Senators signed a letter backing Simpson and Bowles, and Democratic Sen. Mark Pryor demanded that Social Security reductions be "on the table" in deficit talks- even though Social Security is forbidden by law from contributing to the deficit.

No wonder Democrats lost nearly all of the 28-point polling advantage on Social Security they enjoyed in late 2006. These maneuvers created a situation where, at the beginning of this year, Obama was less trusted than Bush on this hot-button issue!

To be sure, there have been stalwart defenders of Social Security among the Democrats. Prominent among them are Sen. Majority Leader Harry Reid and the members of the House Progressive Caucus. They've emphatically rejected Social Security cuts of any kind, including these proposals. (Sen. Bernie Sanders is a champion of Social Security - but he's not a Democrat.)

Tinkering

Now the same Democrats who tried to cut Social Security are offering a stimulus tax break in the form of a highly flawed payroll tax 'holiday' that undermines the best arguments for protecting Social Security from millionaire-coddling government haters. Some even suspect it might be a backdoor strategy for reintroducing benefit cuts later.

Social Security currently keeps 20 million people out of poverty. Why tinker with it? These new poverty statistics offer would-be benefit cutting Dems the perfect out.

When more than 15% of Americans over 65 live in poverty and skyrocketing health care costs are likely to impoverish even more of them, we can't afford to cut any of theie financial lifelines.

Sucker Punched Again

Republicans actually managed to run to the left of Dems in 2010 by positioning themselves as Medicare's defenders. Now observers are shocked - shocked! - that they're is running to the left of the Democrats on Social Security too. They're claiming that the payroll tax 'holiday' would "cut contributions" to the program. (It would, but Democrats plan to replace them out of general revenues).They're also claiming the plan would "drive (Social Security's) Trust Fund into the red." (It wouldn't - but by mingling the trust fund with general revenues, the 'holiday' weakens Social Security's fiscal firewall and endangers its political security.)

So let's see: That means that Democrats who -

appointed and/or served on a Deficit Commission that tried to cut Social Security, and
are on record as proposing cuts to Social Security, and who then
decided to provide tax relief for the middle class by cutting Social Security's income stream when more progressive approaches were available, and who
promised to make up the difference from general revenue by drawing funds from general revenue, which
destroyed Social Security's financial firewall for the first time in 75 years -

- are now being attacked from the left by Republicans who are positioning themselves as defenders of Social Security! Who could have seen it coming? Nobody, that's who!

Oh, sure, this guy did. Back in January he said that if Democrats make any direct or indirect moves against Social Security, "Republicans will run a replay of their successful 2010 campaign, when they spent $71.1 million on ads claiming they were defending Medicare (a program they've always opposed) from Democrats." But he's a freakin' genius! Nobody else could have known, right?

Doesn't matter. Here we are. Social Security needs protecting, and elected officials need to prove they're committed to defending a popular and successful program. Fortunately, there is a solution.

A Pledge for the 99-ized Dems

The Dems are on fire with progressive passion from the White House on down. We're loving the new, tough, populist rhetoric: First the Teddy Roosevelt speech, now today's fiery press conference. Great stuff. Now all the Democrats need to do is put this newfound populist spirit into action. Teddy' Roosevelt's commitment to economic justice and Franklin Roosevelt's vision of Social Security are both urgently needed right now.

Polls show that Social Security cuts are enormously unpopular, even among Republicans and Tea Party members. So why not take a stand on the subject, once and for all? We propose a simple pledge which the President and all Democrats could sign, and which they could urge Republicans to sign too (they won't, which will help them at the polls.) The pledge would go something like this:

"I, _________________, do solemnly swear that I will not support any cuts to Social Security, now or in the future; that I will refuse to vote for or sign any bill that raises the retirement age, lowers the cost of living adjustment, or decreases benefits in any other way; that I will veto any such bill that reaches my desk; that all revenues lost from Social Security due to the "payroll tax holiday" will be replaced in full; and that I will work to replace the "payroll tax holiday" with a more progressive tax break that protects the firewall around the Social Security Trust Fund.

Furthermore, I solemnly affirm that the Social Security program is a hallmark of our country's ability to meet its promises to its citizens, one which people have paid for and deserve to receive after a lifetime of hard work. Signed proudly, this day of __________, by ____________."

We look forward to the first signing ceremony, and trust that the Roosevelts would be proud.

The Long Game: Payroll Taxes, Hostage-Taking, and Social Security

Richard Eskow — Tue, 29 Nov 2011 22:11:48 -0500

Yesterday Thom Hartmann and I discussed the proposal to extend and expand what Democrats have called the 'payroll tax holiday.' (Video is below.) There are no heroes in this debate, but there are certainly villains. There are several different ways this could end - and most of them aren't good.

By proposing to expand and extend this 'holiday,' Democrats have bypassed more efficient ways to help the economy, and have once again endangered Social Security. And by demanding tax breaks for millionaires while blocking them for the middle class, Republicans have once again demonstrated their willingness to blow up the economy for self-serving purposes.

The choice is either to back the highly flawed Democratic proposal or let the Republicans block it, which would plunge the economy into an even deeper hole than it's in right now. Imperfect as the proposal is, the alternative is unacceptable. If it failed the already-wounded economy would suffer even more, and millions of jobless Americans would be left without the unemployment insurance they need.

Hostages

This drama's being played out against a backdrop of political terrorism. Republicans have threatened to shut down the Federal government several times if they don't get what they want, and Democrats have violated the 'don't negotiate with terrorists' principle each time. That's encouraged them to keep it up.

That means every Democratic proposal is likely to weakened considerably before passage. And like other Democratic proposals, this one is born weakened. Today the government is operating under a temporary spending measure that expires on December 16. Guess what happens then?

This bill needs to support because there'll be havoc if something like it isn't passed. But we're being given no choice. The Democrats have their hostage scenario - and we have ours.

The Frame-Up

The bill opens up several avenues for ugly compromises. It would extend the current 'payroll tax holiday' for employees, increasing it from 2% of earnings to 3.1%. It would also cut the employers' contribution in half - from 6.2% to 3.1% - for the first $5 million in payroll, and would eliminate it altogether for newly hired employees (for the first $12.5 million in payroll).

What's wrong with that? The first problem is with the framing. The payroll (or FICA) contribution should be seen as a premium, not a tax, especially for employees. Working people are paying into a social insurance program, with the expectation that they'll collect benefits (primarily Social Security, though the tax also helps fund Medicare) from it when they're needed.

By calling their proposal a "tax holiday" and a "middle class tax cut," Democrats are reinforcing the idea that this is just another burden on working people - one that offers nothing in return. That's not true, and it's bad for Social Security.

Holidays in the Sun

Yes, the middle class needs a tax break right now. And we need to put more money into people's pockets to reduce unemployment. But there were and are far more efficient ways to accomplish that, including the Making Work Pay program which the Democrats abandoned last year in favor of the "payroll tax holiday." That program was a better way to stimulate the economy - and it was fairer to the working poor.

Here's why: A payroll tax cut applies to all income up to the tax cap (which is currently about $106,000). So a person making $100,000 will save $3,100, while a person making $20,000 will only save a few hundred dollars. The switch from Making Work Pay to the payroll tax cut actually hurt lower-income working families last year. And those lower-income families are the ones who are most likely to spend that money as soon as they get it, which makes it a more efficient way to help the economy.

Democrats are being a little misleading when they boast that their proposal will save "the average family" $1,500. That's technically true - but it will save higher-earners a lot more and lower-earners a lot less.

The Bottom Line

The tax break for employers makes even less sense. Corporations are already sitting on $2 trillion in cash. The reason they're not hiring people with that money is because there's not enough demand for their goods and services. So what good will a little cash in their hands more do?

Think about it: A 3.1% tax break on people you've already hired isn't going to do much. When I was in the corporate world we typically budgeted 2.5 times a person's salary to determine the total cost of employing someone. That includes salary, benefits, office space, and other expenses. That means this tax break is a savings of 1.24% for companies like mine. That's not going to change very many hearts and minds in the executive suite.

Eliminating the tax altogether for new hires is a better idea - but not much. If a large corporation doesn't think it makes financial sense to hire someone, reducing the cost of that hire by less than 3% isn't likely to change their mind. Overhead costs are much lower for small employers, especially in the age of telecommuting, but even a 5% or 6% reduction in costs isn't going to change too many business owners' minds in this economy.

Want to know a good way to use Federal funds to create jobs? Hire people with it. You know, government workers like cops and teachers. Invest it in our infrastructure. Or if tax policy's your only option, give most of the breaks to working people who will spend what they get

So why did Democrats choose this approach, rather than another? I might as well program that into my computer as a hot-key function, since the question needs to be asked so often. Could there be a Long Game here that involves cuts to Social Security?

That's speculation. But it wasn't very comforting to watch Sen. Dick Durbin playing the class-war game against Sen. Jon Kyl, since the once-reliable Durbin has started pushing aggressively for needless and harmful Social Security cuts.

The Long Game

EIther way, this proposal opens up avenues to a lot of unpleasant possible outcomes in upcoming negotiations. Here are a few of them:

Republicans could accept the tax cuts, but refuse the tax hikes for millionaires. If the Democrats cave on that issue, Social Security's Trust Fund will be funded with even larger money transfers from the overall Federal government's budget. That's a breach of the Trust Fund's firewall, which hadn't occurred in the program's 75-year history until last year. That's when Democrats, led by President Obama, introduced the payroll tax cut.

Which leads us to the next danger ...

Republicans could accept the tax cuts but insist that the Trust Fund's shortfall not be covered by general funds.That would turn Social Security's mild, easily remedied long-term imbalance into a more urgent problem -- which is just what the anti-Social Security crowd wants. That opens the door for politicians from both parties to raid the Trust Fund's $2.6 trillion surplus for other purposes.

Republicans might insist that some percentage of the 'tax cut' be invested in private Social Security accounts. Republicans have been trying to privatize Social Security for a long time. These ~~hostage negotiations~~ budget negotiations could give them the chance to finally get their foot in the door on that topic.

Democrats might 'compromise' on the COLA reduction, a Social Security benefit cut that both the White House and some other Democrats (including Dick Durbin) have been pushing all along. They call it an 'adjustment,' but their proposed method for calculating cost of living (COLA) adjustments is a benefit cut, pure and simple, that would lower an already-inadequate formula and take money out of people's pockets. It will probably be revived in these debates.

Fit to Be Tied

Where does this all leave us, the public? It leaves us in a position where it makes sense to call your representatives in Washington to push for this proposal - because the economy can't take the hit that it would take if this 'cut' expired, because the middle class needs the break, and because the unemployed deserve an extension in unemployment insurance.

But it also leaves us - some of us, anyway - frustrated as hell with a political system that forces us to choose between the inadequate and the insane. With regrets, for the moment I'm going with inadequate and backing this bill.

But if the Democrats want applause for this, they're going to be disappointed. I think I'm going to listen to that old Peggy Lee song instead. You know the one I mean, don't you?
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Here's the conversation with Thom Hartmann. He sets it up with a good overview, and we start exchanging thoughts about 2:45 in: