Tag: sequester

Cross posted from The Stars Hollow Gazette

With $85 billion across-the-board spending cuts, known as “the sequestration,” set to take effect this Friday, a new investigation reveals how billionaire investors, such as Peter Peterson, have helped reshape the national debate on the economy, the debt and social spending. Between 2007 and 2011, Peterson personally contributed nearly $500 million to his Peter G. Peterson Foundation to push Congress to cut Social Security, Medicare and Medicaid – while providing tax breaks for corporations and the wealthy. Peterson’s main platform has been the Campaign to Fix the Debt. While the campaign is portrayed as a citizen-led effort, critics say the campaign is a front for business groups. The campaign has direct ties to GE, JPMorgan Chase, Morgan Stanley and Goldman Sachs. Peterson is the former chair and CEO of Lehman Brothers and co-founder of the private equity firm, The Blackstone Group. For more, we speak to John Nichols of The Nation and Lisa Graves of the Center for Media and Democracy.

Sequestration Is Austerity, but Not Enough for Simpson and Bowles

by John Nichols, The Nation

Sequestration?

Cue the return of Alan Simpson and Erskine Bowles, frontmen for American austerity. [..]

The former Republican senator and defeated Democratic senate candidate who praises Paul Ryan’s budget don’t particularly like the death-by-slow-cuts of sequestration. They prefer a full frontal assault on the most vulnerable Americans and a redistribution of the wealth upward.

As President Obama has noted, Washington has already reduced the deficit by $2.5 trillion.

But the co-chairs of the failed National Commission on Fiscal Responsibility and Reform now want another $2.4 trillion.

To wit, in a “rehashed” plan to “Fix the Debt,” Simpson and Bowles are busy promoting schemes to “modernize…entitlement programs to account for” an aging population. That’s code for schemes to delay the point at which the hardest working Americans can get access to Social Security and Medicare.

Simpson and Bowles are arguing specifically for the adoption of “chained CPI.” That’s the assault on Social Security cost-of-living increases that Congressman Keith Ellison, D-Minnesota, correctly identifies as “a benefit cut.”

Remember who appointed these two charlatans to head the “National Commission on Fiscal Responsibility and Reform” when Congress refused to create it, Pres. Obama. Remember who embraced their recommendations when the committee failed to come to an agreement, Pres. Obama.

Remember who was privately financing the commission, Peter G. Peterson.

Sperling: Obama Wanted Sequester to Force Democrats to Accept Entitlement Cuts

by Jon Walker, FDL Action

The way Obama has handled basically every manufactured crisis from the debt ceiling, to the Bush tax cuts expiration, to the sequester has been about trying to force both Democrats and Republicans to embrace his version of a “grand bargain.” While it is clear this has been the driving force behind Obama’s decisions, if you pay close attention to his actions is is rare than an administration official will directly admit this. This is actually what I think it most interesting about the recently leaked email exchange between Bob Woodward and Gene Sperling up on Politico. Sperling wrote:

   But I do truly believe you should rethink your comment about saying saying that Potus asking for revenues is moving the goal post. I know you may not believe this, but as a friend, I think you will regret staking out that claim. The idea that the sequester was to force both sides to go back to try at a big or grand bargain with a mix of entitlements and revenues (even if there were serious disagreements on composition) was part of the DNA of the thing from the start. It was an accepted part of the understanding – from the start. Really. It was assumed by the Rs on the Supercommittee that came right after: it was assumed in the November-December 2012 negotiations. There may have been big disagreements over rates and ratios – but that it was supposed to be replaced by entitlements and revenues of some form is not controversial. (Indeed, the discretionary savings amount from the Boehner-Obama negotiations were locked in in BCA: the sequester was just designed to force all back to table on entitlements and revenues.)

Pres. Obama has close ties to Mr. Peterson, both want cuts to Social Security and Medicare. That the president is calling for tax increases is a cover so he can get away with unpopular cuts. If he can get a bipartisan agreement that cuts entitlements and raises taxes then everyone, and no one, is to blame. What John Walker said, “That is why even now Obama isn’t calling for the sequester to be simply repealed or delayed. Obama still wants to use this manufactured crisis to force congressional Democrats to betray their base by adopting Social Security cuts and get Republicans to accept revenue increases.”

This is a fine mess you’ve got us into, Barack.

Cross posted from The Stars Hollow Gazette

With sequestration looming, many Americans are still struggling to recover from the the 2008 recession that cost them billions in lost savings and jobs but not the banks who were the chief perpetrators for the housing crash. As a matter of fact, American tax payers are still bailing out the “Too Big To Jail” banks $83 billion a year:

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers? [..]

Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail. [..]

The top five banks — JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc [..] with almost $9 trillion in assets, more than half the size of the U.S. economy — would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.

It is outrageous that Americans are being bludgeoned with $85 billion in austerity cuts that will most likely halt any recovery while handing banking shareholders an $83 billion gift.

During his appearance before the Senate Banking Committee, Federal Reserve Chairman Ben Bernanke was asked by freshman Sen. Elizabeth Warren about about the risks and fairness of having banks that are “too big to fail”

Warren quizzed Bernanke on that study. “I understand that we’re all trying to get to the end of too big to fail, but my question, Mr. Chairman, is until we do, should those biggest financial institutions be repaying the American taxpayer that $83 billion subsidy that they’re getting?”

Bernanke responded, “The subsidy is coming because of market expectations that the government would bail out these firms if they failed. Those expectations are incorrect.”

After some back and forth, Warren countered, “$83 billion says there really will be a bailout for the largest institutions.”

“That’s the expectation of markets. But that doesn’t mean we have to do it,” Bernanke responded.

Warren insisted that the large banks should pay for the subsidy. “Ordinary folks pay for homeowners’ insurance, ordinary folks pay for car insurance, and these big financial institutions are getting cheaper borrowing to the tune of $83 billion in a single year simply because people believe that the government would step in and bail them out. I’m just saying, if they’re getting it, why shouldn’t they pay for it?” she said.

“I think we should get rid of it,” Bernanke said. He said he agreed with her that government should address the problem of “too big to fail.”

Meanwhile, as Chris in Paris at AMERICAblog points out these banking executives are the forefront of the attack on the social safety net:

You may recall Goldman Sachs CEO Lloyd Blankfein, the guy who Obama has a strange bromance with, adjusted bonus payout dates in both the US and UK to avoid paying taxes. You know, as in the taxes that saved his entire lifestyle.

Even worse is Blankfein’s insistence on bashing programs that are critical to middle class Americans. It’s the Blankfeins of the world that want to take your Medicare and Social Security away.  God forbid we ran out of money and there weren’t any left to bail out the banks next time, right?

Then there’s my other favorite bankster, good old Jamie Dimon of JPMorgan. Dimon is the delightful fellow who ignored the warnings and ended up costing the bank, and our taxpayers, billions.

Since these banks really aren’t turning a profit without government welfare, what would JPMorgan look like without those handouts? For Dimon, banking rules that help protect taxpayers from bailing out the gambling banks are “un-American.”

The major bank chiefs have been quite vocal about trashing the social system, just as they trashed our economy. But when it comes to helping Americans, the banks have little interest beyond their next bailout.

Speaking of Jamie, our favorite vampire capitalist, “thoughtfully” explained why he’s richer than anyone else” in this exchange with Mike Mayo, an analyst at CLSA and Dimon critic:

Mayo: I think what I hear UBS saying in the presentation is that if I’m an affluent customer I’ll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?

Dimon: You would go to UBS and not JPMorgan?

Mayo: I didn’t say that. That’s their argument.

Dimon: That’s why I’m richer than you. [..]

FDL New Desk‘s DSWright found Dimon’s response arrogant but indicative of something even more offensive:

Dimon is right, he did get rich having low capital ratios – which is why his form of banking is dangerous. It’s the precise reason the banks could not protect themselves during the crisis, they were over-leveraged.

   “The real issue isn’t who is rich, but rather whose interests are being fairly served and whose aren’t. Dimon’s approach gives short shrift to both shareholders and taxpayers. Taxpayers still carry substantial risks for which they are not being compensated, a state that will only change when regulations are tightened, and hopefully vastly simplified.

   Shareholders do badly because the kind of bank Dimon runs is prone to loss and volatility, leading markets to set a low value on the bank’s earnings.”

Mathematician Albert Einstein said that doing the same thing over and over expecting different results was the definition of insanity. Continuing to bail out these banks on tax payer’s “dime” when there is no evidence that breaking them up would harm the economy is just insane.

Cross posted from The Stars Hollow Gazette

MSNBC’s “The Last Word” guest host Ezra Klein translates Federal Reserve Chairman Ben Bernanke’s testimony before the Senate Banking Committee lecturing Congress that the austerity of sequestration is a really bad idea for the economy:

“Given the still-moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant,” Bernanke told his students, who included a number of right-wing Republican diehards, such as Senator Bob Corker, of Tennessee, and Patrick Toomey, of Pennsylvania. “Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run.”

Translated from Fed-speak, that meant that congressional Republicans have got things upside down. Bernanke has warned before about the dangers of excessive short-term spending cuts. But this was his most blunt assertion yet that Mitch McConnell, John Boehner, et al. should change course. “To address both the near- and longer-term issues, the Congress and the Administration should consider replacing the sharp, frontloaded spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run,” Bernanke said. “Such an approach could lessen the near-term fiscal headwinds facing the recovery while more effectively addressing the longer-term imbalances in the federal budget.”

Here is Ezra’s translation of Chairman Bernanke’s “Yoda Speak”:

Cross posted from The Stars Hollow Gazette

“Just pass a one sentence bill that repeals sequestration” an idea that was posed by Up with Chris Hayes host Chris Hayes in the last segment of his Sunday show. So why isn’t that “on the table?”

Sequestration, when it was proposed, was supposed to be such a terrible economic idea that it would force Democrats and Republicans to come to “reasonable” agreement about the economy and implementing sound economic policies that would stimulate economic growth, create jobs and, in the long term reduce the deficit/debt that our elected officials and the traditional main stream media are agonizing over. The truth of the matter is, that regardless who is to blame (my opinion both parties are equally responsible), neither side wants to just end this insanity, not even Pres. Barack Obama, who “refuses to kill sequestration“, as William K. Black, former bank regulator and professor of law and economics, points out:

President Obama has revealed his real preferences in the current blame game by not calling for a clean bill eliminating the Sequester. It is striking that as far as I know (1) neither Obama nor any administration official has called for the elimination of the Sequester and (2) we have a fairly silly blame game about how the Sequester was created without discussing the implications of Obama’s continuing failure to call for the elimination of the Sequester despite his knowledge that it is highly self-destructive.

The only logical inference that can be drawn is that Obama remains committed to inflicting the “Grand Bargain” (really, the Grand Betrayal) on the Nation in his quest for a “legacy” and continues to believe that the Sequester provides him the essential leverage he feels he needs to coerce Senate progressives to adopt austerity, make deep cuts in vital social programs, and to begin to unravel the safety net. Obama’s newest budget offer includes cuts to the safety net and provides that 2/3 of the austerity inflicted would consist of spending cuts instead of tax increases. When that package is one’s starting position the end result of any deal will be far worse.

In any event, there is a clear answer to how to help our Nation. Both Parties should agree tomorrow to do a clean deal eliminating the Sequester without any conditions. By doing so, Obama would demonstrate that he had no desire to inflict the Grand Betrayal.

digby noticed Hayes’ comment, too:

As I’ve said a thousand times, this was not written in stone, it did not come down from Mt Sinai, it was an agreement that was struck to save face in the moment and it can be unstruck at any time. There is nothing absolutely requiring the congress to go through with this. There is some discussion that the only way this can happen is if the people see that government services they need are being affected and then put pressure on the government to end this game of chicken. Maybe that’s true. But let’s not kid ourselves that it isn’t a purely political bind these people have gotten themselves into. This goes back to the ill-fated 2011 Grand Bargain negotiations in which both the White House and the Republicans in the House bungled things so badly that we are still dealing with the fallout.

H/T Atrios

Joining Chris and Prof. Black for a lively panel discussion of “the anatomy of the sequester” were Neera Tanden, president and CEO for Center for American Progress; Steve Ellis,  vice president of Taxpayers for Common Sense; and Phyllis Bennis, director of the New Internationalism Project at the Institute for Policy Studies.

Cross posted from The Stars Hollow Gazette

The “comedy team” of former Sen. Alan Simpson (R-WY) and businessman Erskine Bowles trotted out their latest version of their unauthorized report from the “Cat Food Commission” that they co-chaired for President Barack Obama. Not surprisingly, the dynamic duo of austerity and cuts to the social safety net go even further with the 2.0 version of their solution for ending the mythical budget crisis calling for even greater cuts and less revenue all on the backs of those who have the least to contribute:

The corporate austerians released their ‘new’ Bowles-Simpson recommendations today (pdf). They claim that they are building upon their original plan, not replacing it. They framed their recommendations as the last two steps in a four step process. For Social Security followers, Step Three includes the chained CPI. And Step Four includes all of the previous cuts to Social Security which they recommended in their first plan.  Raising the retirement age starting in 2022 slowly to 69, cutting benefits through re-indexing and flattening  all future benefits for our recipients in 2050. [..]

The corporate austerians go for installing the chained cpi first. Why? It could be that they still think that most Americans do not realize that the chained cpi is a cut which keeps on cutting [..]

The language is a vague euphemism for cuts; code words to their rich buddies that the uploading of wealth will not be threatened with significant new taxes. No pesky new scrap-the-FICA cap income taxes which might be used to pay for under-funded social insurance programs.

Meanwhile, President Obama, seemingly ignoring his two side show buddies, called for tax reforms that would increase revenue and a more balanced approach to the looming sequestration that would impose draconian cuts to non-defense spending programs. Taking lessons from Bill Maher, the Speaker of the House, Rep. John Boehner (R-OH), is having none of that and has proposed “new rule“:

“The sequester will be in effect until there are cuts and reforms that put us on a path to balance the budget in the next 10 years.”

At Maddow Blog, Steve Benen points out that Mr. Boehner may not have thought this “new rule” through and it could pose some problems in his caucus:

One of the details that often goes overlooked is that the House Republican budget plan from the last Congress — the one that included all the spending cuts, entitlement reforms, and tax breaks the GOP are desperate to have — didn’t bring the federal budget into balance until 2040. That’s not a typo — under the House Republican plan, written by Paul Ryan, the United States would run deficits every year for nearly three decades, and then might reach a balanced budget 27 years from now if optimistic projections are met.

And that plan included spending cuts so severe, GOP candidates were afraid to talk about them out loud in public.

This year, however, thanks to a new “rule” embraced by Boehner and his cohorts, the new House Republican plan intends to balance the budget by 2023, instead of 2040. Why does that matter? Because trying to eliminate the entirety of the deficit in one decade instead of three necessarily means ridiculously drastic cuts.

A plan from the House Progressive Caucus that presented the unique idea that creating jobs would bring down the already shrinking deficit. But, as Greg Sargent of the Washington Post‘s “Plum Line“, notes it stands little chance of even being considered in the Republican held House:

Needless to say, this plan – the creation of the Congressional Progressive Caucus – has no chance whatsoever of passing Congress. Which is exactly the point: No plan that prioritizes job creation as the best means of reducing the deficit; no plan that cuts defense while determinedly avoiding any cuts that would hurt the poor and elderly; no plan that includes equivalent concessions by both sides – could ever have a prayer in today’s Washington. It’s yet another indication of how out of whack Washington’s priorities are.

Greg sums up the problem of the GOP’s approach in a nutshell:

So, Boehner says House Republicans are not only willing to let the sequester hit, but that the only acceptable replacement for it will be a plan that wipes away the deficit in 10 years – all without revenues. [..]

There’s simply no chance that House Republicans will produce such a budget by March 1st, which is the deadline for the sequester. If Boehner means any of this, he’s confirming that we’re getting the sequester, and it will remain in effect until it is replaced by a plan that is simply never, ever going to happen. Wiping out the deficit in 10 years with no new revenues would be at least as bad as the Ryan plan – probably worse – yet even that plan was loaded up with unspecified cuts and other big question marks. Republicans are never going to propose specific cuts that balance the budget in 10 years with no new revenues – ever. Boehner has, in effect, just taken ownership of the sequester.

No, Mr. Boehner has not thought this “boner” through.