Tag: Deficit

Cross posted from The Stars Hollow Gazette

Bruce Bartlett and Yves Smith join Bill in a discussion about why Washington insiders are talking about the deficit crisis instead of the jobs crisis.

Transcript can be read here.

H/T Yves Smith at naked capitalism:

I had fun in this conversation with conservative Bruce Bartlett, even though he stole some of my best lines (like Obama not being a liberal). Bartlett is in exile from the Republican party for saying things like Keynesian deficits stimulate the economy (after doing research and finding he couldn’t debunk it based on data) and unions help promote higher wages.

Repeat after me, “Austerity is bad.“

Cross posted from The Stars Hollow Gazette

As negotiations continue between the White House and House Speaker John Boehner, leading economist Dean Baker joins us to discuss the myths about the so-called fiscal cliff. With little more than two weeks before the deadline, President Obama insists on an immediate increase in the top two income-tax rates as a condition for further negotiations on changes to spending and entitlement programs. But Boehner said Washington’s “spending problem” is the biggest roadblock to reaching a deal and has urged the White House to identify more spending cuts. “This idea that, somehow, if we don’t get a deal by the end of the year we’re going to see the economy collapse, go into a recession, really that’s just totally dishonest,” says Baker, the co-director of the Center for Economic and Policy Research. “The basis for this is that we don’t have a deal all year. And the fact that you don’t have a deal December 31st does not mean you don’t get a deal by December 31st, 2013.”

Transcript can be read here.

Cross posted from The Stars Hollow Gazette

Where is the Tea Party now that the Republican Party wants to cut Medicare? Does anyone remember the 2010 election that gave the right wing extremists control of the House of Representatives and the disruption these Tea Partiers caused at Democratic Town Halls with their signs and demands that government keep their hands off Medicare? Anyone? Buehler?

So far not a peep from this vociferous crowd now that the Republicans are holding tax reform and budget negotiations hostage demanding major cuts to Medicare and Medicaid and raising Medicare eligibility age to 67 because wealthy white men are living longer.

The popularity for Medicare, Medicaid and Social Security, the three programs that are the major components of the social safety, is overwhelming. According to an ABC News/ Washington Post Poll (pdf) 79% of Americans do not want Medicare cut at all. By a large majority (65%) they would prefer tax hikes on the wealthy than reduction of payments to hospitals and doctors. Meanwhile, the Republicans in the House and Senate, who still think they won in November, are demanding drastic cuts after they campaigned against those very cuts.

Subbing for MSNBC’s Rachel Maddow on her show, Chris Hayes talks about the effort to defend Medicare and making the program more efficient with Rep. Jan Schawkowsky (D-IL), a member of the House Budget Committee.

Cross posted from The Stars Hollow Gazette

A group of CEO’s from major US corporations have been lobbying Capitol Hill to put cuts to the social safety net at the forefront of negotiations to “fix the debt’ at the same time asking for more tax breaks while they reap the benefits of billions in government contracts and hand themselves lucrative pay raises and pensions while they bankrupt companies and underfund their employee pension funds.

From the Huffington Post

A group of high-profile corporate CEOs are lobbying Capitol Hill this week to put Social Security and Medicare cuts at the forefront of deficit reduction negotiations. Their own retirement funds, however, are secure: The coalition includes 54 CEOs who have amassed combined pension assets of more than $649 million from their companies’ executive retirement plans, according to a new report from the Institute for Policy Studies, titled “A Pension Deficit Disorder: The Massive CEO Retirement Funds and Underfunded Worker Pensions at Firms Pushing Social Security Cuts.”

The CEOs’ employees are much less secure in their retirement than the CEOs. According to the report, less than 60 percent of the 71 public companies offer pension plans for their employees. Of the 41 companies that do, 39 of them haven’t contributed enough to their workers’ pension funds to enable the plans to pay out their anticipated obligations. Among the companies with employee pension funds in the red, these deficits exceed $100 billion.

The CEOs are among 71 chief executives of publicly traded companies who belong to the Fiscal Leadership Council of the influential Campaign to Fix the Debt, a group which has raised more than $60 million to lobby for a debt deal driven by cuts to “entitlements.” The coalition will meet Wednesday morning with congressional leaders, according to sources familiar with the group’s lobbying activities. The group, funded in part by former private equity magnate Peter G. Peterson’s foundation, has pledged to push for austerity during the lame duck congressional session, and beyond. Peterson has spent nearly half a billion dollars in recent years pushing his austerity agenda.

As the debate heats up over whether to cut Medicare, Social Security or Medicaid in order to maintain federal spending and corporate tax breaks, companies with well-compensated CEOs who preside over underfunded employee pension funds invite a new round of questions about the motives, and methods, of the CEOs pressuring Congress and the White House to cut programs for the middle class.

As the White House begins a series of meetings today on the looming “fiscal cliff,” a coalition of the largest corporate firms and advocacy groups is lobbying for wide-ranging cuts in government spending, including to programs like Medicare and Social Security. The group, which includes 80 of the country’s most powerful CEOs, is called the Campaign to Fix the Debt. It was co-founded by former Clinton White House Chief of Staff Erskine Bowles and former Republican Sen. Alan Simpson, previously the co-chairs of President Obama’s bipartisan National Commission on Fiscal Responsibility and Reform. Critics have accused the group of using the budget crisis to push for corporate tax cuts. We are joined by Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies and co-author of the new report, “The CEO Campaign to ‘Fix’ the Debt: A Trojan Horse for Massive Corporate Tax Breaks.“

The middle class, elderly, students and the poor have paid more than their “fare share” in this economic downturn while Wall St. and these megacorporations have continued to rake in billions. Social security, medicare and medicaid should be removed from any talks about the “fiscal cliff” myth. Lambert Strether at Corrente enumerated it best.

   Not one penny of cuts to Social Security, Medicare, Medicaid, or any other social insurance program, and any savings to be paid out as benefits.

The Democrats are defending programs. But they should be defending households. Here are some of the social insurance programs that are on the table, even if Social Security, Medicare, and Medcaid turn out to be off the table:

   Unemployment benefits extension in 2013 ($40 billion): If long-term unemployment benefits are allowed to expire at the end of the year, some 2 million jobless will be affected. Kogan says “there will be some extension, because that’s just brutal. It’s just a question of how much.”

   Pell Grants ($36 billion) (pdf): These need-based grants help some 10 million low-income students afford college.

   Section 8 Housing Assistance ($19 billion): Section 8 vouchers allow more than 2 million super low-income families to afford decent housing in the private market.

   Job Training ($18 billion in 2009): Loads of federal job training programs help millions of seniors, Native Americans, farm workers, veterans, young people, and displaced or laid-off workers with career development.

   Head Start ($7.9 billion):  The program, which helps kids from disadvantaged homes be better prepared to start school, had about a million enrollees in 2010. Research has shown that Head Start generates real long-term benefits for participants.

   Low-Income Home Energy Assistance Program ($3.47 billion): In 2011, about 23 million poor folks got help paying the winter heating bills through LIHEAP.

   Community Health Centers ($3.1 billion (pdf): In 2011, more than 20 million patients, 72 percent of whom were below the poverty line, got healthcare through federally-supported community health centers.

   Title 1 Education Grants ($322 million) (pdf): Under the No Child Left Behind Act, school districts serving a big percentage of low-income kids get financial assistance to help them meet state academic standards.

   Women, Infants, and Children ($7.2 million in 2011): The Department of Agriculture’s WIC program helps low-income moms and babies get access to supplemental nutrition and health care referrals. WIC has about 9 million participants, most of whom are kids.

Not one penny should be cut from of any of these programs. Go scuttle an aircraft carrier or something. Stop one of the wars. Whatever, dude. You’re the Preznit.

Know your president by the friends he keeps.

h/t Suzie Madrak at Crooks and Liars

Cross posted from The Stars Hollow Gazette

Chris Hayes, host of [Up with Chris Hayes ],  discusses the stand-off between President Obama and House Republicans over the “fiscal cliff,” the name given to the combination of the expiration of the Bush tax cuts and the sequestration cuts mandated by last year’s debt ceiling agreement. Chris’ “filibuster” in the first segment is a “Cliff Note” summation of the debate about the so-called “fiscal cliff.”

Chris is joined for a comprehensive, and somewhat wonky, discussion with Hakeem Jeffries, newly elected Congressman representing the 8th Congressional District in Brooklyn, New York State Assemblyman; Teresa Ghilarducci (@tghilarducci), labor economist and director of the Schwartz Center for Economic Policy Analysis at The New Schoo; Edward Conard, former partner at Bain Capital from 1993-2007 and author of “Unintended Consequences: Why Everything You’ve Been Told About The Economy Is Wrong;” Ohio Democratic Senator Sherrod Brown; and Molly Ball (@mollyesque), national political reporter for The Atlantic.

I found this article  about the debt/deficit/”fiscal cliff” from letdgetitdone quite interesting. It presents a very compelling argument, point by point, why this entire discussion about a “fiscal cliff” is a myth. He concludes his argument:

So, current claims that we have a fiscal crisis, must debate the debt, must fix the debt, and must immediately embark on a long-term deficit reduction program to bring the debt-to-GDP ratio under control, all misconceive the fiscal situation because they are based on the idea that fiscal responsibility is about developing a plan to bring the debt-to-GDP ratio “under control,” when it is really about using Government spending to achieve outputs that fulfill “public purpose.” There is no fiscal crisis that will require “a Grand Bargain” and cuts to popular discretionary spending and entitlement programs. It is a phoney issue.

The only real crisis is a crisis of a failing economy and growing economic inequality in which only the needs of the few are served. MMT policies can help to bring an end to that crisis; but not if progressives, and others continue to believe in false ideas about fiscal sustainability and responsibility, and the similarity of their Government to a household. To begin to solve our problems, we need to reject the neoliberal narrative and embrace the MMT narrative about the meaning of fiscal responsibility. That will lead us to fiscal policies that achieve public purpose and away from policies that prolong economic stagnation and the ravages of austerity.

     Bankers in the basement,            

     Mixing up the medicine,

     I’m on the pavement,

     Thinking about the government.

     The pols in the empty suits,

     Acolytes of Abramoff,

     Say we got a deficit,

     Want to get it paid off.

     Look out kid,

     It’s something you did,

     God knows when,

     But you’re a parasite again.

     Better blink away the pepper spray,

     Duck back down the alley way,

     Your job creator master,

     To pay for his disaster,

     Wants ninety dollar bills,

     You only got ten.

     Obama comes fleet foot,

     Asking for our input,

     Talking ’bout transparency,

     Freedom and democracy,

     But taps our phones anyway,

     Get used to it, ’cause many say,

     They must watch us every day,

     Orders from the NSA.

     Look out kid.

     Look out, look out, look out.

Cross posted from The Stars Hollow Gazette

While everyone has been focused on the Supreme Court hearings over the constitutionality of the individual mandate of the Patient Protection Affordable Care Act and the tragic murder of a black teenage boy in Florida by a “gun toting vigilante”, the Republican held House of Representatives has been up to its usual shenanigans threatening not only to shut down any infrastructure construction but now planning to shut down the government entirely. Even though they have vowed to defeat the current resident of the Oval Office, knowing they have a “friend”, the Republicans continue to make themselves more unpopular with the majority of their own constituents. This is what they have been up to while the traditional media focused on SCOTUS and a possible racially motivated murder:

The House voted down the proposed White House budget by a vote of 0 – 414. I suppose one could call that “bipartisan.” Nust up was the annual ritual of the Black Caucus Budget which failed but at least managed to garner 107 votes. Then they rejected the “Bowles-Simpson” Budget proposal, which really wasn’t, giving it only 38 votes.

Thus they finally came to Rep. Paul Ryan’s budget, which is a revision of his budget that was passed last year and soundly rejected by both sides of the aisle in the Senate. The current bill passed with a partisan vote of 228-191. All but 10 Republicans voted against the bill mostly because it didn’t cut enough. The bill has no chance of passing the Senate but its passage reignites the same issues of cutting taxes for the rich on the backs of those who can least afford it:

He again proposes tax cuts for the rich at the expense of seniors, the disabled, and children. He would cut taxes by roughly $3 trillion $4.6 trillion (according to a Tax Policy Center analysis just put out), with most of the tax cuts going to people earning more than $200,000. His proposed cuts to Medicare, Medicaid, and food assistance would all fall heavily on seniors, the disabled, and children. Ryan’s budget is doubly bad for children because his proposed cuts to public investments (mostly infrastructure and education) would cause children to inherit a country with crumbling roads and bridges and to enter the labor market with fewer skills.

It would also cut non-defense discretionary spending to lows not seen in the 50’s but raise the defense budget that the Pentagon says it doesn’t need:

Because it doles out trillions of dollars in tax cuts to the rich and corporations, the budget approved by House Republicans today – authored by Budget Committee Chairman Paul Ryan (R-WI) – would increase deficits and drive up the national debt. In fact, under the plan, “deficits would never drop below 4.4 percent of GDP, and would rise to more than 5 percent of GDP by 2022.”

Those increases would come despite the gigantic spending cuts that Ryan has in mind, which would eviscerate the social safety net and non-defense discretionary spending (even while the budget increases defense spending). As the Economic Policy Institute noted today, the plan Republicans adopted would drive discretionary spending down to its lowest level in more than 50 years.

Click on image to enlarge

The House also refused to pass the very bipartisan Senate Transportation bill managing only to pass a stop gap 90 day bill to fund current transportation and construction projects:

Despite several efforts to advance a bipartisan Senate bill championed by (Sen. Barbara) Boxer, House leaders opted for a three-month extension while they try to break a deadlock that has stalled their own proposal to fund transportation by expanding offshore oil drilling.

The extension leaves transportation financing in an increasingly precarious position.

This won’t win them any votes in the Fall

Cross posted from The Stars Hollow Gazette

One of the reasons that the Republicans lost so badly in 2006 and 2008 and the reason the Democrats took such a dive in 2010 was the economy. Since then the job approval rating of Congress has plummeted with the Republicans fairing worse than the Democrats but only slightly. In regards to the economy the public in general doesn’t think that President Obama is doing such a great job, either. People are worried about jobs, good jobs not deficits. Deficit and the national debt are not what is holding back the economy, it’s jobs.

The Republicans in the House seem to be intent on killing more jobs with its latest suicide pact that would cut everything from taxes for the wealthy, food stamps, destroy Medicare, and spending cuts. As Roger Hicky in his Huffington Post article point out, the Republican budget clearly rejecting what the American public wants.

The only thing that could save Republicans would be if Democrats, like Oregon Senator Ron Widen or House Democratic Whip Steny Hoyer, persuaded their party to ignore American public opinion and join with the GOP in destroying Medicare, cutting Social Security, and slashing public spending in a way that cripples the economy and rewards the wealthy. That’s what the Ryan Republican budget would do, and Democrats — and Americans who believe in majority rule — need to explain the extreme nature of this budget to the American people. [..]

So, the brand-new Ryan Republican budget, so very like last year’s Ryan budget, is already unpopular with the American majority, in all of its major elements. Progressives and Democrats should immediately publicize its many unpopular pieces so the public knows about them all. We should immediately demand to know whether the Republican candidates for president embrace it. And we should keep a wary eye out for Democrats who are willing to give the Republicans cover. When the Paul Ryan Republicans — enemies of everything the American majority believe in — are putting a gun to their heads and are about to pull the trigger, progressives should get out of the way and publicize the results — from now until the November elections.

It is obvious from the results of these kinds of cuts in Europe, austerity budgets don’t work. The Occupy Wall Street movement changed that conversation six months ago.

If Obama and the Democrats are smart, they’ll listen to the American public, sit back and let the Republicans pull the trigger.

Up Date: Ezra Klein, writing in the Washington Post, sums up Ryan’s latest version of a “budget plan” in one sentence:

Ryan’s budget funds trillions of dollars in tax cuts, defense spending and deficit reduction by cutting deeply into health-care programs and income supports for the poor.

The last I checked that isn’t going to win them any elections but you never know when the Democrats will ride into save the day. Calling Ron Wyden.

Cross posted from The Stars Hollow Gazette

Everyone one of these Democrats should lose the support of the DCCC and be primaried.

Blue Dogs backing corporate tax holiday

House Blue Dogs are on board with a temporary corporate tax holiday they argue will boost economic growth.

The group joined a growing bipartisan chorus pressing the congressional deficit-reduction committee to give U.S. multinational corporations a tax break in exchange for investing at home.

[]

The Blue Dog Coalition is backing a bipartisan bill sponsored by Reps. Jim Matheson (D-Utah) and Kevin Brady (R-Texas) that would remove a barrier keeping upwards of $1.4 trillion in American private-sector money overseas, which is similar to a Senate bill introduced last week by Sens. Kay Hagan (D-N.C.) and John McCain (R-Ariz.).

I have no idea what experts they are citing the article doesn’t say. I do know the history if the last time this was done in 2004 when they gave 92% of the money to themselves. Nor did the law which stated the money could not be used to raise dividends or to repurchase shares, stop them.:

There is no evidence that companies that took advantage of the tax break – which enabled them to bring home, or repatriate, overseas profits while paying a tax rate far below the normal rate – used the money as Congress expected.

“Repatriations did not lead to an increase in domestic investment, employment or R.& D., even for the firms that lobbied for the tax holiday stating these intentions,” concluded the study by three economists, including a former official of the Bush administration who took part in the discussions leading to enactment of the plan in 2004.

The study, titled “Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act,” was released this week by the National Bureau of Economic Research. It was written by Dhammika Dharmapala, a law professor at the University of Illinois; C. Fritz Foley, an associate professor of finance at Harvard Business School; and Kristin J. Forbes, a professor of economics at the Massachusetts Institute of Technology who was a member of the president’s council of economic advisers from 2003 to 2005.

“The restrictions on how the money will be spent seem to have been completely ineffective,” Ms. Forbes said in an interview this week.

“Dell was a great example,” she added, referring to Dell Computer. “They lobbied very hard for the tax holiday. They said part of the money would be brought back to build a new plant in Winston-Salem, N.C. They did bring back $4 billion, and spent $100 million on the plant, which they admitted would have been built anyway. About two months after that, they used $2 billion for a share buyback.”

The give away also cost the country more than 500,000 jobs:

Following a tax holiday on repatriated foreign earnings in 2004, 58 corporations that benefitted from the holiday slashed a total of nearly 600,000 jobs. These 58 giant corporations accounted for nearly 70 percent of the total repatriated funds and collectively saved an estimated $64 billion from what they otherwise would have owed in taxes.

According to the Joint Committee on Taxation this current clamor by for a tax holiday by the multinational corporations that barely pay any taxes now, would cost the US $80 billion and would do nothing to reduce the deficit and wouldn’t protect or create jobs:

Representative Lloyd Doggett, a Texas Democrat who is a senior member of the Ways and Means Committee, yesterday circulated an estimate from the Joint Committee on Taxation pegging the cost of a repatriation bill at $78.7 billion. An unsuccessful effort to create a similar holiday in 2009 would have cost the U.S. government about $30 billion over a decade in forgone revenue.

“This means we will have to borrow more from foreign creditors or shift a greater burden to American small businesses and families,” Doggett said. Congressional estimators projected that companies would repatriate about $700 billion if offered a 5.25 percent rate, compared with $300 billion during the tax holiday enacted in 2004.

[]

Democrats also maintain that the bill does too little to protect jobs at companies that repatriate overseas funds. They have pointed to such examples as Hewlett-Packard Co. (HPQ), which returned $14.5 billion to the U.S. at a low rate in 2004 and cut its workforce by 14,500 employees in 2005.

Primary these idiots

Cross posted from The Stars Hollow Gazette

To join the Tea Party. Nomura economist Richard Koo gives decent marks to Obama’s jobs plan,:

Arguing need for longer-term fiscal consolidation is irresponsible

The insistence that fiscal consolidation is necessary in the longer term is like the doctor who, faced with a patient who has just been admitted to the intensive care ward, repeatedly questions the patient about his ability to afford the treatment. This is both lacking in decency and irresponsible.

If the patient loses heart after learning the cost of the treatment, he may end up spending even longer in the hospital, leading to a larger final bill. Completely ignoring the policy duration effect of fiscal policy and constantly insisting on longer-term fiscal consolidation was what prolonged Japan’s recession.

For instance, it was because Japan’s policymakers refused to give up the medium-term fiscal consolidation target of achieving a primary fiscal balance by 2011 that the government stumbled from fiscal stimulus to fiscal retrenchment and back again and, ultimately, was unable to meet its fiscal targets even once in the last 20 years.

That is why Japan’s recession lasted as long as it did and why the nation’s debt has risen to some 200% of GDP.

What digby said:

With some notable exceptions, most people still believe that that there will be a hangover of debt which will have to be dealt with at some point. But the confidence fairy died some time back and the only other reason for worrying about it at this point is to get some Shock Doctrine benefits out of the current situation. But as Koo points out, this actually hurts the economy even more.

Paul Krugman eulogizes the “confidence fairy’s” death:

In the first half of last year a strange delusion swept much of the policy elite on both sides of the Atlantic – the belief that cutting spending in the face of high unemployment would actually create jobs.

Herr Professor points out that past analysis  of austerity measures by the IMF is contradictory and even worse in the current economic climate:

   The reduction in incomes from fiscal consolidations is even larger if central banks do not or cannot blunt some of the pain through a monetary policy stimulus. The fall in interest rates associated with monetary stimulus supports investment and consumption, and the concomitant depreciation of the currency boosts net exports. Ireland in 1987 and Finland and Italy in 1992 are examples of countries that undertook fiscal consolidations, but where large depreciations of the currency helped provide a boost to net exports.

   Unfortunately, these pain relievers are not easy to come by in today’s environment. In many economies, central banks can provide only a limited monetary stimulus because policy interest rates are already near zero (see “Unconventional Behavior” in this issue of F&D). Moreover, if many countries carry out fiscal austerity at the same time, the reduction in incomes in each country is likely to be greater, since not all countries can reduce the value of their currency and increase net exports at the same time.

   Simulations of the IMF’s large-scale models suggest that the reduction in incomes may be more than twice as large as that shown in Chart 2 when central banks cannot cut interest rates and when many countries are carrying out consolidations at the same time. These simulations thus suggest that fiscal consolidation is now likely to be more contractionary (that is, to reduce short-run income more) than was the case in past episodes.

Like Dr. Krugman and digby said, we’re doing it wrong.