“A Virtuous Cycle”: At Least The Federal Reserve Is Not Obsessing About The Budget Deficit
With deficit hawks circling overhead, the responsibility for creating jobs has fallen by default to Ben Bernanke and the Federal Reserve. Last week the Fed said it expected to keep interest rates near zero through mid 2015 in order to stimulate employment.
Two cheers.
The problem is, low interest rates alone won’t do it. The Fed has held interest rates near zero for several years without that much to show for it. A smaller portion of American adults is now working than at any time in the last thirty years.
So far, the biggest beneficiaries of near-zero interest rates haven’t been average Americans. They’ve been too weighed down with debt to borrow more, and their wages keep dropping. And because they won’t and can’t borrow more, businesses haven’t had more customers. So there’s been no reason for businesses to borrow to expand and hire more people, even at low interest rates.
The biggest winners from the Fed’s near-zero rates have been the big banks, which are now assured of two or more years of almost free money. The big banks haven’t used the money to refinance mortgages – why should they when they can squeeze more money out of homeowners by keeping them at higher rates? Instead, they’ve used the almost free money to make big bets on derivatives. If the bets continue to go well, the bankers will continue to make a bundle. If the bets sour, well, you know what happens then. Watch your wallets.
The truth is, low interest rates won’t boost the economy without an expansive fiscal policy that makes up for the timid spending of consumers and businesses. Until more Americans have more money in their pockets, government spending has to fill the gap.
On this score, the big news isn’t the Fed’s renewed determination to keep interest rates low. The big news is global lender’s desperation to park their savings in Treasury bills. The euro is way too risky, the yen is still a basket case, China is slowing down and no one knows what will happen to its currency, and you’d have to be crazy to park your savings in Russia.
It’s a match made in heaven – or should be. Because foreigners are so willing to buy T-bills, America can borrow money more cheaply than ever. We could use it to put Americans back to work rebuilding our crumbling highways and bridges and schools, cleaning up our national parks and city parks and playgrounds, and doing everything else that needs doing that we’ve neglected for too long.
This would put money in people’s pockets and encourage them to take advantage of the Fed’s low interest rates to borrow even more. And their spending, in turn, would induce businesses to expand and create more jobs. A virtuous cycle.
Yet for purely ideological reasons we’re heading in the opposite direction. The federal government is cutting back spending. It’s not even helping state and local governments — which continue to lay off teachers, fire fighters, social workers, and police officers.
Worst of all, we’re facing a so-called “fiscal cliff” next year when $109 billion in federal spending cuts automatically go into effect. The Congressional Budget Office warns this may push us into recession – which will cause more joblessness and make the federal budget deficit even larger relative to the size of the economy. That’s the austerity trap Europe has fallen into.
Mitt Romney has been criticizing the Obama administration for not doing more to avoid the cliff, but he seems to forget that congressional Republicans brought it on when they refused to raise the debt ceiling. They then created the cliff as a fall-back mechanism. Romney’s vice-presidential pick Paul Ryan, chair of the House budget committee, voted for it.
It’s a mindless gimmick that presumes our biggest problem is the deficit, when even the Fed understands our biggest problem right now is unemployment. Yet even the nation’s credit-rating agencies have bought into the mindlessness. Last week Moody’s said it would likely downgrade U.S. government bonds if Congress and the White House don’t come up with a credible plan to reduce the federal budget deficit. (Standard & Poor’s has already downgraded U.S. debt.)
Hello? Can we please stop obsessing about the federal budget deficit? Repeat after me: America’s #1 economic problem is unemployment. Our #1 goal should be to restore job growth. Period.
The Federal Reserve Board understands this. And at least it’s trying. But it can’t succeed on its own. Global lenders are giving us a way out. Let’s take advantage of the opportunity.
By: Robert Reich, Robert Reich Blog, September 15, 2012
“Trust Me, I’ll Figure It Out”: Mitt Romney Re-Explains Why He Can’t Be Trusted On Health Care
Over the weekend, Mitt Romney muddied the waters about where he stands on health-care reform with a series of vague statements from himself and his campaign about health insurance for people with pre-existing conditions.
His floundering is a subset of a larger problem: He has committed himself to a set of positions that won’t allow for a replacement of Obamacare with something that actually fixes the problem of tens of millions of Americans without health insurance, including those with pre-existing conditions.
Sarah Kliff of the Washington Post describes Romney’s progression on pre-existing conditions:
It started with the Republican presidential candidate saying during an appearance on “Meet the Press” that he liked the Affordable Care Act’s provision that requires insurers to cover preexisting conditions, and would support something similar. Hours later, his campaign clarified he did not, however, support a federal ban against denying coverage for preexisting conditions. Around 10 p.m., the Romney camp had circled back to the same position it held back in March: that the governor supports coverage for preexisting conditions for people who have had continuous coverage.
The “continuous coverage” distinction is key: In order to retain the right to insurance that covers your pre-existing condition, you need to make sure to pay health insurance premiums every month. But often, the reason people lose health insurance because they have lost their job. Telling the recently unemployed to pay out of pocket for continuous coverage, typically at a cost of several hundred dollars a month for an individual or more than $1,000 for a family, is often not viable.
It’s worth noting that the purpose of the continuous coverage requirement is similar to the purpose of the individual mandate: It provides an incentive for healthy people to stay in insurance pools, avoiding a “death spiral” in which only sick people buy insurance.
Unaffordability is not a fatal problem for Romney’s continuous coverage proposal. It could be fixed with a range of subsidies that make it affordable for people to maintain continuous health coverage. Essentially, that’s what Obamacare does, and what Romney’s health plan in Massachusetts did.
For a conservative approach to fix at least part of the affordability problem, see this article from National Affairs by James Capretta and Tom Miller. Capretta and Miller propose to combine a Romney-style proposal on pre-existing conditions with significantly expanded funding for high-risk insurance pools, in hopes of covering up to 4 million uninsured Americans with pre-existing conditions.
But Capretta and Miller estimate that their plan would cost somewhere on the order of $200 billion over 10 years. Where is the indication that Romney plans to make such a significant financial commitment, let alone get one out of a Republican Congress? Romney’s platform is full of expensive promises — restore $700 billion in Medicare cuts, grow defense spending to 4 percent of GDP, cut tax rates. It funds these promises in part by drastically cutting spending on health care for the non-elderly. Implementing something like the Capretta-Miller proposal would be a significant reversal of course.
And what about the tens of millions of Americans who are uninsured not because they have pre-existing conditions but simply because they cannot afford insurance coverage? Romney says he wants to replace Obamacare, but his plans do not signal much help for them.
Romney has talked about leveling the playing field for individual purchasers of insurance, so they would get the same favorable tax treatment as businesses buying insurance for their employees. This would make it easier for individuals to buy their own health plans, but it’s not a substitute for Obamacare-style subsidies. Any way you structure a tax incentive, it’s likely to over-subsidize the wealthy and under-subsidize the poor, leaving huge swaths of America still unable to afford insurance.
Romney hasn’t said exactly how his tax incentive would work. But it would probably be a tax credit (whose value is static across incomes) or a tax deduction (whose value rises with income). In 2008, John McCain proposed a $5,000 per family tax credit for health insurance. Scaled up for health-care inflation, that would likely be closer to $6,000 today.
The average health plan premium for a family is now $15,745. Some middle- and upper-middle-income families can be expected to cover a gap of about $9,000. But poorer people need a larger subsidy if we hope to get them covered.
(It is also worth noting that if Romney plans to convert the existing tax exclusion for employer-provided health care into some other health-care subsidy, he cannot also use it as an area for tax-base broadening to pay for his cuts in tax rates, and he needs a lot of base-broadening to make his tax-cut math work.)
The key to the subsidy structure in both Romney’s Massachusetts plan and Obamacare is that the subsidies decline in value as people’s incomes rise. Under Obamacare, people with incomes up to 133 percent of the poverty line get Medicaid, which has very little cost to the beneficiary. Above that, they get sliding-scale subsidies for private insurance; the poorest beneficiaries pay just 2 percent of their incomes. Middle-income people get smaller subsidies, and wealthy people have to pay their own way.
Republican rejection of the Medicaid expansion is especially problematic, because Medicaid is cheaper than private insurance, and people earning less than 133 percent of the poverty line have almost no money of their own to contribute toward premiums.
Telling these people the federal government will pay 40 percent of their health insurance premiums will not get them insured. The options aside from Medicaid are to provide them private insurance at significantly higher taxpayer cost than in Obamacare, or leave them uninsured. It is easy to guess which option Republicans in Congress would prefer.
Romney doesn’t want to get into these details about who will get what subsidies. But the details are important. They are the difference between expanding health insurance coverage to the vast majority of Americans, and leaving tens of millions of Americans without access to the health care they need. And they are the difference between actually making it possible for people with pre-existing conditions to get the coverage they need, and not making it possible.
As on so many issues, Romney’s line on health reform is essentially, “Trust me, I’ll figure it out.” But uninsured Americans stand to gain a lot from the implementation of Obamacare. They have no particular reason to believe that Romney’s vague alternative would bring them similar benefits.
By: Josh Barro, Bloomberg, September 13, 2012
“Inconvenient Facts”: Mitt Romney’s Foreign Policy Would Play Into The Terrorists’ Hands
This, apparently, is the sum total of Mitt Romney’s case for being better at foreign policy than Barack Obama: He’s better at rattling sabers than the president is. And while in many ways that means the substance of Romney’s would-be policy really isn’t that different from Obama’s, the stylistic differences are dangerous. To put it bluntly, the kind of swaggering, blustering foreign policy Romney and his neocon advisers favor plays right into the hands of the people who do things like attack and kill U.S. diplomats.
The domestic/political portion of this fight started Tuesday when the Romney campaign issued a statement condemning the Obama administration for what Team Romney characterized as sympathizing with the terrorists who had killed an American consulate worker in Benghazi (the full facts of four Americans, including the ambassador, having been killed were at that point still unknown). That the statement in question was issued before the deadly attacks and without the administration’s clearance proved of little interest to Romney and his advisers who then doubled down even in the face of the inconvenient facts as well as widespread criticism for politicizing a foreign crisis.
Here’s where things stood by week’s end: Romney had resorted to justifying his attacks on the administration by pointing out that the White House had repudiated the offending statement and was, finally, reduced to chastising the Cairo embassy for not updating its Web site fast enough. And while he and his allies had characterized the statement, which condemned an anti-Muslim online video, as an apology for American values, he had … condemned the anti-Muslim online video. Finally, in an interview broadcast Friday morning, Romney told ABC News that he had the same “red line” as Obama in regards to Iran obtaining a nuclear weapon.
What’s left in terms of how Romney would conduct foreign policy differently? Romney would talk loudly while brandishing a big stick. Marc Ambinder notes that he seems to subscribe to the theory of “provocative weakness“—that anything less than a robustly muscular U.S. global posture invites very bad things. So under a Romney administration, an adviser to the candidate opined to the Washington Post, there would be no attacks on American embassies or diplomats for fear of American toughness.
“There’s a pretty compelling story that if you had a President Romney, you’d be in a different situation,” Richard Williamson, a top Romney foreign policy adviser, said in an interview. “For the first time since Jimmy Carter, we’ve had an American ambassador assassinated.”
Williamson added, “In Egypt and Libya and Yemen, again demonstrations — the respect for America has gone down, there’s not a sense of American resolve and we can’t even protect sovereign American property.”
That is a compelling story, if only because it’s so fantastical. Let’s unpack it: Disgruntled Muslims wouldn’t take to the streets if Romney were president because they’d be cowed by American resolve? How does that work? They’d be worried that if they demonstrated President Romney would give them all a stern talking to? Or that he’d send in SEAL Team Six to quiet them down?
The “provocative weakness” theory falls apart in the face of nonstate actors on the world stage, people for whom American force is less a threat than a recruiting tool. The fact of the matter is that assuming the people who killed Ambassador Christopher Stevens and his three colleagues were al Qaeda allies or sympathizers (or al Qaeda itself), they didn’t attack the U.S. embassy because they didn’t fear a U.S. response; they crave a U.S. response, preferably of the ham handed, military variety to bolster their recruiting and inflame the kind of anti-American sentiment that is so clearly present in the Muslim world today.
“[Osama] bin Laden, when he was alive, was very consciously aware that encouraging the United States to lead with its chin—to lead with a military response to everything—would bog us down,” says Heather Hurlburt, executive director of the National Security Network. “And that was very much part of bin Laden’s vision and you could see that on jihadi chat boards and so on.”
And it’s worth noting that the “provocative weakness” theory hasn’t held up in the real world either. As Kevin Drum writes today :
At one level, of course, this is just dumb campaign bravado. Your guy is weak and vacillating and our enemies laugh at him. My guy is strong and resolute and our enemies fear him. But it’s also nonsense. Reagan’s resolve didn’t stop Lebanese militants from bombing a Marine barracks in Beirut. Bush Sr.’s resolve didn’t stop Saddam Hussein from invading Kuwait. Bush Jr.’s resolve didn’t stop al-Qaeda from destroying the World Trade Center and killing 3,000 Americans.
In that respect, anyway, Romney’s foreign policy is much like his domestic policy: Light on details but apparently a retread of the same stuff that didn’t work out so well the first couple of times we tried them.
By: Robert Schlesinger, U. S. News and World Report, September 14, 2012
“Sad And Pathetic”: The Lost Soul Of Mitt Romney
The nation has suffered a death in the family.
This morning we learn that our Ambassador to Libya, Chris Stevens, was among four Americans killed yesterday in a violent attack on the U.S. consulate in Benghazi. It was an attack carried out by a mob deeply upset by a film made by an American-Israeli, California-based real estate developer that ridicules Mohammed, the central figure in Islamic religious belief.
While the Romney campaign chose to turn yesterday’s events in Cairo and Benghazi into a political opportunity by criticizing the Obama Administration for a statement issued by our embassy in Cairo earlier in the day (more on that in a moment), a check of Twitter and other communications sources reveals that, as of the time of publication of this piece, Governor Romney has not yet seen fit to so much as express his condolences to the families of Ambassador Stevens and the other Americans who lost their lives in service to their country. Now, if I’ve somehow missed Romney’ issuance of condolences, I’m sure that there are many readers who will gladly point this out. I, in turn, will be more than willing to correct the record if this is the case—however a close search of all sources reveals that no such statement has been forthcoming from the Romney camp.
The Romney condemnation—issued prior to official confirmation of Ambassador Steven’s death—stated, “I’m outraged by the attacks on American diplomatic missions in Libya and Egypt and by the death of an American consulate worker in Benghazi. It’s disgraceful that the Obama Administration’s first response was not to condemn attacks on our diplomatic missions, but to sympathize with those who waged the attacks.”
These words were uttered at the time when the families of our fellow countrymen were being notified of the terrible fate that had befallen their loved ones.
Is this really how leadership works?
A leader waits until all the facts are available and the impact of one’s words can be more fully assessed. In speaking out before he was fully aware of the situation on the ground, Governor Romney chose the path of the impulsive politician rather that the road taken by a measured leader—and all in the quest of political gain.
And then there is the Twitter posted by GOP Chairman, Reince Priebus, which simply says, “Obama sympathizes with attackers in Egypt. Sad and pathetic.”
Apparently, there is nothing sufficiently sad and pathetic about the violent loss of American lives to merit so much as a follow-up Tweet from Chairman Priebus mourning these terrible deaths.
What was the transgression that led the GOP candidate and party chairman to attack the President for ‘sympathizing’ with the protestors or— as many right-wing voices are today saying—“apologizing” (a favorite trigger word of the right these days) to the protestors?
It was a statement issued earlier yesterday by staffers at the American embassy in Cairo—a statement containing words that sought to defuse a situation quickly getting out of hand as Muslims protested the offending film outside the embassy gates. That statement, issued without the prior approval of either the State Department or the White House, was one that we can reasonably assume was the result of frightened embassy employees—employees under siege and attempting to keep a bad situation from getting dangerously out of control.
The Embassy of the United States in Cairo condemns the continuing efforts by misguided individuals to hurt the religious feelings of Muslims – as we condemn efforts to offend believers of all religions. Today, the 11th anniversary of the September 11, 2001 terrorist attacks on the United States, Americans are honoring our patriots and those who serve our nation as the fitting response to the enemies of democracy. Respect for religious beliefs is a cornerstone of American democracy. We firmly reject the actions by those who abuse the universal right of free speech to hurt the religious beliefs of others.
Maybe I’m experiencing another one of those hemorrhages in that pesky left-side of my brain, but it’s a real struggle to find anything approaching an apology in those words.
What I do see is a reminder to the Muslim protestors that the United States of America, while defending the right of free speech even when that speech is deeply offensive to some, is not a nation that stands for anyone disrespecting the religious beliefs of another. Indeed, as the communiqué noted, this religious tolerance is a cornerstone of American democracy.
At least it used to be.
Governor Romney should understand this better than most as the founder of Romney’s own LDS religion, Joseph Smith, was murdered by a violent mob whose own religious beliefs had been offended by Smith. Ironically, that mob violently stormed the jail in which Smith was being detained and killed the man in cold blood.
I’m sure the irony of our Ambassador’s death at the hands of such a mob is completely lost on Governor Romney who has now cashed in the decency I have always ascribed to the man in exchange for his willingness to do anything—and say anything—if it helps him capture the prize he so intensely seeks. No doubt, the Romney campaign tells itself that trading their souls is the price they must pay for the greater good. No doubt, they convince themselves of some wisdom they find in speaking first and thinking later if that is what must be done to save the American people from themselves.
Yet, I think all Americans know how that storyline ends.
In point of actual fact—not that the facts have ever stood in the way of Romney campaign rhetoric—President Obama has condemned the actions of the mob in the harshest possible terms— as has Secretary Clinton.
Indeed, the only apologizing I can find is the apology issued today by Libya’s interim president, Mohammed el-Megarif, who said on behalf of his country, “We extend our apology to America, the American people and the whole world.”
I suppose this will now put the leader of the Libyan government at risk with the extremists in his own country as, apparently, apologies are offensive to extremists everywhere.
While there is certainly nothing that has been said or done that would suggest that any American official has apologized for the heinous behavior of the mob—at least, not here in the real world—there is an apology that I would like to offer.
On behalf of a few of my fellow Americans who have behaved in an insensitive and inappropriate manner, I would like to apologize to the families and friends of my countrymen who died so tragically in Benghazi. I’m sure that if a presidential campaign was not clouding their judgment, they would have shown a bit more consideration, compassion and class.
At least I’d like to believe that this would be the case.
By: Rick Ungar, Contributor, Forbes, September 12, 2012
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