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“Addicted To The Apocalypse”: Scaremongers Can’t Bring Themselves To Let Go

Once upon a time, walking around shouting “The end is nigh” got you labeled a kook, someone not to be taken seriously. These days, however, all the best people go around warning of looming disaster. In fact, you more or less have to subscribe to fantasies of fiscal apocalypse to be considered respectable.

And I do mean fantasies. Washington has spent the past three-plus years in terror of a debt crisis that keeps not happening, and, in fact, can’t happen to a country like the United States, which has its own currency and borrows in that currency. Yet the scaremongers can’t bring themselves to let go.

Consider, for example, Stanley Druckenmiller, the billionaire investor, who has lately made a splash with warnings about the burden of our entitlement programs. (Gee, why hasn’t anyone else thought of making that point?) He could talk about the problems we may face a decade or two down the road. But, no. He seems to feel that he must warn about the looming threat of a financial crisis worse than 2008.

Or consider the deficit-scold organization Fix the Debt, led by the omnipresent Alan Simpson and Erskine Bowles. It was, I suppose, predictable that Fix the Debt would respond to the latest budget deal with a press release trying to shift the focus to its favorite subject. But the organization wasn’t content with declaring that America’s long-run budget issues remain unresolved, which is true. It had to warn that “continuing to delay confronting our debt is letting a fire burn that could get out of control at any moment.”

As I’ve already suggested, there are two remarkable things about this kind of doomsaying. One is that the doomsayers haven’t rethought their premises despite being wrong again and again — perhaps because the news media continue to treat them with immense respect. The other is that as far as I can tell nobody, and I mean nobody, in the looming-apocalypse camp has tried to explain exactly how the predicted disaster would actually work.

On the Chicken Little aspect: It’s actually awesome, in a way, to realize how long cries of looming disaster have filled our airwaves and op-ed pages. For example, I just reread an op-ed article by Alan Greenspan in The Wall Street Journal, warning that our budget deficit will lead to soaring inflation and interest rates. What about the reality of low inflation and low rates? That, he declares in the article, is “regrettable, because it is fostering a sense of complacency.”

It’s curious how readily people who normally revere the wisdom of markets declare the markets all wrong when they fail to panic the way they’re supposed to. But the really striking thing at this point is the date: Mr. Greenspan’s article was published in June 2010, almost three and a half years ago — and both inflation and interest rates remain low.

So has the ex-Maestro reconsidered his views after having been so wrong for so long? Not a bit. His new (and pretty bad) book declares that “the bias toward unconstrained deficit spending is our top domestic economic problem.”

Meanwhile, about that oft-prophesied, never-arriving debt crisis: In Senate testimony more than two and half years ago, Mr. Bowles warned that we were likely to face a fiscal crisis within around two years, and he urged his listeners to “just stop for a minute and think about what happens” if “our bankers in Asia” stop buying our debt. But has he, or anyone in his camp, actually tried to think through what would happen? No, not really. They just assume that it would cause soaring interest rates and economic collapse, when both theory and evidence suggest otherwise.

Don’t believe me? Look at Japan, a country that, like America, has its own currency and borrows in that currency, and has much higher debt relative to G.D.P. than we do. Since taking office, Prime Minister Shinzo Abe has, in effect, engineered exactly the kind of loss of confidence the debt worriers fear — that is, he has persuaded investors that deflation is over and inflation lies ahead, which reduces the attractiveness of Japanese bonds. And the effects on the Japanese economy have been entirely positive! Interest rates are still low, because people expect the Bank of Japan (the equivalent of our Federal Reserve) to keep them low; the yen has fallen, which is a good thing, because it make Japanese exports more competitive. And Japanese economic growth has actually accelerated.

Why, then, should we fear a debt apocalypse here? Surely, you may think, someone in the debt-apocalypse community has offered a clear explanation. But nobody has.

So the next time you see some serious-looking man in a suit declaring that we’re teetering on the precipice of fiscal doom, don’t be afraid. He and his friends have been wrong about everything so far, and they literally have no idea what they’re talking about.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, October 24, 2013

October 26, 2013 Posted by | Budget, Debt Crisis, Fiscal Policy | , , , , , , | Leave a comment

“That’s Not What ‘Ransom’ Means”: Demanding Something In Exchange For Nothing Is A Deeply Unserious Argument

During the most recent Republican debt-ceiling crisis, the White House used a provocative word grounded in fact: the GOP was demanding a “ransom” before they’d allow the federal government to pay its bills. In an odd twist, now it’s Republicans trying to flip the script.

Senate Minority Leader Mitch McConnell (R-Ky.) sat down with National Review’s Robert Costa last week, and condemned Democratic demands as part of a “grand bargain.” In recent years, the Obama White House has told Republicans that he’d consider entitlement “reforms” if they’d consider new tax revenue as part of a broader compromise. McConnell told Costa, “[W]e don’t think we should have to pay a ransom to do what the country needs.”

Yesterday, McConnell used the same line.

President Barack Obama was holding up a bipartisan fiscal deal by demanding a “ransom” of $1 trillion in new tax revenues, Senate Minority Leader Mitch McConnell charged on Sunday.

“Unfortunately, every discussion we’ve had about this in the past has had what I would call a ransom attached to it: $1 trillion in new tax revenues,” the Kentucky Republican said on CBS’s “Face The Nation.”

This reinforces fears that Republican leaders quite literally don’t understand what a compromise is.

If I go to my favorite sandwich shop for lunch, and then try to take the sandwich without paying, the guy behind the counter wouldn’t be too happy. “Let’s complete our transaction,” he’d say. “I’ll give you your lunch and you give me $5.” It’d be kind of odd if I replied, “Why are you demanding a ransom for my sandwich?”

But that’s effectively McConnell’s argument. Obama is prepared to complete the transaction: Democrats will make a concession on entitlements if Republicans make a comparable concession on revenue. The Senate Minority Leader’s argument is that the president is being unreasonable – to insist on a compromise is to insist on a “ransom.”

What is McConnell prepared to trade in exchange for entitlement cuts? By all appearances, nothing, since he’s under the impression that entitlement cuts are necessary anyway.

For one thing, they’re not necessary, at least not right now. For another, demanding something in exchange for nothing usually isn’t a recipe for bipartisan cooperation.

That said, McConnell’s argument seems to be winning some folks over. The editorial board of the Washington Post this morning compares Democrats’ reluctance to cut social-insurance programs to Republicans’ reluctance to raise the debt ceiling.

That’s a deeply unserious argument, but it’s music to McConnell’s ears.

 

By: Steve Benen, The Maddow Blog, October 21, 2013

October 23, 2013 Posted by | Budget, Mitch Mc Connell | , , , , , | Leave a comment

“A Love Story For The Ages”: Republicans And The Sequester

The deal allowing the government to reopen today included a mandate that the House and Senate engage in a new round of budget negotiations, with the lawmakers involved facing the unenviable task of reconciling the different tax and spending plans passed by each respective chamber. One contentious issue right off the bat is whether or not to preserve the spending levels under the so-called “sequester,” which were a byproduct of the 2011 debt ceiling debacle.

To review, when Republicans took the debt ceiling hostage two years ago, the deal crafted to avoid default – known as the Budget Control Act – mandated the creation of a “supercommittee” that was supposed to come up with a budget compromise. The sequester was meant to be the stick that would force a deal, as it included cuts that were supposedly so painful to each party that they would have no choice but to agree on something else.

Except that’s not what happened. The negotiations fell apart where they always fall apart: with Republicans refusing to accede to one dime in new revenue. The sequester went into effect and is now cutting an indiscriminate path through the budget.

Democrats, then, have made some noise about undoing the sequester, for at least a short period of time, during this new round of budget negotiations. But Senate Minority Leader Mitch McConnell, R-Ky., made clear on the Senate floor yesterday that he is not interested in such an idea.

“I’m also confident that we’ll be able to announce that we’re protecting the government spending reductions that both parties agreed to under the Budget Control Act, and that the president signed into law. That’s been a top priority for me and my Republican colleagues throughout this debate. And it’s been worth the effort,” McConnell said. “Some have suggested that we break that promise as part of the agreement. …  But what the BCA showed is that Washington can cut spending. … And we’re not going back on this agreement.” Rep. Jim Jordan, R-Ohio, called sequestration, “one of the good things that has happened” and “an important thing that we have achieved.” Rep. Kevin Brady, R-Texas, even threatened another debt ceiling standoff in the new year should Democrats try to undo the sequester.

But when the sequester first went into effect, Republicans did everything they could to blame it on Obama. They even tried to call it the “Obamaquester.” In fact, here’s what McConnell had to say about the sequester back in February: “Take the Obama sequester as just one example. The president had a chance last night to offer a thoughtful alternative to his sequester, one that could reduce spending in a smarter way. That is what Republicans have been calling for all along.”

So in just eight short months, those spending cuts went from “the Obama sequester” to a “top priority” for the GOP. How the times change.

During his floor speech, McConnell also excoriated Obamacare for “killing jobs.” Not only is that false, but if McConnell wants to see a real job killer, he needs to look no further than his precious sequester spending levels. As I noted last week, the sequester has not only been gutting important programs, but is slowly strangling economic growth.  According to the Congressional Budget Office, the spending levels under the sequester will cost up to 1.6 million jobs through fiscal year 2014.

Of course, the GOP to this point has been impervious to the mountain of evidence showing that cutting spending in a weak economy just makes for a weaker economy. So perhaps it’s best that McConnell and co. are just owning up to the fact that the sequester is something they desire and admire. It’s a love story for the ages: the sequester, once spurned, is now the one thing Republicans want to ensure will be staying around forever.

 

By: Pat Garofalo, U. S. News and World Report, October 17, 2013

October 18, 2013 Posted by | Budget, Debt Ceiling, Sequester | , , , , , , | Leave a comment

“The ‘Fraidy Cat Group”: Why We Probably Won’t Get Another Government Shutdown In January

So we probably now have a short-term continuing resolution set to expire in January. Does that mean another shutdown in January, after the two sides can’t reach an agreement? After all, that’s what happened in 1995 and 1996: a relatively brief shutdown in the fall was followed by a five-week deadlock in the winter. Is that what we’re going to get?

Probably not.

What the shutdown that appears to be ending today and the 1995-1996 episodes had in common was important: in both cases, one side really wanted the shutdown. In 1995, Newt Gingrich and many Republicans sincerely believed that Bill Clinton was personally weak and would fold if pressed hard enough. That turned out to be wrong; whether it was a foolish idea to test it in the way Gingrich did remains, I suppose, an open question.

This time around, the logic of the showdown gang was clearly foolish; no objective observers believed their stated plan would work; it would have required a massive surge of anger at the Democrats for allowing the government to be shut down over the Affordable Care Act (ACA), but most Democrats like the ACA, and polling indicated that practically no one outside of tea party circles favored a shutdown over it.

There have been a lot of very contentious budget arguments over the last few decades, but none of the others ended with a prolonged shutdown; the next-longest one after those was only three days.

What causes an extended shutdown, then, isn’t missing a deadline. In fact, deadlines are probably needed to get deals done. As long as neither side actively seeks a shutdown, one of three things will happen: they’ll make a deal by the deadline; they’ll miss the deadline but going over the deadline will be enough to get it done; or, they’ll agree to move the deadline.

The question as we approach the next finish line, then, isn’t whether we’ll go close to the edge. Of course we will, but that’s a feature, not a bug (on a shutdown; flirting with the brink on debt limit is a far riskier thing to do). Real negotiations are hard; it takes time to sort out what the real asks are and what’s just bluff.  The question is whether a significant faction of the Republican Party wants to do this again, and, if so, whether the rest of the party will accommodate them again.

My guess, as of now, is that this one was devastating enough that we won’t see a repeat. That doesn’t mean that Republicans will back off their demands; it just means that they won’t see any additional utility in fighting through a shutdown.

My biggest worry? This wasn’t 1995-1996, when the GOP was generally united behind the belief that a shutdown would work for them. Instead, the dynamic this time was that a relatively small group wanted it, and a much larger ‘fraidy cat group was terrified of allowing any visible difference between themselves and the radicals. That could repeat itself next time — and the radicals, especially those in outside groups, may actually be pleased with the fundraising results of this fight, even if it hurt the party overall.

However, it’s reasonable to hope that mainstream conservatives learned their lesson from this one and won’t do it again; there’s also the hope that those radicals who are actually driven by policy goals may also have learned something.

Overall? One way or another, budget deadlines are absolutely necessary. And we won’t get a shutdown unless one side wants it.

 

By: Jonathan Bernstein, The Washington Post, October 16, 2013

October 17, 2013 Posted by | Budget, Government Shut Down | , , , , , , | Leave a comment

“Coming To A Head Very Soon”: Syria Isn’t The Only Crisis On Congress’ To-Do List

It seems like a long time ago, but as recently as mid-August there was a spirited fight within the Republican Party about the looming budget crisis. Far-right lawmakers wanted to use the threat of a government shutdown to pressure Democrats into defunding the federal health care system — an idea destined for failure — while party leaders balked.

U.S. policy in Syria quickly became the dominant issue on the political landscape, but in the back of our minds, there was an awkward realization: the budget fight had been pushed from the front page, but it hadn’t gone away. Indeed, folks stopped talking about this, but nothing had changed — GOP extremists still demanded a shutdown; the GOP mainstream still hated the idea.

This is coming to a head very soon, and the House Republican leadership has an idea on how to get themselves out of this mess. As Sahil Kapur reports, GOP leaders will make their pitch to the caucus today.

First, the House would pass a continuing resolution to continue funding the government at sequester levels, coupled with an amendment to defund Obamacare. When the package is sent to the Senate, it would be required to vote on the defunding measure first. If the Senate votes it down, and then passes the CR with Obamacare funding, it goes straight to President Barack Obama’s desk.

No confrontation. No attempt to force Democrats to back down. No need to go back to the House for a vote on a clean continuing resolution. But conservatives get a vote.

Just to clarify, there would be only one vote in the House — members would vote for the spending measure, with the anti-Obamacare measure tacked on as a sort of appendage. The Senate, meanwhile, would hold two votes — one to reject the House package, the other to approve the House package without the healthcare add-on.

In effect, House Speaker John Boehner (R-Ohio) and the rest of the leadership want to put on a little political theater in the hopes of making their far-right colleagues feel better about themselves. Everyone would know in advance that the Senate would reject the effort to defund the Affordable Care Act, but the plan allows for Republicans to cast this vote with the knowledge that they wouldn’t actually have to shut down the government.

It’s a win-win, right? Conservatives get to say they voted to “defund Obamacare”; Democrats would get to keep the government’s lights on; and GOP leaders would get to placate the radicals among them without any real adverse consequences.

At least, that’s the idea. The trouble comes when we take a closer look.

First, there’s a very real possibility that right-wing lawmakers won’t appreciate feeling patronized by their own leaders, and simply won’t accept the plan as a credible solution. Indeed, this isn’t just idle speculation: “Conservative Republicans who caught wind of the plan on Monday told The Hill it was unacceptable.”

These folks don’t want a symbolic, feel-good gesture; these folks actually want to force a budget crisis in the hopes of denying millions of Americans access to affordable health care. Republican leaders are afraid of the fallout of a government shutdown, but rank-and-file Republicans don’t give a darn.

And if House Republicans balk at their own leadership’s ploy, it means Boehner & Co. will find themselves dependent on House Democratic votes to avoid a shutdown. Do you think Dems might want a little something out of this deal to save the Speaker’s butt? Count on it.

Which then leads us to the second problem: under this approach, spending levels are still at sequestration levels. Why is that important? Because the sequester is a painfully stupid and destructive policy that’s hurting the country for no reason.

In August, Boehner said “none of us like” the sequestration policy. House Majority Leader Eric Cantor (R-Va.) said the sequester “is not the best way to go about spending reductions.” House Appropriations Committee Chairman Hal Rogers (R-Ky.) said the sequester is “unrealistic,” “ill-conceived,” and a policy that “must be brought to an end.”

And yet, the Speaker’s plan is to effectively tell the right, “You’re not getting the shutdown you wanted, but at least you’re getting the destructive sequestration cuts we pretend not to like.”

There’s a real chance that rank-and-file Republicans oppose the idea because they want to shut down the government, while rank-and-file Democrats balk because they hate the sequester.

All of this will have to be dealt with fairly soon, since the government runs out of money on Sept. 30. Once that’s done, we then get to move on to congressional Republicans threatening to crash the global economy on purpose with another debt-ceiling hostage crisis.

 

By: Steve Benen, The Maddow Blog, September 10, 2013

September 11, 2013 Posted by | Budget, Congress | , , , , , , , | Leave a comment

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