“Fighting Fiscal Phantoms”:The GOP Hydra-Headed Deficit Scold Movement Has Lost Some Of Its Clout
These are difficult times for the deficit scolds who have dominated policy discussion for almost three years. One could almost feel sorry for them, if it weren’t for their role in diverting attention from the ongoing problem of inadequate recovery, and thereby helping to perpetuate catastrophically high unemployment.
What has changed? For one thing, the crisis they predicted keeps not happening. Far from fleeing U.S. debt, investors have continued to pile in, driving interest rates to historical lows. Beyond that, suddenly the clear and present danger to the American economy isn’t that we’ll fail to reduce the deficit enough; it is, instead, that we’ll reduce the deficit too much. For that’s what the “fiscal cliff” — better described as the austerity bomb — is all about: the tax hikes and spending cuts scheduled to kick in at the end of this year are precisely not what we want to see happen in a still-depressed economy.
Given these realities, the deficit-scold movement has lost some of its clout. That movement, by the way, is a hydra-headed beast, comprising many organizations that turn out, on inspection, to be financed and run by more or less the same people; dig down into many of these groups’ back stories and you will, in particular, find Peter Peterson, the private-equity billionaire, playing a key role.
But the deficit scolds aren’t giving up. Now yet another organization, Fix the Debt, is campaigning for cuts to Social Security and Medicare, even while making lower tax rates a “core principle.” That last part makes no sense in terms of the group’s ostensible mission, but makes perfect sense if you look at the array of big corporations, from Goldman Sachs to the UnitedHealth Group, that are involved in the effort and would benefit from tax cuts. Hey, sacrifice is for the little people.
So should we take this latest push seriously? No — and not just because these people, aside from exhibiting a lot of hypocrisy, have been wrong about everything so far. The truth is that at a fundamental level the crisis story they’re trying to sell doesn’t make sense.
You’ve heard the story many times: Supposedly, any day now investors will lose faith in America’s ability to come to grips with its budget failures. When they do, there will be a run on Treasury bonds, interest rates will spike, and the U.S. economy will plunge back into recession.
This sounds plausible to many people, because it’s roughly speaking what happened to Greece. But we’re not Greece, and it’s almost impossible to see how this could actually happen to a country in our situation.
For we have our own currency — and almost all of our debt, both private and public, is denominated in dollars. So our government, unlike the Greek government, literally can’t run out of money. After all, it can print the stuff. So there’s almost no risk that America will default on its debt — I’d say no risk at all if it weren’t for the possibility that Republicans would once again try to hold the nation hostage over the debt ceiling.
But if the U.S. government prints money to pay its bills, won’t that lead to inflation? No, not if the economy is still depressed.
Now, it’s true that investors might start to expect higher inflation some years down the road. They might also push down the value of the dollar. Both of these things, however, would actually help rather than hurt the U.S. economy right now: expected inflation would discourage corporations and families from sitting on cash, while a weaker dollar would make our exports more competitive.
Still, haven’t crises like the one envisioned by deficit scolds happened in the past? Actually, no. As far as I can tell, every example supposedly illustrating the dangers of debt involves either a country that, like Greece today, lacked its own currency, or a country that, like Asian economies in the 1990s, had large debts in foreign currencies. Countries with large debts in their own currency, like France after World War I, have sometimes experienced big loss-of-confidence drops in the value of their currency — but nothing like the debt-induced recession we’re being told to fear.
So let’s step back for a minute, and consider what’s going on here. For years, deficit scolds have held Washington in thrall with warnings of an imminent debt crisis, even though investors, who continue to buy U.S. bonds, clearly believe that such a crisis won’t happen; economic analysis says that such a crisis can’t happen; and the historical record shows no examples bearing any resemblance to our current situation in which such a crisis actually did happen.
If you ask me, it’s time for Washington to stop worrying about this phantom menace — and to stop listening to the people who have been peddling this scare story in an attempt to get their way.
By: Paul Krugman, Op-Ed Columnist, The New York Times, November 26, 2012
“What Do Republicans Want?”: President Obama Couldn’t Have Been Any Clearer, And He Won
As we head into negotiations on the Austerity Trap (better known by the inaccurate moniker “fiscal cliff,” which I refuse to use), there’s a clear narrative emerging. This narrative has it that Democrats want to see taxes increase on rich people, which Republicans aren’t happy about, while Republicans want to see entitlement “reform,” which Democrats aren’t happy about. So once everybody gives a little, and Republicans accept some tax increases for the rich while Democrats accept some “reform” of Social Security and Medicare, then we can have a happy ending.
The problem with this is that while the Democrats’ position is quite clear—the Bush tax cuts should expire for income over $250,000—the Republicans’ position is extremely vague, on both the tax side and the entitlement side. Let’s take taxes first. A bunch of Republicans are being praised for their willingness to violate Grover Norquist’s pledge to Never Raise Taxes In Any Way Ever Never Ever. Yet they’re remaining steadfast that tax rates must stay the same, while allowing that maybe we can trim some deductions for the wealthy. As Steve Benen points out, some are acting like these Republicans are being generous for essentially taking the position that they support Mitt Romney’s tax plan. Perhaps they’re assuming that the wealthy will be able to cleverly evade any limitation on deductions, so it won’t make a difference to their primary constituency. But in any case, we haven’t heard them take a specific position. Are they proposing a hard cap on all deductions? Eliminating certain deductions while keeping others? We don’t yet know.
Then we get to the price Republicans are going to want to exact for any agreement to stop the Austerity Trap, and this is where they’re vague. They want “reform” of entitlements. What is “reform,” you ask? Well, nobody ever says. The reason is that Republicans know perfectly well that the things they would like to do to Social Security and Medicare are unpopular. We can dispense with Social Security quickly: The program is basically fine, and you could eliminate future shortfalls in benefits with some minor tweaking of the financing, like raising the income cut-off for Social Security taxes, which is currently at $110,100. But the real budgetary challenge is Medicare.
You may remember that when Paul Ryan joined the Republican ticket, a lot of attention was paid to his Medicare plan, which would essentially turn Medicare from an insurance program into a voucher program, in which seniors would try to find affordable insurance coverage from private insurance companies. You may also remember that he and Romney quickly stopped talking about it and turned to accusing Barack Obama of cutting Medicare by $716 billion, heartless enemy of the welfare state that he is. This should remind us of two things: First, the “reform” that Republicans want in Medicare is to privatize it and end its guarantee of health coverage; and second, that only one party has reformed Medicare. That reform, also known as Obamacare, not only found hundreds of billions of dollars in savings but also moved toward changing the payment structure (away from fee-for-service and toward rewarding providers for making and keeping patients healthy) and included a lot of pilot programs that could reduce costs in the future.
This debate is just getting started, so perhaps it’s not so terrible that Republicans have been so unclear about what specifically they want. But they shouldn’t be allowed to get away with it for long. Let’s also not forget that we had something of a referendum on all these questions earlier this month. Barack Obama couldn’t have been clearer that he wanted to raise taxes on the wealthy and didn’t want to voucherize Medicare. And he won.
By: Paul Waldman, Contributing Editor, The American Prospect, November 25, 2012
“The GOP’s Holiday Gift Guide”: Pain For The Poor, Ponies For The Rich
Republicans are using the fiscal cliff to extract payback for all the “gifts” President Obama has given to Americans.
Before Americans have even finished digesting their Thanksgiving turkey, the holiday shopping season will have officially begun. But according to Mitt Romney, Christmas came early for those who voted for Barack Obama. The failed Republican presidential nominee and latter-day Scrooge told donors last week that President Obama had won re-election by “giving targeted groups a big gift.” And what generous stocking-stuffers they were! For the young and the poor, health coverage under the Affordable Care Act. For Hispanics, an executive order halting deportation of the children of undocumented immigrants. For women, free contraception for use in all their filthy lady activities. If Malia and Sasha don’t find a pair of baby unicorns under the White House Christmas tree this year, they have a right to feel jealous.
Romney’s comments met with disapproval from fellow Republicans who hope to have a future in elective office, but the truth is that they reflect an understanding of the American public and its relationship with government that is widely shared among conservatives. Paul Waldman argues that it fits right in with their “makers vs. takers” ideology, the notion that the country is divided between “the brave individualists needing nothing from anyone, and the blood-sucking parasites who rely on government.” But Republicans don’t just want to reset policy to some sort of neutral state where everyone gives and receives his or her fair share (slow down there, Karl Marx). Instead, they seem to view the fiscal cliff as an opportunity to impose austerity measures that would redistribute the gifts to their Nice List and punish those who have been spoiled by Obama’s Socialist Santa.
The fiscal cliff is in fact better described as an “austerity bomb,” a term coined by Talking Points Memo’s Brian Beutler and echoed by Paul Krugman. Despite what the cliff terminology might suggest, the problem isn’t that the federal deficit is about to explode, but that conservatives who have spent years demanding swift and substantial deficit reduction are about to get exactly what they wanted. If this mix of scheduled tax increases and spending cuts is allowed to take effect, it will carve $560 billion out of the budget next year—so why are deficit scolds suddenly terrified of the consequences? Krugman argues that they’re implicitly conceding that “Keynesians were right all along, that slashing spending and raising taxes on ordinary workers is destructive in a depressed economy, and that we should actually be doing the opposite.”
But are Republicans really worried about the plight of the working man? You wouldn’t know it based on the alternatives they’ve proposed, which involve swapping one set of austerity measures for a slightly different set of austerity measures. Their real concern is what the fiscal cliff will mean for their friends and supporters, not what it will mean for the broader economy. Sure, the poor will take the hit first, as is their lot in life, but taxes will go up on rich people, too! That’s money coming straight out of the 2014 campaign coffers. And what about those poor defense contractors who will suffer from cuts to the Pentagon’s budget? They have mouths to feed, too.
The terms that Republicans have set for the fiscal cliff negotiations provide clear evidence of this favoritism. Chastened by President Obama’s re-election, they keep claiming they’re open to compromise, but they steadfastly refuse to raise tax rates on the rich. Instead, they insist any new revenue must come from “closing loopholes,” a hoary Beltway cliché that means nothing in particular, and they’ll only concede that much if Democrats agree to “reform entitlements,” which is even less specific but more ominous. Oh, and they also want “changes” to the Affordable Care Act to be on the table. In fact, if Barack Obama would just go ahead and resign from office, it would be a real show of good faith and bipartisan spirit.
Proposing to cut Social Security benefits or raise the retirement age as part of a fiscal cliff deal is a non sequitur at best. With all due respect to financial masterminds like Lloyd Blankfein, it’s hard to believe that anyone could be told that Congress is about to pull the rug out from under the fragile recovery and honestly conclude that the solution is to make old people work longer. It’s the equivalent of the president being told that we’re on the verge of nuclear war and replying, “I’ll have the soup.” As Jeff Madrick has explained at length, Social Security is not in crisis, and there are plenty of easy fixes available for its future financial shortfall. (Medicare is a thornier problem, but one that probably shouldn’t be dealt with on a timer.) Senator Mark Begich, for instance, has proposed to cover the gap and pay for more generous benefits by eliminating the payroll tax cap. But don’t expect that plan to be taken very seriously by the Very Serious People, because it asks the rich to sacrifice more instead of inflicting some character-building pain on everyone else.
Aside from being unnecessary, such cuts would have a disproportionate impact on the poor. The right’s claim that Social Security wasn’t designed to handle increased life expectancies is based on a serious misunderstanding of history and human biology, but it is true that life expectancy has risen dramatically—for the rich. Workers on the lower rungs of the economic ladder haven’t been so lucky, so a higher retirement age is just a massive benefit cut for them. Of course, any such changes would only be phased in for younger workers, who (purely coincidentally) don’t vote Republican, not current retirees who do. That will teach those spoiled little punks. Er, I mean, preserve the promise of Social Security for future generations.
The same logic, if you can call it that, applies to demanding changes to the Affordable Care Act. The current law will save $109 billion over the next 10 years, so in theory, the deficit hawks should love it, right? Well, there are two problems with that theory. The first is that those cost savings are based on CBO projections, which, like Nate Silver’s electoral analysis, fall into that category of “liberal math” that Republicans find inherently suspect. The other is that the ACA achieves those savings while helping poor people — that’s what makes it a gift, according to Romney. But deficit reduction isn’t supposed to make life easier; it’s supposed to be tough love that forces people to fend for themselves in a harsh and unforgiving world. Like exercise, the pain means it’s working. Or maybe you just tore a tendon. You should probably check with your doctor, assuming you can afford health insurance.
This barely concealed impulse to punish the undeserving is the source of Republicans’ internal conflict over the fiscal cliff and the biggest hurdle they must overcome in their efforts to become viable contenders for the White House again. They may not see it as punishment; to them, it’s just a teaspoon of unpleasant medicine that will eventually make the country much healthier. But things like government-funded health care, education, and retirement security only look like gifts from the perspective of the man who has everything. What Republicans see as unaffordable luxuries, the rest of us see as essential to a basic standard of living. Until they realize that, we might be able to reach a compromise on the fiscal cliff, but we’ll never really find common ground.
By: Tim Price, The National Memo, November 23, 2012
“A Move Toward A Less Prosperous America”: Afflicting The Afflicted And Comforting The Already Comforted
Mitt Romney has chosen as his running mate U.S. Rep. Paul Ryan, the author of an ill-conceived budget plan that he ambitiously named “The Path to Prosperity.”
In fact, Ryan’s budget plan aims to put more money in taxpayers’ pockets through massive cuts to many programs that have a direct impact on the quality of life in the United States.
There is more to “prosperity” than money in our pockets. Financial prosperity does no one any good if there is not concomitant happiness or, at least, contentment. The ability to lead a happy and satisfying life is the best measure of true prosperity. A happy life is made up of basic American values: access to health care, access to a good education, security, access to sustenance.
Given this, the happiness of our citizenry does not seem to figure into the GOP’s notion of prosperity. Our nation’s founders were wise to emphasize the unalienable rights of life, liberty and the pursuit of happiness. The GOP seems to have lost sight of the pursuit of happiness.
True happiness is difficult to define. It is not just short-term pleasure or immediate gratification. It transcends money. We are all familiar with the phrase “money doesn’t buy happiness.” Research shows that real happiness involves a sense of well-being, a deep connection to others, the freedom to autonomously pursue one’s interests and the ability to find personal meaning in one’s life.
Just how happy are we Americans?
Combined data from the Gallup Poll; the Heritage Foundation, the quintessential conservative think tank; the World Economic Forum and – surprisingly – the CIA, from more than 100,000 people show that the U.S. doesn’t fare well. Many countries are happier than we are, mostly in northern Europe: Denmark, Switzerland, Norway, Austria, Finland, Sweden and the Netherlands.
What are the major factors that contribute to the reported happiness in these countries? Here are the top 10:
- Individual freedom
- Democracy
- Governmental transparency
- Capitalistic economies that promote individual entrepreneurship
- Political support for workers’ rights
- A strong work ethic with the – supported – belief that hard work pays off
- Governmental commitment to improving the quality of life for all residents, that is universal access to health care and a quality education
- A strong infrastructure with efficient public transportation
- Tolerance for all ethnic groups and religions
- A commitment to preserving the environment
These components cannot come from the private sector alone. The U.S. has many of these key components already, yet there are not only glaring omissions, but a few of these are in jeopardy from Ryan’s budget proposal. “The Path to Prosperity” is a radical example of a growing trend that subordinates the building of a society that will improve happiness and prosperity for all to the financial demands of a relatively small cadre of the very rich.
Many supporters of Ryan’s budget and other austerity plans are skeptical about whether building a society based on happiness and prosperity for all citizens is fiscally responsible. They speak of “living beyond our means.” They wail that government programs that promote happiness and prosperity for all will saddle future generations with crippling debt.
But remember the list of the happiest countries? They tend to be fiscally conservative and do not live beyond their means. The Organization for Economic Cooperation and Development data show the U.S. deficit (10.7%) is more than double the average of that of the happiest countries. Here are the others: Denmark, 5.4%; Finland, 4.8%; the Netherlands, 5.9%; Sweden, 3%; Switzerland, 1.3%. And Norway has a 9.9% budget surplus. CIA data show that our national debt, at 59% of gross domestic product, is one-third higher than the average of 45% in the happier Scandinavian countries.
So what’s the difference between these happy, prosperous countries and the U.S.? It is simply shared sacrifice. All, not just some, of their taxpayers are willing to forgo the goals of personal acquisitiveness for the greater happiness of the country as a whole. This is the true “pursuit of happiness” enshrined in the Declaration of Independence.
We cannot slash our way to prosperity, as it places an undue burden on people who have caught relatively few breaks already. To extend an op-ed title from columnist Paul Krugman, the Ryan budget, “afflicts the afflicted and comforts the comforted.” It is imperative that our country’s leaders focus less on tax cuts for those who don’t need them and more on fiscally sound policies that will promote happiness and prosperity for all.
By: Jan Van Schaik, Immediate Past President of the Wisconsin Psychoanalytic Institute and an Assistant Clinical Professor of Psychiatry at the Medical College of Wisconsin, JSOnline, August 18, 2012
“Deliberate Sabotage”: The Public Sector Is Bleeding By The Knife Of Republicans
Public-sector jobs continued to disappear last month; according to today’s report, government employment is down by 4,000. To Republicans, these aren’t “real” jobs. For the rest of us, however, the decline of the public sector over the last three years has been a tremendous drag on economic growth. Since June 2009, state and local governments have shed more than 600,000 jobs. At the Economic Policy Institute, Josh Bivens and Heather Shierholz crunch the numbers to find that the economy would have 2.3 million more jobs if not for those ongoing losses:
Putting our four components together—the jobs lost in the public sector, the jobs the public sector should have gained just to keep up with population growth, the jobs lost in the private sector due to direct public-sector job declines, and the jobs likely lost when state spending cutbacks on transfer programs were made—we find that if it weren’t for state and local austerity, the labor market would have 2.3 million more jobs today—and half of these jobs would be in the private sector.
This is more than a fifth of our 9.8 million “jobs gap”, the number of jobs needed to bring the economy back to full employment. If all of these 2.3 million jobs had been filled, it is likely that the unemployment rate would now be between 6.7% and 7.5% instead of 8.2%, and the labor force participation rate (which has dropped dramatically in recent years due to weak job opportunities) would be up to three-tenths of a percentage point higher than it is.
Remember: Thanks to Republicans on the state and local level, the United States has been going through austerity for the last two years. Our sluggish economic growth has less to do with the administration’s policies and everything to do with a Republican Party that sees mass immiseration as an opportunity to cut spending.
BY: Jamelle Bouie, The American Prospect, July 9, 2012
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