“Willy Nilly Nonsense”: Mitch McConnell Doesn’t Understand What The Debt Ceiling Is
Now that Republicans have pretty much resigned themselves to the idea that there is going to be some kind of tax increase for the wealthy, they’re comforting themselves with the idea that come early next year, they’ll still be able to re-enact the lovely conflict we had over the debt ceiling in 2011 and hold the American economy hostage to their demands. President Obama has quite sensibly said that we ought to just get rid of the debt ceiling itself, since it serves no purpose and allows a party to engage in just this kind of economic blackmail if it’s desperate and cynical enough. So Republicans are pushing back, none more so than Senate Minority Leader Mitch McConnell. But in the process, McConnell has revealed that he has no idea how the debt ceiling actually works.
What McConnell has been saying is that if we eliminate the debt ceiling, it will give the president all kinds of new powers, to spend money willy-nilly however he wants to, run up the debt, and generally become a kind of fiscal dictator. Yesterday he said about the prospect of eliminating the debt ceiling, “I don’t think that there’s any sentiment whatsoever for giving the President perpetual authority without congressional involvement.” And last week in a speech on the Senate floor, he said this:
By demanding the power to raise the debt limit whenever he wants by as much as he wants, he showed what he’s really after is assuming unprecedented power to spend taxpayer dollars without any limit. This isn’t about getting a handle on deficits or debt for him. It’s about spending even more than he already is. Why else would he demand the power to raise the debt limit on his own? And by the way, why on earth would we even consider giving a President who’s brought us four years of trillion dollar deficits unchecked authority to borrow – he’s the last person who should have limitless borrowing power.
Wow, that really would be terrible, if the president had “unprecedented power to spend taxpayer dollars without any limit,” with “unchecked authority to borrow.” The only trouble is that eliminating the debt ceiling does nothing of the sort. In case you’ve forgotten your fourth-grade civics, Congress sets the budget, not the president. The president can’t spend a dollar that Congress doesn’t appropriate. He can’t borrow a dollar that Congress hasn’t said he should borrow. When we reach the debt limit and then go past it, it isn’t because of anything the president has done, it’s because of the budget Congress has written. The reason we take on debt is because federal spending, set by Congress, exceeds federal tax revenues, also set by Congress. The only thing the debt ceiling does is require Congress to have what is in effect an additional vote on their own budget. Eliminating the debt ceiling doesn’t give the president one iota more authority or power. What it does, however, is take away the power the Republicans now have to use blackmail to achieve their policy goals.
OK, so I was kidding when I said Mitch McConnell doesn’t know how the debt ceiling works. He knows exactly how it works. But he also knows that most Americans know next to nothing about it, and he knows that reporters will dutifully pass on whatever he says about it, without adding the appropriate disclaimer that would make their reporting about this topic accurate.
By: Paul Waldman, Contributing Editor, The American Prospect, December 12, 2012
“Robots And Robber Barons”: Profits Continue To Rise At The Expense Of Workers
The American economy is still, by most measures, deeply depressed. But corporate profits are at a record high. How is that possible? It’s simple: profits have surged as a share of national income, while wages and other labor compensation are down. The pie isn’t growing the way it should — but capital is doing fine by grabbing an ever-larger slice, at labor’s expense.
Wait — are we really back to talking about capital versus labor? Isn’t that an old-fashioned, almost Marxist sort of discussion, out of date in our modern information economy? Well, that’s what many people thought; for the past generation discussions of inequality have focused overwhelmingly not on capital versus labor but on distributional issues between workers, either on the gap between more- and less-educated workers or on the soaring incomes of a handful of superstars in finance and other fields. But that may be yesterday’s story.
More specifically, while it’s true that the finance guys are still making out like bandits — in part because, as we now know, some of them actually are bandits — the wage gap between workers with a college education and those without, which grew a lot in the 1980s and early 1990s, hasn’t changed much since then. Indeed, recent college graduates had stagnant incomes even before the financial crisis struck. Increasingly, profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today’s economy.
Why is this happening? As best as I can tell, there are two plausible explanations, both of which could be true to some extent. One is that technology has taken a turn that places labor at a disadvantage; the other is that we’re looking at the effects of a sharp increase in monopoly power. Think of these two stories as emphasizing robots on one side, robber barons on the other.
About the robots: there’s no question that in some high-profile industries, technology is displacing workers of all, or almost all, kinds. For example, one of the reasons some high-technology manufacturing has lately been moving back to the United States is that these days the most valuable piece of a computer, the motherboard, is basically made by robots, so cheap Asian labor is no longer a reason to produce them abroad.
In a recent book, “Race Against the Machine,” M.I.T.’s Erik Brynjolfsson and Andrew McAfee argue that similar stories are playing out in many fields, including services like translation and legal research. What’s striking about their examples is that many of the jobs being displaced are high-skill and high-wage; the downside of technology isn’t limited to menial workers.
Still, can innovation and progress really hurt large numbers of workers, maybe even workers in general? I often encounter assertions that this can’t happen. But the truth is that it can, and serious economists have been aware of this possibility for almost two centuries. The early-19th-century economist David Ricardo is best known for the theory of comparative advantage, which makes the case for free trade; but the same 1817 book in which he presented that theory also included a chapter on how the new, capital-intensive technologies of the Industrial Revolution could actually make workers worse off, at least for a while — which modern scholarship suggests may indeed have happened for several decades.
What about robber barons? We don’t talk much about monopoly power these days; antitrust enforcement largely collapsed during the Reagan years and has never really recovered. Yet Barry Lynn and Phillip Longman of the New America Foundation argue, persuasively in my view, that increasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.
I don’t know how much of the devaluation of labor either technology or monopoly explains, in part because there has been so little discussion of what’s going on. I think it’s fair to say that the shift of income from labor to capital has not yet made it into our national discourse.
Yet that shift is happening — and it has major implications. For example, there is a big, lavishly financed push to reduce corporate tax rates; is this really what we want to be doing at a time when profits are surging at workers’ expense? Or what about the push to reduce or eliminate inheritance taxes; if we’re moving back to a world in which financial capital, not skill or education, determines income, do we really want to make it even easier to inherit wealth?
As I said, this is a discussion that has barely begun — but it’s time to get started, before the robots and the robber barons turn our society into something unrecognizable.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 9, 2012
“The Forgotten Millions”: Spending More To Create Jobs Now Would Actually Improve Our Long-Run Fiscal Position
Let’s get one thing straight: America is not facing a fiscal crisis. It is, however, still very much experiencing a job crisis.
It’s easy to get confused about the fiscal thing, since everyone’s talking about the “fiscal cliff.” Indeed, one recent poll suggests that a large plurality of the public believes that the budget deficit will go up if we go off that cliff.
In fact, of course, it’s just the opposite: The danger is that the deficit will come down too much, too fast. And the reasons that might happen are purely political; we may be about to slash spending and raise taxes not because markets demand it, but because Republicans have been using blackmail as a bargaining strategy, and the president seems ready to call their bluff.
Moreover, despite years of warnings from the usual suspects about the dangers of deficits and debt, our government can borrow at incredibly low interest rates — interest rates on inflation-protected U.S. bonds are actually negative, so investors are paying our government to make use of their money. And don’t tell me that markets may suddenly turn on us. Remember, the U.S. government can’t run out of cash (it prints the stuff), so the worst that could happen would be a fall in the dollar, which wouldn’t be a terrible thing and might actually help the economy.
Yet there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now — except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused.
Meanwhile, there is almost no organized pressure to deal with the terrible thing that is actually happening right now — namely, mass unemployment. Yes, we’ve made progress over the past year. But long-term unemployment remains at levels not seen since the Great Depression: as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year.
When you see numbers like those, bear in mind that we’re looking at millions of human tragedies: at individuals and families whose lives are falling apart because they can’t find work, at savings consumed, homes lost and dreams destroyed. And the longer this goes on, the bigger the tragedy.
There are also huge dollars-and-cents costs to our unmet jobs crisis. When willing workers endure forced idleness society as a whole suffers from the waste of their efforts and talents. The Congressional Budget Office estimates that what we are actually producing falls short of what we could and should be producing by around 6 percent of G.D.P., or $900 billion a year.
Worse yet, there are good reasons to believe that high unemployment is undermining our future growth as well, as the long-term unemployed come to be considered unemployable, as investment falters in the face of inadequate sales.
So what can be done? The panic over the fiscal cliff has been revelatory. It shows that even the deficit scolds are closet Keynesians. That is, they believe that right now spending cuts and tax hikes would destroy jobs; it’s impossible to make that claim while denying that temporary spending increases and tax cuts would create jobs. Yes, our still-depressed economy needs more fiscal stimulus.
And, to his credit, President Obama did include a modest amount of stimulus in his initial budget offer; the White House, at least, hasn’t completely forgotten about the unemployed. Unfortunately, almost nobody expects those stimulus plans to be included in whatever deal is eventually reached.
So why aren’t we helping the unemployed? It’s not because we can’t afford it. Given those ultralow borrowing costs, plus the damage unemployment is doing to our economy and hence to the tax base, you can make a pretty good case that spending more to create jobs now would actually improve our long-run fiscal position.
Nor, I think, is it really ideology. Even Republicans, when opposing cuts in defense spending, immediately start talking about how such cuts would destroy jobs — and I’m sorry, but weaponized Keynesianism, the assertion that government spending creates jobs, but only if it goes to the military, doesn’t make sense.
No, in the end it’s hard to avoid concluding that it’s about class. Influential people in Washington aren’t worried about losing their jobs; by and large they don’t even know anyone who’s unemployed. The plight of the unemployed simply doesn’t loom large in their minds — and, of course, the unemployed don’t hire lobbyists or make big campaign contributions.
So the unemployment crisis goes on and on, even though we have both the knowledge and the means to solve it. It’s a vast tragedy — and it’s also an outrage.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 6, 2012
“A Very Dysfunctional Party”: GOP Needs To Choose Between The Business Community And The Tea Party
How long will the major GOP-aligned interest groups, particularly business groups, stick with the Republican Party, if Republican tax monomania, and intransigence on the debt ceiling, threaten to tank the economy?
Barack Obama, in his interview today with Bloomberg, tried to exploit the business community’s apparent discomfort with Republicans when it comes to the debt limit. He noted that Republican efforts to crash the economy every time it is reached is hardly good for business:
Another thing that CEOs have mentioned is making sure that if we do get a deal done now, that we don’t have another crisis two or three months from now because of the debt ceiling, what we went through back in 2011. You know, the U.S. Chamber of Commerce, which is hardly an arm of my administration or the Democratic Party, I think said the other day, we can’t be going through another debt ceiling crisis like we did in 2011. That has to be dealt with.
Indeed, there really is a question here about the extent to which businesses will follow the GOP down the rabbit hole of another debt limit crisis.
Recall that in the health care debate, Republicans wound up losing several GOP-aligned special interests, including the doctors, because Republicans were far more interested in ideological extremism than in cutting deals to help Republican-aligned interest groups.
Will that happen again in the fiscal cliff negotiations? Note that many business interests are not nearly as interested in the tax-rates-above-all Republican negotiating position as they are in, well, avoiding a recession. It’s not as if the business community is going to suddenly turn into loyal Democrats. It’s just that the more the Republican Party’s positions are dictated by fear of being labeled “RINOs,” forcing them to adopt Tea Party positions, the less Republicans leaders will find themselves responsive to other normally GOP-aligned groups.
That’s a key question to look at not only in the continuing fiscal cliff talks, but really in every issue, from taxes to immigration, that will show up in Congress this year. Republicans simply can’t be a functional party if their politicians only care about possible primary challenges. Before this is all over, the Republican Party may finally have to make a critical choice between the pragmatic concerns of the business community and the fundamentalism of the Tea Party.
By: Jonathan Bernstein, The Washington Post Plum Line, December 4, 2012
“Old Habits Die Hard”: Cutting Taxes Doesn’t Cut It For Republicans
If the GOP pushes the economy over the fiscal cliff, the party will go over too. The longer Republicans push for tax breaks for bankers and billionaires, the more trouble they’ll get themselves into. Republicans have enough problems morphing into the Tea Party, now the GOP is becoming a wholly owned subsidiary of the Fortune 500.
The Election Day national exit survey demonstrates the fact that the GOP doesn’t have a good message for Americans who worry about the economy. The voters have spoken and the poll tells us what they have to say about the economy and taxes. Republicans will not like what they hear.
Voters heard the questions that Mitt Romney asked about the president’s handling of the economy, but the GOP nominee didn’t follow up with the answers. It should have been a plus for the challenger that almost half (45 percent) of the voters felt the economy was “not so good.” However, a majority (55 percent to 42 percent) of these distressed voters actually went for Barack Obama over Mitt Romney. Another illustration of the GOP’s failure to address middle class economic concerns was that nine of 10 voters (90 percent) who gave the economy a positive rating voted to re-elect the president but only six out of every 10 (60 percent) voters who gave the economy a negative rating voted for his challenger.
Cutting taxes doesn’t cut it for Republicans. There were more voters who worried about unemployment (38 percent) and rising prices (37 percent) than there were who were concerned about cutting taxes (14 percent). The good news for the GOP was that voters who worried about taxes voted overwhelmingly for Romney. The bad news was that there were too few of these voters to make much of a difference in the outcome. Along the same lines, almost half (47 percent) of the voters wanted to raise taxes on the wealthy and another small group (13 percent) favored raising everybody’s taxes. That’s six out of 10 voters who are open to raising taxes to stabilize the economy. Only a third (35 percent) of the voters wanted to hold the line on taxes.
The failure of Romney and the GOP to come up with anything but cutting taxes leaves Republicans in the lurch. Nature abhors a vacuum and the party’s neglect of jobs and inflation gives voters the chance to fill that vacuum with their feelings about the last Republican president. This isn’t good news for Republicans because a large majority (53 percent to 38 percent) of the electorate blames George W. Bush not Barack Obama for the condition of today’s economy.
Voters want to fight a class war and the president’s populist approach to the economy is just what they wanted. Trickle-down economics was a disaster for Romney and will continue to tarnish the Republican brand if the party doesn’t craft a more comprehensive economic message. More than half (53 percent) of the voters feel that the American economic system favors the rich and only a third (34 percent) think the system is fair to all Americans. A majority (55 percent to 39 percent) of voters also believe that Romney’s policies would have favored the rich over the middle class. A fifth (21 percent) of the voters wanted a president who cares about people and those voters supported the incumbent overwhelmingly (81 percent to 18 percent).
The party’s fixation on taxes means the GOP is riding a one trick pony into the ground. The debate on taxes only focuses attention on the GOP’s inability to come up with anything new. Old habits die hard so President Obama doesn’t have to worry that Republicans will come up with something that works better.
By: Brad Bannon, U. S. News and World Report, November 26, 2012
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