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“Catastrophically Dangerous”: What Happens If The GOP Shoots The Hostage?

Sen. Saxby Chambliss (R) of Georgia raised an interesting point this morning about the Republican debt-ceiling hostage crisis.

To translate this a bit, Chambliss is embracing the hostage strategy with both arms. From 1939 to 2010, the debt ceiling was raised without preconditions by both parties 89 times, but in 2013, Chambliss and his cohorts are demanding a ransom: painful-but-unspecified cuts to Social Security and Medicare.

And if the president refuses to meet the Republicans’ demands, and GOP policymakers follow through on their threats, Chambliss thinks it’s Obama who’ll “suffer the consequences.”

Except, whether he understands the issue or not, Chambliss is mistaken. If Republicans refuse to allow the nation to pay for the money it’s already spent, and in the process push the nation into default by trashing the full faith and credit of the United States, it’s not the president who’ll “suffer the consequences”; it’s the rest of us.

Obama will be fine. Chances are, Saxby Chambliss will get by, too. But if Republicans refuse to do their duty, conditions for the national and global economy will get “very bad, very fast,” including “financial-market chaos.”

“Think about what we’re talking about here,” Steve Bell, director of economic policy at the BPC, told Ezra Klein yesterday. “We’re talking about the reserve currency of the world. We’re talking about the deepest and most liquid markets in the world. And we’re sitting here wondering if we’ll cover our obligations?”

The consequences would be brutal and long-lasting. America’s reputation, global standing, and stability would very likely never — ever — be the same.

So, Sen. Chambliss should probably take five minutes to understand that the fire he’s playing with is catastrophically dangerous. Because at this point, the Republican senator isn’t just threatening to hurt America on purpose, he’s under the misguided impression that Obama’s the one who’ll suffer.

 

By: Steve Benen, The Maddow Blog, January 7, 2013

January 9, 2013 Posted by | Debt Ceiling | , , , , , , , , | 2 Comments

Government Spending Is Just What Our Economy Needs

Our  nation’s economy is approaching a precipice. The continuing housing market  crisis has stripped about $10 trillion from families’ assets, and nearly 1 in 10 workers are unemployed. Nearly 1 in 10 others are either working less than they want or have given  up their job search. Family income is now back where it was in 1996, in  inflation-adjusted dollars.

This all  means there is less money flowing through our economy. That’s just math.

The lingering consequences of the Great  Recession—the housing crisis, the jobs crisis, the fear among businesses to  invest their earnings despite record profits—continue to pull against faster  economic growth and job creation. Because customers have less money to spend  due to the collapse of the housing bubble and the ensuing high unemployment,  businesses have little incentive to hire and invest.

Even  Federal Reserve Chairman Ben Bernanke says there is a role for fiscal  policy. Monetary authorities have  already pushed interest rates down to zero. And they have few levers left to  spur growth, although there are some steps that would continue to help  on the margin.

In short, the economy continues to suffer from a  lack of demand.

The federal government can help with this. We know that government spending  can help restart an economy. Over the past two years, increased investments in  infrastructure have saved or created 1.1 million jobs in the construction  industry and 400,000 jobs in manufacturing by March 2011. Almost all of these  jobs were in the private sector.

Money  targeted toward the long-term unemployed helped not only those individual  families hardest hit by the Great Recession but also kept dollars flowing into  their local communities, keeping an average of 1.6 million American workers in jobs every  quarter during the recession. But now, the threat of jobs again disappearing looms  large.

Unless Congress acts, the private sector will  continue to generate insufficient demand. A  sweeping consensus of economists and forecasters across the political divide  now calls for the government to forcefully intervene in precisely this way, to  create demand for goods and services, which will in turn boost hiring and  business growth. Goldman Sachs, for example, said the positive effect of the  president’s American Jobs Act would increase U.S. gross domestic product by 1.5  percent in 2012.

Conservatives want us to believe that America’s broke,  that we cannot afford to address our most pressing issue—mass unemployment and  stagnating incomes. The reality is that there are clear steps that we can take  to pave the way for economic growth. Congress just needs to act.

 

By: Heather Boushey, Economist-Center for American Progress, Published in U. S. News and World Report, September 27, 2011

October 6, 2011 Posted by | Businesses, Congress, Deficits, Federal Budget, GOP, Government, Ideologues, Ideology, Middle Class, Republicans | , , , , , , , , | Leave a comment

Religion, Patriotism And Freedom: Ayn Rand Vs. America

Ayn Rand has a large and growing influence on American politics. Speaking at an event in her honor, Congressman Paul Ryan said, “The reason I got involved in public service, by and large, if I had to credit one thinker, one person, it would be Ayn Rand.”

A few weeks ago, Maureen Fiedler, the producer of the weekly radio show, Interfaith Voices, asked me to participate in a debate with Onkar Ghate, a senior fellow at the Ayn Rand Institute. I eagerly accepted. I wanted to hear how a follower of Rand would defend proposals to cut Medicare, Medicaid, and food stamps while exempting the wealthy from paying their fair share.

In one sense there was agreement. Maureen, a Sister of Loretto, argued that Republican budget proposals turned their back on Christ’s admonition to care for “the least among us,” the hungry, the sick, the homeless. Ghate did not dispute that. Rand, he said, was an atheist who did not believe in government efforts to help those in need.

Ghate countered Sister Maureen’s religious position with a moral argument. He maintained that redistribution of wealth was unfair to the rich and weakened the ambition of the rest. I wasn’t surprised by this position, since I’d heard it repeatedly during the fight on welfare reform.

What I did find startling was Ghate’s insistence that just as there should be a separation of church and state, so there should be a separation of economics and state. That notion really got me thinking.

I’ve always understood that one’s loyalty to God should take precedence over one’s patriotic duty. Churches are exempt from taxation, and conscientious objectors aren’t required to serve in war. Our high regard for the First Amendment shows the preeminence of faith in the American consciousness.

But to place economics on the same level as religious freedom seemed to me almost blasphemous. Are we really to believe that the freedom to make money should stand on the same level of religious liberty? Are the words of Milton Friedman equal to the Sermon on the Mount?  I don’t think so. But maybe in the eyes of Ayn Rand and Paul Ryan, they are.

Ayn Rand’s biography goes a long way toward explaining her animus to government. Her first-hand experience of communism showed her how the state can crush people, kill dissent, and exile lovers of freedom to the gulag. Horrified by what government power could do, she was determined to shrink it to the point of impotence.

America was the perfect place for Rand’s single-minded celebration of the individual. After all, this was the nation that inspired intrepid emigrants to leave behind country, family, and friends with little more than the shirt on their back to make a new life. Here they wouldn’t be judged by what they were before or who their parents were but by what they could made of themselves.

America was a beacon of freedom from its earliest days. But the freedom to earn one’s living is not the same as the freedom to emasculate government. It’s a mistake to enshrine individual liberty without acknowledging the role that a good government plays in preserving and promoting it. Look at places like Haiti, Somalia, and the Congo to see what happens when governments aren’t around much.

When government is marginalized, it’s not just individual freedom that suffers; the economy suffers too. A vibrant capitalism requires a legal system: contracts must be honored, fraud punished. Markets have to work, and for that we need a strong infrastructure of roads, rail, energy, and water and sewage systems.

Good government sets us free to spend our days in fruitful endeavors, not evasive action motivated by fear and distrust. Government regulations reassure us that speeding drivers will be arrested, that the financial products we buy won’t cheat us, and that it will be safer to put our money in banks than under our pillows. If we can’t trust our food to be healthy, our drugs to be safe, or our planes to fly without crashing, we’ll waste a lot of productive time.

During the debate, I also raised the point that the separation of economics and state implies that businesses and the people who run them are under no obligation to be patriotic.

In the 19th century, the Rockefellers, Carnegies, Fricks, and J.P. Morgans wanted America to do well because their own fortunes were tied to American prosperity. They made America a great economic power by creating jobs and technological advances right here at home. They knew that their own fortunes were bound up with the well-being of their fellow Americans.

In Ayn Rand’s America, the first obligation of CEOs is to their shareholders, not to citizens. Their business is global, not local. Why should they care if they send jobs overseas? Why should they be concerned if American kids can’t do math or write a sentence? They’ll just outsource the work. Why should they worry that the next generation of Americans is going to have a tough time? Their own kids will do just fine. And in the meantime, they’re doing just fine themselves.

Andy Grove, the former CEO of Intel, sees a problem with this view. He writes, “You could say, as many do, that shipping jobs overseas is no big deal because the high-value work–and much of the profits–remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work–and masses of unemployed?”

Don Peck makes a similar point in his new book, Pinched, and in an Atlantic cover story. “Arguably,” he writes, “the most important economic trend in the United States over the past couple of generations has been the ever more distinct sorting of Americans into winners and losers, and the slow hollowing-out of the middle class.”

Besides this economic problem, I also see a moral issue with Ayn Rand’s insistence that all of us, CEOs included, should be totally free of the ties that bind. I especially disagree when it comes to CEOs. As I wrote here a few months ago, the wealthy have a special responsibility. Much will be asked of those to whom much has been given. Participating in government and civic life, serving in war, helping the less fortunate, and–yes–paying a fair share of taxes are inescapable responsibilities for all Americans, especially for those who have realized the American dream that inspires us all.

I doubt there was anything I could have said in the debate that would have induced Onkar Ghate to view the meaning of freedom in a different light. I suppose he might say the same of me. Still, I can’t see how one can be free in a vacuum. Freedom takes work, by each of us, and by our government, to create the place where each of us can prosper. The freedom to sleep under a bridge is no freedom at all. We can only be free when we work together for the well-being of all Americans–including the least among us.

By: Kathleen Kennedy Townsend, The Atlantic, August 23, 2011

August 26, 2011 Posted by | Capitalism, Class Warfare, Congress, Conservatives, Corporations, Democracy, Democrats, Equal Rights, Freedom, GOP, Government, Human Rights, Ideologues, Ideology, Immigrants, Liberty, Medicaid, Medicare, Middle East, Politics, Regulations, Religion, Rep Paul Ryan, Republicans, Right Wing, Taxes, Teaparty, Wealthy | , , , , , , , , , , , , , | Leave a comment

The Poisonous Radicalization Of The Republican Party

The death this past weekend of former Oregon Gov. and U.S.  Sen. Mark Hatfield, was not just the passing of a good and decent man with a  strong sense of Western independence, but a realization that “this ain’t your  mother’s Republican Party anymore!”

Of course, it hasn’t been for some time. The era of Senators Hatfield  and Mathias and  Percy and Baker and Javits and Case and Brooke and  Scott and Dirksen and so  many others is long gone. The moderates  and  progressives were drummed out or retired long ago and were replaced with Republican conservatives beginning in the late ‘70s and ‘80s.

Even many of the hard liners who were replaced were still  pragmatic conservatives who often worked across the aisle. The Bennetts,  Hatches, Bonds, Grahams and  others are practical, serious conservatives.

But if you look at the collection of candidates for  president, if you look at what just happened with the debt  limit insanity on  the Hill, if you examine the inner workings of the  Republican caucus in the  House, you begin to wonder whether Washington  is governable and whether the  radicalization of the Republican Party is  responsible for this meltdown. Has the Republican Party become an  extreme  Nihilist party?

Let’s look at the current state of politics within the Republican Party.

The upcoming Iowa straw poll and the debate tomorrow night  will  further push the already extreme candidates more to the extremes . There are so many potential  nominees who have not only gone  hard right on the social issues but have decided  that they must call  for abolishing the Departments of Education, Commerce,  Energy,  and even the IRS. They still  oppose the TARP program, which kept the  world from a depression, and they are  proud to reject any form of  additional revenue stream by signing inane pledges  that handcuff  America.

The extreme agenda of cut, cut, cut without regard for the   consequences is backed up by statements that even Pell education grants  for  needy college students are “welfare.”   All the sound and fury  about the debt did not create a single job or  advance economic stability or growth. In  fact, the failure of Speaker John Boehner  and the Tea Party to agree to efforts by  President Obama to reach a $4  trillion grand bargain to right the economic ship  was an example of  radicals’ my-way-or-the-highway approach.

The American people, overwhelmingly, reject this  extremism. They are  fed up with the lack  of progress and the extremism that has become the  modern Republican Party. Their anger is across the board but it is   more heavily directed towards what has become of the Republican  Party—Tea  Party ideologues who lack  common sense and have no desire to  actually solve problems. In the campaign of 2010 the Tea Party was   more or less a Rorschach test, many people saw in it what they wanted.  In April 2010, the strong unfavorable was 18  percent; it has risen to  around 50 percent.

The scary market volatility, the lack of public confidence  in the  economy, and most important, the many Americans who are suffering the   disasters of unemployment and foreclosure should be front and center for   Republicans. Instead, we have a “get  Obama” frenzy and a pull to the  extreme right that precludes progress.

Speaker Boehner, who seemed close to negotiating the grand  bargain  with the president, was pulled back into the extremist fold. He even  said that he got “98 percent of what  I wanted” on the debt deal and  declared himself happy with it!  If he is happy, there aren’t many  Americans  who are there with him.

There are few Republican leaders who recognize that what  they did  with this budget deal led to Americans’ savings and retirements taking  a  severe hit, a downgrade from Standard & Poor’s that will ripple for   years, and a decline in confidence for businesses and consumers.

The old Republican Party wouldn’t have done it; Ronald  Reagan  wouldn’t have done it; even recent conservatives committed to debt   reduction and cutting spending wouldn’t have done it, if they had the  courage  to stand up to the radicals within the Party.

The time for the Republicans to rediscover their pragmatic,   governing side is now. The time to  reject the pledges, the ideological  straitjackets, the wave of Tea Party hysteria  is now. The public is  demanding it and  the country needs it. (And just a bit of  advice from  this Democrat: the overreaching and the extremism won’t win you many  elections either!)

By: Peter Fenn, U. S. News and World Report, August 10, 2011

August 11, 2011 Posted by | Class Warfare, Congress, Conservatives, Debt Ceiling, Debt Crisis, Deficits, Democracy, Economic Recovery, Economy, Education, GOP, Government, Ideologues, Ideology, Iowa Caucuses, Jobs, Lawmakers, Politics, President Obama, Republicans, Right Wing, Standard and Poor's, Tax Loopholes, Taxes, Teaparty, Unemployment, Wall Street | , , , , , , , , , , , , , , , , , , , | Leave a comment

Standard And Poor’s Goes Tea Party

Big headlines for a Friday night: “U.S. Loses Top Credit Rating!” Yes, as most now know, Standard & Poor’s went ahead with its warnings of the past weeks and downgraded the sovereign debt of the United States government from its pristine triple-A to a still stellar but one notch less so AA+. And after a miserable week in global equity markets that was almost as ugly as it gets, a week that began with the conclusion of a universally reviled debt-ceiling deal, the late-night downgrade was the fitting end.

The symbolism is undeniable. This is the first downgrade in history, as commentators rushed to remind us. But of course, that history goes back only to the late 1930s, when the ratings agencies began to hold sway. And S&P is the only one of the major three—Fitch, Moody’s, and S&P—to downgrade. So this was big bad news, a bad coda to a bad week, but only as news and not as a trenchant analysis of the creditworthiness of the United States or its ability to meet its debt obligations going forward.

Let’s be clear: Congress and the White House did not cover themselves with glory during the debt debate throughout July. The United States has a stalled economy and a large amount of debt. But on so many levels, this downgrade is absurd.

First there is the question of math. When S&P informed the White House of its intention to downgrade on Friday afternoon, the Treasury Department took issue with S&P’s math and claimed that their assessment of the trends of the U.S. debt burden and its ratio to GDP was off by trillions of dollars. No matter. After a brief review, the wizards at S&P went ahead and removed an A.

A news ticker reads “Standard & Poor’s downgrades US credit rating from AAA to AA+” in Times Square on August 5, 2011 in New York City., Andrew Burton / Getty Images

Second, what’s with the fetish for a so-called proper ratio of debt-to-GDP. Academic economists have done no favors here. Carmen Reinhart and Kenneth Rogoff have become the go-to economists for their work showing how countries that reach a 90% ratio slide into recession and see slowing growth well before. The U.S. current level according to S&P is 74% and will rise to 85% by 2021. The explanation of the downgrade closely tracks this academic logic.

I have no criticism of an academic theory about how nations function economically. But when debatable theories become the underpinnings of decisions by unelected individuals who run organizations with significant sway (sway ceded to them by governments throughout the 20th century), then we have a problem. We have a problem when that argument gives short shrift to the debt-servicing burden. The current interest rate that the U.S. government pays to service its massive debts is hovering around 2.5%, which makes interest payments as a percentage of GDP as low as they have been since the mid-1970s.

Servicing the debt does not enter into the analysis, yet that and current interest rates make all the difference. Dismissing that counterargument, warning that rates will of course rise (yet even if they double, that will still leave the U.S. more than able to meet its obligations), and drawing on theories about the “right” level of debt puts S&P in a strange bedfellow alliance with the Tea Party.

The people who run the ratings agencies are welcome to their analysis, as is the Tea Party. But if Rogoff and Reinhart or the Tea Party announced that they were downgrading U.S. sovereign debt, they would be laughed for their audacity. Yet when it is one of the anointed ratings agencies, there is this sudden need to genuflect.

This is largely because covenant after covenant in both SEC rulings and institutional money management (pensions especially) dictate that many types of capital can only be invested in credit-worthy instruments as determined by Moody’s, S&P and Fitch. The downgrade doesn’t remotely begin to threaten the “investment grade” status of U.S. debt, and there is little reason to suspect that borrowing costs will go up as a result. Still, the reason we are in this situation of having to genuflect to S&P is because an entire structure of credit and investments, and the issuance and purchase of bonds above all, has been built on the shaky and questionable foundation of the ratings agencies.

The worst part of the downgrade is this: S&P spent considerable time in the body of their explanation about debt and GDP and growth. But they didn’t lead with that. That wasn’t the kicker. No, this was: “the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.” The company assailed the Washington culture of “brinkmanship” so in display during the debt ceiling fiasco, and used that as the primary reason to take us down a notch.

Excuse me, but since when is a pristine political process a key ingredient to good credit? Are we supposed to have civil politics in order to maintain the rating? Are we supposed to have some mythic Scandinavian concord? Washington has usually been a mess, and arguably more now than ever. Nonetheless, the great distortion of the debt-ceiling imbroglio was that failure to do a deal would have led to a default. It would have led to a partial and then increasing complete shut down of the government, which would have soon enough forced a resolution. At no point would there have been insufficient tax revenue to meet the $20 billion of so in monthly interest payments on the debt, unless the crisis had gone on for months and months, which barring collective national psychosis simply could not have happened.

So S&P doesn’t feel comfortable that the American political process is conducive to dealing with long-term debt issues and so issued a downgrade. Yet S&P is a ratings agency, not a political arbiter. Olympic judges rule on athletic aptitude, not the politics of the athletes (usually). There is not a scintilla of evidence that the political process has yet impeded the ability of the United States to meet its debt obligations, even with the debt ceiling brinkmanship. The political process may indeed be contributing to the morass of the American economy, but the larger causes are the challenges of emerging economic centers and changing patterns of global commerce. Those are long-term issues that have little bearing on current ability to manage debts.

Finally, as a symbol that the United States is sliding off the rails, the downgrade is potent. It’s hard to argue with the reality that America is in a challenging moment that looks and feels a lot like decline. Whether that proves false and a new dawn awaits, we’ll find out soon enough. But the actions of S&P are part of problem and not just an independent verification that one exists.

These agencies have been elevated to heights that should not ascend; they have been chronically wrong and late in the past; and their rationale for a downgrade sounds more like a prim distaste for a dysfunctional political process that a reasoned assessment of the ability of the United States to discharge its obligations. No defense can be offered of our current political system or near-term economic prospects. But S&P—already on overreach as “neutral” judge of American creditworthiness—has no special standing to rule on the political system, and using that as a cudgel to prove their own power is a destructive act.

 

By: Zachary Karabell, The Daily Beast, August 6, 2011

August 7, 2011 Posted by | Congress, Conservatives, Consumers, Debt Ceiling, Debt Crisis, Deficits, Democracy, Economy, Federal Budget, GOP, Politics, Republicans, Right Wing, Teaparty | , , , , , , , , , , , , , , | Leave a comment

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