So the House Republicans finally sort of recognized that holding the country's economy hostage until the GOP minority could extort changes to Medicare and Social Security that the majority doesn't want wasn't a very good idea. See House GOP Agrees to Lift Debt Limit, New York Times (Jan 18, 2013).
The bills are already due, based on expenditures that the Congress has already approved. Nobody likes a slacker who borrows and then renegs on his debt, and for the Congress to even consider doing that is nothing short of despicable.
But this is just another bargaining ploy to try to build up pressure, with the sequester and other provisions, to argue for cutting social welfare programs. And that's what is really despicable. These guys (and a few gals) don't mind paying off big companies and their lobbies with extensions of economically wasteful tax breaks. They are willing to give away huge amounts to the uberwealthy who have garnered all the gains from the last few decades through an estate tax bill that lets multimillionaires pass on $10 million without taxation, and then pay a piddling rate on any in excess of that amount. But they wanna get at the vulnerable elderly through benefit cuts to Social Security and Medicare--ideally through privatizing them. In their world, the rich merit it all and everybody else--that's the vast majority of us--will just have to suffer along in a diminishing world of incredible inequality.
The Democrats should push for eliminating the debt ceiling altogether. It is an artifact of a different time. It is meaningless today and it is merely a hurdle that invites the worstg in behavior out of the right-wing political minorities who try to blackmail the country to get their way.
Jacob Lew, Obama's nominee for Treasury Secretary, will be coming into office (assuming confirmation) at a time when the harpy forces on the right are gathering steam, to try to use the artificial debt ceiling as a weapon to push the Democrats to needlessly eviscerate the New Deal programs while the harpies claim to be focused on cutting the deficit.
The worry, of course, is that Lew was already involved in White House budget negotiations that appeared to buy that line, offering up COLA adjustments and age-eligibility extensions that cut back on benefits, rather than dealing with the resource issue (lifting or removing the Social Security cap; moving towards universal single-payer to cut back on the wasteful health care expenses generated by all of the rent-seekers in the health care chain of providers). See WPAA, Obama Picks Lew for Treasury as Fiscal Issues Loom, AP (Jan. 10, 2013).
Remember, readers. There is no evidence whatsoever that the right-wing really is interested in the well-being of the US economy. If they were, they would not threaten to use the archaic, artificial debt-ceiling limitation as an occasion to swing a cudgel at that very economy and send it reeling into another recession. They would more readily admit that once they have legislated X dollars of spending and Y dollars of revenue, any excess of X over Y has to be made up by debt. Given that debt is very very cheap right now, that's no big deal. Congress should simply eliminate the debt ceiling and authorize borrowing as needed to make pay for the spending they have already authorized in lieu of raising more revenues to do so. Even Ben Bernanke has finally said what is obvious--the debt ceiling has no fiscal value. See Ben Bernanke: Get Rid of the Debt Ceiling, The Examiner, Jan. 15, 2013 (hat tip to Naked Capitalism's Yves Smith).
Robewrt Pollin, another academic interested in the issues of employment, wages, fair benefits, workers rights and, yes, tax and debt policy, has a good blog on Lew and the need for clear statements about debt, deficits and the US economy: A Modest Proposal for Jacob Lew: Acknowledge Three Simple Facts about US Fiscal Reality (Jan. 15, 2013). The three facts are straightforward (and he has some good charts to support them).
1) The US is not facing a fiscal crisis: our interest payments as a percent of our expenditures are considerably lower now than they have been in the past (including the past under GOP presidents).
2) Interest rates on US bonds are at historic lows, making borrowing even cheaper today than it has been in the past and causing even less worry about a "fiscal crisis" than borrowing might have caused in the past. As Pollin notes, "[w]e should expect Jacob Lew to at least state the obvious here: that the deficit hawks have been wrong about an impending interest rate spike for four years running."
3) The deficits that we are running right now are due to the Great Recession, not to out-of-control spending. The spike (to 10.1% of GDP) occurred in 2009, right after we nearly went off the speculation cliff built by Wall Street, and the deficit has now fallen to around 8.5% of GDP in 2012.
Lew should be able to acknowledge each of these points. And if he could, it would help convince people like me that the Obama administration is finally really ready to fight the teaparty naysayers who seem prepared to destroy the economy in order to be able to bring down benefits under Social Security and Medicare.
Pollin has it right when he says the following:
"[T]he single most important thing we can do to lower the fiscal deficit further is to push unemployment down. This will generate increased government revenues with people paying more in income and sales taxes, and it will reduce government payments on unemployment insurance and supplemental aid for health care and family support. The U.S. has the capacity to pursue a stimulus agenda now quite easily, precisely because interest rates and interest payments to creditors remain historically low." Id.
Paul Krugman appeared on Bill Moyers PBS program Sunday night, talking sanely and rationally about the economy and why jobs (should) come first--and along the way noting how politics now dominates what and how we can talk about economic policies. See Moyers & Company, Paul Krugman on Why Jobs Come First (Jan. 11, 2013).
(While you are at the site, also watch Moyers' essay, The Crony Capitalist Blowout, about the goodies that corporations got out of the fiscal cliff deal, which included everything from immediate expensing to the active financing exception and the R&D credit--all subsidies for big corporations that spent lots of lobbying power ensuring they would get them).
We have all kinds of reasons to know that the US is not Greece and will not be like Greece--we are a powerful economy, we have our own currency, and our debt is widely respected. Nonetheless, the right-wing radicals want to destroy the New Deal programs--Social Security, Medicare, and Medicaid, and they are willing to take the entire economy hostage to try to get their way. Just look at Pat Toomey in the clip Moyers shows on the show, threatening to put the US government into default unless the majority in Congress accedes to the will of the wacky minority.
That wacky minority hopes to use brinksmanship games around the debt ceiling to force progressives to yield on their dream target--decimating the New Deal.
The radicals on the right don't really care about the debt ceiling--look at the way they willingly raised it throughout the Bush administration, even while viciously cutting taxes for the wealthy and creating huge deficits out of the surplus existing when Bush took office! They don't really care about deficits. Look at the way they viciously cut taxes for the wealthy and spent on military budgets and preemptive wars when Bush was in office!
What they want is a radical restructuring of the economy in a way that will maintain and further the new gilded age, where bankers and private equity titans get rich off the labor of ordinary folk and ordinary folk find themselves eeking out a living at more or less the same rate they were before the Bush decades. The top 1%, as Moyers pointed out, have seen a 275% increase in incomes over the last decade (due in large part to the Bush tax cuts, but also to the misappropriation of productivity gains by the rich). Meanwhile, average American workers have seen their wages barely increase by $1.23 an hour.....not even keeping up with inflation.
Obama has said he will not negotiate on the debt ceiling. He must hold firm. There are various ways he can combat their "leverage". The obvious one is that it is unconstitutional for Congress to pass laws that require spending, pass laws that raise too little revenue to pay for that spending, and then refuse to permit the government to borrow to make up the difference that they have legislated into being. That is irresponsible, and can be viewed as a violation of their constitutional obligation to ensure that the nation can pay for the debts it has already incurred. See Taylor, Top Dems Urge Obama to Weigh Unilater Debt Hike, Salon.com (Jan. 13, 2013). Obama is correct when he highlights this. And surely as President, his power reaches to borrowing to fund the government that he is obligated by Congress to run under the laws he is obligated to implement. He should make it clear that he is willing to risk impeachment to test that power rather than be held hostage by their petty, selfish games.
What about the "trillion dollar platinum coin" idea? This is the law that grants the executive the right to mint platinum coins of any denomination. Why not mint a few that add up to a trillion, and then pay it to the Fed and draw cash from the Fed based on that coin, to pay our bills? That is perfectly legal--Congress did not limit the use of the coins in the legislation authorizing them. If Congress can play brinksmanship games by threatening to put the US in default and destroy our economy unless the majority enacts the pet legislation of the minority to destroy the Social Security, Medicaid, and Medicare safety net programs, then the Executive should be willing to use every tool at his disposal to prevent that. Of course, Treasury today said it wouldn't do that. See Anne Lowrey, Treasury Won't Mint Coin to Defy Debt Ceiling, New York Times (Jan. 12, 2013). Stupid of them to do so, since it is clearly within the law. Obama cannot "wimp out" on this debt ceiling issue (to use Krugman's term): if he lets the zanies in the GOP use these tactics to force changes in the safety net programs, he will have destroyed the Democratic party and the recovery from the Grand Recession in one fell swoop.
Remember, the analogy of US government debt to household debt is a silly one, just as is the analogy to Greece. The government is not a family; our income is not the fixed wages of a head of household; our debt may feel staggeringly large for ordinary people to comprehend, but it is not too large a share of our GDP and our cost-of-funds right now is incredibly low. We should borrow while the borrowing is good, to pay for the vital infrastructure repairs that need to be made and to ensure that we do not default on a key obligation to our people--the provision of a decent standard of living through measures that encourage job creation (by creating demand) and provide security against job loss and the vulnerabilities of old age and sickness.
The Peterson INstitute is spending half a billion dollars to distort the public's understanding of debt and deficits, in order to convince Americans that we should run the government like they run their households, in terms of amount of debt. But Peterson is a right-wing billionaire whose views are antiquated and wrong for the time. Keynes is the only one who has had it right, and we should listen to Keynes, not Friedman's brute capitalism theories of a "free" market in which the wealthy control the assets and confiscate the rewards, not Peterson's cacophonous sounds about debt.
Look again at Moyers' program. He runs a tape where Lloyd Blankfein--head of Goldman Sachs, filthy rich, and one of the culprits of the financialization of the economy and the speculation that threw us into the Great Recession--talks about how ordinary people will have to give up on their expectations from Social Security and Medicare. Entitlements, he says, just can't deliver what people want--we can't afford it. This from a guy who has socked away millions garnered from the everyday lives of ordinary people. This from a person who has ridden the easy street rail line of subsidized profits for his banking firm (cost-of-funds extraordinarily low due to the government bailout; and subsidies in the code both internationally (active financing exception) and at home (the tax treatment of derivatives has been extraordinarily kind to banks in terms of sourcing and therefore taxability), etc. This from a person who has enjoyed a priviledged preferential rate of taxation on much of his income, lobbied for through the revolving door of Treasury officials and banksters and their attorneys.
No, Obama shouldn't listen to the Blankfeins of the world, or the Norquists, or the Toomeys. He should turn a deaf ear to Mitch McConnell and to Rand Paul and all of those who insist that we have to keep funding the military-industrial oligarchy but that we can't afford to keep funding the earned benefit programs that have made the difference between an intolerable standard of living and a decent standard of living for millions of Americans.
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