Category: Economy

Austerity Soon?

There’s clearly a drumbeat for the solution to all of what ails the American economy to be increasing pain and suffering felt by the lower and working class. It’s not surprising that right wing governors like Chris Christie are trying to convince people that government deficits are caused by public workers making $30,000. Christie is an asshole and this is what assholes do. But what is so unfortunate – and dangerous – is the willingness of mainstream media outlets like 60 Minutes are buying into it, then failing to even include a cursory counterweight to the right’s attacks on workers. Lies and misinformation of this sort evolve into Conventional Wisdom quite quickly when presented unilaterally as fact by major media outlets.

This isn’t just about Conventional Wisdom, though. It’s actually about the march towards cruel austerity measures being enacted here in America, punishing people who did nothing to contribute to the collapse of the economy so those who wrecked it can be fully restored and kept in the style to which they’ve grown accustomed. The Republican Party, as well as conservatives in the Democratic Party, seem fully down to enact austerity measures, strip public programs and destroy the social safety net. At some point soon, politicians on the left will have to stand up to fight back against austerity from coming to America. But other than Bernie Sanders, I don’t know who will be willing to take the fight to the super-rich and the banks. I have to believe there are still politicians who will fight for working Americans. Now is the time for them to show themselves.

People Hate Banksters

I guess it really doesn’t matter that 88% of Americans think Wall Street bonuses should be either heavily taxed or banned in full, unless you are trying to figure out a way for the big banks to be upstanding members of American society. This does seem to be a great opportunity for the President, though. Rather than respond to idiotic concerns that he isn’t nice enough to them at a time when the stock market and bank profits have exploded, there should be recognition by the banksters that they are hated by the American people and President Obama is standing between them and a very angry public. In an ideal world, this political dynamic should enable the President and Democrats in Congress to extract concessions from Wall Street that will enable greater economic growth.

The biggest question I have is why aren’t  politicians on either side of the aisle trying to speak to  this 88% of America? I would hazard that the person who can best capture this anger politically will be well poised to turn it into political power and use it for improved economic policy-making.

Student Protests in London

Austerity has consequences and it’s not surprising that there have been massive protests in London by students following massive tuition hikes for British students. This speech by a fifteen year-old student is pretty incredible and a real example of what anger about the theft of wealth from working people to pay for the folly’s of banksters.

The notion that the Millenials, which this student describes as previously post-ideological, will become ideological because of cruel austerity measures has got to scare the crap out of those who wish to consolidate wealth into the hands of the powerful.

Do the rich need us?

On Twitter last night I saw NTodd (via Steve Benen) promote this post by Ted Frier of They Gave Us A Republic (neither a blogger nor a blog that I was familiar with). Frier writes an incredibly thoughtful and important post on today’s economic crisis and the cold way in which the wealthy – and their political proxies in the Republican Party – are showing disdain for the continued existence of the American social compact. Frier writes:

Elites can make money from factories in China by selling to consumers in India, says Lind “while relying entirely on immigrant servants at one of several homes around the country.”  Between the profits they can earn from overseas factories in countries policed by brutal autocracies, and factories in the US manned by non-voting immigrant labor, “the only thing missing is a non-voting immigrant mercenary army whose legions can be deployed in foreign wars without creating grieving parents, widows and children who vote in American elections.” That, maybe in part, is what the Dream Act is about.

There was a time when rich and poor alike subscribed to the promise that a rising tide raises all boats. But American investors and corporate managers no longer need the rest of America to prosper, says Lind, since “they can enjoy their stream of profits from factories in China while shutting down factories in the US.” And if Chinese workers have the impertinence to demand higher wages, says Lind, American corporations can find low-wage labor elsewhere.

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The point is, says Lind: If the rich do not depend for their wealth – or even their security — on American workers, consumers and soldiers “then it is hardly surprising that so many of them should be so hostile to paying taxes to support the infrastructure and the social programs that help the majority of the American people. The rich don’t need the rest anymore.”

That is all too evident from the contempt for the unemployed that we see coming from Republicans like Jim DeMint, Christine O’Donnell and Sharron Angle, as the severing of America’s historic social contract now finds institutional expression in a modern Republican party that has abandoned all pretense that it governs on behalf of those other than the upper class.

From my experience both inside and outside the Republican Party, I’ve gradually come to believe that one of the major differences separating Republicans from Democrats is that Democrats view service in Congress as the pinnacle of their careers while Republicans look at their time on Capitol Hill as an internship – a chance to do their time, pay their dues and build up a resume of favors and chits they can cash in later for a far more lucrative second career as lobbyist or corporate hack.

Yes, Democrats pass through the same revolving door between government and K Street that Republicans push on. But Republican behavior while still in government seems far more devoted towards creating jobs for themselves when that Big Day finally arrives and they get to make the jump to an appreciative corporate sector.

There’s real truth to this, though I think the break is more along the axis of conservative versus liberal than it is Republican versus Democrat. There are many conservative Democrats who do exactly what the Republicans Frier refers to in this passage. Later in the piece, he does get more specific along ideological lines.

Eventually, says Drum, someone needs to notice “that Republican policy is no longer rooted in any kind of recognizable conservative principle” and is instead “little more than a program of preventing the middle class from sharing in the gains of economic growth and divvying up the resulting loot among the richest of the rich.”

Conservatives, says Chait, have simply redefined conservatism to be nothing more than an expression of material self-interest, “defined in the narrowest and most short-sighted terms.”

And there’s the rub.  Conservativism is no longer a substantive ideology, but a vehicle to facilitate the transfer of wealth from the poor and working classes in America to the rich.

Go read all of Frier’s piece. It’s a thoughtful look at wealth, power, and economic voodooism that is driving change in America.

Tax Cuts & Liberalism

Kevin Drum:

Looking at American politics from a 100,000-foot level, conservatives have won. Programmatic liberalism is essentially dead for a good long time, and small bore stuff is probably the best we can hope for over the next 10-20 years — though social liberalism will continue to make steady advances. I reserve judgment on whose fault that is.

David Dayen responds:

It’s certainly dead in a situation where tax rates are permanently at 2001 levels. To me, that’s the choice. If the debt ceiling rise was included in this deal, ensuring that one bargaining chip for spending cuts came off the table, I’d have a much easier time agreeing to this, mindful of the near-term need for stimulus. As it isn’t, I have problems with mortgaging the future for a short-term gain I find ephemeral.

Fiscally Doomed


Felix Salmon:

If you were structuring a tax code from scratch, it would look nothing like this. But the problem is that tax hikes seem to be politically impossible no matter which party is in power. And since any revamp of the tax code would involve tax hikes somewhere, I fear we’re fiscally doomed.

There has to be a conversation about the tax code that includes arguments by Democrats for making corporations and the wealthy pay their fair share of taxes. Unless and until Democrats are willing to forcefully make this argument to the public, we will continue to be incapable of doing what is fiscally necessary, viz. raising taxes on the wealthy.

The Cost of Tax Cuts

Separate from the partisan ideological debate over what should be done in response to the pending scheduled expiration of Bush’s tax cuts, there’s a real argument to be had about how expensive these cuts would be if they were extended. Paul Krugman, in a column where he goes somewhat from critic to coach of the President, writes this about the short-term costs of a blanket extension of these tax cuts.

But while raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils.

Bear in mind that Republicans want to make those tax cuts permanent. They might agree to a two- or three-year extension — but only because they believe that this would set up the conditions for a permanent extension later. And they may well be right: if tax-cut blackmail works now, why shouldn’t it work again later?

America, however, cannot afford to make those cuts permanent. We’re talking about almost $4 trillion in lost revenue just over the next decade; over the next 75 years, the revenue loss would be more than three times the entire projected Social Security shortfall. So giving in to Republican demands would mean risking a major fiscal crisis — a crisis that could be resolved only by making savage cuts in federal spending.

And we’re not talking about government programs nobody cares about: the only way to cut spending enough to pay for the Bush tax cuts in the long run would be to dismantle large parts of Social Security and Medicare.

Keeping the tax cut expiration debate squarely in the realm of the political is a mistake. There’s no way to win this argument without talking about the actual economic impact these cuts will have down the road. At a time where there is a mania about deficit reduction, what the Republicans are pushing for truly represents a break with fiscal reality. As Krugman points out, the only way to pay for what the Republicans want is to thoroughly crush the social safety network…to pay for tax cuts for millionaires.

What’s most frustrating about how this debate has played out, again as Krugman notes, is that the GOP is blackmailing the President and Democrats in Congress. No more, no less. The response should come on multiple levels: as I said above, laying out the case for the fiscal irresponsibility of extending tax cuts to millionaires, a partisan assault framing for 2012 (which is where it has mostly been done so far), and a moral argument about pushing for handouts to Paris Hilton at a time when millions are about to lose their unemployment benefits.

Unfortunately, it’s late in the game. Though there is still nearly a full month before the cuts expire on schedule, there doesn’t seem to be a desire to have the fight that needs to be had. Maybe there really is too much at stake to deal in the details now, but I’m just hard pressed to believe that neither economics nor ideology have anything to play in the resolution of this legislative fight.

Moving Catfood Commission Goal Posts

The Wall Street Journal does a cute trick when talking about the upcoming deficit commission report and whether or not it will be implemented by Congress:

The co-chairmen, Democrat Erskine Bowles and former Republican Sen. Alan Simpson, need 14 of the 18 members of the National Commission on Fiscal Responsibility and Reform to support their proposal in order to issue a formal recommendation, which could then be voted on by Congress before the end of the year.
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If the panel wins close to a dozen votes for its proposal, some of the ideas could be incorporated into the White House’s 2011 budget proposal, or tax and spending plans from either Democrats or Republicans next year. If the proposal receives only a handful of votes, it will likely send a signal that the parties remain at odds over how best to rework the country’s tax and spending priorities, suggesting that it will take much longer for any changes to be made.

A key threshold for the co-chairmen will be whether they can get the support of the 10 lawmakers on the panel who are returning in January as part of the new Congress.

The panel needs 14 votes to pass anything out to Congress. But the WSJ is suggesting that if they get 10-12 votes for a plan that it would be enough for the White House to take some or all of it and send it to Congress. Fourteen votes are needed to signify bipartisan support unto having a worthy proposal – not ten, not twelve. This is a clear example of moving the goal posts on what constitutes agreement on the Catfood Commission. Expect more goal post moving to come, especially as it becomes clear that the painful austerity measures, including cutting Social Security, supported by Bowles and Simpson are not supported by liberals on the commission.