The "deficit debate" isn't about deficits

Krugman:

(T)he only major budget proposal out there offering a plausible path to balancing the budget is the one that includes significant tax increases: the “People’s Budget” from the Congressional Progressive Caucus, which — unlike the Ryan plan, which was just right-wing orthodoxy with an added dose of magical thinking — is genuinely courageous because it calls for shared sacrifice.

True, it increases revenue partly by imposing substantially higher taxes on the wealthy, which is popular everywhere except inside the Beltway. But it also calls for a rise in the Social Security cap, significantly raising taxes on around 6 percent of workers. And, by rescinding many of the Bush tax cuts, not just those affecting top incomes, it would modestly raise taxes even on middle-income families.

"Serious" concern about deficits...

All of this, combined with spending cuts mostly focused on defense, is projected to yield a balanced budget by 2021. And the proposal achieves this without dismantling the legacy of the New Deal, which gave us Social Security, and the Great Society, which gave us Medicare and Medicaid.

But if the progressive proposal has all these virtues, why isn’t it getting anywhere near as much attention as the much less serious Ryan proposal? It’s true that it has no chance of becoming law anytime soon. But that’s equally true of the Ryan proposal.

The answer, I’m sorry to say, is the insincerity of many if not most self-proclaimed deficit hawks. To the extent that they care about the deficit at all, it takes second place to their desire to do precisely what the People’s Budget avoids doing, namely, tear up our current social contract, turning the clock back 80 years under the guise of necessity.

Paul Krugman's entire column today is a "must read" - HERE.

Making money the old fashioned way...

1980s Smith Barney "icon", John Houseman

Since confidence games have no doubt been with us since history has been written, it seems that Smith Barney has indeed been making money "the old fashioned way."

Several high-end investors have just won $54.1 million in civil arbitration against the company (a division of Citigroup) - including over $17 million in punitive damages - for a municipal bonds leveraging scheme that made a lot of money for the company but was a disaster for people who apparently believed they were putting their wealth into a safe municpal bonds haven.

According to Gretchen Morgenson at The New York Times:

Requiring a minimum investment of $500,000, the deals employed the wonders of leverage, borrowing 8 to 10 times the value of the municipal bonds in an underlying portfolio to generate higher income. Calling the strategy conservative and ideal for investors’ safe money, Smith Barney sold the trusts to wealthy investors...

Smith Barney’s sales representatives kept 40 percent of the total fees paid by their investors, far exceeding what they would have earned selling ordinary municipal bonds. This arrangement encouraged Smith Barney to lever up the portfolios...lawyers argued, putting the interests of their clients and those of Smith Barney at odds...

When economically illiterate partisan demagogues control Congress: "The cascading effects on the economy would be severe and long-lasting"

Huffington Post:.

"Reagan taught us deficits don't matter."

“If there is a vote on raising the debt ceiling and it fails, there will be a significant market reaction,” said Tony Fratto, a former Treasury and White House official in the Bush administration. “Investors already believe that Congress doesn’t understand the financial markets. A failure to raise the debt ceiling will confirm this to them."

If the markets get spooked, U.S. treasury bond yields will spike, driving up interest rates and increasing the price of borrowing money for everyone from the federal government to municipalities to consumers, Fratto warned. The cascading effects on the economy would be severe and long-lasting.

The negative market reaction would "come quickly,” Fratto said. “I think you can virtually guarantee that, and I hear it from everyone that I talk to in the markets, here and abroad.” He added, “I’m uncomfortable about the number of [Congress] members who don’t seem to understand that.”

The GOP's "Kill Medicare" budget plan is in a shambles, but they have a back-up strategy

From Friday's Washington Post:

Anxiety is rising among some Republicans over the party’s embrace of a plan to overhaul Medicare, with GOP lawmakers already starting to face tough questions on the issue at town hall meetings back in their districts.

House leaders have scheduled a Tuesday conference call in which members are expected in part to discuss strategies for defending the vote they took this month on a budget that would transform the popular entitlement program as part of a plan to cut trillions in federal spending...

A Washington Post/ABC News poll published this week found that two-thirds of Americans want Medicare to remain as is. That includes 62 percent of independents and nearly eight in 10 people 65 and older — making for an uphill climb for House Republicans trying to reassure constituents...

“Republicans don’t want to be talking about Medicare every day for the next year and a half,” said a Republican Party official, speaking on the condition of anonymity to address internal strategy deliberations...The GOP official added that the party “can fight the Medicare issue to a tie” by “muddying the waters”...

Who could have guessed they might try this approach?

The poor standards of Standard and Poors

There was a bit of brouhaha on Monday when the credit ratings agency Standard & Poors talked of a one-in-three chance that US Treasury securities could be downgraded by the company to "negative" in three years. The warnings were based on projections of federal deficits and were welcomed by many in the punditry, in politics and in the financial sector who want to make deficits the centerpiece of any immediate economic agenda.

But one wonders how much credence should be given to Standard and Poors?  How much of what they publish is tailored to what Wall Street wants to hear and carefully aligned in their immediate interests?

The Congressional Financial Crisis Inquiry Commission has judged S&P and the other ratings agencies as key players in the big stakes deceptions and fundamentally fraudulent mortgage bundling that was at the center of the 2008 financial meltdown. For example, last fall, via the New York Times reporting of the Crisis Inquiry hearings, we learned this:

D. Keith Johnson, a former president of Clayton Holdings, a company that analyzed mortgage pools for the Wall Street firms that sold them, told the commission on Thursday that almost half the mortgages Clayton sampled from the beginning of 2006 through June 2007 failed to meet crucial quality benchmarks that banks had promised to investors.
Yet, Clayton found, Wall Street was placing many of the troubled loans into bundles known as mortgage securities.

Mr. Johnson said he took this data to officials at Standard & Poor’s, Fitch Ratings and to the executive team at Moody’s Investors Service.

“We went to the ratings agencies and said, ‘Wouldn’t this information be great for you to have as you assign tranche levels of risk?’ ” Mr. Johnson testified last week. But none of the agencies took him up on his offer, he said, indicating that it was against their business interests to be too critical of Wall Street.

So anything coming from Standard and Poors needs to be taken with some very large grains of salt. In this vein, emeritus Amherst economics professor Richard Wolff, in an article for the UK Guardian, called the S&P warning,"another scary instalment in the conservative campaign to justify cutting government social spending. S&P may be rampant in its interests, but it hardly seems conflicted about them." 

Simon Johnson, former chief economist for the International Monetary Fund, also had some appropriately skeptical comments on S&P's pronouncements at the NYT's Economix blog:

It is commendable that S.&P. now wants to talk about the United States fiscal deficit –- one wonders where it was, for example last year, during the debate about extending the Bush-era tax cuts.

The House GOP - just a few months into their "Winning-Duh!" triumphalism - has already reached the "I know they're lying because I saw them moving their lips" stage of epic political and policy failure

Two items on today's menu highlight the radical incoherence, profound dishonesty and - yes - "unseriousness" of the alleged conservatives in Congress who are using the country's economic and budgetary challenges as an excuse for ideological hyperventilation and rank hypocrisy, but little else.

Exhibit A - The New York Times reported that:

Mr. Obama wants to expand the power of the 15-member panel, which was created by the new health care law, to rein in Medicare costs.

But not only do Republicans and some Democrats oppose increasing the power of the board, they also want to eliminate it altogether. Opponents fear that the panel, known as the Independent Payment Advisory Board, would usurp Congressional spending power over one of the government’s most important and expensive social programs.

Matt Yglesias notes this opposition signifies that:

...the very same members of congress who voted this month to privatize Medicare in 2022 and enact draconian cuts throughout the 2020s and 2030s are here in town right now defending health care providers’ right to charge the government high prices for services that don’t work. Indeed, as recently as 2009 no less a figure than Paul Ryan himself was fuming at the idea of reducing government subsidies to for-profit insurance companies (via Medicare Advantage.) 

Of course, this is mostly on the GOP side about President Obama being damned if he does anything to rein in deficits and make Medicare more efficient and damned if he doesn't. 

Exhibit B, which is truly stunning in the annals even of congressional hypocrisy - Matt Miller's column at the Washington Post:

The House Republican budget adds $6 trillion to the debt in the next decade yet the GOP is balking at raising the debt limit...

I thought about making this week’s column that one sentence printed over and over 30 times. It would have been the opinion page equivalent of a Dada-esque protest against the inanity of the debate — and a cry for every news outlet to focus on this simple, clarifying fact...

For the life of me I don’t understand why the press doesn’t shove this fact in front of every Republican who says the debt limit cannot be raised unless serious new spending cuts are put in place. The supposedly “courageous,” “visionary” Paul Ryan plan — which already contains everything Republicans can think of in terms of these spending cuts — would add more debt than we’ve ever seen over a 10-year period in American history. Yet Ryan and other House GOP leaders continue to make outrageous statements to the contrary. 

The classic definition of chutzpah was a kid who kills his parents and then asks for the mercy of the court because he’s an orphan. The new definition of chutzpah is Republicans who vote for the Ryan plan that adds trillions in debt and who then say the debt limit goes up only over their dead bodies!

If I were Barack Obama, my mantra on this week’s debt tour and in the months ahead would be that we should lift the debt limit only by as much debt as is needed to accommodate Paul Ryan’s budget. The president and his team should say this every time they’re asked about the debt limit until people can’t stand hearing it any more.

Matt Miller's piece via Economist's View and Stan Collender

Executive PayWatch

The AFL-CIO has a great new website where you can get data on Fortune 500 CEO pay and information on CEO "pay abuse" which should be addressed by shareholders:

Click HERE.

During the past decade, CEOs of the largest American companies received more in compensation than ever before in U.S. history. They supposedly deserved this money for increasing stock prices. Did they? On Dec. 31, 2010, the S&P 500 Index closed 19 percent below its high on March 24, 2000.

Over the past decade, shareholders—including workers—lost trillions of dollars in retirement savings through the collapse of the Internet stock bubble and the corporate accounting scandals at Enron and other companies. More recently, shareholders have suffered further declines from the bursting of the real estate bubble and the Wall Street financial crisis.

While CEO pay is still out of control on Wall Street and in the rest of Corporate America, shareholders now have new tools to fight back. CEOs must now give their shareholders a “say on pay,” thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act that President Obama signed in July 2010.           

Via Steven Greenhouse at New York Times' "Economix."

Ryan's private savings

Alan S. Blinder, economics professor at Princeton and a former vice-chair of the Federal Reserve, writes of the GOP budget czar's proposal in the Wall Street Journal:

The House Budget Committee's own rack-up of changes from the CBO baseline displays the much-ballyhooed $5.8 trillion in spending cuts over 10 years. But it also displays $4.2 trillion less in tax revenue. How many Americans know that 72% of Mr. Ryan's claimed budget cuts would go to fund tax cuts that overwhelmingly benefit the rich?

Another Ryanfest - but I'll post a picture of a funny baby rather than the GOP's congressional budget czar because I'm getting sick of his mug

I feel like I'm in a mode of constant repetition, but the fundamental flaws and dishonesty of the GOP's "deficit reduction" proposal need to be driven home, at the risk of boring even myself. Jeff Madrick, economics contributor to the New York Review of Books and senior fellow at The Roosevelt Institute, brings a bit of history to take the GOP's budget strategy apart:

"A fine mess..."

Among the economic fallacies embraced in Congressman Paul Ryan’s budget proposal, two are particularly egregious: that getting rid of Medicare will reduce health care costs and that enacting yet further tax cuts for the rich will spur growth and investment...

(T)he Ryan plan won’t reduce health care costs...the bipartisan Congressional Budget Office calculates that overall health care spending will go up as Medicare recipients are forced to buy private insurance, since private insurance has far higher administrative expenses than Medicare. Health care expenditures...are not being reduced on the backs of seniors, they are being raised on the backs of seniors.

And herein lies a further misunderstanding. It is true that the main cause of long-term budget deficits today is the expected rapid rise in expenditures for health insurance programs like Medicare and Medicaid (not Social Security, though they are all too often lumped together in the press). But the main reason those programs will become so costly is the rapid expected increase in health care costs in general, not the purported over-generosity of Medicare and Medicaid.

All effort should go into reforming health care. Americans pay far more per person in health care for outcomes that are typically not as good as in many nations that spend far less. In my view, effective health care reform will require much more serious government involvement—certainly not less—in improving efficiency and reducing costs.

As for the tax-cut mantra that it will automatically raise rates of growth, it is hard to believe that this theory has any credibility after the poor performance of the economy since the Bush tax cuts. Yet the Ryan plan would not only retain the Bush cuts for those who earn more than $250,000 a year; it would increase the cut for those who make more.

The conscience of a conservative

I do not much like David Frum, the former Bush speechwriter who penned one of the most idiotic and overwrought locutions I've heard a President deliver in a State of the Union address in my lifetime - "The Axis of Evil" - combining Saddam's Iraq, the Mullah's Iran (which had seen its conscripts subjected to chemical warfare at Saddam's hands in a nine-year conflict) and the isolated outlier of North Korea into some imagined alliance that defied even a wisp of rational analysis.

Frum became identified with the neoconservative movement at its worst. That is, until the GOP think tank, American Enterprise Institute, dismissed him soon after he began questioning aspects of the party line. (I have to say that today neo-conservatism seems like a fading echo within the spectrum of loud noise on the right.) But partly because I have long seen him as herald of a conservative mindset which in all honesty I despise, I also happen to find much of his current analysis of the ideological cul-de-sac of the Republican party's recent parade of political "stars" fascinating and telling.

"You'd have to be half mad to dream me up!"

In short, Frum - of all people - is freaked out by the descent into blindered unreality and unhinged  hsyterics of a Tea-Partyized GOP.  Here's a Frum commentary - reflecting on the aftermath of the 2008 financial meltdown and his own efforts at rethinking a "free market" outlook in it's wake - that captures some of the essence of just how disconnected from reality the current iteration of the GOP has become:

Especially after 2000, incomes did not much improve for middle-class Americans. The promise of macroeconomic stability proved a mirage: America and the world were hit in 2008 by the sharpest and widest financial crisis since the 1930s. Conservatives do not like to hear it, but the crisis originated in the malfunctioning of an under-regulated financial sector, not in government overspending or government over-generosity to less affluent homebuyers.

"In politics, the side with a fixed notion of ends and an unscrupulous approach to means always has the advantage"

George Packer brings clarity to the essential nature of today's GOP - their goals and their means - as "The Budget War" is being waged in Washington:

Rep. Ryan: "This is not a budget. It's a cause."

The Republicans now hold just one house of Congress, yet they have controlled the terms of the debate, because they understand that budget battles are about far more than numbers, and they’ve made the ideology behind their various bargaining positions startlingly clear: government should be reduced to gasping for air. What’s more, they’re willing to deploy legislative terrorism—threatening to shut down the government and to allow the United States to default on its debt—to get their way. In politics, the side with a fixed notion of ends and an unscrupulous approach to means always has the advantage.

No joy in Medicareville: more on the funny numbers and dishonest packaging of "Ryancare"

GOP Congressional Budget Czar Paul Ryan in the Wall Street Journal:

“Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy.”

Princeton economics professor Uwe Reinhardt begs to differ with Ryan's (false) claim that he's giving Grandma the same health insurance that he and John Boehner "enjoy:"

Mr. Ryan goes to Washington... to snatch Grandma's purse, enrich insurance companies and keep the cost of health care high.

Dean Baker of the Center for Economic and Policy Research comments on just how fundamentally irresponsible the GOP's "Ryancare" plan to kill medicare is, solely in terms of  dollars spent on coverage, according to the non-partisan Congressional Budget Office estimates:

The CBO projections show that under the Ryan plan, seniors would soon be spending more than half of their income to buy a Medicare equivalent plan. This is both due to the cost shifting from the government to individuals, but even more importantly CBO projects that Ryan's plan will lead to much higher health care expenses since it will be less effective in containing costs than the traditional Medicare program.

The CBO projections imply that Ryan's plan would add more than $30 trillion to the cost of providing Medicare equivalent policies over the program's 75-year planning period. The additional cost under the Ryan plan is an amount that is approximately equal to $100,000 for every person in the country or 6 times the size of the projected Social Security shortfall. This sum is the pure waste, it does not count the costs shifted from the government to seniors.

This breakdown of CBO findings is so stunning it's worth repeating: Obtaining private insurance policies that are equivalent to Medicare coverage over the duration of "Ryancare's" 75 year projection - would cost $30 trillion more than current Medicare. This is the sum of difference between profit-driven private insurance premiums and the cost of low-overhead Medicare with fee containment structured in.

Via Center for Economic and Policy Research.

New York Times Budget Puzzle - "You Fix The Budget!"

ACCESS PUZZLE HERE.

Assuming some haven't seen this, the Times "Budget Puzzle" is a fascinating (and fun) interactive federal fiscal "game" in which you can make your own choices as to how best to generate federal revenues and align them with federal spending.  The puzzle gives you a menu of choices on both sides of the balance sheet.  It's been online since last fall, but its worth revisiting in the context of current debates and definitely worth checking out if you've missed it.

Inflation is still low...(and "doing nothing" to reduce deficits)

According to Friday's Consumer Price Index, core inflation (which excludes food and energy prices because they are subject to sharp and often short-term spikes, driven by events external to the economy, that tend to obscure overall inflationary trends) rose slightly less than expected and remains low. (Via "NYTs Economix.)

This is important to underscore because anti-stimulative agendas that are fundamentally ideological or political often come cloaked in inflation alarmism.

Historical inflation comparison chart, including the past 12 months.  NYT's "Economix"

In the words of the New York Times' economics reporter, David Leonhardt, "The recent signs of economic weakness remain a much bigger risk than inflation."

The point is that economic policy must be about promoting jobs and growth rather than controlling a largely imagined threat of inflation - that is, if it's "serious."

Also of note, the NYTimes' Leonhardt had a column worth reading this past week that explains the "do nothing" approach to deficit reduction.  While it runs counter to "conventional wisdom" of the punditocracy, embracing the potential of "partisan gridlock" by simply "doing nothing" and letting the Bush tax cuts expire, as they will in 2013 within the framework of existing legislation, would solve 75% of the deficit problem over the next 5 years and 40% of deficits in the 20 year projections. This "do nothing" approach - especially given the extreme partisan obstructionism of the congressional GOP - should become the "baseline scenario" for any further discussion of deficit reduction, rather than the alarmism of far-right ideologues intent on using deficit fears as a club to kill Medicare and Social Security.

"Thought for the Day"

Credits: WW CHART — SOURCE: AUTHOR CALCULATIONS FROM IRS

From David Cay Johnston - "9 Things the Rich Don't Want You to Know About Taxes."

"People who actually understand budget numbers went to work..."

Nobel Prize-winning economist Paul Krugman notes in his NYT's column today (see below), "Last week, (House Budget Committee Chair, Paul) Ryan unveiled his budget proposal...Then people who actually understand budget numbers went to work, and it became clear that the proposal wasn’t serious at all."  One of those people was Emmy-award-winning budget analyst Jon Stewart:

The Daily Show
Tags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

The credibility of the President vs. the GOP's Budget Czar: "Who's Serious Now?"

 From Paul Krugman's NYTimes column:

Last week Mr. Ryan ( the chairman of the House Budget Committee) unveiled his budget proposal...

"You know what else might work?"

Then people who actually understand budget numbers went to work, and it became clear that the proposal wasn’t serious at all. In fact, it was a sick joke. The only real things in it were savage cuts in aid to the needy and the uninsured, huge tax cuts for corporations and the rich, and Medicare privatization. All the alleged cost savings were pure fantasy.

On Wednesday... the president called Mr. Ryan’s bluff: after offering a spirited (and reassuring) defense of social insurance, he declared, “There’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. And I don’t think there’s anything courageous about asking for sacrifice from those who can least afford it and don’t have any clout on Capitol Hill.” Actually, the Ryan plan calls for $2.9 trillion in tax cuts, but who’s counting?

And then Mr. Obama laid out a budget plan that really is serious.

The president’s proposal isn’t perfect, by a long shot. ... But the vision was right, and the numbers were far more credible than anything in the Ryan sales pitch...

More on the Brits' austerity strategy

 Landon Thomas in New York Times' "Global Business:"

In the United States, the debate over how to cut the long-term budget deficit is just getting under way.

But in Britain, one year into its own controversial austerity program to plug a gaping fiscal hole, the future is now. And for the moment, the early returns are less than promising.

"We do not have to sacrifice the America we believe in"

President Obama:

The America I know is generous and compassionate; a land of opportunity and optimism. We take responsibility for ourselves and each other; for the country we want and the future we share. We are the nation that built a railroad across a continent and brought light to communities shrouded in darkness. We sent a generation to college on the GI bill and saved millions of seniors from poverty with Social Security and Medicare. We have led the world in scientific research and technological breakthroughs that have transformed millions of lives.

This is who we are. This is the America I know. We don’t have to choose between a future of spiraling debt and one where we forfeit investments in our people and our country. To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I’m President, we won’t.

The New York Times editorial in response to the President's speech on fiscal policy is, in my view, one of the best appreciations of the stand President Obama took - as well as a realistic assessment of the  limitations and the political problem we face moving forward:

The President's Speech on long-term budget strategy

Visit msnbc.com for breaking news, world news, and news about the economy

I'll have commentary on this tomorrow.

Update: For starters, check out Paul Krugman's reaction. Since Krugman tends to play Cassandra when it comes to President Obama's economic agenda and messaging, his relative optimism is heartening - HERE.

Economic growth estimates for the first quarter are down - "And the year started out so very hopeful"

Noting the "great expectations" for faster economic growth this year, Catherine Rampell at the New York Times' "Economix" has this disturbing report:

When 2011 began, Macroeconomic Advisers, a forecasting company, expected that America’s economic output would shape up to rise at a 4.1 percent annual rate in the first quarter, the highest pace in over a year.

But economic reports coming in over the last few months have been increasingly disappointing.

Today, after an especially weak report on February’s trade deficit, the group’s economists lowered their first quarter G.D.P. estimate to a sorry 1.5 percent annualized. If borne out, that rate would be slower than each of the last two quarters, at a time when the economy desperately needs to be rocketing forward so that companies will hasten their hiring.

The Commerce Department will release its preliminary number for first quarter G.D.P. on April 28.

Update: MarketWatch (via CalculatedRisk) reports that forecasters at Morgan Stanley and RBS Securities have also lowered their G.D.P. estimates for the first quarter.

This bad news comes as little other than the scale of proposed spending cuts is being debated as our "serious" path to getting the economy back on track - as a "path to prosperity" even.  One of the NYT's online commenters, Chris Guan, in responding to this "Economix" news, offered strong evidence that allowing our economic agenda to shift radically toward austerity or focusing on the scale of cuts rather than growth, jobs and effective stimulus  - with Democrats appearing to tail after Republicans who are framing the debate - is precisely the wrong direction to move if we're serious about recovery.

Aggressive austerity and spending cuts have been imposed by David Cameron's government in the UK and appear to be dragging the country even further down into recession. According to an article in Bloomberg that Guan links,  "UK retail sales plunged most on record in March."

In the real world the Conservative government's austerity program is making matters worse not better, as one might expect if you're not reliant on "faith-based" economic notions that somehow consumer confidence and greater demand will arise magically in the midst of a program of cutbacks by the government overlaying depressed demand by households:

"Ryan's plan...a fairy tale utterly disconnected from the real world"

Economist and former consultant to Presidents Ronald Reagan and G.H.W. Bush, Bruce Bartlett - who I quote frequently and consider an authentic conservative, as opposed to the right-wing radicalism dominating the GOP - has issued a blistering critique of Paul Ryan, published in both The Fiscal Times and Capital Gains and Games blog:

House Budget Committee Chairman Paul Ryan’s budget plan has been the talk of Washington this week. Most of the discussion has revolved around his proposal to privatize Medicare and slash many federal programs to the bone. Less attention has been paid to the tax side of Ryan’s plan, which is every much as radical as the spending side.

One would think that a comprehensive budget proposal designed primarily for the purpose of reducing budget deficits and the national debt would put at least some of the burden on the revenue side of the equation. First, it would reduce the need to cut spending so heavily and improve the chances of passage; unless Ryan is only interested in scoring points with the Tea Party crowd...

Three views on the budget deal and moving forward...

What was that definition of insanity?

All 3 POVs are up at Huffington Post and worth reading:  Robert Reich - "Why the Right-Wing Bullies Will Hold the Nation Hostage Again and Again," Robert Creamer - "Why Last Week's Deal Reduces Republican Leverage in the Budget Battle" and  R.J. Eskow - "Why Progressives Keep On Losing and the Right Keeps On Winning."

I hope Creamer is correct, but I'm concerned that the points made by Reich and Eskow appear to be realistic rather than alarmist.

A Common Sense Guide to the Great Deficit Debate - Part 7

The folks at Winning Progressive have the final installment of "Common Sense" Guide to the Great Deficit Debate - focusing on the need for us to take action - up today at the WP site, HERE.

Again, thanks to Winning Progressive for publishing this "deficit primer" over the last couple of weeks.  And thanks again for their ongoing insights and commentary.

You know you're in trouble when "MSM" reporters are better at articulating a coherent liberal agenda than high-profile Democrats

This morning on ABC's "This Week," with David Plouffe interviewed by Amanpour and DNC stalwart Donna Brazile at the Roundtable  - both suggesting some sort of "win" by Democrats in averting some of the more outlandish of the GOP's proposals while agreeing to larger spending cuts than those originally outlined by Speaker Boehner  - it was up to two journalists to make the central point about a an appropriate and coherent Democratic strategy in negotiating the budget deal that was just agreed to and what it means for a liberal agenda moving forward.

Chrystia Freeland of Reuters:*

I think the Planned Parenthood stuff was a gift to the Democrats and that was so easy for them to push on that. Thank goodness from the Democrats point of view that those riders came up because it allowed the Democrats to argue that actually the Republicans don't care about the economy but pushing their social agenda.  

What I think is missing...is Democrats actually arguing that the recovery is incredibly fragile, unemployment is high and it's not about .. if you make cuts in the right way, that's okay.  There is an argument to be made - and I think if anyone makes it, it should be the Democrats - that  says "Don't make cuts right now.  Yes, the budget is a problem but it's a medium term problem...Right now is a time when actually we should still be talking about government spending."

Ron Brownstein of National Journal:

They concede an important predicate for this debate. They have not drawn the line and said this is not the time to be retrenching, so when we begin this bigger debate - I mean this is the foothills of the Himalayan debate that's coming over the overall budget and the Paul Ryan plan. 

It's going to be harder for them to come back and say, Look we shouldn't be withdrawing federal spending when the economy's so weak, because they clearly didn't make that argument here.

Freeland:

And there's a strong argument to be made because they could say, so far it's working - and just look across the ocean, look across the Atlantic, the Brits have imposed budgetary austerity and their economy is shrinking even faster than they thought.   

This argument is crystal clear, with good evidence based on real-world experience of the European austerity agenda in the midst of continuing high unemployment and lagging economic growth.  Why it was up to two conventional journalists to have to make it, rather than the representatives of the Democratic agenda, is a question we have to ask ourselves going forward.  Something is very wrong with the picture.


*My transcript from This Week's video.

Happy days are here again...

The Drought is Over (at Least for CEOs) -

Rarely has the view from the corner office seemed so at odds with the view from the street corner. At a time when millions of Americans are trying to hang on to homes and millions more are trying to hang on to jobs, the chief executives of major corporations like 3M, General Electric and Cisco Systems are making as much today as they were before the recession hit. Indeed, some are making even more. 

The disparity is especially stark as companies are swimming in cash. In the fourth quarter, profits at American businesses were up an astounding 29.2 percent, the fastest growth in more than 60 years. Collectively, American corporations logged profits at an annual rate of $1.678 trillion.

So far, this recovery has not trickled down. After two relatively lean years, C.E.O.’s in finance, technology, energy and beyond are pulling down multimillion-dollar paychecks. What many of these executives aren’t doing, however, is hiring. Unemployment, although down from its peak, stood at 8.8 percent in March. And few economists predict the jobless rate will drop substantially anytime soon.

From Daniel Costello in New York Times' Business Day

View from Salt Lake City: "Ryan’s plan is anchored in an open contempt for anyone who isn’t wealthy"

 The Salt Lake Tribune takes on the "serious" Mr. Ryan:

The so-called federal deficit reduction plan announced recently by the Republican chairman of the House Budget Committee is represented as a blueprint that makes the hard choices necessary to steer the United States away from fiscal disaster. But learned analysis exposes Rep. Paul Ryan’s prescription as a plan that differs little from President Obama’s vision in terms of total deficits, but apportions the pain in very different ways.

Ryan’s “Path to Prosperity” runs through various fantasy lands, envisioning that large tax cuts, mostly for the rich, and huge spending cuts, mostly in programs that benefit the poor and middle class, will lead to unprecedented booms in hiring, homebuilding and other economic activities.

Ryan’s plan is mostly a means to shelter those who have already benefited from a half-century of fiscal irrationality and dump the burden on those who are to come later.

Quote of the Day

Conservative author and economist Bruce Bartlett*:

The truth is that Republicans don’t care anything about the deficit. They made that abundantly clear when they controlled Congress during the dismal George W. Bush years. What all of the current budget discussion is about is defunding programs that benefit Democratic constituencies and if possible destroying institutions, such as labor unions, that historically support the Democratic Party. In other words, it’s all about political power; any concern for the deficit is purely for show, window dressing to disguise the true Republican agenda.

* Bartlett has served on the staffs of Congressmen Ron Paul and Jack Kemp and Senator Roger Jepsen; as staff director of the Joint Economic Committee of Congress; senior policy analyst in the Reagan White House; and deputy assistant secretary for economic policy at the Treasury Department during the George H.W. Bush administration.

Shutdown averted - but the GOP hostage-takers are still firmly in control of our "debate!"

I'm glad that a potentially disastrous, hurtful government shutdown was averted, but it was averted largely on terms the GOP set out early on - with Democrats agreeing to larger spending cuts than Boehner had initially proposed (before his "Tea Party" wing weighed in with their extremist agenda.) Paul Krugman, I think, makes a valid point for Democrats and the White House to consider on the deal's implications and aftermath:

The GOP "negotiates"

(I)t’s one thing for Obama to decide that it was better to give in to Republican hostage-taking than draw a line in the sand; it’s another for him to celebrate the result. Yet that’s just what he did. More than that, he has now completely accepted the Republican frame that spending cuts right now are what America needs.

It’s worth noting that this follows just a few months after another big concession, in which he gave in to Republican demands for tax cuts. The net effect of these two sets of concessions is, of course, a substantial increase in the deficit.

There has to be a better way to get this fundamental message across to the public - that the GOP, consumed for over thirty years with an ideology of tax cuts as the solution to every problem, is NOT even serious about the deficits they brandish like a club, so much as attacking government's role in helping seniors, the disadvantaged and increasingly a struggling middle-class which has seen their wages stagnant, their homes devalued and their jobs at risk.

Update: Steve Benen has a bit more "nuanced" view than Krugman's, HERE.
More:  The Winners? - "Tea Party Activists Give Boehner a Nod of Approval" - Wall Street Journal, HERE.

What can the Affordable Care Act do to contain out-of-control health care costs?

US vs. France-Switzerland-Germany-Belgium-Canada...

Ezra Klein, the Washington Post blogger who wrote extensively and cogently on the health insurance reform debate, had some excellent analysis yesterday at his "Wonkbook" of precisely how the Affordable Care Act to overhaul and extend health insurance can work to begin bringing down our country's exorbitant health care costs.

(You can see by the chart above right that this is a uniquely "American" problem, due primarily to  the system's reliance on profit-driven insurance/health care industries, in comparison to other countries with universal coverage and excellent health outcomes, but better-regulated insurance and delivery systems.)

Klein was looking at ACA in contrast to the Paul Ryan/GOP budget plan - which intends to strip seniors of Medicare in favor of a voucherized private insurance scheme - but his outline is useful as a general overview of just what direction the new health care reform will take in beginning to control costs.

Rapid rise in health care $$$ are the big "fiscal" issue.

Anyone who is truly serious about the future of budget deficits and rational allocation of our GDP understands that the only truly difficult "crisis" looming over the nation's finances is in health care costs - whether they come out of the public or private "pocket" - not the more general fiscal issues that are subject more to demagogy than serious discussion.

Here are the essentials on how ACA can help, from Klein:

The Affordable Care Act’s central hope is that Medicare can lead the health-care system to pay for value, cut down on over-treatment, and cut out treatments that simply don’t work. The law develops Accountable Care Organizations, in which Medicare pays one provider to coordinate all of your care successfully, rather than paying many doctors and providers to add to your care no matter the cost or outcome, as is the current practice. It also begins experimenting with bundled payments, in which Medicare pays one lump-sum for all care related to the successful treatment of a condition rather than paying for every piece of care separately. To help these reforms succeed, and to help all doctors make more cost-effective treatment decisions, the law accelerates research on which drugs and treatments are most effective, and creates and funds the Patient-Centered Outcomes Research Institute to disseminate the data.

The Federal Reserve - Some background and perspective

In their "Breakdown" podcast, American Prospect blogger Matt Yglesias and The Nation's Washington DC editor Chris Hayes explain much of what you need to know about the Federal Reserve, the most obscure and murky enormously powerful institution in the country - and one which isn't easy to understand in terms of its central role in the economy.  Listen HERE.

Current & former Fed Chairs, Bernanke & Greenspan

"I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant" - former Fed Chairman Alan Greenspan.

After listening to the Yglesias/Hayes podcast, if you want to dig deeper, follow up with Yglesias' useful article HERE in "Democracy" on why progressives should pay more attention to the Fed.

"Money quote" as to why we should care?

Government shutdown looms...Boehner & Company's strategy of "trickle-down" sacrifice

Now is the time for your tears...

In the likely event of a "shutdown of the government," John  Boehner, Paul Ryan, Eric Cantor, et. al. - who have refused to compromise even with their own opening offer of $33 billion in spending cuts to avert a crisis - will continue to get their paychecks.

While the troops in Iraq and Afghanistan may not.

Senate Democrats have passed a bill to impose  "shared sacrifice," denying Congress and the President pay if there is a shutdown,  but so far the GOP-majority House are deferring to their preferred notion of "trickle-down sacrifice" and will keep their own money coming.

(Troops link via commenter "Seth" at Ta-Nehisi Coates/Atlantic.)

"Starve the Beast" made taxpayers poorer (and killed conservatism in the bargain)

Self-proclaimed fiscal conservative and blogger extraordinaire, Andrew Sullivan, has been praising Paul Ryan and the budget proposal he's hatched for the GOP - and he's been taking a lot of well-deserved flak for embracing an agenda that Paul Krugman has correctly identified as "ludicrous and cruel" (HERE in an excellent fact-based column.)

E.D. Kain, writing at Forbes quotes one of Sullivan's readers in response:

[Ryan’s budget] is the culmination of about a thirty year Republican strategy called "starve the beast," by which Republicans have worked to reduce taxes and increase the national deficit as large as possible -  all to create the supposed "deficit crisis" that we now face and to use that crisis to eliminate programs like Medicare, Medicaid, Social Security and a slew of other programs (EPA, SEC, Planned Parenthood, collective bargaining, etc.) that the Republican class has never been able to eliminate through the democratic process.  This "starve the beast" Republican strategy has been openly acknowledged for years and I know you are well aware of it.  And the Ryan "budget plan" is transparently an attempt to cash in on this long-standing political agenda.

Interestingly, also at Forbes, last year the conservative commentator Conor Friedersdorf clearly offered an analysis that should be obvious to anyone like Sullivan who touts "fiscal conservatism" as a guiding principle. In short, "Starve the Beast" proponents - the kind of reckless "conservatives" like Paul Ryan, who voted for the Bush tax cuts and wants  even bigger breaks for high earners - are themselves responsible for the growth in debt and the ensuing obligations on average taxpayers to sustain fiscal balance over the long run, a prospect which no sane person believes can be done without increases in progressive taxation. Fiedersdorf "headlined" his piece forthrightly - "How 'Starve the Beast' Made the Taxpayer Poorer."

Phony inflation hysterics...and ice-skating in Hell today

Yes, apparently it's frozen over Down Under, as I'm agreeing with The National Review.

Senior Editor Ramesh Ponnuru has written something sensible on the false inflation fears that are being paraded in many circles as opposition to the "quantitative easing" policy of the Fed to get more money moving in a lagging economy:

Talking back to the Banksters - Keep the Cap on Debit Card Fees!

Spot from American Family Voices

Simon Johnson has the story in today's NYT on grassroots efforts to push back against the Banksters' lobbying operation to water down Dodd-Frank financial reform:

As a lobbying group, the largest American banks have been dominant throughout the latest boom-bust-bailout cycle – capturing the hearts and minds of the Bush and Obama administrations, as well as the support of most elected representatives on Capitol Hill.

Their reign, however, is being seriously challenged – finally – by an alliance of retailers, big and small, on whose behalf a variety of ads are now running, including on television (such as this one, by Americans for Job Security), the Web (such as the one above, by American Family Voices) and a powerful radio spot directly attacking the too-big–to-fail banks.

The Common Sense Guide to the Great Deficit Debate - Part 6

The 6th segment of our "Common Sense" deficit primer is up today at Winning Progressive, HERE. This part focuses on solutions moving forward.  Thanks to the folks at Winning Progressive for their great work and for helping to make the "primer" more accessible and available.

One more Paul Ryan post...

Government is evil - selfishness is the only virtue.

"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," Ryan said at a D.C. gathering five years ago honoring the author of Atlas Shrugged and The Fountainhead.

Quote via Digby.

The Congressional Budget Office rains cold water on poor, screwy Paul Ryan

"But if you turn it this way..."

Wisconsin Representative and GOP Budget Czar Paul Ryan is becoming something of an obsession here at  "Titanic."  But his plan to privatize Medicare and shrink the government is getting serious kudos in the press.  David Brooks, in a NY Times column, has attempted to sanctify Ryan's scheme as the "adult in the room" - an earnest voice that "serious" people ignore at their peril.  (In better than average form,  he's about half right.  Attention must be paid to the GOP's extremist foray into social nihilism.)

Brooks writes: 

The Ryan budget will not be enacted this year, but it will immediately reframe the domestic policy debate.

His proposal will set the standard of seriousness for anybody who wants to play in this discussion. It will become the 2012 Republican platform, no matter who is the nominee. Any candidate hoping to win that nomination will have to be able to talk about government programs with this degree of specificity, so it will improve the G.O.P. primary race...

Paul Ryan has grasped reality with both hands. He’s forcing everybody else to do the same.

This assessment - described by one wag as a "wet kiss" - is typical of the "serious" face being painted in the media and throughout the Beltway on the hustle that the zealous Congressman has hatched and that the GOP has chosen as it's fiscal cris de coeur.  And as further testament to Ryan's seriousness, serious Sarah Palin has Tweeted in with, "Serious and necessary leadership has rolled out serious and necessary reform proposal." It doesn't get more serious than that!

But sooner or later reality intrudes on most of these purely ideological enterprises and in Ryan's case it's come sooner - in the form of the staid, non-partisan Congressional Budget Office beginning to crunch his numbers. Here's the scoop from TPM Muckraker:

Ringing endorsement of Ryan's Roadmap

Andrew Sullivan, who has moved his blog over to The Daily Beast, is one of those pundits who has been offering praise of the unhinged Congressman from Wisconsin, Paul Ryan and his fiscal Roadmap - now the official GOP scheme and apparently designed as a guide for anyone interested in driving America off the cliff.  But in one telling line, Sullivan offers a great example of the old cliche about "having friends like these, you don't need enemies":

What I admire is Ryan's willingness to cop to the suffering and sacrifice that the Bush years made inevitable in its fiscal irresponsibility.

GOP Pols: "A government shutdown for thee - but not for me!"

 "Shared sacrifice!"

Rep. Paul Ryan*, our current poster boy for GOP wing-nuttery, whoppers and wackiness, is on record as stating that the looming government shutdown by Congresss "sounds worse than it probably is." But...uh...Congressman, for starters  government workers will go without paychecks and that's tough for them and their families.  Right?

Well, that's sort of true. Despite the shutdown, which cuts off funds to most federal operations, at least one group of government workers will still be getting paid.  Guess who?  The answer is HERE.  (Hint: Paul Ryan is one of them.)

* Note: Today is our fun-filled "Ryanathon," so there'll be no commentary here that doesn't include his name.  I promise to come up with something tomorrow morning that doesn't necessitate another picture of the congressman's vacant stare.

Where's the "fierce urgency of now?"

"Yes, we can!"

As President Obama begins his Campaign 2012 for re-election against a GOP field that ranges from the terminally disingenuous to the dangerously demagogic, we have a "must-read" commentary from Ezra Klein (the WaPo's Wonkbook), reflecting on some undeniable weaknesses of the administration's approach to dealing with its opposition - most notably a failure to take a compelling counter-argument directly and dramatically to the American people:

I don’t blame Obama for being unable to change Washington. I don’t blame him for being unable to pass cap-and-trade. But I blame him for ceasing to try. And for sometimes letting what can be done distract from what needs to be done...

Back when Obama won the South Carolina primary, he warned of a “status quo that extends beyond any particular party and right now that status quo is fighting back with everything it’s got.” If anything, he was understating his case. But he was right to try to inspire voters to cast away their skepticism, to say that “where we are met with cynicism and doubt and fear and those who tell us that we can’t, we will respond with that timeless creed that sums up the spirit of the American people in three simple words — yes, we can.”

Lately, the administration’s creed can be summed up more modestly: “Hopefully, the Senate won’t let them.”

The contrast with the 2008 campaign — which correctly saw some virtue in ambition, even if what it promised was unrealistic — is stark.

Read Klein's entire piece, "What happened to the 'fierce urgency of now?'", HERE.

GOP budget czar Paul Ryan proposes killing Medicare - and replacing it with "Obamacare" for seniors

Forbes' columnist & health care consultant Rick Ungar has the story:

Ryan, 3/23/10: "Obamacare is a fiscal Frankenstein, it’s a train wreck."

Despite the Republican propensity to compare the Affordable Care Act to something akin to the antichrist, word is that GOP budget leader, Rep. Paul Ryan (R-WI), will propose a dramatic change in the Medicare program that will closely mirror the key features of Obamacare – only for seniors.

The proposal would do away with (for everyone presently under 55 years of age) the current single payer government system for senior medical care and replace it with a program whereby seniors would choose private health insurance coverage from a menu of approved private health insurers. The government would subsidize the program by giving seniors a voucher to be used in purchasing coverage, the amount of such payment to be defined according to need.

The columnist then asks, "Does this sound familiar?"  Well, yes.  It's a government subsidized exchange system following the model of what the GOP derisively dubbed "Obamacare" - the Affordable Care Act of 2010 that reformed our health insurance system for those under 65. But there's a poison pill in this "Ryancare" bill. A Congressional Budget Office study last November determined that seniors would likely either face higher premiums or less extensive coverage under Ryan's scheme to kill Medicare. 

Forbes' Ungar explains:

Unfortunately, while Ryan has emulated a number of features from the ACA, he’s forgotten to make the adjustments the law makes to actually ensure that health care is more accessible to beneficiaries rather than more profitable to health insurance companies.

Making private insurance work for the younger demographics is far easier than trying to make it work for the elderly due to the most basic tenant of health insurance – the insurance pool must be balanced by having 80 healthy people in the pool to pay for every 20 who are ill.

Given that most Americans 65 and older are a walking pre-existing medical condition, it is difficult to imagine how functioning insurance pools can be constructed from a universe filed with these people.

Shutdown! - the "Tea Party GOP" plays a dangerous game in a fragile economy

The Financial Times' Clive Crook weighs in on the GOP holding the country and the economy hostage to their destructive agenda:

Rep. Paul Ryan: "It sounds worse than it probably is."

Republicans in Congress are playing an outrageous game of brinkmanship over the budget for the current fiscal year.

Some Tea Party supporters happily contemplate a shutdown of government at the end of this week....

(W)ith the US labour market at a turning point, whatever Congress can do to undermine confidence and add to uncertainty, it is doing. Just as the private sector shows signs of reviving, Capitol Hill is threatening to drag it back down.