Is the GOP completely crazy?

 Or just crazy like a Fox?

Ezra Klein:

GOP's Roger "Fox" Ailes

There are two ways to read the current stalemate in the debt-ceiling negotiations. There’s David Brooks’s take, which is that watching Republicans pass up “the deal of the century” should leave conservatives convinced there’s something wrong with the GOP.

But you can also read it the opposite way: Democrats control the White House and the Senate, Obama is the most popular national political figure, a balanced approach to deficit reduction outpolls plans made entirely of spending cuts, and yet Democrats are still offering recalcitrant Republicans the deal of the century rather than taking to the ramparts. What’s wrong with them?

(Look at previous) deficit-reduction deals passed by Presidents Ronald Reagan, George H.W. Bush and Bill Clinton.

As you can see on the graph, in each case, taxes were at least a third of the total, and in Reagan’s case, his massive tax cuts were followed by deficit-reduction deals that actually relied on tax increases. Today, tea party conservatives would be begging Sen. Jim DeMint to primary the Gipper.

Enough to make you cry?

Speaker Boehner emotes

"When Congressional Republicans claim that the reason for their recalcitrance in budget negotiations is concern for the welfare of ordinary Americans, look more closely. Do we really want to close down the American government and risk another global financial crisis to protect the tax bills of billionaires"

Nick Kristoff explains - HERE - the "carried interest loophole" that the GOP is adamantly protecting with it's "No Taxes" tantrum, as they hold the country hostage over the deficit and debt ceiling. "Carried interest" allows billionaires - and by billionaires I mean guys who make billion$ ANNUALLY - to pay taxes on their income at less than half the established upper marginal rate.  Check out Kristoff's entire column.

Recovery for corporations - the hallowed "supply side" is doing just fine

Even the Wall Street Journal reported the "supply side economics free lunch" of tax cuts as a means of increasing government revenues effectively dead back in 2003.  After George W. Bush cut taxes, the conservative-leaning Congressional Budget Director, Douglas Holtz-Eakin, couldn't come up with figures showing tax revenues increasing in the wake of the tax cuts.  If the goal - as initially stated - was to fight the projected surplus in government solvency, it worked brilliantly.

That argument is over - at least among normal folks who aren't on ideological crack. But the persistent argument remains that cutting taxes for corporations generates essential capital that will be directed to creating new jobs - that increasing corporate profitability inevitably leads to a robust, growing economy and employment for just about anyone willing to work.

There certainly may be particular, targeted scenarios - such as cuts in employer payroll taxes or credits tied to new employment  - where the desired effect of job-creation can be enhanced by tax breaks, but overall evidence for a rebound of corporate profitability as the magic bullet that will get us out of a deep jobs slump appears slim to non-existent.

Andrew Leonard at Salon has the facts and figures:

When "conservatives" were actually...uh...conservative

In the wake of the near-insane radicalism of contemporary "conservatism" it's useful to look back at the governing policies of Margaret Thatcher,  an authentic conservative.

She's no hero of mine, but neither was Margaret Thatcher a far-right radical along the lines of so many who invoke as icons the lady and her good buddy Ronald Reagan (who, himself, despite starting out with large tax cuts that began the trend toward large deficits, rolled back about half of his initial tax reductions, with as many as 11 tax increases over the course of his Presidency, when reality started to collide with rhetoric.)

Bruce Bartlett - our favorite conservative commentator based on his connection to reality over ideology and wishful thinking - offers this view:  

While Mrs. Thatcher is a towering figure in British political history, well deserving of admiration, the conservative legend about her time in power is at odds with the facts. In this legend, she was even more aggressive than Reagan in cutting taxes and the welfare state. But that is not true...

Paul Krugman's latest over-the-top, shrill, vituperative, anti-GOP column in the New York Times...

(T)he Republican Party may no longer be a normal party...it has been infected by a faction that is more of a psychological protest than a practical, governing alternative. The members of this movement do not accept the logic of compromise...

The members of this movement do not accept the legitimacy of scholars and intellectual authorities...

The members of this movement have no sense of moral decency...

The members of this movement have no economic theory worthy of the name....

The struggles of the next few weeks are about...an odd protest movement that has separated itself from normal governance, the normal rules of evidence and the ancient habits of our nation.

Oh wait a minute.  That's not Prof. Krugman - it's that other Times columnist David Brooks, musing on the incoherence of GOP Mad Hatters, fearful of chickens that have come home to roost on his carefully trimmed front lawn, smelling the noxious stuff that has hit his "conservative" fan, chafing at the inmates taking over his asylum and obviously angered at long-ago losing any shot at gaining the driver's seat in the GOP Clown Car.

"A lie gets halfway around the world before the truth has a chance to get its pants on." - Winston Churchill

Apparently via George Will's cherry-picking a new book on the finanical crisis, the "Fannie Mae and Freddie Mac (and Community Reinvestment Act and Democrats) caused the financial crisis" fairy tale is finding new currency.  Pushing this phony narrative is of utmost importance for the right because it puts government rather than Wall Street at the center of the ugly story that's caused the country so much pain.

We went through this fraudulent "history" at the rarified levels of polite parlor conservatism already with David Brooks parroting the nonsense that generally emanates from crazy old Know-Nothings with tea bags taped to funny hats.

Now it's George Will, whose words will be echoed "halfway around the world" in certain ideological and intellectually vulnerable circles before they are countered. Certainly Will's pronouncements have more cachet than a guy holding a hand-lettered sign at a Michele Bachmann rally or  the ravings of one of the usual suspects on FOX News. Will's voluminous commentaries are larded with the Ivy League erudition of 19th Century historical references and lots of Winston Churchill quotes.

Will once wrote "A politician's words reveal less about what he thinks about his subject than what he thinks about his audience." Apparently - given Will's willfull misrepresentations, aka Big Lies, regarding Fannie, Freddie and the CRA - this applies to pundits as well. George Will thinks his readers are as ignorant and eager to swallow fabrications based on his long-standing ideological resentments as the Tea Partiers he echoes. 

We'll let Dean Baker at Council for Economic and Policy Research do the necessary debunking:

It really is incredible to see such a concerted effort to rewrite history in front of our faces. There is not much ambiguity in the story of the housing bubble. The private financial sector went nuts. They made a fortune issuing bad and often fraudulent loans which they could quickly resell in the secondary market. The big actors in the junk market were the private issuers like Goldman Sachs, Citigroup, and Lehman Brothers. However, George Will and Co. are determined to blame this disaster on government "compassion" for low-income families.

This land...

Crisis at the state level

The Center on Budget and Policy Priorities:

States have enacted deep cuts in education, health care, and other important public services in their budgets for fiscal year 2012 (which begins July 1 in most states).

It is the fourth year in a row of budget-cutting for states, and the 2012 cuts are deeper than in past years. Of the 32 states that have enacted budgets, as least 24 are imposing significant cuts. These cuts will delay the nation’s economic recovery and undermine efforts to create jobs...

Excellent advice from strange places

Via Krugman's "Conscience of a Liberal":

Barton Biggs, re-born in Keynesia

Speaking exclusively with The Wall Street Journal, Barton Biggs, managing partner at multibillion dollar hedge fund Traxis Partners, painted a bleak outlook for the developed world with only huge government intervention likely to improve things...

Mr. Biggs, former chief global strategist for U.S. investment banking powerhouse Morgan Stanley, demanded the U.S. government temporarily return to ideas used in the Great Depression as a way to get the country back to higher growth.

“What the U.S. really needs is a massive infrastructure program … similar to the WPA back in the 1930s,” he says.

The plan would be to employ some of the many unemployed people, jump start the economy, as well as help catch up with Asia, which is building state-of-the-art infrastructure from new mechanized port facilities to high-speed trains.

He suggested financing such building through the sale of U.S. Treasuries.

Just for the heck of it, I checked Wikipedia on Barton Biggs and found he was chief global strategist for Morgan Stanley for 30 years before partnering at Traxis.  Institutional Investor rated him the "top global investor" from 1996 to 2000 and he's been "the premier prognisticator on the global scene" according to Smart Money mag.

So Biggs is a formidable, greatly respected character in the upper echelons of global finance.  And he's currently pushing hard-core "New Deal" style Keynesianism in response to the economic crisis that puts him approximately in Bernie Sanders' territory.

Welcome aboard, Mr. Biggs.  Now, not to be rude, but what about those bizarre super-low tax rates on your mega-compensation as a hedge fund manager?

Giving Larry Summers his due...

American Public Media's Marketplace correspondent Jeremy Hobson had an interesting interview with the much-maligned Summers that helps put some perspective on his role and views within the Obama administration and suggests he's on the side of the need for more stimulus:

HOBSON: You recently called for a new stimulus in the form of a payroll tax cut. But it's been reported over and over again that within the Obama administration -- when you were in the administration -- you were actually on the side of a smaller stimulus back in 2009.  

SUMMERS: Not accurately. Not accurately.

HOBSON: That's not true? You weren't pushing for a less-than $1.2 trillion stimulus?

SUMMERS: No, I mean it's a much more complicated story, but those reports are not accurate. It was my judgment as an economist that there was no danger of doing too much stimulus and one should achieve as much stimulus as possible. There were a set of political calculations having to do with what the Congress could accept that were mostly determined by the president's political advisers and ultimately by the president which pointed towards the size of the program that was ultimately passed. But the economic advice that I gave was that the stimulus program should be as large as it could be.

HOBSON: Do you think it was too small in the end?

The crisis is jobs, not deficits

Yes, we have a serious need to reduce spending over the long-term - with rising health care costs in both private and public markets the key area that appears out-of-control.

But at this point in a weak, essentially "jobless" recovery, the focus on deficit reduction is a fool's errand.  This entire deficit debate has been generated, cynically, by a GOP that has put their fetish for fiscally profligate tax cuts over balancing budgets.

Underlying the GOP's apparent cognitive dissonance on fiscal matters is a long-term strategy to use a deficit crisis to destroy essential government social programs.  In the nearer term, their aim is to weaken the President even if it means economic ruin.

Clinton administration economic advisor Laura Tyson brings some sensible thought about serious priorities into the heated atmosphere of deficit hysterics and debt-ceiling roulette - smokescreens obscuring our very real problems that, frankly, too many Democrats have bought into:

Long term, the United States faces a fiscal challenge that must be tackled –- but it is not an immediate fiscal emergency. In the labor market, though, there is an immediate crisis, the worst since the Great Depression...

The Jobless and Wageless "Recovery"

Steven Greenhouse at NYT's Economix has disturbing - but not really surprising - news on the unequal benefits at the center of a historically weak economic recovery. 

Regular folks aren't making signficant gains, while the corporate and economic elites are doing just fine and taking the lion's share of increases in national income. The arc of inequality that's predominated over the last thirty years continues, in extremis:

Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.

In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth.

"Obama and the Democrats are fighting to get what the Republicans and the right-wing economic think tanks originally proposed they should do, and the GOP just keeps walking the goalposts to the right"

 We are truly screwed.

The Democrats are seeking to impose the conservative approach to deficit reduction, while the GOP has chosen to simply take the terrorist route and threaten to blow up the economy unless anti-tax zealot Grover Norquist - to whom the Republicans have literally pledged allegiance as maximal leader in their anti-tax cult - gains victory in his "drown the US government in a bathtub" jihad.

It appears that no one - save perhaps Bernie Sanders - is pushing for a balanced fiscal approach that actually makes economic sense in the context of deep recession and a jobs crisis. 

Mike Konczak at "Rortybomb" has this depressing insight into the depths - and rather pathetic ironies -  of the present impasse:

Republicans Reject the Republican Offer on Deficit Cutting Mix, or Democrats Propose the (Rightwing) AEI Plan on Tax Increases vs Spending Cuts

"When taxpayers hear a bank chief complaining, it’s worth keeping in mind that his 10-figure paycheck is largely coming courtesy of us"

 Jesse Eisinger, of ProPublica, writing in the NYT's "Dealbook":

The most pronounced development in banking today is that executives have become bolder as their business has gotten worse.

The economy is clearly weaker than expected, and housing prices are falling throughout the land, eroding bank asset values. Yet regulators are on their heels in Washington as bankers and their lobbyists push back against the postcrisis regulations, even publicly condemning the new rules.

In a well-covered exchange, Jamie Dimon, JPMorgan Chase’s chief executive, challenged Ben S. Bernanke, the Federal Reserve chairman, about the costs and benefits of the Dodd-Frank rules. More attention has been paid to the banker’s audacity, but the response of the world’s most powerful banking regulator was more troubling. Mr. Bernanke scraped and bowed in apology without mentioning the staggering costs of the crisis the banks led us into.

So this is a good occasion to step way back to understand just how good the banks have it today.

The federal government, in ways explicit and implicit, profoundly subsidizes and shelters the banking industry. True since the 1930s, it is much more so today. And that makes Mr. Dimon no capitalist colossus astride the Isle of Manhattan, but one of the great welfare queens in America.

"Could Obama just ignore the debt ceiling?"

Catherine Rampell at NYT's Economix:

In the ongoing debate over raising the debt ceiling, one option has not had much prominence: whether the Obama administration could ignore it altogether, and just spend the money it owes anyway. Would that be legal?

Matthew Zeitlin at The New Republic spoke with a few political scientists, budget wonks and constitutional scholars who argue that it would be.  An excerpt:

"Health Care Law Ruled Constitutional (Again)"

Jun 29, 2011 | By ThinkProgress War Room

Decision Day: Federal Appeals Court Upholds the Affordable Care Act

In exciting (and hugely important) news that broke earlier this afternoon, the Sixth Circuit Court of Appeals upheld the health care law, including the key individual responsibility provision that requires everyone to purchase health insurance, as constitutional. Here’s the rundown of everything you need to know to talk about this at dinner tonight.

Home on the range...

Reuters - Dateline: Cheyenne, Wyoming.

At a single address in this sleepy city of 60,000 people, more than 2,000 companies are registered. The building, 2710 Thomes Avenue, isn't a shimmering skyscraper filled with A-list corporations. It's a 1,700-square-foot brick house with a manicured lawn, a few blocks from the State Capitol.

Neighbors say they see little activity there besides regular mail deliveries and a woman who steps outside for smoke breaks. Inside, however, the walls of the main room are covered floor to ceiling with numbered mailboxes labeled as corporate "suites." A bulky copy machine sits in the kitchen. In the living room, a woman in a headset answers calls and sorts bushels of mail.

A Reuters investigation has found the house at 2710 Thomes Avenue serves as a little Cayman Island on the Great Plains. It is the headquarters for Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as "shell" companies, paper entities able to hide assets.

Mr. President...

Bernie makes the case on the budget "deal".



Complete transcript of Senator Sanders' 90 minute speech HERE.

Via Balloon Juice

Dire stakes

I hope Paul Krugman is being hyperbolic. I fear he's not:

Debt Limit Stakes

So, here’s where we are on the debt limit discussions: Democrats have agreed to large spending cuts, but are holding out for doing something about

a rule that lets businesses value their inventory at less than they bought it for in order to lower their tax burden, a loophole that lets hedge-fund managers count their income as capital gains and pay a 15 percent marginal tax rate, the tax treatment of private jets, oil and gas subsidies, and a limit on itemized deductions for the wealthy.

And Republicans walked out.

Think about it. There’s a significant chance that failing to raise the debt limit could provoke a renewed financial crisis — and Republicans would rather take that chance than allow a reduction in tax breaks on corporate jets.

What this says to me is that Obama cannot, must not, concede here. If he does, he’s signaling that the GOP can extract even the most outrageous demands; he’s setting himself up for endless blackmail. A line has to be drawn somewhere; it should have been drawn last fall; but to concede now would effectively mean the end of the presidency.

The dangers of playing politics with the debt ceiling

Jared Bernstein, former chief economic advisor for Vice President Biden:

Does underscoring the sense of urgency simply give strength to dark forces who are trying to leverage the threat of default for their political gains? Perhaps so, but the other way lies madness.

We’ve got to talk truth about the stakes here because they’re so high...

(W)hy do interest rates remain low?  Why are investors in ten-year US treasury bonds accepting 2.93% interest today instead of insisting on a big rate premium the way bond investors in, oh, I don’t know…GREECE are??

Because they assume we’ll get our act together and raise the debt ceiling well in advance of Aug 2.  That’s the date when the Treasury will have exhausted their ability to move money around to cover their obligations while staying under the debt limit.

But what if that assumption should weaken?