Thursday, May 24, 2012

Dangerous New Deals

Some powerful Democrats have been trying to claim lately that are donning the austerity mantle just to prove to the country how insane and intractable the Republicans are in comparison. They won't admit that they themselves have veered right in order to please their Wall Street paymasters, and to keep that campaign cash flowing. They are pretending we are in a debt and deficit crisis and that a strict diet of safety net slashes coupled with a smidgen of new revenue will magically put some fat on the GDP.

They are buying into the tripe pushed by centrist think tanks run by corporations and talk show pundits owned by corporations. They insist that the failed Bowles-Simpson Catfood Commission is still alive and well and beloved by all the world. Many of them have become full-fledged members of the cult whose prime tenet is that the government is just like a family, that fairness is defined as impoverished grannies giving up one daily meal at the same time Jamie Dimon surrenders the tax deduction on his 10th vacation home.

Latest case in point: House Minority Leader Nancy Pelosi has just approached Speaker John Boehner about immediately and permanently extending the Bush tax cuts to people earning less than $1 million a year, rather than the $250,000 championed by the Obama Administration. This idea is nothing new. In fact, N.Y. Senator Chuck Schumer (D-Wall Street) has been proposing the million dollar figure since forever. The sad fact, claims Chuck, is that $999,000 is just chump change when you live in New York or its wealthy 'burbs. Private school tuition is skyrocketing, property taxes on multimillion dollar mansions are out of control, and with the slight chance that the state minimum wage is going up to $8.50 an hour, the cost of The Help will go through the roof.

Chuck claimed in 2010 that the million-dollar compromise would show those nasty Republicans just how nasty they are. He predicted that his offer would make it impossible for them to say No. Guess what? They said No then, and they'll say No again. Chuck and Nancy just don't want to admit that their party's prime allegiance is to rich people, too. They have to pretend to be a bit more populist.  

Never mind that extending the tax cuts to almost-millionaires will seriously
bloat the deficit. The public interest group Citizens for Tax Justice estimates that in 2013 alone, the Pelosi-Schumer plan would cost between $60 and $70 billion. As a matter of fact, their plan would actually be more beneficial to the really, truly, filthy rich than to the merely rich: a full 50% of their tax cuts would go straight to millionaires:
This would result because under Pelosi’s proposal, a married couple making $3 million a year, for example, would continue to pay the lower tax rates (enacted under President Bush) on $1 million of their income. Under Obama’s proposal, a married couple making $3 million a year would continue to pay the lower tax rates on just $250,000 of their income.
Taxpayers with incomes exceeding $1 million would therefore receive substantially larger tax cuts under Pelosi’s proposal than they would under Obama’s proposal.
The Huffington Post quoted an anonymous Democratic aide whose name could not possibly be Nancy Pelosi as saying Nancy Pelosi's whole point is just to make the Republicans look bad by displaying how reasonable and serious she herself is:
If Republicans refuse to move on this proposal, it is clear they are standing with millionaires and endangering the economic security of the middle class," said the aide.
"What Pelosi is proposing is a reasonable path forward given this situation," said the aide.
Pelosi made other waves recently by signalling she would also be open to a "Grand Bargain" of social safety net cuts, leading former Wisconsin Senator Russ Feingold to circulate a petition against the plan. Again, she had defended herself by claiming that her aim was simply to make the nihilistic GOP look unreasonable to voters in this election year. Same game of chicken, in which she puts impoverished surrogates (real people) behind her political daredevil wheel.

Either Nancy Pelosi is trying to out-Obama Obama in the Negotiating With Oneself department, or she is getting old and befuddled, or she is giving needed cover for Obama to "cave" in an election year/lameduck session, or she has been a corrupt phony all along and it's just beginning to dawn on people. If I had to cast a vote today, I would opt for all of the above.

As the sixth wealthiest member of the House with a reported net worth of almost a quarter-billion dollars, Pelosi ranks right up there with Mitt Romney in the riches department. Maybe her California constituents should consider throwing her a retirement party, sooner rather than later.


Denis Neville said...

Democrats (faux party of FDR) continue to push the Overton window farther and farther to the right.

How far to the right has the Overton's window shifted?

What real liberal Democrats used to look like:

“Let me warn you and let me warn the Nation against the smooth evasion which says, 'Of course we believe all these things; we believe in social security; we believe in work for the unemployed; we believe in saving homes. Cross our hearts and hope to die, we believe in all these things; but we do not like the way the present Administration is doing them. Just turn them over to us. We will do all of them- we will do more of them we will do them better; and, most important of all, the doing of them will not cost anybody anything.'” – Franklin D. Roosevelt, Address at the Democratic State Convention, Syracuse, N.Y. September 29, 1936

Today, FDR’s warning could apply equally to both the Republican and Democrats.

Obama, aided and abetted by the useful idiots in Congress, is gutting the core principles of the Democratic Party. His attacks on the social safety net are destroying the soul of the Democratic Party. He has been eager right from the start to cut Social Security along with Medicare, something Bush was unable to achieve. He has been the leading force pushing for cuts to both social security and Medicare. If he is reelected, be assured that he will devote his presidential power to cutting these programs that have been the defining hallmark of the Democratic Party since FDR's New Deal. What had been an unattainable dream of Republicans, slashing the nation's social safety net, is about to become a reality.

Where is the shit storm?

It boggles my mind.

Let the beatings continue!

Obamabots march like lemmings behind the man who betrays FDR’s legacy.

Obama took the Presidential Oath of Office on Lincoln’s bible. He betrays Lincoln’s words about “malice towards none, charity for all.” Lincoln’s Second Inaugural came after Sherman had laid waste to Georgia and South Carolina, destroying the Confederate economy. Grant had done the same to the Shenandoah Valley. The proposed austerian ideology promises the same.

spreadoption said...

Excellent insight, Karen. Thank you. To help understand what he's doing, almost three years ago I started thinking of Obama as a Republican. Clearly, Pelosi and Reid are full-fledged Republicans too. It's government of the people by and for the few.

As a realistic idealist, the only comfort I find is in the child-like hope that we could elect a bunch of truly good and sensible people to the left side of Congress.

It's much easier to agree with Paul Krugman that we're doomed. But it's lousy to feel so powerless.

Karen Garcia said...

Here is my comment re Paul Krugman's column:

What ingrates the greedy banksters are. Not one of them has been prosecuted for the epic conspiracy, mortgage and foreclosure frauds, and other larcenies that brought down the entire economy. Yet they have the nerve to get peeved when the president gently chides them for being careless with other people’s money.

Being criticized is obviously a novelty for them.The millionaires attending a private $35,000-a-plate dinner for Barack Obama at the home of the president of the Blackstone private equity group were reportedly aghast when they were asked to leave their cell phones at the door. In a tacky plastic bag, no less! Don’t the lords of finance understand that the president is walking a fine line, and can’t afford to have any of his pleasant remarks to them get to the ears of the 99%? Sure, he is bashing Romney and Bain, but it has nothing to do with the grifting plutocracy as a whole. There are good vampires and bad vampires.

They just need to be patient, and hedge their political bets the same way they do in their casinos. It's all so much theater anyway.

In the corrupt duopoly of American politics, their generous donations and expensive lobbyists have paid off before, and they'll pay off again, no matter who wins. They seem to have forgotten, as Sen. Carl Levin famously admitted, that "they own the place."

The only thing that should give them and their puppets pause are the mobs of the hoi polloi, the barbarians at their gates.

Zee said...


Related to an earlier thread, I really did try to read The Constitution at a Crossroads but it appears not to be downloadable and/or printable.

I do my best, but my tired old eyes will only read my computer screen so long before they wear out. Which is why I have often mentioned in the past that I have printed things off for later perusal.

If you have a printable link, please let me know.

Denis Neville said...

Social Security, the most successful government program in American history, uses an elegant self-sustaining funding mechanism that will go on forever if left alone. However, our oligarchical elite have no intention of leaving it alone. Make no mistake. They will cut Social Security. They just have to find a way to do it. And they have succeeded.

Only “liberal” Democrats can safely begin the process of attacking Social Security. Obama is leading the charge with his Grand Bargain.

“Why Progressive Austerians do the Greatest Damage” by William K. Black:

The rationale for the liberal assault on Social Security and austerity is TINA (“there is no alternative”).

“The right will always be in favor of slashing aid for those in need and taxes for those in greed. They do not need the aid and comfort of progressive austerians. To be an austerian one must attack successful progressive program. The goal of the austerians is to set the progressives in conflict with each other – to force us to recurrently make versions of Sophie’s choice – to force us to do their dirty work of gutting progressive programs.”

“It’s not a paradox that conservatives target not the worst social programs, but the best. Bad government programs are desirable from the right’s perspective – they discredit government intervention. Good government programs pose an existential challenge to conservative memes, so they are the prime target for attack.”

“TINA is the most dangerous lie.”

“The austerian economists were the architects of the global financial crisis, the great depression of the European periphery, and the assault on the needy. They have proven wrong about every important issue. When moderates and progressives adopt the suicidal austerian policies of these architects of disaster they become the most destructive members of the austerian movement.”

So our pampered posh boys and girls will continue our beatings.

We are doomed. They need our sacrifice.

Progressive Austerians! Useful idiots!!!

Denis Neville said...

@ Zee

I will check The Constitution at a Crossroads site out later, when I have more time, and get back to you.

Zee said...

@Karen and @All--

“They [powerful Democrats] are pretending we are in a debt and deficit crisis...” --Karen Garcia, Dangerous New Deals

As I have repeatedly said, “I am no economist.” So, once again I will exhibit my ignorance by asking “If we're not in a debt and deficit crisis now how will we know when we get there?”

I know that Paul Krugman and other economists pooh-pooh the deficit and national debt as merely long-term problems, to be fixed only when the economy recovers. But who knows how long that will take, and if we will really will have the willpower to actually fix them once “happy days are here again (if ever)?”

Krugman says (more-or-less), “Well, we can just print the money that we need! Greece can't do that! And we didn't see any signs of inflation after the stimulus, anyway! So why should we worry about further debt now?”

But as I look at the prices for food, gasoline and health care—the first two of which the Feds naïvely don't count toward “core inflation”—I would say inflation is already here.

Chris Hedges, who seems to garner some respect in this forum, has said the following:

“The moment China, the oil-rich states, and other international investors stop buying U.S. Treasury Bonds, the dollar will become junk. Inflation will rocket upward. We will become Weimar Germany. A furious and sustained backlash by a betrayed and angry populace, one unprepared intellectually and psychologically for collapse, will sweep aside the Democrats and most of the Republicans. A cabal of proto-fascist misfits, from Christian demagogues to simpletons like Sarah Palin to loudmouth talk-show hosts, whom we naïvely dismiss as buffoons, will find a following with promises of revenge and moral renewal. The elites, the ones with their Harvard Business School degrees and expensive vocabularies, will retreat into their sheltered enclaves of privilege and comfort. We will be left bereft, abandoned outside the gates, and at the mercy of the security state.” --Chris Hedges, Empire of Illusion

So, again I ask, if the debt and deficit are not problems now, as Krugman et al. insist, when will they become problems à la Chris Hedges?

And at that point, what do we do if hiking taxes on millionaires and above ain't enough?

Karen Garcia said...

@Zee, I am no economist either, but to make a long story short, you don't worry about the deficit during a recession, because in order for the economy to recover, the govt must create demand via jobs (corporations are not creating demand, because they're hoarding their profits instead of hiring and/or offshoring the jobs). One of the duties of the Fed is to address unemployment, and in that regard, it (Bernanke) has failed miserably. The time to address the debt/deficit is when people have jobs. Our political leaders are not facing the fact that the real crisis in this country is chronic, long-term and relentless unemployment. They are instead focusing on being austerians. Look how well that is working out in Europe. The Zone is a-crumbling!

Concernicus said...

It was Dick Durbin, not Carl Levin who said that banksters own the place. He was right and deserves the credit for having the stones to say so.

Karen Garcia said...

This is my week for mixing up senators. Sorry for misappropriating Dick Durbin's quote in the Times comment! I knew Levin had also said something pithy about the banksters, and I dug up this quote:

Goldman Sachs is “a financial snake pit rife with greed, conflicts of interest, and wrongdoing."

He then handed the results of his Senate inquiry to DOJ on a silver platter. It is still there, gathering dust, one year later.

Zee said...


Well, at least Dick Durbin and Carl Levin aren't worth nearly as much as New Mexico's Senator Jeff Bingaman after all their years in Congress.

Maybe I should believe what they have to say, in contrast to Jeffy:

How do you go from Attorney General of the podunky State of New Mexico to being a multi-multi- millionaire?

Can you say "Insider trading?" Can you say "Abuse of power?" Can you say "They're all crooks?"

Denis Neville said...

Zee asks, “If we're not in a debt and deficit crisis now how will we know when we get there?”

We are in a depression! The crisis is not debt and deficits. Too many fall for that Henny-Penny “the sky is falling” folk tale. Worry about debt and the budget deficit once the economy is off the bottom and our fellow citizens are no longer suffering. But the economy is not off the bottom. Far from it. We are in a depression and too many are suffering. This is the time to spend. The problem is shrinking incomes that are the result of shrinking spending. Austerity budgets, by reducing government spending, will only make incomes fall even more. The only way to make incomes rise is to make spending rise, more borrowing by governments to create more public sector spending.

My question, “Why are deficit hawks more afraid of debt than depression? Why is depression their solution to the so called debt and deficit crisis?”

The deficit hawks are actually dumb parasites. They really believe that corporations can make larger profits and survive if they create a depression. What do they want to do? Reduce their taxes by shifting them onto labor, by getting rid of the taxes that fall on capital and making taxes fall only on labor. Help capital by hurting labor! Labor is now one paycheck away from homelessness. It can’t strike for fear of being fired. It can complain about working conditions for the same reason. Miss the mortgage payment and lose a home. Then cut social spending so more government funds are available for bailouts.

Socialism for capitalists. Free enterprise for the rest. Such is their mentality.

More questions: Why listen to the Siren song of austerity budgets of the Henny-Pennys, the very same elites who drove the bus off the cliff? Who is listening to those will suffer from austerity budgets: our children, who will only get one opportunity for an education, the sick and disabled, who will be unable to support themselves, and our older citizen, who will be too old to work?

The economic madness of our neo-feudalism society.

Zee asks, “who knows how long that will take, and if we will really will have the willpower to actually fix them once “happy days are here again (if ever)? And at that point, what do we do if hiking taxes on millionaires and above ain't enough?”

My question: how long are we willing to ignore the plight of those suffering now and those who will suffer from austerity budgets? At what point to we say enough of the financial parasitic relationship that shifts the burden of taxation disproportionately onto the backs of the working middle class? When is enough enough? Happy days are already here for the parasites. And that’s the problem.

Neil Gillespie said...

In my view the argument about spending vs. austerity is a false dichotomy. The answer to unsustainable debt is bankruptcy or other plan of debt forgiveness.

@Zee, re "what do we do if hiking taxes on millionaires and above ain't enough?"

What we should have done back in 2008, let markets work. Bankruptcy is a tool of the market that would have eliminated To Big To Fail banks through orderly liquidation.

A variant on bankruptcy is national debt forgiveness, also known as a haircut, or debt jubilee. This idea was in the media last year, not so much now. See this story on Reuters, Special Report: A "great haircut" to kick-start growth

Paul Krugman is a nice guy, but the answer to a debt problem is not more debt. Krugman essentially argues that we should spend our way out of this depression because that worked in the 1930’s. But spending did not really end the Great Depression, our involvement in WWII ended the depression, and paved the way for 25 years of post-war boom times.

Lenders are responsible for this depression by making bad loans. The market fix for those bad loans is bankruptcy or other debt forgiveness.

Conservatives (this is not directed to you) love to talk about letting the market work, but they are selective in their choice of market tools, and who should bear the market’s wrath. A properly functioning market cuts both ways.

Denis Neville said...

@ Neil re: “spending did not really end the Great Depression, our involvement in WWII ended the depression, and paved the way for 25 years of post-war boom times."

Such a view exhibits a lack of historical memory and/or historical revisionism.

As Marshall Auerbach writes:

“The reputation of fiscal activism has also been harmed by a historical revisionism aimed at the heart of FDR’s original New Deal, the essence of which is that he achieved little of lasting economic benefit and that it was only World War II that finally took America out of the Great Depression. This is factually incorrect. There is much evidence to support the contrary position, that the effects of the New Deal were in fact greater.”

“The Roosevelt administration reduced unemployment from 25 per cent in 1933 to 9.6% per cent in 1936, up to 13 per cent in 1938 (due largely to a reversal of the fiscal activism which had characterized FDR's first term in office), back to less than 1 per cent by the time the U.S. was plunged into the Second World War at the end of 1941.

“In fact, once the Great Depression hit bottom in early 1933, the US economy embarked on four years of expansion that constituted the biggest cyclical boom in U.S. economic history. For four years, real GDP grew at a 12% rate and nominal GDP grew at a 14% rate. There was another shorter and shallower depression in 1937 largely caused by renewed fiscal tightening (and higher Federal Reserve margin requirements).

“This economic relapse has led to the misconception that the central bank was pushing on a string throughout all of the 1930s, until the giant fiscal stimulus of the wartime effort finally brought the economy out of depression. That's factually incorrect. Most accounts of the Great Depression understate the effect of the New Deal job creation measures, because they don't show how much of the decline in official employment was attributable to the multiplier effect of spending on direct job creation. Also, the "work relief" category does not include employment on public works funded by the Public Works Administration (PWA) nor the multiplier effect of PWA spending. The figures tell the story indirectly, however, in the path official unemployment followed - steeply declining in periods when work relief spending was high and either declining more slowly or increasing in periods when work relief spending was cut back. In fact, by the end of 1934, more than 20 million Americans (one out of six!) were receiving jobs or public assistance of one form or another from the "Welfare State".

“What about the relapse in 1937/38? By 1936 many economists and financial experts (notably FDR's Treasury Secretary, Henry Morgenthau) feared the country would go bankrupt if the government kept deficit-spending (sound familiar?). And after all, they argued, the government deficits had "pump-primed" the economy. The private sector could now take off on its own and get back to close to the full employment level of 1928-early 1929.”

“Any type of fiscal austerity during a period of economic slowdown, whether via government spending cuts or higher taxes, will indeed depress economic activity. But the other lesson of the Great Depression is that properly targeted fiscal policy which focuses on job creation can work. The Great Depression was indeed a disastrous human calamity but FDR's New Deal (including the high wage policies) attenuated the disaster. There is nothing to the claims that the interventions made things worse, other than when Roosevelt himself capitulated to the tired old forces of financial conservatism and fiscal austerianism, and the economy paid the price."

“If deficits are so economically ruinous, then why run them during wartime, when in theory the optimal functioning of the economy is most crucial?”

Neil Gillespie said...


Taking your points as true, and I believe they are, it still appears that WWII ended the depression. War production began in the late 1930’s to supply the Allies in Europe, and our own buildup, long before we officially entered the war in December 1941.

Roosevelt’s New Deal was great, and produced many great and lasting projects, but people I spoke with from the time said the war ended the depression. Frank McCourt wrote about this in Angela’s Ashes, "They thank God for Hitler because if he hadn’t marched all over Europe the men of Ireland would still be at home scratching their arses on the queue at the Labor Exchange." (p217)

Megan McArdle of the Atlantic wrote "The Great Depression indisputably ended during World War II, which is when the output gap closed. But was it causal? Like everything else about the Great Depression, it's really hard to know."

And Bloomberg: How Did World War II End the Great Depression?: Echoes

"In a genius marriage of finance and policy, the government founded the Defense Plant Corporation, or DPC, in 1940. The DPC was run by a committee of public-minded businessmen from all stripes of commerce: William Knudsen, who had helped organize Ford's production line and then became the president of General Motors Co.; Donald Nelson, a vice president at Sears, Roebuck & Co.; and Ralph Budd, president of the Chicago, Burlington and Quincy Railroad, to name a few."

"Before the DPC's founding, government-financed capital spending accounted for only 5 percent of the annual U.S. investment in industrial capital. In 1943, thanks to the DPC, the government accounted for 67 percent of U.S. capital investment, utterly transforming not only how much was produced but what was produced."

My point is not to glorify the war. It could be argued that the Defense Plant Corporation led to the current military industrial complex and unsustainable military empire which is bankrupting us.

The problem with the current high level of personal debt, even if Krugman’s theory was successfully implemented and created new jobs, a large portion of the new salaries would go right back to the banks to pay off existing debt. I’m not talking about deficits, but what people owe personally. Like student loan payments. Graduates need a job, and they also need debt forgiveness, or their salary goes back to the banks and is not spent on homes and consumer goods.

Denis Neville said...

@ Neil re: citation of Megan McCardel, “The Great Depression indisputably ended during World War II.”

From the woman who infamously mistook $250 for $25, and then proceeded to build an entire argument on why we shouldn’t bother allowing taxes on the rich to return to Clinton-era levels!!!

$25, $250, What's the difference? No time to check the other numbers, but as asserted the per person amount is $250, not $25. Good enough for journalism!

Megan McArdle actually wrote a post about other journalists' math errors.

They say misery loves company.

Tom Levenson @ The Inverse Square Blog:

“McArdle never cares if she’s wrong. Her real goal is to prove that government action informed by reason and empirical knowledge is impossible. It’s about the impossiblity of governance.”

[Hence the value (for her) in repeating stuff like this: “The Great Depression indisputably ended during World War II.”]

“The key fact to remember is that McArdle’s lapses of reasoning and fact are features, not bugs. Remember the mission of her home institution: “The Atlantic – shaping the national debate on the most critical issues of our times, from politics, business, and the economy, to technology, arts, and culture.” McArdle is indeed trying to shape the debate, to constrain what might be possible in the exercise of government power. Mere logic, paltry fact may not be permitted to get in the way. She is Always Wrong™ — by design.”

McArdle is just another soldier of kleptocracy - a mouthpiece for Wall Street and a rather transparent one at that. She is extremely useful as an example of authoritarianism, conventional wisdom, and the hollowness of our ruling class and its wannabes. Errors and dishonesty pervade Megan McArdle’s writings and destroy any pretense to her credibility.