Archive for December 2012

The Cliff

Here is what I cannot quite figure out:  If the Republicans in Congress would not vote on Boehner’s plan that would only raise taxes on those making over $1 million, why does anyone think they will agree to a deal for over $400k?  All the incentives are for no deal and I will be surprised if we get one today that will actually pass Congress.

Oh, and I am so sorry that President Obama’s upbeat attitude during his press conference offended some of you.  You know, smiling and trying to tell Americans the truth can be so offensive when the truth hurts the nutballs.

RIP 2012 – America,The Greatest Country in the World, Is Not Making Sense

Since this is the last day of the year, and the noise, the absolute total noise, about the fiscal cliff is drowning out everything, I want at least my readers to step back a moment and think.  What the hell is going on here?  We are no longer using logic and critical thinking to look at what we are doing.  We are jumping to conclusions and trying make policy based upon false assumptions.  We are letting conventional wisdom and ideology blind us to our irrational behavior.  Let’s review:

  • We are all about solving our debt problem and that is the whole focus, but we are not asking the basic question, is the debt causing our economic problems or are our economic problems causing our debt problem.  We are proceeding as though the debt is the problem and more and more data is showing that in the near term that is not the issue.  Interest rates were supposed to go out of sight according to very smart people (VSPs) and they are the lowest in 60 years.  Inflation was suppose to take off, and it won’t even get high enough to help us devalue our debt.  Lack of Demand is what is hurting the economy and that has to do with the lack of good jobs and good salaries which we don’t have.  Nobody cares about the debt except in the abstract.
  • Okay, lets assume that I am wrong (well me and most reliable economists), the fiscal cliff attacks the deficit gang busters.  So what is the problem?  Right now we are all about trying to avoid the fiscal cliff and it is the best invention since sliced bread to reduce the deficit.  Well everyone admits it will grossly reduce government spending (yes, tax cuts are spending) and shrink our economy, further losing jobs.  Huh?  So if cutting hurts, how does that square with the debt is the problem.  Gee, could it be we are not spending enough right now and more spending might help?
  • Now everyone says our growing debt due to unconstrained spending is going to make us become Greece.  But let’s review:  First, it would appear that the debt prior to the 2008 crash was manageable.  It would also appear that most of the growth of our near term debt  has come from losses to tax revenue, safety net expenditures, our unfunded wars, and Bush Tax cuts since the great crash.  Second, Greece is dependent on the Euro.  We can print money till the cows come home.  These are two very different types of economies.  People who say we will become Greece clearly have no understanding of basic economics (Republicans):

120412krugman1-blog480-1

  • Then there is the long term deficit and it is being driven almost exclusively by rising costs in Medicare and Medicaid.  See the graphic and quote below from Ezra Klein’s Wonkblog.  So everyone is saying we have to cut entitlements, but nobody is really looking at these costs and asking why they are twice what the rest of the industrialized world pays.  In other words our assumption is we can’t afford it, instead of asking why we are paying so much for so little.  As Dean Baker of the Center for Economic and Policy Research tells us:  “The biggest item on the other side of the equation is health care. Our costs are hugely out of line with the rest of the world. We pay on average more than twice as much per person for our health care as people in other wealthy countries with little to show for it in terms of outcomes. If our per person costs were comparable to those in other countries we would be looking at long-term budget surpluses, not deficit.”  

cbo-three-mountains-deficits

Ezra Klein:  “What these three charts tell you is simple: It’s all about health care. Spending on Social Security is expected to rise, but not particularly quickly. Spending on everything else is actually falling. It’s health care that contains most all of our future deficit problems.”

 So in our panic over artificial crises created to distract us, we are not had a discussion about the root causes of our problems.  To wit:

  1. Whether the deficit is the problem hurting our economy (current assumption) or the economy is the problem hurting our deficit, and the two have very different treatments.
  2. We are not facing the fact that we are all focused on MAINTAINING GOVERNMENT SPENDING to save jobs while denying that government spending creates jobs and may be the way to get our economy going again.  This would be the Keynesian solution that has been sadly rejected.
  3. Whether the deficit, if we remove the current lesser depression economy, is sustainable, thus questions whether the short term deficit is the problem at all.
  4. Whether the issue of growing cost of entitlements is about us being overly generous and we can not afford them (the current assumption), or that what we are paying for those benefits is way out of line with what the rest of the world pays and look at ways to reform the system instead of cutting benefits.

We have made the wrong assumptions for the above five critical issues and our solutions are bound to fail.  But we are having this massive focus on the fiscal cliff, soon to be followed by the even more critical debt ceiling, and we are still failing to look at our basic underlying assumptions to find out if we are tilting at wind mills.  We are and it is so sad to see how dumb America has become.  Critical thinking is a lost art.  Oh well, in the meantime:

♫ High Ho, High Ho, It is Over the Fiscal Cliff we Go ♫

Happy New Year.  Also, thank you Paul Krugman, Ezra Klein, Dean Baker, Rachel Maddow, Ed Shultz, Chis Hayes, Michael Tomasky, Lawrence O’Donnel, E. J. Dionne, and those few others who are making sense and cutting a path through the forest of ignorance.  Maybe next year will be our year.

Chained CPI for Social Security

The Republicans have thrown out chained CPI and you wonder what discussions about Social Security has to do with the deficit.  Republicans are about one thing, and that is cutting spending on the backs of the poor to maintain their tax cuts for the wealthy. THERE IS NO PROOF OR DATA SUPPORTING CUTTING TAXES FOR THE WEALTHY HELPS THE ECONOMY! In fact research shows just the opposite  Now on the chained CPI, this is a terrible idea. First it penalize those least able to afford it.  But it is most of all flawed logic:

“Chained CPI assumes people can substitute cheaper products as prices go up, but this is not true of seniors and people with disabilities for whom health care makes up a larger share of expenses. In 2009, health care made up 12.9 percent of expenses for people 65 or older, but 5.3 percent of spending for people ages 25-64.”

In other words, more of their purchases are impacted by rising health care costs and in fact their CPI should probably be higher than a normal CPI. If you are really interested in the facts (few Americans are) see Ten Reasons Whe the Chained CPI is Terrible Policy.

Meet the Press is Insufferable

I turned on Meet the Press to watch the Obama interview and the panel discussion that followed tells you why America is so badly informed.  These panelist are too connected to the status quo, too much of the conventional wisdom, and to much of insider Washington incestual thinking.   David Brooks tells us it is the Republicans who are at fault but Obama needs to form more connections across the aisle and have them up to the White House more often. In other words it is his fault that they are so hard headed because he did not kiss their asses. They lack that trust thing.

Tom Brokaw tells us we must solve the deficit (not true if you actually understand what is holding back our economy, demand) gives us the Washington Conventional Wisdom with no insight into real economics, and then agrees that Obama needs to make more connections like Reagan, LBJ, and Clinton did.  Doris Kearn Goodwin tells us that Obama has had less socializing with the enemy than other Presidents, but again no insight into present day Republicans and their hatred of him.  Then Brokaw tells us “Congress” is gerrymandered instead of saying the word “Republicans” with Democrats in Congress receiving over a million more votes than the Republicans, yet Republicans are still in charge.  Chuck Todd understands the truth, but walks a fine line so as not to cut off his access so critical to he said/she said journalism.

And I am wondering if they were around for the last four years when Obama went the extra mile and got his…cut off.  I am wondering if they understand anything about the economy and how we need to get it going and solving the deficit problem is not the problem. I am wonering if they really understand what is driving costs in our entitlement programs.  I am wondering if they read economics at all.  I am wondering if they understand Republican politics and ideology, and it’s not your Dady’s Republican Party anymore.  What I am not wondering is why the American public is so confused about where we need to go.  Their journalism is sadly out of date, pure Washington conventional wisdom, and so yesterday.

Where was the challenge that the debt is the problem (good data from both Dean Baker and Paul Krugman that all of the problem is in the cost driven by loss of revenue and safety net expenditures after the crash); how does the debt hold back the economy (it doesn’t) and what would it take to get it going; and then Tom, Republican Talking Points, Browkaw tells us we have to control entitlements, and where was the question about whether that means cutting benefits or looking at our system of paying for them and recognizing it is out of whack?  Nope, lets just push the usual drivel and misconceptions on the American people, never question your assumptions, and things never change.  That is our media these days.

Who Said It Best Today: Paul Krugman

Here is the real upcoming cliff as Paul points out and where we find out whether Obama represents the people who put him in office or caves to Republican terrorism and we continue the Republican nightmare:  The Hostage Drama Begins

“It sure looks as if we’re going over the fiscal cliff, but that may be the least of our problems. The debt ceiling is a much bigger and more dangerous issue, and it looks very much as if Republicans are set to destroy the full faith and credit of the United States if they can’t get their way.

The key thing to remember — and what the GOP hopes you won’t understand — is that raising the debt ceiling only empowers the president to spend money that he’s authorized to spend by Congressional legislation; nothing more. Conversely, a party that refuses to raise the debt limit is saying that it’s prepared to inflict vast damage on America in order to achieve things that it couldn’t achieve through actual legislation — in effect, that it’s prepared to use vandalism to subvert the constitutional process.”

Dueling Views on the Deficit, Maybe

Yesterday there were what appeared to be three very different views of our deficit problem by three noted and trust worthy (not owned by Wall Street or conservative think tank endowments) economists:

Paul Krugman: “… the current budget deficit is overwhelmingly the result of the depressed economy, and it’s not clear that we have a structural budget problem at all, let alone the fundamental mismatch between what we want and what we’re willing to pay for that people like to claim exists” (On the Economics and Politics of Budget Deficits).

Jeffrey Sachs: “In short, something terrible would have to give. Either we’d have to gut life-sustaining programs for the poor (Medicaid, Food Stamps, etc.), or gut civilian government (education, science, environment), or bust the budget with trillions of dollars more in public debt.

The point is that prolonging the Bush-era tax cuts, whether it’s for everybody (as the Republicans want) or “only” for the bottom 98 percent as Obama wants, or someplace in between, would leave the government without the federal revenues needed for basic services, support for the poor, and public investments for training, education, infrastructure, science, and the environment. So, if a deal is struck, we likely face a decade of shrinking civilian programs, more suffering of the poor, and mounting public debt” (Going Over the Cliff is the Only Way to Save the Economy).

Dean Baker: “Actually the deficits were not ballooning until the collapse of the housing bubble crashed the economy in 2008. The budget deficit in 2007 was 1.2 percent of GDP and the debt to GDP ratio was falling. The Congressional Budget Office projected that it would stay in this neighborhood for another decade or so even if the Bush tax cuts did not expire. The reason that the deficit became large and the debt to GDP ratio started to rise was that the collapse of the economy cost the government hundreds of billions in tax revenue annually and led to hundreds of billions of additional expenditures for unemployment benefits and other programs to counteract the impact of the downturn.

While the Bush tax cuts may have been bad policy, in fact they were affordable in the context of an economy that was near full employment. If the collapse of the housing bubble had not sank the economy, there would be little issue about the sustainability of the debt ” (The Debt was Not Ballooning Until the Economy Collapsed)

So is the deficit a big problem or not? Well there are several things being said here. First let’s talk about the short term. What Dean and Paul are arguing is that most of the growing deficit in the near term is primarily due to the crash of 2008 and its impacts (lost revenue and payout on safety nets). That prior to the boom, the debt we were incurring was affordable, albeit probably very bad policy considering what we were investing it in, tax cuts for the wealthy. In other words if we get the economy going again, the near term debt becomes much less problematic.

Jeffrey, I believe is looking at the long term debt (more a function of the Bush Tax cuts and the growing costs in Medicare, Medicaid, and other safety net programs and saying that eventually if we are going to invest (read spend here) in things to make our country great and afford these programs then something has to give, and it can’t just be tax cuts for the wealthy. We all have to play. Note he does not address reforming the way we pay for these programs, but that is where the solution lies (national healthcare and doing way with fee for service).

Here is my take-away: The debt is not the near term problem, the economy is. The fiscal cliff is a giant austerity bomb that will hurt the economy and make the deficit intransigent. So we need to rescind all tax cuts, make reasonable cuts to programs, AND REINVEST THE MONEY IN THE ECONOMY, NOT IN THE DEFICIT. As the economy improves and the private sector picks up the investment load, the government can then throttle back both on spending, and on tax cuts left in place (like the payroll tax). We, like all businesses, have to decide how much we need to invest in the future as a percent of GDP and then adjust our policies to match that.  This is hard medicine that we all have to play in, but it is the only thing that will work.

Now for reality: The Republicans will never let us spend a dime except on tax cuts for the wealthy. As Paul points out, any ground we make up on the deficit, will be given away in tax cuts by the Republicans (See Bush years). Worse, any short term deal, as Jeffrey points out, is just an austerity program that will be on the backs of our future to afford tax cuts we can’t afford. Worst, the Republicans are betting on the debt ceiling negotiations to wreak havoc with our credit rating to get their tax cuts and spending cuts. So going over the cliff is the only way forward because any short term deal gives away bargaining chips to hold the line against the nation wreckers. We will see what happens, but as I like to say:

♫ High Ho, High Ho, It is Over the Cliff we Go ♫

Unless the Democrats capitulate once again. And things are looking up because after four long years President Obama this morning on Meet the Press actually pointed the finger at the Republicans. Maybe, just maybe, he is starting to get it.

Heinlein on Guns

There is another author whose message stuck with me about guns and that is the science fiction writer Robert A. Heinlein. In his novel, Tunnel in the Sky, a group of students are sent on a survival test to an uninhabited planet:

“Rod Walker is a high school student who dreams of becoming a professional colonist. The final test of his Advanced Survival class is to stay alive on an unfamiliar planet for between two and ten days. Students may team up and equip themselves with whatever gear they can carry, but are otherwise completely on their own. They are told only that the challenges are neither insurmountable nor unreasonable.

On test day, each student walks through the Ramsbotham portal (Similar to Star Trek’s transporter) and finds him or herself alone on a strange planet, though reasonably close to the pickup point. Rod, acting on advice, chooses to equip himself with hunting knives and basic survival gear rather than high-tech weaponry, on the grounds that the latter is dependent on the infrastructure required to maintain it and can easily become a crutch” (Wikipedia).

With only a knife, Rod is extremely careful and takes extra precautions against predators that may see him as a tasty little snack. He comes across the bodies of his more heavily armed compatriots, who with their dependence on heavier fire power, were careless. The lesson I took away is that armed with fire power, our arrogance gets in the way of our brain. Could that be a lesson for all those who think the answer to gun violence is more guns?

It is strange what I think about a 4:30 in the morning before I get up to do my yoga (or my imitation of yoga).

Life of Pi with a Gun

I am reading the Life of Pi after seeing the wondrous movie and I got to thinking at O’dark thirty in the morning about what would have happened to Piscine (Pi) if he would have been packing as the NRA thinks we all should. He would have shot Richard Parker, had lots of meat for a while, but in the end, with one bullet left, he would have committed suicide because he killed the one thing that keep him alive. No, guns are not the solution.

Filibuster Reform

For those of us who see the dysfunction of the Senate through the use of filibuster, it is a no brainer that we need filibuster reform. So I was shocked when I saw that my two Senators, Barbra Boxer and Dianne Feinstein had not sign up to vote for the reform proposed by Senator Jeff Merkley (D-Oregon). Right now there are 48 Democrats willing to vote for it and you really have to wonder what the others are thinking. They need the magical 51.

Ezra Klein of the Washington Post’s Wonkblog has indicated that Carl Levin and John McCain have put forward a plan that basically changes nothing (Read: John McCain’s Filibuster Reform). As Ezra put it:

“If you think the Senate is pretty much working well as is, and the biggest threat are the folks who want to change the rules, then this is the proposal for you. It lets people say they’re doing something to curb the abuse of the filibuster without actually doing anything at all. But if you think the Senate is broken, there’s nothing in here that would even plausibly fix any of its problems.”

I am a loss to explain or understand how these Democrats cannot see that the world has changed and the good old boy club of the Senate does not exist anymore. If we want to govern with majority rule, then this idea of silent filibusters and a Senator’s hold are no longer niceties we can afford. After seeing Senator McConnell propose and then filibuster his own bill, and my guess will be they will filibuster anything in the Senate that might solve the fiscal cliff, you think Democrats might get a clue.

I will work tirelessly to have Boxer and Feinstein defeated by more Progressive Democrats if they cannot see that those days are gone and if they hope to get anything done against the Republicans who take no prisoners, they must reform the filibuster with real reforms. I cannot imagine after failing to reform it in 2010, they have not learned their lesson. If they have not, they have no business leading our state in the Senate. We voted for change twice and hopefully they are not going to thwart change again or according to that old cliche: They will have snatched defeat from the jaws of victory.

Please sign the petition to reform the filibuster at Reform the Filibuster.

112th Congress Most Unproductive Since 1940s

Well those fruitcakes who thought we had a partisan Congress back in 2008-2010 elected this mob of Neanderthals, known locally as Tea Party Congressmen in the Republican Party, and things got significantly worse. Starting to regret your vote yet? Meanwhile the President blames Congress, but the Democrats in Congress aren’t at fault here. I wonder when we will start pointing fingers and assigning blame so the country can truly understand where the fault lies. That would be Republicans in general.