Posts tagged ‘the debt’

WTF Friday

As we normalized President DFF, it is also how we normalize WTF moments. In fact they just become news tidbits among all the news tidbits. But still we have them. The biggest one is those fiscal conservative Republicans just passed a massive spending bill that raises our debt massively. If you are not confused by the propaganda machine you will note that that has been their modus operandi since Ronald Reagan. It is kind of hard to be the party of big military spending, tax cuts, and the magical supply side economics and do anything but blow up the budget. Not sure how they got the reputation of fiscal hawks other than they cried loudest about deficit spending but did the most to ensure it.

The next WTF moment will come when we hit the debt ceiling, the amount we have agreed is the debt we will pay for (we already spent it, see above). We will see if the hypocrisy reins supreme if they start pounding their chests on this one. This is one of those things we should have changed a long time ago, if you authorized the spending then you authorized the raising of the debt ceiling to pay our bills. I have argued before that Republican’s fixation on debt and trying to make the micro economy the same as the macroeconomy of our economy equal is disingenuous, but there is an element of truth to it in the details:

As we learned from John Maynard Keynes, deficit spending should be countercyclical. When economic growth goes down, deficits should go up, and vice versa. The idea is that the government can pick up the slack when private demand lags (as was the case back in 2009).”

But they are doing just the opposite here. Here is the thing. In a economy we should be raising taxes right now if we really need all this spending. Now I am all for a strong military, but President DFF and his cohorts confuse a strong military with a strong country as if bullying is the only tactic of power. We are becoming weakened in the world, not because we got the biggest baddest weapons, but because we are becoming economically and ethically weak under President DFF and his boys. Note he now wants a military parade to show off our shiny weapons while we withdraw from the stage of economic deals to strengthen our power and influence in the rest of the world.

And here is really a WTF moment for conservatives if they want to admit it. Here in California under the leadership of a very pragmatic liberal, Jerry Brown, we are putting money away for a rainy day.  Yes there are Californians who don’t like the gas tax or the higher taxes, but they are the next wave of fools that vote Republican, and they are a minority.  When things got better we did not “give the money back to all those hard working rich people,” we started putting it away for when the economy turns south as it may be doing now. It is because Democrats have always been the party of more careful budgeting. The best way to talk about debt is a percentage of GDP and here are the facts:

Republican presidents after Eisenhower have increased the federal debt as a percentage of gross domestic product by a total of 60%. Democratic presidents have reduced the debt as a percentage of GDP by a total of 9%.

President Obama is the only Democratic President during whose time in office the debt has risen relative to GDP. The data extends to the end of FY2014 (September 2014). President Obama’s bar will almost certainly drop by the end of his presidency, as GDP growth is relatively high and the deficit is relatively low. 2/5ths of the increase during President Obama’s presidency occurred during the first year while the country was still in the midst of the Great Recession.

Of course President Obama inherited a failed economy in 2009 and safety net, stimulus, and war spending (from the Bush War) did not help. But the bottom line when you look at numbers and you care about debt and deficits, you are better off under Democrats.

We need to be raising taxes right now, not cutting them. Gas tax should go up to pay for improvements to our transportation systems. The recent tax cut should be repealed so that the wealthy pay their fair share, and we should be investing in infrastructure improvements. In fact, there is a bigger picture here if we are willing to look at it. Economic inequality. We need to more fairly share our gains so our citizens have the buying power to keep our economy self sustaining. But I am spitting into the wind. People who believe in sounder budgets vote for Republicans because they make the most noise about it, but never deliver. WTF.

Well we will have another disaster like the Bush years and then Democrats will regain power. Hopefully this time they won’t think the answer is to reach across the aisle to find middle ground solutions that fail and put the fools back in power. They should just turn away from that approach and leave them in the dust of history’s failed lessons. I can hope.

Is Anybody Awake Out There? The Dow and Everything that Is Wrong with Our Economy

I am going to focus here on economic issues. What are the debates that are raging? Well, we progressives think the whole austerity thing is nonsense when we are in a liquidity trap (A situation in which prevailing interest rates are low and savings rates are high, making monetary policy ineffective) and we should be spending to create demand in the economy. The President and “the middle” think we should be focused on (or the only political feasible thing to be focused on) reducing the deficit with a balanced approach of spending cuts and some revenue generation through reforming the tax code. This is also part of the grand bargain strategy where the President puts entitlements on the chopping block to get some revenues out of the Republicans (really doubtful). Meanwhile the Republicans are focused also on the debt and claim we will get jobs when we do this by cuts to spending only and they refuse to budge. So we go nowhere.

Okay, that is what we are arguing about, and may I add that the data* supports the Progressive approach, that is austerity in a truly depressed economy will be counter-productive (See Everything Conservatives and VSPs Have Wrong). But what really makes me wonder if we can ever solve our problems is that we are not looking at the reality of our systemic economic problems and structuring our policies to address them. We are oblivious to them and yet we are living them. Our economy, in a nutshell, no longer is about anyone but the very rich. The alarm bell ringing in the background identifying this problem is the one on Wall Street. The Dow hit a new high (well not really if you account for inflated dollars but our media is rather brain dead to anything above third grade math), and this is cited by both sides as progress. Let’s summarize some of this “wonderful” news and then see who it is wonderful for:

  • 50 percent of all capital gains go to the richest 0.1 percent
  • From 2009 to 2011, average real income per family grew modestly by 1.7% but the gains were very uneven. Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%
  • Saying this another way, the top 1% captured 121% of the income gains in the first two years of the recovery. In other words, the top not only took all the income gains, but sucked up the losses of the bottom 99%
  • Much of the economic recovery is simply an increase in the value of financial assets: stocks and bonds. 80% of all stocks and bonds are owned by 10% of our population (see graphic below**)
  • As the stock market hits this celebrated peak, the wages that average Americans are bringing home are plunging into a trough — despite measurable gains in overall productivity
  • Corporations have been investing in technology rather than their workers. They get tax credits and deductions for such investments; they get no such tax benefits for improving the skills of their employees. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits and no jobs
  • Those with the money control our politics

So the Dow is booming and the rest of us are crashing. This is recovery? This should tell you something when both political parties use the Dow as a measure of the effectiveness of their policies and how misguided it is. So as Jason Linkins and Zach Carter wrote in the article that I have used liberally above, Dow Jones Hits Record High Thanks to Smoke, Mirrors Sector:

“So what does it say about the Dow that it can hit this dizzying new height — impressive by any measure in any era, post-crash or otherwise — at a time when the overall global economic outlook is so dismal, and the domestic recovery is barely felt by the citizens who sacrificed their capital to save the world from calamity? It says that we should be gravely concerned. It says that we have a two-tiered economy, one where profits flow and another where risks lurk. It says that a lot of people are being left behind”

So the economy we are so busy trying to fix is not working for most of us, and the austerity that we are implementing is welcomed by that top 1% while it hurts the rest of us. Yet we are oblivious to the reality of our diverging inequality . Here is the data that shows what people think our inequality is, what they think a true good distribution of income and wealth should be, and finally, what it actually is:

Screen Shot Inequality

Okay now add to that the following:

  • Our children are entering the job market with large education loans that will also depress our economy as they are prevented from buying homes or spending that could stimulate our economy
  • Many have been unemployed so long, that the damage may be permanent
  • Education is becoming more expensive and financial support is being cut so that less and less is available to more and more young Americans
  • Medical costs continue to grow and take more and more spending power away from the majority of people
  • We incentivize the investment in equipment and technology, but not people
  • With corporations hoarding cash and not hiring, wages are depressed and workers have no bargaining power

So when you put all this together, and we fighting over the Sequester, you wonder if we have lost our minds. What policies are we putting in place to deal with this giant wealth inequality? What policies are we putting in place to see that people can earn a living wage? What policies are we putting in place to ensure afforable education and health care? What policies are we putting in place to make sure that we all profit from profits? The answer to that question, if the Republicans win, is policies to exacerbate these problems, not rectify them. Even if we get Obama’s balanced approach, we are still moving in the wrong direction.

Clearly we need policies that tax and redistribute much of the wealth in this country so that all of us share in profits and increased productivity. We need to use these revenues to make education affordable, and reduce the debt load of our nation and our young people. We need a minimum wage that would guarantee a living wage. We need tax policies that encourage employment and investment in our people. We need to be creating jobs to rebuild our infrastructure. What are we getting are massive cuts to programs that help us do these things, and policies that continue the trends identified above.

Clearly what we are doing is not working as these trends continue to worsen and yet we are in denial about the effects of these misguided policies. The Tea Party had it right, sort of. We need to take our country back, but not from government, but from the wealthy. We need government to do that because without government, nobody can control those with all the money. They (or we the people) are the only ones who can level the playing field. Now do understand why Conservatives have been encouraging the Tea Party in the hate government creed? Are any of you awake out there?

*The way out of the deficit is to grow our way out, not by cutting and further contracting our economy, but by spending. As Paul Krugman pointed out this morning, “People still talk as if the deficit were exploding, as if the United States budget were on an unsustainable path; in fact, the deficit is falling more rapidly than it has for generations, it is already down to sustainable levels, and it is too small given the state of the economy…America never did pay off the debt from World War II — in fact, our debt doubled in the 30 years that followed the war. But debt as a percentage of G.D.P. fell by three-quarters over the same period.” If we could only learn from history.

**Graphic from Wonkblog

20130311-102949.jpg

Isn’t It Obvious?

I think one of the most interesting phenomena in today’s political world is that a large portion of our population believes that if we just do nothing, things will get better.  I believe the latest polling showed that over 70% of Americans now feel we are on the wrong track, but enough of them also believe that returning to the policies of failure is the right choice, so that change is stymied.  I watched a Tea Party convention in Sacramento this weekend and as expected it was fat white people mad as hell about something, but no plan to go forward other than government is bad, except of course for their Social Security and Medicare.  People want lower taxes, no government interference, a clean environment, safe food, good transportation and infrastructure, cheap energy, and energy independence.  See some conflicts here?  They don’t.

It is what I like to call the free ride syndrome.   It is a fairy tale that is being sold to us by many of our politicians that everything will be fine and no sacrifice is required if we just let business expand unfettered.  It is a lie that ought to be patently obvious at this point, but apparently is not.  We still believe in capitalism in the sense that what is good for business is good for America.  But back in the roaring nineties and early 2000s things were going just fine for business and yet our middle class was shrinking, average wages were stagnating or decreasing, and the segment of our population considered poor was growing.  Business doesn’t give a hoot about the country or its people.  Their “caring” has been apply demonstrated with the BP public relations ads about being there to help for the long haul while threatening to pull their money out of the recovery fund if the administration doesn’t lift its moratorium on deep water drilling.

Right now we have a population that still believes that the businesses that shipped their jobs overseas, cut wages,  pays executives now an average of 300 times the average worker salary, and is flush with money but won’t hire, is going to save us.  I don’t think we should be business friendly, but business wary.  We have heard some of their leaders claim that President Obama is hurting business.  Actually some compared him to Hitler.  What he is hurting is their unfettered ability to rape and pillage which they now think is their god given right.  If they are making fabulous amounts of money then they deserve it, and if it is at the expense of the rest of us, well, that is the law of capitalism.  Who do you think is better represented in Congress, you or the corporations?  But again and again a large portion of our population who is suffering at the hands of what these corporations promote continue to vote to empower them.  Go figure.

Right now we are living in a period of insanity.  The Tea Partiers are just one element of it.  The fact that many of our citizens still think that we can return to the good old days of less government where we lived on a housing bubble and its resultant credit, while no one minded the store is the real insanity.  Don’t get me wrong.  I strongly believe in capitalism, but real capitalism, not the oligarchies we have today.  Even Adam Smith thought capitalism should be controlled as he warned about the inequalities it could produce.  This is one of those inconvenient truths proponents of “Capitalism” forget today.  Probably our first step toward regaining who we once were is to realize that what is good for business and Wall Street may not be good for the country.  The outcome of that new conventional wisdom would be a new look at how business is conducted and who it benefits.  To put it quite succinctly, it has to be conducted in a way that is socially responsible which is not its mode of operation today.  It has to care about all of our citizens, and not jettison social and moral responsibility, not to mention patriotism, for its bottom line and maximizing its profits.  FDR knew this when he went to battle with the forces of industry to pull the country out of the Great Depression.

One last obvious fact:  We are not going to change anything if we are not willing to sacrifice.  I listen to Republicans and some Democrats tell us that we can’t afford to invest in infrastructure or education, or anything because of the deficit.  I guess once again we do nothing and hope things will get better.  The lesson from our own Depression and the Japanese Stagnation was that we cannot afford not to.  Right now we Americans have to understand that we need to make big investments by borrowing, with a plan down the road to pay it off.  That means taxes.   World War II saved us in that we were forced to go into deep debt by borrowing from our own citizens.  It resulted in the biggest economic boom our country has ever seen after the war, which made paying that debt off much easier.  If we can’t see that we need to do that now, well then we can’t see the obvious.  Sadly most can’t.