Why We Should Stop Obsessing About The Federal Budget Deficit
I wish President Obama and the Democrats would explain to the nation that the federal budget deficit isn’t the nation’s major economic problem and deficit reduction shouldn’t be our major goal. Our problem is lack of good jobs and sufficient growth, and our goal must be to revive both.
Deficit reduction leads us in the opposite direction — away from jobs and growth. The reason the “fiscal cliff” is dangerous (and, yes, I know – it’s not really a “cliff” but more like a hill) is because it’s too much deficit reduction, too quickly. It would suck too much demand out of the economy.
But more jobs and growth will help reduce the deficit. With more jobs and faster growth, the deficit will shrink as a proportion of the overall economy. Recall the 1990s when the Clinton administration balanced the budget ahead of the schedule it had set with Congress because of faster job growth than anyone expected — bringing in more tax revenues than anyone had forecast. Europe offers the same lesson in reverse: Their deficits are ballooning because their austerity policies have caused their economies to sink.
The best way to generate jobs and growth is for the government to spend more, not less. And for taxes to stay low – or become even lower – on the middle class.
(Higher taxes on the rich won’t slow the economy because the rich will keep spending anyway. After all, being rich means spending whatever you want to spend. By the same token, higher taxes won’t reduce their incentive to save and invest because they’re already doing as much saving and investing as they want. Remember: they’re taking home a near record share of the nation’s total income and have a record share of total wealth.)
Why don’t our politicians and media get this? Because an entire deficit-cutting political industry has grown up in recent years – starting with Ross Perot’s third party in the 1992 election, extending through Peter Peterson’s Institute and other think-tanks funded by Wall Street and big business, embracing the eat-your-spinach deficit hawk crowd in the Democratic Party, and culminating in the Simpson-Bowles Commission that President Obama created in order to appease the hawks but which only legitimized them further.
Most of the media have bought into the narrative that our economic problems stem from an out-of-control budget deficit. They’re repeating this hokum even now, when we’re staring at a fiscal cliff that illustrates just how dangerous deficit reduction can be.
Deficit hawks routinely warn unless the deficit is trimmed we’ll fall prey to inflation and rising interest rates. But there’s no sign of inflation anywhere. The world is awash in underutilized capacity As for interest rates, the yield on the ten-year Treasury bill is now around 1.26 percent – lower than it’s been in living memory.
In fact, if there was ever a time for America to borrow more in order to put our people back to work repairing our crumbling infrastructure and rebuilding our schools, it’s now.
Public investments that spur future job-growth and productivity shouldn’t even be included in measures of government spending to begin with. They’re justifiable as long as the return on those investments – a more educated and productive workforce, and a more efficient infrastructure, both generating more and better goods and services with fewer scarce resources – is higher than the cost of those investments.
In fact, we’d be nuts not to make these investments under these circumstances. No sane family equates spending on vacations with investing in their kids’ education. Yet that’s what we do in our federal budget.
Finally, the biggest driver of future deficits is overstated — rising health-care costs that underlie projections for Medicare and Medicaid spending. The rate of growth of health-care costs is slowing because of the Affordable Care Act and increasing pressures on health providers to hold down costs. Yet projections of future budget deficits haven’t yet factored in this slowdown.
So can we please stop obsessing about future budget deficits? They’re distracting our attention from what we should be obsessing about — jobs and growth.
We the People, and the New American Civil War
The vitriol is worse is worse than I ever recall. Worse than the Palin-induced smarmy 2008. Worse than the swift-boat lies of 2004. Worse, even, than the anything-goes craziness of 2000 and its ensuing bitterness.
It’s almost a civil war. I know families in which close relatives are no longer speaking. A dating service says Democrats won’t even consider going out with Republicans, and vice-versa. My email and twitter feeds contain messages from strangers I wouldn’t share with my granddaughter.
What’s going on? Yes, we’re divided over issues like the size of government and whether women should have control over their bodies. But these aren’t exactly new debates. We’ve been disagreeing over the size and role of government since Thomas Jefferson squared off with Alexander Hamilton, and over abortion rights since before Roe v. Wade, almost forty years ago.
And we’ve had bigger disagreements in the past – over the Vietnam War, civil rights, communist witch hunts – that didn’t rip us apart like this.
Maybe it’s that we’re more separated now, geographically and online.
The town where I grew up in the 1950s was a GOP stronghold, but Henry Wallace, FDR’s left-wing vice president, had retired there quite happily. Our political disagreements then and there didn’t get in the way of our friendships. Or even our families — my father voted Republican and my mother was a Democrat. And we all watched Edward R. Murrow deliver the news, and then, later, Walter Cronkite. Both men were the ultimate arbiters of truth.
But now most of us exist in our own political bubbles, left and right. I live in Berkeley, California – a blue city in a blue state – and rarely stumble across anyone who isn’t a liberal Democrat (the biggest battles here are between the moderate left and the far-left). The TV has hundreds of channels so I can pick what I want to watch and who I want to hear. And everything I read online confirms everything I believe, thanks in part to Google’s convenient algorithms.
So when Americans get upset about politics these days we tend to stew in our own juices, without benefit of anyone we know well and with whom we disagree — and this makes it almost impossible for us to understand the other side.
That geographic split also means more Americans are represented in Congress by people whose political competition comes from primary challengers – right-wing Republicans in red states and districts, left-wing Democrats in blue states and districts. And this drives those who represent us even further apart.
But I think the degree of venom we’re experiencing has deeper roots.
The nation is becoming browner and blacker. Most children born in California are now minorities. In a few years America as a whole will be a majority of minorities. Meanwhile, women have been gaining economic power. Their median wage hasn’t yet caught up with men, but it’s getting close. And with more women getting college degrees than men, their pay will surely exceed male pay in a few years. At the same time, men without college degrees continue to lose economic ground. Adjusted for inflation, their median wage is lower than it was three decades ago.
In other words, white working-class men have been on the losing end of a huge demographic and economic shift. That’s made them a tinder-box of frustration and anger – eagerly ignited by Fox News, Rush Limbaugh, and other pedlars of petulance, including an increasing number of Republicans who have gained political power by fanning the flames.
That hate-mongering and attendant scapegoating – of immigrants, blacks, gays, women seeking abortions, our government itself – has legitimized some vitriol and scapegoating on the left as well. I detest what the Koch Brothers, Karl Rove, Grover Norquist, Rupert Murdock, and Paul Ryan are doing, and I hate their politics. But in this heated environment I sometimes have to remind myself I don’t hate them personally.
Not even this degree of divisiveness would have taken root had America preserved the social solidarity we had two generations ago. The Great Depression and World War II reminded us we were all in it together. We had to depend on each other in order to survive. That sense of mutual dependence transcended our disagreements. My father, a “Rockefeller” Republican, strongly supported civil rights and voting rights, Medicare and Medicaid. I remember him saying “we’re all Americans, aren’t we?”
To be sure, we endured 9/11, we’ve gone to war in Iraq and Afghanistan, and we suffered the Great Recession. But these did not not bind us as we were bound together in the Great Depression and World War II. The horror of 9/11 did not touch all of us, and the only sacrifice George W. Bush asked was that we kept shopping. Today’s wars are fought by hired guns – young people who are paid to do the work most of the rest of us don’t want our own children to do. And the Great Recession split us rather than connected us; the rich grew richer, the rest of us, poorer and less secure.
So we come to the end of a bitter election feeling as if we’re two nations rather than one. The challenge – not only for our president and representatives in Washington but for all of us – is to rediscover the public good.
Obama is Back
Tonight our president was articulate and forceful — in sharp contrast to his performance in the first presidential debate. He stated his beliefs. He defended his record. He told America where he wanted to take the nation in his second term.
And he explained where Romney wanted to take us.
For example: “Romney says he’s got a five-point plan. Governor Romney doesn’t have a five-point plan; he has a one-point plan. And that plan is to make sure that folks at the top play by a different set of rules. That’s been his philosophy in the private sector; that’s been his philosophy as governor; that’s been his philosophy as a presidential candidate. You can make a lot of money and pay lower tax rates than somebody who makes a lot less. You can ship jobs overseas and get tax breaks for it. You can invest in a company, bankrupt it, lay off the workers, strip away their pensions, and you still make money.”
“Governor Romney … was on ‘60 Minutes’ just two weeks ago, and he was asked, is it fair for somebody like you, making $20 million a year, to pay a lower tax rate than a nurse or a bus driver, somebody making $50,000 a year? And he said, yes, I think that’s fair. Not only that, he said, I think that’s what grows the economy. Well, I fundamentally disagree with that.”
Obama told voters what Romney’s plan was for women (take away their freedom of choice), and for Hispanics (allow police to stop them and demand proof of citizenship, as in the Arizona law “that’s his [Romney’s] policy, and it’s bad policy.”)
He took responsibility for the security lapse in Libya, but made sure Americans understood the danger in Romney’s shoot-from-the-hip, rush to judgment approach to foreign policy.
And the President explained why the way to create more jobs and to get the economy back on track is to strengthen the middle class, in sharp contrast to Romney’s trickle-down redux.
Romney was as combative as in the first debate, but our newly-invigorated president made Romney’s combativeness look like that of a child in a tantrum rather than a principled adult with facts and detailed proposals to support his position.
Romney was also an automaton — moving robot-like across the stage, repeating the same scripted paragraphs in answers to different questions as if he had been programmed with a limited number of options.
Obama, by contrast, seemed steady and relaxed.
The debate left me relieved — the President’s performance will almost certainly stop Romney’s momentum, and may turn the tide — but also left me perplexed. Where was this Barack Obama in the last presidential debate? Was it the altitude in Denver, a failure of preparation, exhaustion, a temporary emotional glitch?
Mostly, though, I’m glad Barack is back.
Questions that are Unlikely to be Asked Wednesday Night
Governor Romney: You’ve said that you have used every legal method to reduce your tax liability. You’ve also said that as president you would close tax loopholes in order to help finance a major across-the-board tax cut. What specific tax loopholes have you used that you would close? A followup: Would you close the loophole that allows private-equity managers to treat their income as capital gains, subject to a 15 percent tax, even when they risk no capital of their own?
President Obama: You have spoken eloquently of the need to reduce the influence of big money in politics. What specific measures will you advance if you are reelected to accomplish this goal?
Governor Romney: You have promised to repeal the Dodd-Frank bill if you’re elected. Yet our largest Wall Street banks are significantly larger than they were before the near meltdown of 2008. How would you prevent another bank from being too big to fail?
President Obama: The Dallas Federal Reserve Board, one of the most conservative in the nation, has called for a limit to the size of Wall Street banks. Sanford Weill, the creator of Citigroup – one of the largest Wall Street banks – says Wall Street banks should be broken up. If you are reelected, will you support capping the size of Wall Street banks?
Governor Romney: You have said you’d repeal the Affordable Care Act if you’re elected. That would leave 30 million Americans without health insurance. You championed a small version of the Affordable Care Act in Massachusetts. Does that mean you believe it’s more efficient for each state to have its own system for insuring the uninsured?
President Obama: Last December, in a speech you gave in Osawatomie, Kansas, you noted that in the last few decades the average income of the top 1 percent has gone up by more than 250 percent, to $1.2 million per year. For the top one hundredth of 1 percent, the average income is now $27 million per year. And yet, over the last decade the incomes of most Americans have actually fallen by 6 percent. If you’re reelected president, what do you propose to do about this trend?
Governor Romney: Your mathematics has been attacked by those who say it’s impossible to provide the tax cut you propose; expand the military, as you want to do; preserve Medicare and Social Security, as you promise to do; and at the same time balance the federal budget, as you say you’ll do. Can you take us through the math, please, with specific numbers?
President Obama: You have called for equal marriage rights for gay Americans. If you’re reelected, will you support repeal of the Defense of Marriage Act?
Governor Romney: You support states’ rights, and don’t support wealth redistribution. Yet as you know, the citizens of most so-called “blue” states – notably California, New York, and Massachusetts – send more federal tax revenue to Washington than they receive back from Washington, while most of the citizens of “red” states send less tax revenue to Washington than their citizens receive back. Would you, as president, seek to end this subsidy of red states by blue states?
President Obama: In the 2008 campaign you and your opponent, Senator McCain, both supported some version of a “cap and trade” system for limiting emissions of carbon into the atmosphere. During the last four years, evidence has mounted that climate change may be doing irreversible damage to the planet. If you are reelected, will you push for a “cap and trade” system, or a carbon tax, or both?
Governor Romney: America has had some very wealthy men elected president. Your wealth is estimated to be more than a quarter of a million dollars. The wealthy men elected president – a Republican, Teddy Roosevelt; Franklin D. Roosevelt; and John F. Kennedy – all fought for equal opportunity, reduced the power of large corporations and Wall Street, and gave average working Americans more economic security. Do you share these objectives, and, if you’re elected president, what will you do to achieve them? Please be specific.
President Obama: TARP authorized not only a bailout of Wall Street banks but help to distressed homeowners. You chose not to condition the bailout of Wall Street on the banks reducing the amount people owed on their mortgages. hindsight, do you think that was a mistake? A follow up question, if I may: It is estimated that one in five American families is still underwater – owing more on their home mortgages than their homes are worth. So far your efforts to help them have fallen far short of the goals you set. If you are reelected, what specific measures will you initiate do more for these families?
Governor Romney: You have campaigned as a “businessman” who has the managerial experience to turn the economy around. Yet some say you’ve run one of the worst campaigns in recent memory – filled with gaffes, misstatements, poor timing, Clint Eastwood, and much else. Conservative columnist Peggy Noonan, for example, calls your campaign a “calamity.” Should Americans be concerned about your management abilities?
President Obama: You faced a particularly truculent Republican congress. But some say you didn’t fight Republicans hard enough during your first term, that you often began negotiations with compromises, and you didn’t use the full powers of your office to get more of what you wanted. Do you think there’s any validity to this criticism and, if so, what will you do differently in your second term?
How Romney Keeps Lying Through His Big White Teeth
“We’re not going to let our campaign be dictated by fact-checkers,” says Neil Newhouse, a Romney pollster.
A half dozen fact-checking organizations and websites have refuted Romney’s claims that Obama removed the work requirement from the welfare law and will cut Medicare benefits by $216 billion.
Last Sunday’s New York Times even reported on its front page that Romney has been “falsely charging” President Obama with removing the work requirement. Those are strong words from the venerable Times. Yet Romney is still making the false charge. Ads containing it continue to be aired.
Presumably the Romney campaign continues its false claims because they’re effective. But this raises a more basic question: How can they remain effective when they’ve been so overwhelmingly discredited by the media?
The answer is the Republican Party has developed three means of bypassing the mainstream media and its fact-checkers.
The first is by repeating big lies so often in TV spots – financed by a mountain of campaign money – that the public can no longer recall (if it ever knew) that the mainstream media and its fact-checkers have found them to be lies.
The second is by discrediting the mainstream media – asserting it’s run by “liberal elites” that can’t be trusted to tell the truth. “I am tired of the elite media protecting Barack Obama by attacking Republicans,” Newt Gingrich charged at a Republican debate last January, in what’s become a standard GOP attack line.
The third is by using its own misinformation outlets – led by Fox News, Rush Limbaugh and his yell-radio imitators, book publisher Regnery, and the editorial page of the Wall Street Journal, along with a right-wing blogosphere – to spread the lies, or at least spread doubt about what’s true.
Together, these three mechanisms are creating a parallel Republican universe of Orwellian dimension – where anything can be asserted, where pollsters and political advisers are free to create whatever concoction of lies will help elect their candidate, and where “fact-checkers” are as irrelevant and intrusive as is the truth.
Democracy cannot thrive in such a place. To the contrary, history teaches that this is where demagogues take root.
The Romney campaign has decided it won’t be dictated by fact-checkers. But a society without trusted arbiters of what is true and what is false is vulnerable to every lie imaginable.
Romney’s Lying Machine
I’ve been struck by the baldness of Romney’s repetitive lies about Obama — that Obama ended the work requirement under welfare, for example, or that Obama’s Affordable Care Act cuts $716 billion from Medicare benefits.
The mainstream media along with a half-dozen independent fact-checking organizations and sites have called Romney on these whoppers, but to no avail. He keeps making these assertions.
Every campaign is guilty of exaggerations, embellishments, distortions, and half-truths. But this is another thing altogether. I’ve been directly involved in seven presidential campaigns, and I don’t recall a presidential candidate lying with such audacity, over and over again. Why does he do it, and how can he get away with it?
The obvious answer is such lies are effective. Polls show voters are starting to believe them, especially in swing states where they’re being repeated constantly in media spots financed by Romney’s super PAC or ancillary PACs and so-called “social welfare” organizations (political fronts disguised as charities, such as Karl Rove and the Koch brothers have set up).
Romney’s lying machine is extraordinarily well financed. By August, according to Jane Mayer in her recent New Yorker article, at least 33 billionaires had each donated a quarter of a million dollars or more to groups aiming to defeat Obama – with most of it flooding into attack ads in swing states.
In early August, “Americans for Prosperity,” one of the nonprofit front groups masquerading as a charity, and founded in part by billionaire right-wingers Charles and David Koch, bought some $27 million in ad time on spots now airing in eleven swing states.
So Romney’s lying machine is working.
But what does all this tell us about the man who is running this lying machine? (Or if Romney’s not running it, what does it tell us about a man who would select the people who are?)
We knew he was a cypher — that he’ll say and do whatever is expedient, change positions like a chameleon, eschew any core principles.
Yet resorting to outright lies — and organizing a presidential campaign around a series of lies — reveals a whole new level of cynicism, a profound disdain for what remains of civility in public life, and a disrespect of the democratic process.
The question is whether someone who is willing to resort to such calculated lies, and build a campaign machine around them, can be worthy of the public’s trust with the most powerful office in the world.
The Fanatical GOP
The Republican Party platform, approved today, would bar abortion even in cases of rape and incest. This is basically Todd Akin’s position, but at least the GOP platform doesn’t assert that women’s bodies identify and reject rapists’ sperm.
Meanwhile, Romney’s selection of Paul Ryan provides ample evidence to seniors (and anyone planning to become a senior) that the GOP wants to eliminate Medicare.
And it’s convincing anyone in America still needing convincing that the GOP exists primarily to cut taxes on the wealthy rather than to reduce the budget deficit. The latest estimate of the non-partisan Center for Tax Policy is Ryan’s tax cuts for the rich would result in $4.6 trillion less revenue over the decade, generating an average saving for the typical millionaire of almost $400 million a year.
At the same time, the GOP remains unwaivering in its support of state laws allowing or encouraging the profiling of Latinos. And unrelenting in its war against gay rights.
We’re witnessing the implosion of what was once a great party. Its capture by the extreme right is becoming more apparent by the day.
And it’s not just women, seniors, budget hawks, Latinos, gays, and the poor who are becoming alarmed. Average Americans who don’t fall into one of these categories are becoming concerned, too — as they should.
Yet although the GOP crackup may bode well for Democrats this coming Election Day, it bodes ill for America. The capture of one of our great parties by fanatics is nothing to celebrate. A democracy needs at least two sane political parties.
Paul Ryan’s Faux Populism
On Friday, Paul Ryan, the presumptive Republican vice-presidential nominee, made the most populist speech of this campaign season.
“It’s the people who are politically connected, it’s the people who have access to Washington that get the breaks,” he told an enthusiastic crowd of over 2,000 at a high school gym in Virginia.
“Well, no more. We don’t want to pick winners and losers in Washington… . Hardworking taxpayers should be treated fairly and it should be based on whether they’re good, whether they work hard and not who they know in Washington. That’s entrepreneurialism. That’s free enterprise.”
Sounds good, but earlier this week – three days after being picked as Romney’s running-mate – Ryan went to Las Vegas to pay homage to Sheldon Adelson, the casino billionaire who is the poster boy for using money to become “politically connected” in Washington, and getting the “breaks” that come with it. Adelson has promised to donate up to $100 million to make sure Romney and Ryan are in the White House next year.
Much of Adelson’s fortune comes from his casino in Macau, in China, via his money-greased access to Washington.
When China’s pitch for the 2008 Olympics was endangered by a House resolution opposing the bid because of China’s “abominable human rights record,” Adelson phoned Tom DeLay, then House majority whip and recipient of Adelson’s political generosity — urging him to block the resolution, which DeLay promptly did. The next day, according to the New York Times, a Chinese vice premier promised Mr. Adelson an endless line of gamblers to the Macau casino.
The money Adelson has committed to putting Romney and Ryan into the White House is a business investment. Adelson has a lot riding on the 2012 election.
Last year, his Las Vegas Sands Corporation came under investigation by the Justice Department and the Securities and Exchange Commission for possible violations of the Foreign Corrupt Practices Act — bribing Chinese officials to help expand its casino in Macau.
The U.S. attorney’s office in Los Angeles, meanwhile, is investigating whether the Sands Corporation violated federal money-laundering laws by accepting more than $100 million from high-rolling gamblers accused of drug trafficking and embezzlement, rather than reporting the suspicious funds to the government.
Ryan has also been a major recipient of contributions from billionaire energy moguls Charles and David Koch. Koch Industries PAC has donated more than $100,000 to Ryan’s campaigns and his leadership PAC – more than any other corporate PAC, according to a NY Times analysis of campaign records.
You see, Koch industries spans a variety of oil and gas investments – whose value would be compromised if Congress and the White House got serious about climate change.
Small wonder Paul Ryan has emerged as one of Congress’s most outspoken skeptics of climate change. He has also repeatedly voted against energy efficiency standards, including a House vote to prohibit the EPA from regulating greenhouse gases.
Several months ago, when I debated Paul Ryan on ABC-TV’s “This Week,” he said we need to shrink the size of government because big corporations and wealthy individuals otherwise use government to their advantage.
“If the power and money are going to be here in Washington, that’s where the influence is going to go … that’s where the powerful are going to go to influence it,” he said.
It’s an odd argument coming from Ryan because his proposed budget doesn’t shrink government by cutting benefits and payments to big business and the rich. He increases military payments to defense contractors, for example, slashes Wall Street regulations, and gives giant tax benefits to the rich.
His budget shrinks government mainly by cutting benefits and payments to the poor and lower-income Americans. Over 60 percent of his spending cuts target programs for Americans in the bottom third of the income ladder.
Ryan is correct when he says “it’s the people who are politically connected, it’s the people who have access to Washington that get the breaks.”
But his faux populism obscures the main point. A much smaller government still dominated by money would continue to do the bidding of billionaires like casino mogul Sheldon Adelson, energy moguls like the Koch bothers, military contractors, and other high rollers now actively trying to put Ryan and Romney into the White House.
It just wouldn’t do anything for the rest of us.
Back from Three Weeks Vacation with a Bold Proposal
The Truth About Obama’s Tax Proposal (and the Lies the Regressives are Telling About It)
To hear the media report it, President Obama is proposing a tax increase on wealthy Americans. That’s misleading at best. He’s proposing that everyone receive a continuation of the Bush tax cuts on the first $250,000 of their incomes. Any dollars they earn in excess of $250,000 will be taxed at the old Clinton-era rates.
Get it? Everyone is treated exactly the same. Everyone gets a one-year extension of the Bush tax cut on the first $250,000 of income. No “class warfare.”
Yet regressive Republicans want Americans to believe differently. The editorial writers of the Wall Street Journal say the President wants to extend the Bush tax cuts only “for some taxpayers.” They urge House Republicans to extend the Bush tax cuts for “everyone” and thereby put Senate Democrats on the spot by “forcing them to choose between extending rates for everyone and accepting Mr. Obama’s tax increase.”
Regressives also want Americans to think the President’s proposal would hurt “tens of thousands of job-creating businesses,” as the Journal puts it.
A small business owner earning $251,000 would pay the Bush rate on the first $250,000 and the old Clinton rate on just $1,000.
Congress’s Joint Tax Committee estimates that in 2013 about 940,000 taxpayers would have enough business income to break through the $250,000 ceiling – and, again, they’d pay additional taxes only on dollars earned above $250,000.
All told, fewer than 3 percent of small business owners would even reach the $250,000 threshold.
A third lie is Obama’s proposal will “increase uncertainly and further retard investment and job creation,” as the Journal puts it.
Don’t believe it.
The real reason businesses aren’t creating more jobs is American consumers — whose purchases constitute 70 percent of U.S. economic activity — don’t have the money to buy more, and they can no longer borrow as before. Businesses won’t invest and hire without consumers. Even as executive pay keeps rising, the median wage keeps dropping — largely because businesses keep whacking payrolls.
The only people who’d have to pay substantially more taxes under Obama’s proposal are those earning far in excess of $250,000 — and they aren’t small businesses. They’re the fattest of corpulent felines. Their spending will not be affected if their official tax rate rises from the Bush 35 percent to the Bill Clinton 39.6 percent.
In fact, most of these people’s income is unearned — capital gains and dividends that are now taxed at only 15 percent. If the Bush tax cuts expire on schedule, the capital gains rate would return to the same 20 percent it was under Bill Clinton (the Affordable Care Act would add a 3.8 percent surcharge).
Funny, I don’t remember the economy suffering under Bill Clinton’s taxes. I was in Clinton’s cabinet, so perhaps my memory is self-serving. But I seem to recall that the economy generated 22 million net new jobs during those years, unemployment fell dramatically, almost everyone’s income grew, poverty dropped, and the economy soared. In fact, it was the strongest and best economy we’ve had in anyone’s memory.
In sum: Don’t fall for these big lies — Obama wants to extend the Bush tax cut “only for some people,” small businesses will be badly hit, businesses won’t hire because of uncertainty this proposal would create, or the Clinton-era tax levels crippled the economy,
A ton of corporate and billionaire money is behind these lies and others like them, as well as formidable mouthpieces of the regressive right such as Rupert Murdoch’s Wall Street Journal editorial page.
The truth is already a casualty of this election year. That’s why it’s so important for you to spread it.
The Wall Street Scandal of all Scandals
Just when you thought Wall Street couldn’t sink any lower – when its myriad abuses of public trust have already spread a miasma of cynicism over the entire economic system, giving birth to Tea Partiers and Occupiers and all manner of conspiracy theories; when its excesses have already wrought havoc with the lives of millions of Americans, causing taxpayers to shell out billions (of which only a portion has been repaid) even as its top executives are back to making more money than ever; when its vast political power (via campaign contributions) has already eviscerated much of the Dodd-Frank law that was supposed to rein it in, including the so-called “Volker” Rule that was sold as a milder version of the old Glass-Steagall Act that used to separate investment from commercial banking – yes, just when you thought the Street had hit bottom, an even deeper level of public-be-damned greed and corruption is revealed.
Sit down and hold on to your chair.
What’s the most basic service banks provide? Borrow money and lend it out. You put your savings in a bank to hold in trust, and the bank agrees to pay you interest on it. Or you borrow money from the bank and you agree to pay the bank interest.
How is this interest rate determined? We trust that the banking system is setting today’s rate based on its best guess about the future worth of the money. And we assume that guess is based, in turn, on the cumulative market predictions of countless lenders and borrowers all over the world about the future supply and demand for the dough.
But suppose our assumption is wrong. Suppose the bankers are manipulating the interest rate so they can place bets with the money you lend or repay them – bets that will pay off big for them because they have inside information on what the market is really predicting, which they’re not sharing with you.
That would be a mammoth violation of public trust. And it would amount to a rip-off of almost cosmic proportion – trillions of dollars that you and I and other average people would otherwise have received or saved on our lending and borrowing that have been going instead to the bankers. It would make the other abuses of trust we’ve witnessed look like child’s play by comparison.
Sad to say, there’s reason to believe this has been going on, or something very much like it. This is what the emerging scandal over “Libor” (short for “London interbank offered rate”) is all about.
Libor is the benchmark for trillions of dollars of loans worldwide – mortgage loans, small-business loans, personal loans. It’s compiled by averaging the rates at which the major banks say they borrow.
So far, the scandal has been limited to Barclay’s, a big London-based bank that just paid $453 million to U.S. and British bank regulators, whose top executives have been forced to resign, and whose traders’ emails give a chilling picture of how easily they got their colleagues to rig interest rates in order to make big bucks. (Robert Diamond, Jr., the former Barclay CEO who was forced to resign, said the emails made him “physically ill” – perhaps because they so patently reveal the corruption.)
But Wall Street has almost surely been involved in the same practice, including the usual suspects — JPMorgan Chase, Citigroup, and Bank of America – because every major bank participates in setting the Libor rate, and Barclay’s couldn’t have rigged it without their witting involvement.
In fact, Barclay’s defense has been that every major bank was fixing Libor in the same way, and for the same reason. And Barclays is “cooperating” (i.e., giving damning evidence about other big banks) with the Justice Department and other regulators in order to avoid steeper penalties or criminal prosecutions, so the fireworks have just begun.
There are really two different Libor scandals. One has to do with a period just before the financial crisis, around 2007, when Barclays and other banks submitted fake Libor rates lower than the banks’ actual borrowing costs in order to disguise how much trouble they were in. This was bad enough. Had the world known then, action might have been taken earlier to diminish the impact of the near financial meltdown of 2008.
But the other scandal is even worse. It involves a more general practice, starting around 2005 and continuing until – who knows? it might still be going on — to rig the Libor in whatever way necessary to assure the banks’ bets on derivatives would be profitable.
This is insider trading on a gigantic scale. It makes the bankers winners and the rest of us – whose money they’ve used for to make their bets – losers and chumps.
What to do about it, other than hope the Justice Department and other regulators impose stiff fines and even criminal penalties, and hold executives responsible?
When it comes to Wall Street and the financial sector in general, most of us suffer outrage fatigue combined with an overwhelming cynicism that nothing will ever be done to stop these abuses because the Street is too powerful. But that fatigue and cynicism are self-fulfilling; nothing will be done if we succumb to them.
The alternative is to be unflagging and unflinching in our demand that Glass-Steagall be reinstituted and the biggest banks be broken up. The question is whether the unfolding Libor scandal will provide enough ammunition and energy to finally get the job done.
Excluding Outsiders or Coming Together for the Common Good: What’s the True Meaning of Patriotism?
Recently I publicly debated a regressive Republican who said Arizona and every other state should use whatever means necessary to keep out illegal immigrants. He also wants English to be spoken in every classroom in the nation, and the pledge of allegiance recited every morning. “We have to preserve and protect America,” he said. “That’s the meaning of patriotism.”
To my debating partner and other regressives, patriotism is about securing the nation from outsiders eager to overrun us. That’s why they also want to restore every dollar of the $500 billion in defense cuts scheduled to start in January.
Yet many of these same regressives have no interest in preserving or protecting our system of government. To the contrary, they show every sign of wanting to be rid of it.
In fact, regressives in Congress have substituted partisanship for patriotism, placing party loyalty above loyalty to America.
The GOP’s highest-ranking member of Congress has said his “number one aim” is to unseat President Obama. For more than three years congressional Republicans have marched in lockstep, determined to do just that. They have brooked no compromise.
They couldn’t care less if they mangle our government in pursuit of their partisan aims. Senate Republicans have used the filibuster more frequently in this Congress than in any congress in history.
House Republicans have been willing to shut down the government and even risk the full faith and credit of the United States in order to get their way.
Regressives on the Supreme Court have opened the floodgates to unlimited money from billionaires and corporations overwhelming our democracy, on the bizarre theory that money is speech under the First Amendment and corporations are people.
Regressive Republicans in Congress won’t even support legislation requiring the sources of this money-gusher be disclosed.
They’ve even signed a pledge – not of allegiance to the United States, but of allegiance to Grover Norquist, who has never been elected by anyone. Norquist’s “no-tax” pledge is interpreted only by Norquist, who says closing a tax loophole is tantamount to raising taxes and therefore violates the pledge.
True patriots don’t hate the government of the United States. They’re proud of it. Generations of Americans have risked their lives to preserve it. They may not like everything it does, and they justifiably worry when special interests gain too much power over it. But true patriots work to improve the U.S. government, not destroy it.
But regressive Republicans loathe the government – and are doing everything they can to paralyze it, starve it, and make the public so cynical about it that it’s no longer capable of doing much of anything. Tea Partiers are out to gut it entirely. Norquist says he wants to shrink it down to a size it can be “drowned in a bathtub.”
When arguing against paying their fair share of taxes, wealthy regressives claim “it’s my money.” But it’s their nation, too. And unless they pay their share America can’t meet the basic needs of our people. True patriotism means paying for America.
So when regressives talk about “preserving and protecting” the nation, be warned: They mean securing our borders, not securing our society. Within those borders, each of us is on our own. They don’t want a government that actively works for all our citizens.
Their patriotism is not about coming together for the common good. It is about excluding outsiders who they see as our common adversaries.
How Wall Street Aims to Keep its Global Betting Parlor
The Commodity Futures Trading Commission, the main regular of derivatives (bets on bets), wants to extend Dodd-Frank regulations to the foreign branches and subsidiaries of Wall Street banks.
Horror of horrors, say the banks.
“If JPMorgan overseas operates under different rules than our foreign competitors,” warned Jamie Dimon, chair and CEO of JP Morgan, Wall Street would lose financial business to the banks of nations with fewer regulations, allowing “Deutsche Bank to make the better deal.”
This is the same Jamie Dimon who chose London as the place to make highly-risky swaps trades that have lost the firm upwards of $2 billion so far – and could leave American taxpayers holding the bag if JPMorgan’s exposure to tottering European banks gets much worse.
Dimon’s foreign affair is itself proof that unless the overseas operations of Wall Street banks are covered by U.S. regulations, giant banks like JPMorgan will just move more of their betting abroad – hiding their wildly-risky bets overseas so U.S. regulators can’t control them. Even now no one knows how badly JPMorgan or any other Wall Street bank will be shaken if major banks in Spain or elsewhere in Europe go down.
Call it the Dimon loophole.
This is the same Jamie Dimon, by the way, who at a financial conference a year ago told Fed chief Ben Bernanke there was no longer any reason to crack down on Wall Street. “Most of the bad actors are gone,” he said. “[O]ff-balance-sheet businesses are virtually obliterated, … money market funds are far more transparent” and “most very exotic derivatives are gone.”
One advantage of being a huge Wall Street bank is you get bailed out by the federal government when you make dumb bets. Another is you can choose where around the world to make the dumb bets, thereby dodging U.S. regulations. It’s a win-win.
Wall Street would like to keep it that way.
For two years now, squadrons of Wall Street lawyers and lobbyists have been pressing the Treasury, Comptroller of the Currency, Commodity Futures Trading Commission, SEC, and the Fed to go easier on the Street for fear that if regulations are too tight, the big banks will be less competitive internationally.
Translated: They’ll move more of their business to London and Frankfurt, where regulations are looser.
Meanwhile, the Street has been warning Europeans that if their financial regulations are too tight, the big banks will move more of their business to the US, where regulations will (they hope) be looser.
After the Basel Committee on Banking Supervision (a global financial regulatory oversight body) came up with a new set of rules to toughen bank capital and liquidity requirements, European officials threatened to get even tougher. They approved a new system of European regulatory bodies with added powers to ban certain financial products or activities in times of market stress.
This prompted Lloyd Blankfein, CEO of Goldman Sachs, to issue — in the words of the Financial Times — “a clear warning that the bank could shift its operations around the world if the regulatory crackdown becomes too tough.”
Blankfein told a European financial conference that while Europe remains of vital importance to Goldman, with less than half of the bank’s business now generated in the U.S., the introduction of “mismatched regulation” across different regions (that is, tougher regulations in Europe than in the U.S.) would tempt banks to search out the cheapest and least intrusive jurisdiction in which to operate.
“Operations can be moved globally and capital can be accessed globally,” he warned.
Someone should remind Dimon and Blankfein that a few years ago they and their colleagues on the Street almost eviscerated the American economy, and that of much of the rest of the world. The Street’s antics required a giant taxpayer-funded bailout. Most Americans are still living with the results, as are millions of Europeans.
Wall Street can’t have it both ways – too big to fail, and also able to make wild bets anywhere around the world.
If Wall Street banks demand a free rein overseas, the least we should demand is they be broken up here.
Romney-Trump in 2012!
What could Romney’s handlers be thinking when they hyped his connection with Donald Trump — fundraising with Trump, offering supporters the possibility of a meal with Trump, relishing Trump’s attention and endorsement?
Trump signifies everything Romney presumably doesn’t want people to associate with himself — conspicuous wealth, arrogance, hubris, and a distinct preference for money over all other human values.
Trump, like Romney, represents almost everything that’s wrong with the American economy today — an unprecedented amount of wealth and power at the very top, widespread insecurity and declining real wages for everyone else, and a form of casino capitalism that places huge bets with other peoples’ money and depends on everyone else to bail it out when the bets turn sour.
But wait a minute. Perhaps Romney’s handlers are smarter than they seem. Maybe Mitt has decided to let it all hang out. Rather than try to hide what’s obvious to everyone, the new strategy is to make Romney’s liabilities into assets by flaunting them. Be even bigger and bolder. Money rules!
In fact, they’re mulling an even bigger and bolder move. Just as Bill Clinton’s choice of Al Gore as running mate in 1992 accentuated Clinton’s youthful energy and the new era Clinton hoped to bring forth, Mitt’s choice of Trump as running mate would allow Mitt to celebrate the “I’ve got mine and the hell with you” social Darwinism that he and the regressive right are convinced will be good for America.
The new bumper-sticker: ROMNEY-TRUMP IN 2012. YOU’RE FIRED!