Better Late Than Never

12/02/2012
Robert Kuttner
Co-founder and co-editor, 'The American Prospect'
http://www.huffingtonpost.com/robert-kuttner/fiscal-cliff_b_2229352.html

President Obama has belatedly grasped that holding firm on tax increases for the top 2 percent, and defending Social Security, Medicare and Medicaid against needless cuts, is good politics and good policy. As his Treasury Secretary, Tim Geithner put it on Fox News Sunday, "Why does it make sense for the country to force tax increases on all Americans, because a small group of Republicans want to extend tax rates for 2 percent of Americans, why does that make any sense? There's no reason why it should happen."

Geithner was even more explicit on CNN, when interviewer Candy Crowley pressed him on whether the Administration was really prepared to go "off the cliff" if Republicans refused to raise tax rates on the top 2 percent.

"If Republicans are not willing to let rates go back up [on the top 2 percent" Geithner said, "and we think they should go back to the Clinton levels when the American economy did exceptionally well, then there will not be an agreement."

In his budget proposal, the president offered no cuts in Social Security, and only $400 billion over 10 years in Medicare and other savings, money that can be gotten by allowing Medicare to negotiate bulk discounts with drug companies and other administrative savings, without raising the eligibility age or otherwise cutting into benefits.

The Republicans, meanwhile are revealed as the people who would push the economy off a cliff in order to fight for tax breaks for the richest 2 percent; the party that would rather cut benefits in Medicare and Social Security than have the wealthy pay even the relatively low tax rates of the Clinton years.

It was Winston Churchill who said that you can always count on Americans to do the right thing, after they've tried everything else. Obama, belatedly, is doing the right thing.

He tried taking big savings out of Medicare in order to finance his Affordable Care Act. The Republicans pilloried him for it.

He tried pivoting to fashionable austerity, appointing the Bowles-Simpson Commission to propose far deeper budget cuts than the economy required. The commission majority report offered a deflationary program of cuts in Medicare, Social Security, and no rate increases on the taxes paid by the rich. Mercifully, the commission failed to get the necessary super-majority for its proposals.

And he tried offering cuts in Social Security and Medicare in order to get a budget deal in 2011 with House Speaker John Boehner. But the refusal of the Republicans to consider even a penny of tax increases saved the President from himself.

Now, as a last resort, President Obama has come around to sensible economics and smart politics -- no cuts in social insurance benefits, no backing down on tax hikes for the rich, no deeper deficit cuts until the economy is stronger. His plan even proposes $50 billion in new public investments -- not enough but a big step in the right direction.

What's so heartening is not just that Obama is helping voters appreciate what Republicans really stand for but that he is turning his back on the echo chamber of deficit hysteria ginned up by Wall Street as a way of cutting social insurance and protecting low tax rates on the richest. Seeing Pete Peterson and his corporate deficit-hawk cronies lose this fight is as satisfying as seeing the Republicans lose.

So what happens next?

The Republicans will continue to huff and puff that it's Obama's fault if taxes go up for everyone. But the fact is that the Senate has already approved a continuation of the Bush tax cuts for the bottom 98 percent -- all the Republican House has to do is concur and Obama will sign the bill into law.

The business elite, through the corporate-funded campaign "Fix the Debt" campaign, will continue to warn about the perils of the automatic tax hikes and spending cuts -- the dreaded fiscal cliff -- and press the two parties to meet each other halfway.

But domestic spending has already been cut by $1.7 trillion over 10 years under the terms of the 2011 budget deal. Domestic spending has been cut enough. Tax rates on the rich are already at a postwar low, and it hasn't levitated a depressed economy. The Democratic Party have already met the GOP more than halfway. And each time, the Republicans use the concession as the new starting point.

If Obama hangs tough and the budget briefly goes "over the cliff" in the form of automatic tax increases for everyone and mandated indiscriminate spending cuts that risk sending the economy back into recession, the Republicans are at last set up to take the blame that they richly deserve.

Obama seems willing let that happen, in order to keep the pressure on Republicans to allow taxes to rise on the rich.

The risk is that when the negotiations finally get to the end game, and Republicans are forced accept the tax deal, Obama may succumb to pressure to cut Social Security and Medicare, so that he can say that he, too, gave ground on issues that were difficult for his party. The risk is that he will listen to his inner bipartisan.

That would be a huge mistake. The Republicans have been unmasked for who they are. The best thing Obama can do is to continue to hold the high ground of this debate. The Republican position is entirely at odds with the vast majority of voters. If Obama doesn't fold a winning hand, eventually the Republicans will have to come to him.

Carly Fiorina Wants Stuff

Failed CEO Carly Fiorina, with $40m retirement package, says union pensions too high
11/26/2012 by Chris in Paris
http://americablog.com/2012/11/carly-fiorina-fiscal-cliff-budget.html

The other day it was the CEO of a bailed out bank demanding cuts to Social Security.

But nobody whines about the fake “fiscal cliff” better than failed GOP candidate and “19th Worst CEO of All Time” CEO Carly Fiorina.

You might remember Fiorina from the days when she worked at HP, and was sent packing in 2005 with a whopping $40 million severance benefits package. Was that “fair,” Carly?

Fiorina is widely considered one of the worst CEOs in recent years, though that didn’t stop her from receiving millions in cash, stock, benefits and pension when she was fired. It rarely does.

Carly Fiorina Says You Can’t Want Stuff Too

But no, in her entitled little world, the problem is not the fat cats like her, but the unions.

“It is not fair that public employee union pensions and benefits are so rich now that cities and states are going bankrupt, and college tuition is going up 20 and 30%… There is a lot that isn’t fair right now.”

Failed investments and drastic tax cuts by governments have nothing to do with the problem. Imagine that. As Think Progress noted, Fiorina whined on TV that she “only” received a $21 million severance, though she somehow overlooked the rest of the redundancy plan. But to be fair to Fiorina, what Republican candidate hasn’t overlooked another $20 million plus?

She starts at about 2 minutes into the video below.  More from me after the video.Other than being an expert on living off of a platinum parachute and failing as a political candidate, it’s not clear what special expertise Fiorina has to offer for NBC News or any other media outlet. She’s certainly not even considered to be a corporate jobs creator, the way Jack Welch is (wrongly) considered by the media. She has a pretty good agent though if she can get TV spots despite her awful record.

So tell me who is really part of the moocher class that corporate CEOs and 1%-ers keep talking about? Are they the people asking for basic healthcare or the people who have enough money to build moats and personal golf courses around their mansions? Another tip off sign of a moocher is that no matter how much they have, it’s not enough and they want more of your money.

Damn if these Republicans don’t always want stuff.

The other sign of who belongs to the moocher class is to listen to who actually believes in the so-called fiscal cliff. Anyone who believes it’s for real is probably a moocher, but a moocher who grabs a lot more money than anyone who actually needs Social Security or Medicare.

As we get closer to the end of the year, expect the moocher class to be in your face a lot more, explaining how the situation is dire and the world will end if we don’t address the “fiscal cliff” but cutting everything we hold dear while leaving the GOP tax and war machine firmly in place to kill the budget yet again another day.

Ignore them and remember, it’s not a fiscal cliff, it’s an austerity bomb.

Goldman CEO insists on Social Security cuts

Goldman’s multi-billion dollar bailout queen CEO insists on Social Security, Medicare cuts
11/20/2012 by Chris in Paris
http://americablog.com/2012/11/multi-billion-dollar-bailout-queen-ceo-insists-social-security-cuts-are-necessary.html

Of course, another super rich white guy, who is set for life, wants to gut Social Security and Medicare because “we can’t afford it.”

Why is it that the people howling the most about ripping apart the social system, who complain the loudest about us being unable to afford Social Security and Medicare, are those who profited so heavily from the public’s largesse?

Goldman Sachs CEO Lloyd Blankfein is an extreme example since his own firm (like the rest of Wall Street) required billions of taxpayer money to stay alive, but let’s not forget about the destructive duo, Alan Simpson and Erskine Bowles.

Alan Simpson spent his life working as a politician, followed by going on the speaking circuit or whatever it is that he does when he talks about butchering Social Security and Medicare while promoting tax cuts. It must be nice knowing that he’s set for life with the best health care plan, and a retirement plan unknown to most working Americans. And our friend, fellow “Democrat” Erskine Bowles also did well working in finance followed by the White House, then a large state university followed by his own speaking circuit gigs.

One does wonder how much they intend to give up from their own fat government benefits, as part of our “common sacrifice.”

Many of us have completely had it with rich, white guys like this proudly speaking to the media about how much gutting and shredding they think is necessary to “save the system,” while refusing to budge on their own massive tax cuts. They’ve all lived high on the hog at our expense, and now we’re giving them an easy forum for promoting this rich-guy assault on the system.

When is enough enough for these people? Much like sending a bill to Texas as the cost of seceding, let’s send a bill to these pampered fat cats for everything we’ve given them, and tell them all to shove off. They’ve cost us enough — quite literally trillions — and now they want to cost us more, by ripping apart the social fabric of America.

No thanks.

CBS News:

BLANKFEIN: You’re going to have to undoubtedly do something to lower people’s expectations — the entitlements and what people think that they’re going to get, because it’s not going to — they’re not going to get it.

PELLEY: Social Security, Medicare, Medicaid?

BLANKFEIN: You can look at history of these things, and Social Security wasn’t devised to be a system that supported you for a 30-year retirement after a 25-year career. … So there will be things that, you know, the retirement age has to be changed, maybe some of the benefits have to be affected, maybe some of the inflation adjustments have to be revised. But in general, entitlements have to be slowed down and contained.

PELLEY: Because we can’t afford them going forward?

BLANKFEIN: Because we can’t afford them.


Someone please help me refresh my memory, but how did we afford to give away trillions of dollars to Wall Street, to save their lifestyle, so they could continue giving themselves huge bonuses while the rest of us lost our business and our homes?

I don’t recall any complaints back in 2008 and 2009 about the middle class not being able to afford the bail out of people like Blankfein, do you?  Or any talk during the Bush years of the entire country not being able to afford his massive tax cuts that broke the budget?

Some thanks.

Obama and progressives

Obama and progressives: what will liberals do with their big election victory?
With fights over social security, Medicare, ongoing war, and other key progressive priorities looming, what will they do with their new power?
Glenn Greenwald
Wednesday 7 November 2012
http://www.guardian.co.uk/commentisfree/2012/nov/07/obama-progressives-left-entitlements

The greatest and most enduring significance of Tuesday night's election results will likely not be the re-election of Barack Obama, but rather what the outcome reflects about the American electorate. It was not merely Democrats, but liberalism, which was triumphant.

To begin with, it is hard to overstate just how crippled America's right-wing is. Although it was masked by their aberrational win in 2010, the GOP has now been not merely defeated, but crushed, in three out of the last four elections: in 2006 (when they lost control of the House and Senate), 2008 (when Obama won easily and Democrats expanded their margins of control), and now 2012. The horrendous political legacy of George Bush and Dick Cheney continues to sink the GOP, and demographic realities – how toxic the American Right is to the very groups that are now becoming America's majority – makes it difficult to envision how this will change any time soon.

Meanwhile, new laws to legalize both same-sex marriage and marijuana use were enacted in multiple states with little controversy, an unthinkable result even a few years ago, while Obama's late-term embrace of same-sex marriage seems to have resulted only in political benefit with no political harm. Democrats were sent to the Senate by deeply red states such as Indiana, Missouri and North Dakota, along with genuinely progressive candidates on domestic issues, including Elizabeth Warren in Massachusetts and Tammy Baldwin in Wisconsin, who became the first openly gay person elected to the Senate. As a cherry on the liberal cake, two of the most loathed right-wing House members – Rep Joe Walsh of Illinois and Allen West of Florida – were removed from office.

So the delirium of liberals this morning is understandable: the night could scarcely have gone better for them. By all rights, they should expect to be a more powerful force in Washington. But what are they going to get from it? Will they wield more political power? Will their political values and agenda command more respect? Unless the disempowering pattern into which they have voluntarily locked themselves changes, the answer to those questions is almost certainly "no".

Consider the very first controversial issue Obama is likely to manage, even before the glow of his victory dims, literally within the next couple of weeks. It is widely expected - including by liberals - that Obama intends (again) to pursue a so-called "Grand Bargain" with the GOP: a deficit- and debt-cutting agreement whereby the GOP agrees to some very modest tax increases on the rich in exchange for substantial cuts to entitlement programs such as social security and Medicare, the crown legislative jewels of American liberalism.

Indeed, Obama already sought in his first term to implement sizable cuts to those programs, but liberals were saved only by GOP recalcitrance to compromise on taxes. In light of their drubbing last night, they are likely to be marginally if not substantially more flexible, which means that such a deal is more possible than ever.

In other words, the political leader in whose triumph liberals are today ecstatically basking is likely to target their most cherished government policies within a matter of weeks, even days. With their newly minted power, will they have any ability, or even will, to stop him? If history is any indication, this is how this "fight" will proceed:

STEP ONE: Liberals will declare that cutting social security and Medicare benefits – including raising the eligibility age or introducing "means-testing" – are absolutely unacceptable, that they will never support any bill that does so no matter what other provisions it contains, that they will wage war on Democrats if they try.

STEP TWO: As the deal gets negotiated and takes shape, progressive pundits in Washington, with Obama officials persuasively whispering in their ear, will begin to argue that the proposed cuts are really not that bad, that they are modest and acceptable, that they are even necessary to save the programs from greater cuts or even dismantlement.

STEP THREE: Many progressives – ones who are not persuaded that these cuts are less than draconian or defensible on the merits – will nonetheless begin to view them with resignation and acquiescence on pragmatic grounds. Obama has no real choice, they will insist, because he must reach a deal with the crazy, evil GOP to save the economy from crippling harm, and the only way he can do so is by agreeing to entitlement cuts. It is a pragmatic necessity, they will insist, and anyone who refuses to support it is being a purist, unreasonably blind to political realities, recklessly willing to blow up Obama's second term before it even begins.

STEP FOUR: The few liberal holdouts, who continue to vehemently oppose any bill that cuts social security and Medicare, will be isolated and marginalized, excluded from the key meetings where these matters are being negotiated, confined to a few MSNBC appearances where they explain their inconsequential opposition.

STEP FIVE: Once a deal is announced, and everyone from Obama to Harry Reid and the DNC are behind it, any progressives still vocally angry about it and insisting on its defeat will be castigated as ideologues and purists, compared to the Tea Party for their refusal to compromise, and scorned (by compliant progressives) as fringe Far Left malcontents.

STEP SIX: Once the deal is enacted with bipartisan support and Obama signs it in a ceremony, standing in front of his new Treasury Secretary, the supreme corporatist Erskine Bowles, where he touts the virtues of bipartisanship and making "tough choices", any progressives still complaining will be told that it is time to move on. Any who do not will be constantly reminded that there is an Extremely Important Election coming – the 2014 midterm – where it will be Absolutely Vital that Democrats hold onto the Senate and that they take over the House. Any progressive, still infuriated by cuts to social security and Medicare, who still refuses to get meekly in line behind the Party will be told that they are jeopardizing the Party's chances for winning that Vital Election and – as a result of their opposition - are helping Mitch McConnell take over control of the Senate and John Boehner retain control of the House.

And so it goes. That is the standard pattern of self-disempowerment used by American liberals to render themselves impotent and powerless in Washington, not just on economic issues but the full panoply of political disputes, from ongoing militarism, military spending and war policies to civil liberties assaults, new cabinet appointments, immigration policy, and virtually everything else likely to arise in the second term.

Indeed, nobody takes STEP ONE in that depressing ritual even a little bit seriously. Nobody believes the declarations of progressives about what is "unacceptable", about what their "red lines" are, about how they will refuse to go along with what they are given if it contains what they declare intolerable. That's because STEPS TWO THROUGH SIX always follow, and until that pattern is broken, STEP ONE will continue to be viewed as a trivial joke.

With last night's results, one can choose to see things two ways: (1) emboldened by their success and the obvious movement of the electorate in their direction, liberals will resolve that this time things will be different, that their willingness to be Good Partisan Soldiers depends upon their core values not being ignored and stomped on, or (2) inebriated with love and gratitude for Obama for having vanquished the evil Republican villains, they will follow their beloved superhero wherever he goes with even more loyalty than before. One does not need to be Nate Silver to be able to use the available historical data to see which of those two courses is the far more likely one.

Beast of the Year 2012: Paul Ryan

The votes are in, and The Konformist readers have spoken. Paul Ryan is your choice for the 2012 Beast of the Year - a choice that is well deserved.

Perhaps the biggest news story of the last year - if not of the last four years - is just how scary crazy the entire GOP has gone in the age of Obama.  And no figure has been more important in the Republican Party to the right-wing movement than Paul Ryan, currently their VP nominee in this year's election.  His 2012 federal budget plan would abolish korporate income taxes, estate taxes, taxes on capital gains, dividends and interest, and heavily reduce tax rates on the wealthy while ruthlessly cutting social programs, partially privatizing part of Social Security to Wall Street and fully privatizing Medicare.  Some would call this "Ayn Rand on Crack" (which may be an unfair smear of Ms. Rand, who was at least a gifted writer) yet all but four Republicans in the the HOR and five in the Senate voting for it.

Runner-Up: Brian Moynihan

In the unlikely event that Ryan can no longer fill his duties as Beast of the Year, Brian Moynihan is ready to take over the crown. Rest assured the BOTY trophy is in good hands either way, as Mr. Moynihan has had great Beastly practice as CEO of Bank of America.

In any case, we salute you, Paul Ryan and Brian Moynihan.  Congratulations, and keep up the great work, dudes!!!

Thank You, Paul Ryan

Robert Kuttner
Co-founder and co-editor, 'The American Prospect'
09/16/2012
http://www.huffingtonpost.com/robert-kuttner/thank-you-paul-ryan_b_1888870.html

Two years ago, the Democrats handed the Republicans their two crown jewels -- Social Security and Medicare. By targeting Medicare for budget "savings" that could be used to finance what the Republicans called Obamacare, the White House gave the GOP ammunition to contend that the Democrats were taking benefits away from seniors.

Expanding health coverage for the young and defense of Medicare for the elderly got depicted as a zero sum game. Republicans made huge gains in 2010 with seniors. Instead of the political winner it should have been, Obamacare became an epithet.

Then, in the aborted grand budget bargain of 2011, Obama was so eager to achieve a compromise on mostly Republican terms that he very nearly agreed to needless cuts in Social Security. Only Republican intransigence on any kind of tax hikes saved the president from himself -- or more precisely from his deficit-hawk advisers.

Now, however, Republicans have given Social Security and Medicare back to the Democrats (where they belong.) Polls show that Medicare is no longer a winner for the Republicans, and the Democrats have embraced the term, "Obamacare" as positive label.

The reason, of course, is Paul Ryan.

Thanks to Ryan's very explicit advocacy of scrapping public Medicare in favor of vouchers, seniors are returning to their natural Democratic home. The transparently bogus effort of the Romney-Ryan ticket to walk back Ryan's voucher proposal -- and alter it into a plan where seniors get to choose traditional public Medicare or vouchers -- only reinforces the voter perception of Romney as someone who keeps changing his story. The euphemism of "premium support" is fooling nobody and adds to the perception of Republican evasiveness.

The latest New York Times-CBS poll shows that some three quarters of likely voters favor keeping Medicare the way it is, and trust Obama more than the Republicans to defend it. This is a huge shift from last year.

Democrats, meanwhile, have acquired some spine. Defense of public Medicare against "vouchercare" has become part of their standard message.

So far, so good.

Also good ammunition against Romney-Ryan was Ryan's support in 2005 for a George W. Bush plan to allow younger workers to divert some of their Social Security taxes into private accounts -- a proposal that proved a political disaster and was subsequently scrapped.

But never underestimate the Democrats' capacity for snatching defeat out of the jaws of victory.

Lurking in the wings is the latest reincarnation of Bowles-Simpson, the bipartisan zombie that refuses to die. A "Fix the Debt" campaign," chaired by none other than Erskine Bowles and Alan Simpson, has become the darling of the centrist media and of Wall Street.

The Peter G. Peterson Foundation, the National Committee for a Responsible Federal Budget, several leading Democratic deficit hawks, and some 70 corporate CEOs have pledged to raise $50 to 100 million dollars in corporate money for this latest campaign, which promotes yet another a grand bargain of tax increases and cuts in Social Security and other social spending.

Bowles continues to be touted as Obama's next Treasury Secretary when Tim Geithner finally (mercifully!) calls it a day. Other Democrats who are part of this effort are former Pennsylvania Governor Ed Rendell, who was chair of the Democratic National Committee in 2000, and former Democratic Congressman Vic Fazio, who once headed the Democratic Congressional Campaign Committee.

Rounding out this group of Democrats doing Republicans' bidding on fiscal issues are former Georgia Senator Samm Nunn and Wall Streeter and former Obama official Steve Rattner.

Shame!

Bowles and Simpson were featured on NBC's Meet the Press Sunday where they were described as "widely hailed as serious thought leaders on dealing with the country's economic problems."

Hailed, that is, by the same corporate media. The mainstream media just laps this stuff up, because Simpson, a Republican, is willing to criticize the Romney-Ryan ticket and Bowles, a Wall Street Democrat, is not shy about criticizing Obama. So they must be both courageous and right. As Bowles said on Meet the Press Sunday, "We don't think President Obama has gone far enough in his reduction on entitlement spending."

But Social Security continues to be in surplus, and to lend the rest of the government money. Its projected future deficits did not cause the current economic crisis. Its reduced revenues are the result of the crisis.

Social Security is financed by payroll taxes. If median worker pay rose with productivity, instead of most of the gain in national income going to people like those on the "Fix the Debt Campaign", Social Security would be in surplus indefinitely. Social Security's modest projected shortfall can be erased by raising the ceiling on income subject to payroll tax, not by slashing benefits.

The corporate elite lives in a self-reinforcing bubble, where the deficit is the economy's most dire problem. An important study by political scientists Benjamin Page, Larry Bartels and Nathan Seawright interviewed a sample of very wealthy Americans. Not surprisingly, their views on the importance of budget balance versus job creation and social supports were far to the right of those of most voters. (Fully 87 percent of very wealthy respondents put deficit reduction as the most pressing national issue.)

This is conventional wisdom among the top one percent. Corporate CEOs of the sort who are underwriting this latest Bowles-Simpson assault don't need Social Security for their own retirement and don't mind sacrificing it on the altar of budget balance.

Back in the real world, Social Security is both good policy and good politics. As private pension plans keep being gutted and seniors interest earnings on savings accounts are basically nothing, Social Security is the one government guaranteed portion of retirement income. It is immensely popular, and to the extent Democrats are resolute in its defense, the program's popularity rubs off on them.

But because of pressure from corporate-funded groups like this one, the Obama Administration keeps coming close to buckling on the issue of traditional Democratic defense of Social Security. This will arise again as Congress gets closer to the dread "fiscal cliff," made up of expiration of the Bush tax cuts in January 2013 and the threatened budget sequester (that is the fruit of Republicans holding the government hostage in 2011.)

Given the importance of Social Security to regular Americans and its partisan value to Democrats since Franklin Roosevelt, no sane Democrat should be associated with these efforts. But in an age of Citizens United and unlimited corporate donations, where Obama tacks back and forth between criticizing Wall Street and soliciting Wall Street executives for campaign funds, it is all too tempting to demonstrate fiscal "soundness" by joining this parade.

Thanks to Paul Ryan, however, the president may be spared again. The association of Romney-Ryan with the gutting of Medicare and Social Security offers just too tempting a political target to throw away for the sake of impressing Simpson, Bowles, and their corporate cronies. Or so we must hope.

Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is A Presidency in Peril.

Lies, Bigger Lies, and the Ryan Budget

Pat Choate

Economist, Author and Ross Perot's Vice Presidential Running Mate in 1996
08/16/2012
http://www.huffingtonpost.com/pat-choate/lies-bigger-lies-and-the-_b_1792580.html

The Presidential campaign now seems to hinge on whether the financing of Medicare and Social Security is going to kill the American economy. It is not. This is a faux issue being pushed by radical Republicans who want to eliminate these two programs altogether.

The financial reality is that the Old Age Survivors and Disability Insurance Program (OASDI), the Disability Insurance Program (DI) -- what we call Social Security -- and the Medicare Program have huge trust funds paid for by workers over the past 40 years and both Social Security and Medicare are solvent well into the future.

The Social Security trust fund has more than $2.7 trillion of assets and Medicare's trust fun has $244 billion. No other federal programs have such large reserves to finance future operations.

In their 2012 Annual Report, the Social Security System's Board of Trustees reported that the "dollar level of the combined trust funds (OASDA and DI) declines beginning in 2021 until assets are exhausted in 2033."

Yes, the Social Security System is fully funded for another 21 years. Even if no changes are made between now and then, the System will provide 75 percent of benefits to recipients for an additional 50 years. This is hardly a financial crisis.

The Trustees also reported that Medicare is fully funded until 2024 -- that is another 12 years.

Small painless steps, such as increasing the cap on wages taxed to fund Social Security, can extend its surpluses until the last part of the 21st Century -- for us, our children and children's children.

Shifting U.S. health care to a single pay medical system, such as Israel's, which Mitt Romney found so outstanding during his recent trip there, could cut medical costs from the present 16 percent of the U.S. Gross Domestic Product to 8 percent and provide even better care. That would create more than $1 trillion of annual savings alone.

What is particularly striking about all this is that even as the GOP ticket and their surrogates are making these specious arguments, our infrastructure is falling apart because of underinvestment. Cities and states are firing hundreds of thousands of teachers, firemen and police, because they have too little money. More than 25 million American workers who want a job remain out of work. Apparently, these are not crises that merit the candidates' or the nation's immediate attention.

The real crisis, according to Mitt Romney, Paul Ryan and the Republican Party is the financing of Social Security and Medicare. To "save" Medicare, Ryan's plan advocates creating a voucher program for those 55 years old and under. To "save" Social Security, they want to privatize it. Subtly, they are even implying that these two programs are the source of the present federal budget deficit of $1 trillion annually.

The true goal of these Republicans is to use the current fiscal crisis as a Trojan horse to gut both these programs. Our federal budget deficits exist because of lost revenues created by the Bush tax cuts, the two wars that are being financed by more debt, and the economic collapse created by federal deregulation of banks and Wall Street. Therein lies the real solution.

Simply put, both the Republicans and Democrats are filling the presidential and Congressional campaigns with noxious lies.

But of all these lies, the Ryan Budget's attack on Medicare and Social Security is the greatest and of the most consequence.

CEO Plan to Steal Social Security and Medicare

The CEO Plan to Steal Your Social Security and Medicare
Monday, 30 July 2012
Dean Baker, Truthout
http://truth-out.org/news/item/10600-the-ceo-plan-to-steal-your-social-security-and-medicare

Many people are following the presidential election closely with the idea that the outcome will have a major impact on national policy. However, according to Steven Pearlstein, a veteran Washington Post columnist and reporter, it may not matter who wins the election. In a column last week, Pearlstein told readers that the top executives of some of the country's largest companies are getting together to craft a budget package that they will try to push through Congress and get the president to sign.

While Pearlstein clearly sees these backroom meetings of corporate chieftains in positive terms (he refers to them as "grown-ups" who have been noticeably absent from the conversation about the budget), the rest of us might view this plotting a bit differently. As Pearlstein openly acknowledges, this corporate coup is an end-run around the electorate. As corrupt as the political process may have become, at least we will get a vote in the election. Pearlstein's plotters are not inviting the rest of us into the conversation.

Many of the same folks who brought the economy to ruin just a few years ago are now going to come up with a plan that is supposed to set the budget and the economy on a forward path. At the center of their proposal are big cuts in Social Security and Medicare.

The most popular Social Security cut among this gang is a reduction in the annual cost of living adjustment (COLA) by 0.3 percentage points. They are betting that are ordinary people are too dumb to notice this cut since it is a relatively small amount each year.

However, the effect of this cut accumulates into a much bigger deal over time. After ten years, it is roughly 3 percent; after 20 years, it would be close to 6 percent; and after 30 years, it would be close to 9 percent.

If we assume that an average retiree collects benefits for 20 years, this implies an average cut in their benefits of 3 percent. Is that a big deal? Well, there are a lot of would-be Social Security cutters who are screaming bloody murder because President Obama wants to increase the tax rate on a portion of their income by a bit more than 3 percentage points. This means that if President Obama's proposal to increase taxes on the richest 2 percent is a big deal, then the plan to cut the Social Security COLA is also a big deal.

The corporate CEO crew is also considering a plan to raise the normal retirement age for Social Security to 69. And, they want to reduce the benefit formula for high-income workers, which, incredibly, they define as people who earn more than $40,000 a year.

Their main trick for Medicare is to raise the age of eligibility from 65 to 67. Apparently, our CEO gang has not discovered that the health insurance market for older people is a disaster. They also continue to promote the misconception that the problem is Medicare and Medicaid.

These programs are actually much more efficient than private insurers. The real problem is our private-sector health care system which already costs more than twice as much per person as the average in other wealthy countries, with few obvious benefits in outcomes.

The scary budget projections that our CEOs like to tout assume that health care costs will exceed 20 percent of gross domestic product in a decade. That would imply costs of more than $34,000 for a family of four in today's economy. And these costs are projected to keep growing through time.

The normal response to this situation would be to focus on the need to fix the health care system. But many of Pearlstein's CEOs profit from the waste in the health care system, so they would rather cut our Medicare benefits.

So there you have it, the richest people in the country - the big gainers from economic growth over the last three decades - have plans to cut Social Security and Medicare benefits for current and future retirees.

To get some perspective on this story, the typical near retiree has about $180,000 in wealth, including everything, such as the equity in their home, their 401(k) and any other savings. That is what our CEO gang makes in a week. The average Social Security check of $1,200 a month is more than half of the income for two-thirds of seniors and more than 90 percent for one third. Yet, the CEOs think seniors are living too well.

But wait, there's more. We're all paying for their campaign to take away our Social Security and Medicare. We do this through several different channels.

First, many of these CEO and honcho types come from Wall Street. For example, Erskine Bowles, the co-chair of President Obama's deficit commission, is a director of Morgan Stanley in one of his day jobs. Had it not been for the taxpayers' generosity, the bank that Mr. Bowles directs would have died in the fall of 2008, so it would not be around to pay him his six-figure stipend.

The other way we are paying for this corporate effort to cut our Social Security and Medicare is by virtue of the fact that we allow the CEOs to pay for their campaign with pre-tax dollars. If most of want to give $100 to a political candidate or political cause, we have to first pay taxes on our income and then make the campaign contribution out of what we have left.

However, if you are a CEO who wants to cut Social Security and Medicare, the Supreme Court says you can make your contributions with pre-tax dollars, in effect deducting this contribution as if you were giving money to charity. According to Pearlstein, the CEOs' "charitable" contribution for cutting Social Security and Medicare will be on the order of $278 million.

For most of us, that sum would be real money, but not for CEOs who control trillions of dollars. And with the rest of us subsidizing through our tax dollars this effort to cut our Social Security and Medicare, how can the CEOs not take up Pearlstein's call?

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.

Healthcare Jujitsu

Robert Reich
Monday, March 26, 2012
http://robertreich.org/post/19972321637

Not surprisingly, today’s debut Supreme Court argument over the so-called “individual mandate” requiring everyone to buy health insurance revolved around epistemological niceties such as the meaning of a “tax,” and the question of whether the issue is ripe for review.

Behind this judicial foreplay is the brute political fact that if the Court decides the individual mandate is an unconstitutional extension of federal authority, the entire law starts unraveling.

But with a bit of political jujitsu, the President could turn any such defeat into a victory for a single-payer healthcare system – Medicare for all.

Here’s how.

The dilemma at the heart of the new law is that it continues to depend on private health insurers, who have to make a profit or at least pay all their costs including marketing and advertising.

Yet the only way private insurers can afford to cover everyone with pre-existing health problems, as the new law requires, is to have every American buy health insurance – including young and healthier people who are unlikely to rack up large healthcare costs.

This dilemma is the product of political compromise. You’ll remember the Administration couldn’t get the votes for a single-payer system such as Medicare for all. It hardly tried. Not a single Republican would even agree to a bill giving Americans the option of buying into it.

But don’t expect the Supreme Court to address this dilemma. It lies buried under an avalanche of constitutional argument.

Those who are defending the law in Court say the federal government has authority to compel Americans to buy health insurance under the Commerce Clause of the Constitution, which gives Washington the power to regulate interstate commerce. They argue our sprawling health insurance system surely extends beyond an individual state.

Those who are opposing the law say a requirement that individuals contract with private insurance companies isn’t regulation of interstate commerce. It’s coercion of individuals.

Unhappily for Obama and the Democrats, most Americans don’t seem to like the individual mandate very much anyway. Many on the political right believe it a threat to individual liberty. Many on the left object to being required to buy something from a private company.

The President and the Democrats could have avoided this dilemma in the first place if they’d insisted on Medicare for all, or at least a public option.

After all, Social Security and Medicare require every working American to “buy” them. The purchase happens automatically in the form of a deduction from everyone’s paychecks. But because Social Security and Medicare are government programs financed by payroll taxes they don’t feel like mandatory purchases.

Americans don’t mind mandates in the form of payroll taxes for Social Security or Medicare. In fact, both programs are so popular even conservative Republicans were heard to shout “don’t take away my Medicare!” at rallies opposed to the new health care law.

There’s no question payroll taxes are constitutional, because there’s no doubt that the federal government can tax people in order to finance particular public benefits. But requiring citizens to buy something from a private company is different because private companies aren’t directly accountable to the public. They’re accountable to their owners and their purpose is to maximize profits. What if they monopolize the market and charge humongous premiums? (Some already seem to be doing this.)

Even if private health insurers are organized as not-for-profits, there’s still a problem of public accountability. What’s to prevent top executives from being paid small fortunes? (In more than a few cases this is already happening.)

Moreover, compared to private insurance, Medicare is a great deal. Its administrative costs are only around 3 percent, while the administrative costs of private insurers eat up 30 to 40 percent of premiums. Medicare’s costs are even below the 5 percent to 10 percent administrative costs borne by large companies that self-insure, and under the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.

So why not Medicare for all?

Because Republicans have mastered the art of political jujitsu. Their strategy has been to demonize government and seek to privatize everything that might otherwise be a public program financed by tax dollars (see Paul Ryan’s plan for turning Medicare into vouchers). Then they go to court and argue that any mandatory purchase is unconstitutional because it exceeds the government’s authority.

Obama and the Democrats should do the reverse. If the Supreme Court strikes down the individual mandate in the new health law, private insurers will swarm Capitol Hill demanding that the law be amended to remove the requirement that they cover people with pre-existing conditions.

When this happens, Obama and the Democrats should say they’re willing to remove that requirement – but only if Medicare is available to all, financed by payroll taxes.

If they did this the public will be behind them — as will the Supreme Court.

FACTS ABOUT THE 99 PERCENT

FACTS ABOUT THE 99 PERCENT AND THEIR HAPPIER COUNTERPARTS, THE 1 PERCENT
Richard Metzger, DangerousMinds.net
http://www.dangerousminds.net/comments/occupy_thanksgiving

The richest 5 percent of households obtained roughly 82 percent of all the nation’s gains in wealth between 1983 and 2009. The bottom 60 percent of households actually had less wealth in 2009 than in 1983, meaning they did not participate at all in the growth of wealth over this period.

The average wealth of the 1% is 225 times bigger than the wealth of the typical household - perhaps the highest it’s ever been. In just the last generation, the richest 1% almost quadrupled their incomes.

Three decades ago, CEOs made about 40 times as much as an average worker - now CEOs make almost 200 times as much as regular employees.

Last year, half of Americans earned less than $26,000, while CEOs at top 500 companies raked in an average of $11 million. Over the past decade, earnings for middle-class Americans actually fell. In fact, working Americans’ wages are now a lower percentage of our economy than they’ve ever been.

The divide between the richest and the poorest is worse in America than it is in nearly all of Europe and Asia and much of Africa. It’s about as bad as in Rwanda and Serbia - and it’s bad for our economy.

The 1 percent is not an accident - it is the result of policies our government chose to pursue.

For the last three years, there have been at least 4 unemployed workers for every single job opening. Right now there are 4.6 jobless workers for every job opening.

If the government doesn’t extend benefits to jobless workers in December, it will devastate millions. The unemployment rate, currently over 9 percent, includes more than six million people who have been out of work for six months or longer. Unemployed workers spend their benefit money on things like groceries, gas, rent - and other necessities that increase economic activity that saves and creates jobs (like grocery clerks, gas station attendants and real estate administrators).

(Sources: Wall Street Journal, Media Matters, Economic Policy Institute, National Employment Law Project)

COMMONLY TROTTED OUT FALSEHOODS/MYTHS/SPIN AND YOUR FACT-BASED ANSWERS

“We have serious economic problems, and that means everybody has to tighten their belts.”

Laying off nurses, teachers and firefighters doesn’t make our communities stronger - it just puts more Americans out of work and puts our safety at risk.

It is economic suicide to lay off state workers and undermine the services we rely on just to fund huge tax cuts for the wealthy.
Instead of taking away the rights of hardworking Americans to negotiate their pay and benefits - which does nothing to address deficits or create jobs - let’s start with getting rid of tax breaks to millionaires and corporations that send our jobs overseas.

Corporate profits are at an all-time high, but corporations are paying lower taxes than ever - and some aren’t paying any at all. Politicians who refuse to ask them to pay their fair share just don’t get it.

“The Occupiers are all elite anarchist vegan violent hippie communist jobless tattooed America-hating thugs.”

Um, no.

The Occupiers are part of the 99 percent, and come from all walks of life. They are teachers, nurses, jobless workers, working moms, disenfranchised people, young people, older people, working professionals, activists. They are construction workers, firefighters, artists, business owners.

They have a very clear message and that is that for too long, the 1 percent has had continual, astronomical earnings and benefits while the 99 percent suffer or are turned on one another.

This kind of public protest is part of a proud American tradition, one that is protected by the Constitution.

“Corporations should not be taxed because they create jobs.”

Tax giveaways for the rich don’t get the economy moving or create jobs because millionaires and billionaires don’t need or spend the money - they just hand it over to their hedge fund managers, send jobs overseas and continue to enjoy overseas tax shelters and other corporate loopholes.

Working people like you and me spend that money to pay bills, buy milk and bread, and see The Muppet Movie at the multiplex. Are you saying you oppose the Muppets?

CEOs are currently making an average of more than 200 times as much as the average worker. And yet they do not create jobs here at home because they are consistently rewarded for it with?more tax breaks.

“Too much government is the problem.”

Wall Street control of government is the problem. When there’s a revolving door between lobbyists on K Street and Capitol Hill, and corporate elites determine political and legislative goals, then you have total corporate control of government.

Lack of government regulations has led to unfettered Wall Street greed that continues to this day - look at Enron, the Wall Street Meltdown and the Gulf Oil spill. Nobody can say with a straight face that we need less oversight and less accountability.

Here’s a video of Jack Abramoff, a famous former lobbyist convicted of illegal activity, explaining how the revolving door of lobbyists and Capitol Hill works on 60 Minutes. Watch it with your family! (Before or after The Muppet Movie.)

“We need to balance our budget first. We need to fix the deficit before we can invest in jobs.”

Major economists agree that the WORST way to handle the deficit is to put more Americans OUT of work. We need to stop tax giveaways for millionaires who don’t create jobs and corporations that send our jobs overseas and use the money to put Americans back on the job.

“We need a free market. Government regulations destroy jobs.”

Do you want someone to make sure your food and water are safe to eat and drink? An unregulated free market creates a system that is rigged against the 99 percent. It is what paved the way for predatory, unregulated lenders and bankers to hijack our economy, and its influence is what led to the appalling bank bailouts given to the “too big to fail” 1 percent, leaving the 99 percent out in the cold - literally.
Again: an unregulated free market, crony capitalism and unfettered Wall Street greed is what caused the financial crisis.

“The reason people are struggling is their own fault. I could find a job if I wanted to right now.”

Right now there are five jobless people for every one job opening. Millions have been laid off through no fault of their own. Unable to pay for basic things like groceries, rent and bills, people are now being punished for being jobless by employers who discriminate against them and rhetoric that blames them for an economy wrecked by Wall Street greed.

“Unemployment insurance keeps people unemployed and causes unemployment to increase.”

Unemployment insurance is one of the most effective ways to help get our economy going again - economists estimate that for every dollar spent on unemployment insurance, the economy grows by one and half times as much.

People who are out of work cut back on spending - meaning less money flowing into our economy. Unemployment benefits mean people who are out of work are putting money back into the economy.

“Tax cuts increase revenue.”

That…doesn’t even make sense.

Tax breaks mean less revenue, not more, and they don’t create jobs or grow the economy - the Bush tax cuts led to record budget deficits that we’re still dealing with.

Let’s put money into the hands of the real job creators in this country - working- and middle-class Americans - and stop giving special tax breaks to millionaires and billionaires who don’t need it and don’t spend it.

“The United States has the highest corporate tax rate in the world.”

The United States has the second-lowest corporate tax rate in the developed world, and many of America’s largest corporations don’t pay any taxes at all.

The middle class has sacrificed enough. It’s time for big corporations to start paying their fair share.

“This is class warfare.”

I think it is safe to say that it wasn’t our teachers, firefighters and nurses that tanked the economy; it wasn’t the middle class or working class who gambled away people’s life savings.

No middle-class family should have to pay higher taxes than any millionaire.

America was founded as a country where we reward hard work more than how much money anyone’s family has. But right now, a paycheck earned from working in a job is taxed higher than the money that millionaires and billionaires make off money they already have.

As Warren Buffett tells it, the only “class warfare” in America is being waged by his class - and they’re winning.

“We don’t need tax increases to get our fiscal house in order.”

Experts, including conservative economists, agree that spending cuts alone are not enough. We need serious solutions, not irresponsible tax pledges.

They tried tax handouts to the richest few that never trickle down, and they tried giant tax breaks for big corporations that lay off Americans and ship our jobs overseas. We’ve all had enough of their schemes that don’t work.

We can’t afford millionaire tax giveaways when jobs are what we need.

Plus, we’re not talking about raising YOUR taxes. Unless you’re a multimillionaire, in which case, these mashed potatoes should be way better.

When Presidents Reagan, Bush Sr., and Clinton told millionaires and big corporations to pay their fair share, it was followed by millions of new jobs and strong economic growth.

“Out-of-control entitlement spending is responsible for the deficit.”

You’re going to say that with grandma sitting right there?

They’d rather gut Social Security and Medicare than make millionaires and big corporations pay a few more cents on the dollar in taxes.

Social Security doesn’t add a penny to the deficit, and Medicare is the most cost-effective way for our seniors to get health care. But Republican politicians never liked Social Security or Medicare and still want to take them away.

When Republican politicians take away the benefits our seniors have earned, they take money out of the pockets of middle-class Americans. That takes away customers from our businesses - and that means less hiring and fewer jobs.
If they were serious about deficits, they wouldn’t have fought so hard for the Bush tax cuts and two unfunded wars that led to the record deficits we’re dealing with today.

“Unions are bad for business or only care about their members.”

Today, unions across the country are on the frontlines advocating for basic workplace reforms such as increasing the minimum wage and pushing lawmakers to require paid sick leave. For all workers.

It’s easy to forget that we have unions to thank for a lot of things we take for granted today in today’s workplaces: the minimum wage, the eight-hour work day, child labor laws, health and safety standards, and even the weekend.

Studies show that a large union presence in an industry or a region raises wages even for nonunion workers. That means more consumer spending and a stronger economy for us all.

A recent Harvard University study revealed that the rising income inequality of the last three decades directly correlates to the decline in union membership.

Don't cut Medicare, Medicaid or Social Security benefits

Tell the deficit super committee: Don't cut Medicare, Medicaid or Social Security benefits
http://act.credoaction.com/campaign/sc_dont_cut

Medicare, Medicaid and Social Security are in danger. But the biggest threat isn't driven by economics, it's driven by politics.

Twelve members of Congress from the House and Senate have been newly empowered to force both chambers of Congress to vote on a deficit reduction bill that can neither be amended nor filibustered.

Unfortunately many members of this new bipartisan, bicameral deficit super committee have Medicare, Medicaid and Social Security squarely in their sights.

In essence, they think it's better to let seniors fall into poverty, or deny needed health care to the poor and elderly, than to raise taxes on people who can comfortably afford to pay more.

Tell the members of the deficit super committee not to cut Medicare, Medicaid or Social Security benefits.

Cuts to Social Security, Medicare and Medicaid are deeply unpopular, even among Republican voters. But Congress isn't reflecting the values and priorities of most Americans.

It used to be that programs like Medicare and Social Security were considered a "third rail" in politics, and that neither Democrats nor Republicans wanted to face the wrath of voters should they try to roll back these wildly popular programs.

But today in Washington, the programs that keep millions of Americans from falling into poverty have taken a back seat to manufactured concerns about the long term implications of our national debt. Incredibly, some Democrats have bought into the Republican craze for cuts, even signaling that they would be willing to put Medicare benefits on the table!

Until our economy recovers, we should be spending money to take care of people and boost our economy, not fixating on deficit reduction.

Yet the concern about the debt has been used as a wedge to force deep cuts to important programs that help many Americans live a dignified life.

That doesn't mean that there shouldn't be vigilant efforts to root out fraud in government programs. But it does mean that we absolutely cannot afford the human or the economic effects of cuts to vital benefits.

We need to make sure that we speak out to put massive pressure on the members of the deficit committee not to agree to a plan that puts Medicare, Medicaid and Social Security benefits on the chopping block.

Let's be clear on some things. While there are progressive reforms to all these programs, that's not what's on the table.

Furthermore, Social Security has nothing to do with the debt and is projected to be fully solvent for over 25 years. And while Medicaid and Medicare costs are rising, that's because health care in this country is very expensive. Saving money by cutting benefits does nothing more than shift the cost of necessary medical care onto the backs of people who might not be able to pay for it.

Finally those who say we can't afford these hugely popular and successful programs are also happy to spend trillions of dollars on corporate welfare, needless military spending and tax cuts for the rich.

Government has a role in ensuring there's a social safety net, and democracy demands that everybody is asked to pay what they are able before we start cutting programs that all of us need.

Tell the members of the deficit super committee not to cut Medicare, Medicaid or Social Security benefits.

The Market Has Spoken: Austerity Is Bad for Business

http://globalresearch.ca/index.php?context=va&aid=25916
Ellen Brown
Global Research, August 6, 2011
Web of Debt

It used to be that when the Fed Chairman spoke, the market listened; but the Chairman has lost his mystique. Now when the market speaks, politicians listen. Hopefully they heard what the market just said: government cutbacks are bad for business. The government needs to spend more, not less. Fortunately, there are viable ways to do this while still balancing the budget.

On Thursday, August 4, the Dow Jones Industrial Average fell 512 points, the biggest stock market drop since the collapse of September 2008.

Why? Weren't the markets supposed to rebound after the debt ceiling agreement was reached on Monday, avoiding U.S. default and a downgrade of U.S. debt?

So we were told, but the market apparently understands what politicians don't: the debt deal is a death deal for the economy.

Reducing government spending by $2.2 trillion over a decade, as Congress just agreed to do, will kill any hopes of economic recovery. We're looking at a double-dip recession.

The figure is actually more than $2.2 trillion. As Jack Rasmus pointed out on Truthout on August 4th:

Economists estimate the "multiplier" from government spending at about 1.5. That means for every $1 cut in government spending, about $1.5 dollars are taken out of the economy. The first year of cuts are therefore $375 billion to $400 billion in terms of their economic effect. Ironically, that's about equal to the spending increase from Obama's 2009 initial stimulus package. In other words, we are about to extract from the economy - now showing multiple signs of weakening badly - the original spending stimulus of 2009!

As others have pointed out, that magnitude of spending contraction will result in 1.5 million to 2 million more jobs lost. That's also about all the jobs created since the trough of the recession in June 2009. In other words, the job market will be thrown back two years as well.


We're not moving forward. We're moving backward. The hand-wringing is all about the "debt crisis," but the national debt is not what has stalled the economy, and the crisis was not created by Social Security or Medicare, which are being set up to take the fall. It was created by Wall Street, which has squeezed trillions in bailout money from the government and the taxpayers; and by the military, which has squeezed trillions more for an amorphous and unending "War on Terror." But the hits are slated to fall on the so-called "entitlements" - a social safety net that we the people are actually entitled to, because we paid for them with taxes.

The Problem Is Not Debt But a Shrinking Money Supply

The markets are not reacting to a "debt crisis." They do not look at charts ten years out. They look at present indicators of jobs and sales, which have turned persistently negative. Jobs and sales are both dependent on "demand," which means getting money into the pockets of consumers; and the money supply today has shrunk.


We don't see this shrinkage because it is primarily in the "shadow banking system," the thing that collapsed in 2008. The shadow banking system used to be reflected in M3, but the Fed no longer reports it. In July 2010, however, the New York Fed posted on its website a staff report titled "Shadow Banking." It said that the shadow banking system had shrunk by $5 trillion since its peak in March 2008, when it was valued at about $20 trillion - actually larger than the traditional banking system. In July 2010, the shadow system was down to about $15 trillion, compared to $13 trillion for the traditional banking system.

Only about $2 trillion of this shrinkage has been replaced with the Fed's quantitative easing programs, leaving a $3 trillion hole to be filled; and only the government is in a position to fill it. We have been sold the idea that there is a "debt crisis" when there is really a liquidity crisis. Paying down the federal debt when money is already scarce just makes matters worse. Historically, when the deficit has been reduced, the money supply has been reduced along with it, throwing the economy into recession.

Most of our money now comes into the world as debt, which is created on the books of banks and lent into the economy. If there were no debt, there would be no money to run the economy; and today, private debt has collapsed. Encouraged by Fed policy, banks have tightened up lending and are sitting on their money, shrinking the circulating money supply and the economy.

Creative Ways to Balance the Budget

The federal debt has not been paid off since the days of Andrew Jackson, and it does not need to be paid off. It is just rolled over from year to year. The only real danger posed by a growing federal debt is the interest burden, but that has not been a problem yet. The Congressional Budget Office reported in December 2010:

[A] sharp drop in interest rates has held down the amount of interest that the government pays on [the national] debt. In 2010, net interest outlays totaled $197 billion, or 1.4 percent of GDP--a smaller share of GDP than they accounted for during most of the past decade.


The interest burden will increase if the federal debt continues to grow, but that problem can be solved by mandating the Federal Reserve to buy the government's debt. The Fed rebates its profits to the government after deducting its costs, making the money nearly interest-free. The Fed is already doing this with its quantitative easing programs and now holds nearly $1.7 trillion in federal securities.

If Congress must maintain its debt ceiling, there are other ways to balance the budget and avoid a growing debt. Ron Paul has brought a creative bill that would eliminate the $1.7 trillion deficit simply by having the Fed tear up its federal securities. No creditors would be harmed, since the money was generated with a computer keystroke in the first place. The government would just be canceling a debt to itself and saving the interest.

The Trillion Dollar Coin Alternative

The most direct solution to the debt problem is for the government to fund its budget with government-issued money. One alternative would be for the Treasury to issue U.S. Notes, as was done in the Civil War by President Lincoln.

Another alternative was suggested in my book Web of Debt in 2007: the government could simply mint some trillion dollar coins. Congress has the Constitutional power to "coin money," and no limit is put on the value of the coins it creates, as was pointed out by a chairman of the House Coinage Subcommittee in the 1980s.

This idea is now getting some attention from economists. According to a July 29th article in the Johnsville News titled "Coin Trick: The Trillion Dollar Coin":

The idea just started to get serious traction the last few days as the debt stalemate has grown more intense and partisan. Yale constitutional law professor Jack Balkin floated it as an option in a CNN op-ed yesterday (July 28th).

Today the idea has gone mainstream. It is covered by NY Magazine, CNBC, and The Economist. Even Nobel economist Paul Krugman of the NY Times has weighed in. Annie Lowrey of Slate discusses it as one of several gimmicks the government could use to resolve the debt-ceiling debacle. Krugman added:

These things [like coin seigniorage] sound ridiculous - but so is the behavior of Congressional Republicans. So why not fight back using legal tricks?


The debt ceiling itself was a legal trick, a form of extortion based on a century-old statute that conflicts with the Constitution. However, said the Johnsville News article, "coin seigniorage is not a scam. It is legal . . . . This plan looks like it might be Obama's ace in the hole . . . ."

The article cites Warren Mosler, founder of MMT (Modern Monetary Theory), who reviewed the idea in a January 20th blog post and concluded it would work operationally.

Scott Fullwiler, associate professor of economics at Wartburg College, also did a comprehensive analysis and concluded that the trillion dollar coin alternative was unlikely to result in inflation. Comparing it to Ron Paul's plan, he wrote:

This option is much like Ron Paul's proposal-actually identical in terms of the effect on the debt ceiling and the Treasury-except that his proposal would destroy all of the Fed's capital (and then some), which is a potential problem politically . . . though not operationally, and which the Fed is therefore very unlikely to agree to.


On the inflation question, just because the Treasury has money in its account doesn't mean it can spend the funds. It needs the usual Congressional approval. To keep a lid on spending, Congress just needs to be instructed in basic economics. They can spend on goods and services up to full employment without creating price inflation (since supply and demand will rise together). After that, they need to tax -- not to fund the budget, but to pull excess money back in and avoid driving up prices.

Spending More While Borrowing Less

In an economic downturn, the government needs to spend more, not less, as history shows. This can be done while still balancing the budget, simply by taking back the government's Constitutional power to issue money.

The budget crisis is an artificial one, and the current "solution" will only guarantee a deeper recession and more widespread suffering. Rather than obsessing over deficits and debt, the government needs to turn its focus to jobs, sales and quality of life.
------------------------
Ellen Brown is president of the Public Banking Institute and the author of eleven books. She developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, she turns those skills to an analysis of the Federal Reserve and "the money trust." Her websites are http://WebofDebt.com and http://PublicBankingInstitute.org.

Ellen Brown is a frequent contributor to Global Research.

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Thoughts About the Catfood II Super Congress Appointments

Jane Hamsher
Wednesday August 10, 2011
http://fdlaction.firedoglake.com/2011/08/10/thoughts-about-the-catfood-ii-super-congress-appointments/

1. There are no good choices for this commission. It is designed to protect members of Congress from the electoral repercussions of cutting Social Security and Medicare benefits, something that 82% of the country vehemently opposes. A full 60% of the country think the wars are responsible for the deficit, but the money for war will not be touched. The committee exists solely to impose the will of a small minority of oligarchical elites on the nation, and rob millions of Americans of the retirement insurance they have been faithfully and honorably been paying into their entire adult lives. The fact that the committee exists at all represents the breakdown of the social contract.

2. The US government is the largest contractor in the world. Lockheed Martin: $16.7 billion in 2010. Boeing: $10.5 billion. Hewlett-Packard: $2.3 billion. IBM: $1.8 billion. These companies spend millions each year bribing elected officials for for pennies on the dollar in exchange for these contracts. They do not want to be the one on the chopping block. Appointing the Chair of the DSCC to the committee — whose job is collecting campaign contributions on behalf of Senate Democrats — is like putting up a “for sale” sign. Democrats would be screaming bloody murder if John Cornyn were appointed. Greenberg-Quinlan-Rossner polling finds that the only message polling well for Democrats right now is “reducing the influence of lobbyists and money in Congress.” Way to go with the optics, Harry Reid.

3. Jon Kyl is the Senate Minority Whip. Kyl walked out of the Biden talks with Eric Cantor in order to force Obama to take ownership of the deal. Toomey is a member of the Tea Party who authored a balanced budget amendment and will vote for increased revenues when hell freezes over. Rob Portman is a former budget director under George Bush. Dave Camp and Jeb Hensarling are Catfood Commission I retreads. Fred Upton’s niece is a Sports Illustrated swimsuit model.

4. The Democratic House appointees will be meaningless. With three Democratic “grand bargain” Senate appointees, there is already a strong majority in favor of cutting Social Security and Medicare benefits.

3. None of these 6 Senators is up for reelection soon (Kyl is retiring), and the House members are in safe districts (notice no Paul Ryan). That exacerbates the anti-democratic nature of (1) above.

The only thing these committee members are going to respond to is is their fellow members of Congress who are up for reelection. They need to start telling them that they will be the ones will who bear the burden of whatever decision the committee makes, but they’re all in the throes of an austerity fit. They need to hear from you.

We’re running a new round of online ads on Facebook and Google targeted to voters in ey 2012 swing states. Some of these ads are about opposing the coming benefit cuts from the Super Congress, and joining our pledge to oppose anyone who votes for them.

Others are focused on individual members of Congress to pressure them not to vote for the Super Congress’ final recommendations, and let them know members know what the consequence will be in 2012 if they do.

Rightward Tilt Leaves Obama With Party Rift

JACKIE CALMES
July 30, 2011
http://www.nytimes.com/2011/07/31/us/politics/31dems.html

WASHINGTON — However the debt limit showdown ends, one thing is clear: under pressure from Congressional Republicans, President Obama has moved rightward on budget policy, deepening a rift within his party heading into the next election.

Entering a campaign that is shaping up as an epic clash over the parties’ divergent views on the size and role of the federal government, Republicans have changed the terms of the national debate. Mr. Obama, seeking to appeal to the broad swath of independent voters, has adopted the Republicans’ language and in some cases their policies, while signaling a willingness to break with liberals on some issues.

That has some progressive members of Congress and liberal groups arguing that by not fighting for more stimulus spending, Mr. Obama could be left with an economy still producing so few jobs by Election Day that his re-election could be threatened. Besides turning off independents, Mr. Obama risks alienating Democratic voters already disappointed by his escalation of the war in Afghanistan and his failure to close the Guantánamo Bay prison, end the Bush-era tax cuts and enact a government-run health insurance system.

“The activist liberal base will support Obama because they’re terrified of the right wing,” said Robert L. Borosage, co-director of the liberal group Campaign for America’s Future.

But he said, “I believe that the voting base of the Democratic Party — young people, single women, African-Americans, Latinos — are going to be so discouraged by this economy and so dismayed unless the president starts to champion a jobs program and take on the Republican Congress that the ability of labor to turn out its vote, the ability of activists to mobilize that vote, is going to be dramatically reduced.”

While Mr. Obama and Republicans have been unable to agree on a debt reduction plan for spending cuts and revenue increases to cut $4 trillion in the first decade, on Saturday they were negotiating a deal with fewer spending cuts that would ensure the government’s debt ceiling would be increased into 2013 to avoid another deadlock in the heat of campaign season.

No matter how the immediate issue is resolved, Mr. Obama, in his failed effort for greater deficit reduction, has put on the table far more in reductions for future years’ spending, including Medicare, Medicaid and Social Security, than he did in new revenue from the wealthy and corporations. He proposed fewer cuts in military spending and more in health care than a bipartisan Senate group that includes one of the chamber’s most conservative Republicans.

To win approval of the essential increase in the nation’s $14.3 trillion borrowing ceiling, Mr. Obama sought more in deficit reduction than Republicans did, and with fewer changes to the entitlement programs, because he was willing to raise additional revenue starting in 2013 and they were not. And despite unemployment lingering at its highest level in decades, Mr. Obama has not fought this year for a big jobs program with billions of dollars for public-works projects, which liberals in his party have clamored for. Instead, he wants to extend a temporary payroll tax cut for everyone, since Republicans will support tax cuts, despite studies showing that spending programs are generally the more effective stimulus.

Even before last November’s election gave the Republicans control of the House, Mr. Obama had said he would pivot to deficit reduction after two years of stimulus measures intended first to rescue the economy and then to spur a recovery from the near collapse of the financial system. With Republicans’ gains in the midterm elections, that pivot became a lurch. Yet Congressional Republicans say Mr. Obama seeks a debt limit increase as “a blank check” to keep spending.

“The Republicans won, and they don’t know how to accept victory,” said Robert D. Reischauer, a former director of the Congressional Budget Office.

In his budget proposal in January, Mr. Obama declined to suggest a plan along the lines proposed by a majority of his bipartisan fiscal commission, which in December recommended $4 trillion in savings over 10 years through cuts in military and domestic programs, including Medicare and Medicaid, and a tax code overhaul to lower rates while also raising more revenue.

Even though Mr. Obama was widely criticized, administration officials said at the time that to have embraced that approach then would have put him too far to the right — where he ultimately wanted to end up in any compromise with Republicans, not where he wanted to start.

But by this month, in ultimately unsuccessful talks with Speaker John A. Boehner, Mr. Obama tentatively agreed to a plan that was farther to the right than that of the majority of the fiscal commission and a bipartisan group of senators, the so-called Gang of Six. It also included a slow rise in the Medicare eligibility age to 67 from 65, and, after 2015, a change in the formula for Social Security cost-of-living adjustments long sought by economists.

“He’s accommodated himself to the new reality in Washington,” said Tom Davis, a former House Republican leader from Virginia. “That’s what leaders do.”

But Congressional Democrats and liberal groups objected.

“The president’s proposing cuts to Social Security and Medicare has the potential to sap the energy of the Democratic base — among older voters because of Medicare and Medicaid and younger voters because of the lack of jobs,” said Damon A. Silvers, policy director of the A.F.L.-C.I.O. “And second, all these fiscal austerity proposals on the table will make the economy worse.”

Mr. Obama’s situation has parallels with the mid-1990s, when President Bill Clinton shifted to the center after Republicans took Congress and battled them on deficit reduction and a welfare overhaul. Many Democrats were angered by his concessions, by a sense of being left out of negotiations and by a fear of alienating Democratic voters. Mr. Clinton was re-elected in 1996.

But Mr. Obama is likely to face the voters with a weaker economy and higher unemployment than during Mr. Clinton’s era. Still, his advisers express confidence that voters will reward Mr. Obama either for winning a bipartisan deal, if that were to happen, or for at least having a more balanced approach that does not remake Medicare and Medicaid and asks for more revenue from the wealthy. And they suggest another potential parallel with the Clinton years of divided government: that Republicans risk a voter backlash with their uncompromising stands.

“Democrats created Social Security and Medicare, and we have fought for decades against Republican attempts to end these programs,” said Dan Pfeiffer, Mr. Obama’s communications director. “And President Obama believes that now is the time for Democrats to be the ones to step up and save Social Security and Medicare.”

Mark Mellman, a Democratic pollster, said polling data showed that at this point in his term, Mr. Obama, compared with past Democratic presidents, was doing as well or better with Democratic voters. “Whatever qualms or questions they may have about this policy or that policy, at the end of the day the one thing they’re absolutely certain of — they’re going to hate these Republican candidates,” Mr. Mellman said. “So I’m not honestly all that worried about a solid or enthusiastic base.”

Binyamin Appelbaum contributed reporting.

A version of this article appeared in print on July 31, 2011, on page A1 of the New York edition with the headline: Rightward Tilt Leaves Obama With Party Rift.

WSWS on Debt Deal

President Barack Obama made a brief White House appearance Sunday night to announce that an agreement had been reached with Republican and Democratic congressional leaders to raise the federal debt ceiling before Tuesday’s deadline set by the Treasury. Speaking in advance of the opening of financial markets in Asia, Obama thanked “the leaders of both parties” and said the deal would “allow us to avoid default.”
The agreement, which must still be voted on by the Senate and the House of Representatives, imposes unprecedented cuts on domestic social spending without a single dollar of increased taxes on the wealthy.

It calls for raising the debt limit by $2.7 trillion in two stages, $1 trillion immediately and $1.7 trillion in four months. The increase in the debt ceiling will be matched dollar-for-dollar by cuts in spending over the next ten years, as demanded by Boehner, the top congressional Republican. Reid admitted that the deal would “give the Republicans everything they’ve asked for.”

The first $1 trillion will comprise spending cuts already agreed upon in bipartisan talks headed by Vice President Joseph Biden, mainly in non-entitlement domestic programs including education, housing, transportation and the environment. The immediate effect of these cuts will be substantial—$25 billion in fiscal year 2012, which begins October 1, and $47 billion in fiscal year 2013—and escalating thereafter.

A new 12-member House-Senate committee, consisting of three Democrats and three Republicans from each body, will have until Thanksgiving to identify an additional $1.7 trillion to $1.8 trillion in spending cuts, including entitlement programs such as Medicare, Medicaid and Social Security. Theoretically, the committee could also mandate an end to certain tax breaks to increase government revenues, but Republican leaders are on record opposing even token tax increases on the wealthy, and Obama and the congressional Democratic leadership have dropped their previous demand that any deficit reduction package include some tax increases.

If the bipartisan committee fails to reach agreement, the equivalent reduction will be carried out through an across-the-board spending cut in both domestic social programs and the military, with tax increases ruled out. According to press reports, the automatic cuts triggered by a failure of the committee to agree on a package would include Medicare, but not Social Security. Exempting Social Security from cuts under this scenario was the bone thrown to House Democrats, whose votes will be required to offset the expected defection of some ultra-right Republicans linked to the Tea Party.

The outlines of the deal emerged after Saturday’s vote by the House of Representatives preemptively rejecting a plan proposed by Reid that called for spending cuts and a debt ceiling increase of the same amount, but included more than $1 trillion in reduced military spending from the winding down of the wars in Iraq and Afghanistan.

House Republicans wanted much greater cuts in social spending and they voted unanimously against the Reid bill. Nearly every liberal Democrat in the House, including former presidential candidate Dennis Kucinich, voted for the Reid bill and the massive domestic spending cuts it called for...

The media coverage of the debt ceiling crisis can no longer conceal the dramatic shift to the right in the Democratic Party and the Obama administration. The New York Times carried on the front page of its Sunday edition an account headlining the “rightward tilt” of the Obama White House and writing that Obama “has adopted the Republicans’ language and in some cases their policies…”

This observation, however, is itself duplicitous. It is not that Obama has gone over to the side of the Republicans. The budget-cutting agreement is the expression of the bipartisan consensus of both capitalist parties, the Democrats just as much as the Republicans. It was Obama who insisted on tying the debt ceiling increase to massive deficit reduction, dropping the initial position of the administration—following all its predecessors—that a debt ceiling increase should be considered separately from any social policy issue.

Appearing on several television interview programs Sunday, Senator Charles Schumer of New York, the third-ranking Democrat, boasted of his party’s embrace of drastic cuts in social spending, which he portrayed as “a willingness to compromise.” Schumer declared, “There are people on the left who would probably say ‘no cuts,’ but they haven’t been able to have their way within our caucuses.”

There is virtually no discussion in the media or from any of the representatives of big business, Democratic or Republican, of the actual human cost of the cuts that are being discussed. Three trillion dollars in domestic spending over ten years is a gargantuan sum—at $300 billion a year, it would cover the annual deficits of all 50 states, twice over. It is more than the combined annual budgets of the departments of Education, Housing and Urban Development, Labor, Transportation, Agriculture and Veterans Affairs.

The initial impact of the cuts will be on the social infrastructure of education, public housing, mass transportation and environmental protection, as well as the Medicaid program for the poor, disabled and blind. In the longer term—in other words, as soon as the 2012 elections are safely past—the cuts will begin to be felt by the more than 50 million elderly covered by Medicare.

And it must be clear: these cuts are only the beginning. Spokesmen for the financial elite, such as the Wall Street Journal editorial board, are pressing for trillions in additional cuts, including the outright destruction of Medicare and Social Security, which are to be privatized and effectively abolished. Obama and the Democrats differ only on the tactical means for carrying out this historic assault on the working class...

The US debt ceiling deal
Patrick Martin
1 August 2011
http://wsws.org/articles/2011/aug2011/pers-a01.shtml

Debt Deal 2011

From the Associated Press:
Pending a perilous stalemate, President Barack Obama and congressional leaders announced agreement Sunday night on an emergency deal to avoid to avert the nation's first-ever financial default. The arrangement would cut more than $2 trillion from federal spending over a decade.

The dramatic agreement, with scant time remaining before Tuesday's deadline, "will allow us to avoid default and end the crisis that Washington imposed on the rest of America," Obama said. Default "would have had a devastating effect on our economy," the president said at the White House, relaying the news to the nation and to financial markets around the world. He thanked the leaders of both parties.

House Speaker John Boehner telephoned Obama at mid-evening to say the agreement had been struck, officials said.

No votes were expected in either house of Congress until Monday at the earliest, to give rank-and-file lawmakers time to review the package.

But leaders in both parties were already beginning the work of rounding up votes.

In a conference call with his rank and file, Boehner said the agreement "isn't the greatest deal in the world, but it shows how much we've changed the terms of the debate in this town."

Obama underscored that point. He said that, if enacted, the agreement would mean "the lowest level of domestic spending since Dwight Eisenhower was president" more than a half century ago.

Senate Democratic leader Harry Reid provided the first word of the agreement.

"Sometimes it seems our two sides disagree on almost everything," he said. "But in the end, reasonable people were able to agree on this: The United States could not take the chance of defaulting on our debt, risking a United States financial collapse and a world-wide depression."

In his remarks, Obama said there will be no initial cuts to entitlement programs like Social Security and Medicare. But he said both could be on the table along with changes in tax law as part of future cuts.

That was a reference to a special joint committee of lawmakers that will be established to recommend a second round of deficit reductions, to be voted on by Congress before year's end as part of an arrangement to raise the debt ceiling yet again. That is expected to be necessary early next year.

Pending final passage, the agreement marked a dramatic reach across party lines that played out over six months and several rounds of negotiating, interspersed by periods of intense partisanship.

A final stick point had concerned possible cuts in the nation's defense budget in the next two years. Republicans wanted less. Democrats pressed for more in an attempt to shield domestic accounts from greater reductions.

Details apparently included in the agreement provide that the federal debt limit would rise in two stages by at least $2.2 trillion, enough to tide the Treasury over until after the 2012 elections.

Big cuts in government spending would be phased in over a decade. Thousands of programs -- the Park Service, Labor Department and housing among them -- could be trimmed to levels last seen years ago.

No Social Security or Medicare benefits would be cut, but the programs could be scoured for other savings. Taxes would be unlikely to rise...

In the first stage under the agreement, the nation's debt limit would rise immediately by nearly $1 trillion and spending would be cut by a slightly larger amount over a decade.

That would be followed by creation of the new congressional committee that would have until the end of November to recommend $1.8 trillion or more in deficit cuts, targeting benefit programs such as Medicare, Medicaid and Social Security, or overhauling the tax code. Those deficit cuts would allow a second increase in the debt limit.

If the committee failed to reach its $1.8 trillion target, or Congress failed to approve its recommendations by the end of 2011, lawmakers would then have to vote on a proposed constitutional balanced-budget amendment.

If that failed to pass, automatic spending cuts totaling $1.2 trillion would automatically take effect, and the debt limit would rise by an identical amount.

Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.

Officials describing those steps spoke on condition of anonymity, citing both the sensitivity of the talks and the potential that details could change.

The deal marked a classic compromise, a triumph of divided government that would let both Obama and Republicans claim they had achieved their objectives.

As the president demanded, the deal would allow the debt limit to rise by enough to tide the Treasury over until after the 2012 elections.

But it appeared Obama's proposal to extend the current payroll tax holiday beyond the end of 2011 would not be included, nor his call for extended unemployment benefits for victims of the recession.

Republicans would win spending cuts of slightly more than the increase in the debt limit, as they have demanded.
Additionally, tax increases would be off-limits unless recommended by the bipartisan committee that is expected to include six Republicans and six Democrats. The conservative campaign to force Congress to approve a balanced-budget amendment to the Constitution would be jettisoned.

Congressional Democrats have long insisted that Medicare and Social Security benefits not be cut, a victory for them in the proposal under discussion. Yet they would have to absorb even deeper cuts in hundreds of federal programs than were included in Reid's bill, which many Democrats supported in a symbolic vote on the House floor on Saturday.

As details began to emerge, one liberal organization, Progressive Change Campaign Committee, issued a statement that was harshly critical.

"Seeing a Democratic president take taxing the rich off the table and instead push a deal that will lead to Social Security, Medicare and Medicaid benefit cuts is like entering a bizarre parallel universe -- one with horrific consequences for middle-class families," it said...

It's a deal: Obama, Congress will avert default
Obama and congressional leaders are now all on the same page -- but many progressives are fuming
DAVID ESPO
Sunday, Jul 31, 2011
http://www.salon.com/news/feature/2011/07/31/us_debt_showdown_7