Feb 27 2013

The Sequester: Bipartisan Craponomics at Its Worst

(2 pm. – promoted by ek hornbeck)

Yes, because no one listened to those that warned(including myself) this would happen in 2010 with the Bush tax cut sellout leading to the debt ceiling debacle in 2011 to now, it looks like the sequester created by this White House and Congress is going to happen. Back then, there was leverage with the Bush tax cuts expiring for using the High Value Platinum Coin, invoking the 14th amendment, or legislating the debt ceiling away entirely. None of this was considered even as a temporary measure to avoid this epic failure fixing to hit our shores.

It’s insulting to the public that none of this was even tried, because this sequester will be painful and more painful in the future. The political damage as we create more miniature crisis will be even costlier than what is projected as more bills have to be passed every few months which always get worse the more they are revisited, all needlessly created all in the name what I call deficit terrorism. Through each bipartisan crisis more austerity is brought out in these miniature Shock Doctrine scenarios especially on the debt ceiling. This austerity will eventually terrorize the public because a failure to govern or understand our economy.

Sure, it will take awhile to be phased in and each federal agency will implement its cuts differently, on its own timeline, but by April 4th, 2013 some real pain is likely to be felt by the public.

Starting out, budget cuts will grow from 2.4% of the budget(including 26 billion in domestic programs) to more and more over the next 10 years all based on craponomic fantasies regarding 4 trillion of cuts somehow “growing the economy.” There is nothing smart or sensible about any of these cuts now or in the future. It’s just cruel or stupid depending on the reasons this is being done in an age where there hasn’t been a level of labor participation this low since the early 80s and the employment population ratio is also way too low.

This is despite the fact that the debt is coming down faster than any other time since WWII.  The macro economy this WH and Congress have no idea about is not calling for deficit reduction now or later. So why do we have to have fiscal cliffs, sequesters, and showdowns every 3 months unable to run a government? A constant United States of crisis over debt that doesn’t really exist in addition to it not being a constraint shows either disdain or disregard for the public.

Even a mainstream blog like Think Progress has finally dropped the harmful deficit dove argument too many progressives embrace and gets it right in this excellent piece.

VIEWPOINT: The Debt Everyone Is Freaking Out About Does Not Exist

“Well, it’s not all that clear that’d be bad: contrary to popular belief, there’s no magic debt-to-GDP ratio that would trigger an economic crisis. Japan, Britain, and France have all carried far larger debt burdens than ours for extended periods of time without calamity arriving. America’s own borrowing costs are lower now than in the 90s, despite lower debt then. And because we control our own currency, it’s not even clear that the United States could ever suffer a debt-induced economic collapse. We could eventually run ourselves into high inflation, presumably, but we have more than enough room to maneuver there as well.”

I would expect only to read something like that on New Economic Perspectives(reality based econ blog) but I was very glad to read this on a mainstream blog. It’s reality. However, most in Washington DC, from the leadership of both parties straight to the top, refuse to acknowledge these facts about our system.

Instead they are all putting on a disgraceful show blaming each other when they could stop the sequester they all created anytime they want by just passing a bill to stop the damage that is going to be inflicted soon. The point of view in this diary is my own, but Pluto has the numbers in this sequester. She offers some cogent analysis listed along with what’s to come from the even more dangerous debacle on the debt ceiling happening March 27th. That was easily predictable as well, so I can’t pretend I am not disgusted with all the players.

Let me emphasize that again; this sequester was created by this White House and this Congress working together to, I don’t know, impoverish the masses? The President threatened to veto the stop gap if the sequester wasn’t in it when Republicans in Congress tried to get rid of it. UKMC economist William K. Black lays this out now as he did then.

Why Obama Refuses to Kill the Sequester

We are in the midst of the blame game about the “Sequester.”  I wrote last year about the fact that President Obama had twice blocked Republican efforts to remove the Sequester.  President Obama went so far as to issue a veto threat to block the second effort.  I found contemporaneous reportage on the President’s efforts to preserve the Sequester – and the articles were not critical of those efforts.  I found no contemporaneous rebuttal by the administration of these reports.


Similarly, President Obama has revealed his real preferences in the current blame game by not calling for a clean bill eliminating the Sequester.  It is striking that as far as I know (1) neither Obama nor any administration official has called for the elimination of the Sequester and (2) we have a fairly silly blame game about how the Sequester was created without discussing the implications of Obama’s continuing failure to call for the elimination of the Sequester despite his knowledge that it is highly self-destructive.

The only logical inference that can be drawn is that Obama remains committed to inflicting the “Grand Bargain” (really, the Grand Betrayal) on the Nation in his quest for a “legacy” and continues to believe that the Sequester provides him the essential leverage he feels he needs to coerce Senate progressives to adopt austerity, make deep cuts in vital social programs, and to begin to unravel the safety net.  Obama’s newest budget offer includes cuts to the safety net and provides that 2/3 of the austerity inflicted would consist of spending cuts instead of tax increases.  When that package is one’s starting position the end result of any deal will be far worse.

Balanced budgets and austerity to appease make believe confidence fairies and bond vigilantes is not a lot different than human sacrifice. It’s just sacrificial on a lesser level than death while slowly sacrificing a human standard of living that means real life. The unexpected 0.1% drop last quarter came from 15% across the board cuts in spending. The quarter before that spending rose 9.5%. This shouldn’t be hard to understand even for deficit terrorists.

I know many want to play the blame game, and there is plenty of it to go around. However, there’s a sad little delusion playing out by those who were all too accepting of all these sellouts causing this predictable debacle while barking at us to put sole blame on the Republicans. Republicans are the party of austerity, but the Democrats have decided being the party of austerity light is going to be more appealing even though both economic ideologies are absolute crap.

We know this with recent examples in the eurozone and the UK. Republicans are acting on what they believe in and are pulling out all the stops. If they don’t their constituency is not going to make excuses for them because the sad truth is that Republicans fear their base and Democrats despise theirs. Republicans are who they are and their ideology is truly awful, but it has been for awhile as it was in the 80s and 90s.

This shouldn’t have been a surprise to the President or Congressional Democrats though. That is, assuming they are actually trying to oppose austerity. We don’t really know. There’s also too much reliance on who people will blame for austerity. Look at Congress’s poll numbers. They stopped caring what the people thought a long time ago.

Besides, the people will respond more to economic conditions than what the polls say about who they will blame; they will blame whoever is in power and has the most power when this kind of craponomic policy is the norm in tandem with a failure to govern.

And now to explain why the President is selling a false bill of goods on so called responsible deficit reduction while making investments to add enough jobs for the 25 million who need them. All you have to listen to to know that is crap is his support for more Trans Pacific Partnership like trade agreements while promising to lead an export growth orientated economy. We of course know that never happened with NAFTA or letting China into the WTO with PNTR, and because of the dust-bowl service economy we were left with, it is unlikely to happen in the future.

Without serious revisions on global trade law, the US certainly can’t manufacture enough products for the demand needed that doesn’t escape overseas once it turns into capital. All you have to do is look at our trade deficit(It is the sum of the balance of trade i.e., net revenue on exports minus payments for imports) which is part of our current account in the private sector to know this. Therefore the government sector can and needs to run the amount of deficits to cover this private outflow(because whether anyone wants to deny it or not our system public and private is a double entry bookkeeping system), but those in charge are too busy creating sequesters while telling you that we are broke and can default when that is impossible and a scare mongering lie for austerity.

We are not Greece and never will be as issuer of our own currency. It’s like if you or I had a money machine or a spread sheet on our computers right now in front of us we could type in dollars that would exist instantly as they really do at the FED this way to pay the rent and everything. It would be the same if we could mint our own coins like the Treasury does to pay our own bills with.

Will we ever hear this fiscal and monetary truth from DC? Will manufacturing ever come back under this President on a level to offset balancing the budget sucking income out of the private sector? Nope, last time I looked this bump in exports Obama brags about is certainly mostly offset by a bump in imports so don’t count on that. So when the White House tries to scare you about the national debt while also preaching free trade, just think of that as their way of telling you that since not enough jobs from manufacturing and exports are going to be part of the equation for a trade surplus, they don’t want to run the deficits needed to supplement that lost income and demand(buying stuff with that income) from those lost industries either.

After all, you can have a private(one entry adding to the private sector) national manufacturing strategy framework or worry about balanced budgets(one entry taking away income from the private sector where you and I live and work) but you can’t have both for enough jobs. Some jobs will never come back because of mechanization, but there’s only a lack of political will for the US to spend to replace them until full employment creating new industries here with that spending. This is why through every press conference I am seeing the insults that others don’t in this lie. It makes me apoplectic like this whole debacle I predicted.

So tell the President to advocate killing the sequester. Tell him you don’t buy craponomics. Tell him to stop ignoring the realities of sectoral balances and the need for massive deficit spending we can and should pursue to heal our dustbowl economy. Tell him there is no responsible and sensible deficit reduction until there is a road to full employment.  

1 comment

  1. TMC

    wants to just cancel the sequester. From Gaius Publius at Americablog

    From the office of the two leaders, Raúl Grijalva and Keith Ellison:

       If Congress cannot come up with a replacement to the sequester before the end of the week, we should eliminate the sequester entirely. One million working Americans should not be forced to pay the price for Republican stubbornness. If this goes into effect, it will be one of the most irresponsible legislative failures in the history of the Republic.

    And GP’s prediction with a note to the CPC

    If Obama and Boehner can blackmail their recalcitrants (that’s you, CPC, so far) into voting for cuts to Social Security, Medicare or Medicaid, you’ll see a sequester “deal” vote that includes benefit cuts.

    But if that blackmailing manufactured crisis can’t attract enough votes to make it worth proposing, the sequester will magically disappear. Hayes and the CPC will have gotten their wish. In a blink Congress will be asked to make the sequester go away, and they will.

    My caution to the CPC – this is a strong statement, the one above, and a strong position. Congratulations, and thanks. But you may not get to vote on a cancellation. Obama may get the deal he wants, and you’ll be stuck with only two choices – Yes to Cuts or No to Cuts. If so, I suspect that any progressive who votes Yes to Cuts will have hell to pay.

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