Tag Archive: Debt Ceiling

Oct 05 2013

Galbraith: Government Doesn’t Have to Borrow to Spend

cross-posted from Voices on the Square

James K. Galbraith in Government Doesn’t Have to Borrow to Spend quite clearly and without economic jargon explains why the debt ceiling debate is puppet theater:

The debt ceiling was enacted in 1917 for one purpose: to fool the rubes back home. Just as Congress started running up debts to pay for the war, they voted in the ceiling to pretend otherwise. And that is why whenever reached, it must be raised.


In the modern world, when the Treasury writes you a check, your bank credits your account. That’s how money creation works. The Treasury then issues bonds to absorb that money. Banks like this because bonds pay more interest than reserves. But there is nothing economically necessary about the bonds. This is obvious since the Federal Reserve buys back many of them, leaving the public with the cash it would have had in the first place.


Under present law, Jack Lew could even pay off public debt held by the Federal Reserve by issuing a high-value, legal-tender coin – so long as the coin happened to be platinum. A coin is not debt, so that simple exchange would retire the Fed’s debt holdings and lower the total public debt below any given ceiling.

James Galbraith admits that this is a gimmick … but then, so is the debt ceiling, so it would be one gimmick fixing the fact that one faction of one political party is holding the faith and credit of the US government hostage over what was originally and has always been since a gimmick.

Oct 03 2013

Grand Bargain Circus – Red Clowns Ready?

Jugglers_Circus_Amok_by_David_Shankbone

There’s a big deal brewing in the Beltway Bigtop that’s been years in the making.  The Grand Bargain is now officially on the red clown leadership’s radar.  But can they get their ducks in a row?  Will the rank and file blue clowns have an attack of conscience?  And what about the audience – will they meekly accept the shears as the Ringmaster and clowns together begin to fleece them?  Or will they bombard the clowns with rotten tomatoes, imprecations, incantations and entreaties frightening them away from yet another of the Ringmaster’s big plans as they did with the Ringmaster’s recent plan to engage in yet another stupid and expensive war of choice?

Here’s a wrap up of the past couple of days under the Beltway Bigtop.

Bigtop Blame-a-Rama – Juggling the Hot Potato of Blame

The lights have been doused under the Beltway Bigtop as the red clowns and blue clowns could not come to agreement over how best to rob the audience.  The blue clowns adamantly protected the Ringleader’s plan to demand tribute of the audience for his donor cronies in the insurance and pharmaceutical industries in return for health care insurance products of dubious utility.  The red clowns would not give up their demands to kill the Ringleader’s program as well as demands for a smorgasbord of environmental destruction, means-testing for medicare, limitation of court awards for medical malpractice, repeal of taxes on some of their cronies and a contraceptive-free dessert bar.

Killer-Klowns-from-Outer-Space-pies

As the sun came up on the Beltway Bigtop Tuesday morning there were lines of circus employees leaving the parking lot as the tall order of the day began – the search for a scapegoat.

While both the red clowns and the blue clowns stayed up until the wee hours juggling the hot potato of blame back and forth between the red clown-controlled Ring 1 and the blue clown-controlled Ring 3, the Ringmaster called the red clowns “irresponsible” and upbraided them for their, “ideological crusade.”

The US government shut down early Tuesday for the first time since 1996 after lawmakers divided over Obamacare failed to reach an agreement to fund federal agencies through the next fiscal year.

President Barack Obama called it the “height of irresponsibility.”

Speaking Tuesday afternoon, Obama slammed Republicans for shutting down the government as part of an “ideological crusade” designed to kill his signature health care law.

“I urge House Republicans to reopen the government,” Obama said at the White House Rose Garden, while surrounded by Americans he said would benefit from the Affordable Care Act.

Meanwhile one of the red clowns’ leaders, Boner T. Redclown, did impressions of the Ringmaster over in Ring 1 as he passed juggling potatoes back and forth with Harry T. Blueclown over in Ring 3.  Harry T. Blueclown, for his part, returned the relentless hail of hot potatoes with all of the speed and bravado he could muster.

House Speaker John Boehner imitated the president on the House floor as he described their ultimately fruitless conversation Monday evening in the hours before a U.S. government shutdown.

“I talked to the president earlier tonight,” the Ohio Republican said before dropping his voice to sound more like President Barack Obama. “‘I’m not gonna negotiate. I’m not gonna negotiate. We’re not gonna do this.’ Well, I would say to the president, ‘This is not about me. This is not about Republicans here in Congress. It’s about fairness for the American people.'”

House Republicans repeatedly sent bills that would have temporarily funded the federal government but cut funding or delayed the implementation of the Affordable Care Act.

The Senate’s Democratic majority repeatedly stripped those bills of their anti-Obamacare provisions and sent them back to the House for approval, setting up the impasse that led to the first U.S. government shutdown in 17 years.

Audience reaction was mixed to the impressions and the rapid-fire juggling spectacle, however, the Beltway Bigtop Office of Promotions was quick to assign responsibility for Boner T. Redclown’s performance to a subset of the most effusive and animated of the red clowns.  Some in the Beltway Bigtop’s Office of Promotions claim that a conspiracy is afoot amongst some of the red clowns to force Boner T. Redclown into his behavior, while others claim that Boner T. Redclown and his leadership group

held a meeting outside of the Bigtop and stole the schtick of the more animated red clowns.

Bozos_Circus_postcard_1960sMonday was a frantic day on Capitol Hill, though all the activity ultimately came to nought: A flurry of last-minute legislative feints failed to prevent the government from shutting down at midnight. But in the process, House Republicans’ total crackup was on full, public display.

The breaking point was Speaker John Boehner’s penultimate proposal, a bill that would have funded the government — and Obamacare — while delaying the health-care law’s individual mandate and canceling congressional staffers’ insurance subsidies. To Boehner, this was a major concession from the House’s previous offering — a delay of the entire law. To the White House and Senate Democrats, it was just as unacceptable and no concession at all.

But within the GOP, it provoked a freakout on both Boehner’s right and left flanks. Moderate Republicans, long silent for fear of the party’s angry base, correctly viewed the proposal as inexorably leading to shutdown, and threatened to rise up and block it. “This is going nowhere,” New York Representative Peter King told National Review. He claimed to have 25 members on his side and demanded that Boehner instead put a “clean” government-funding bill — one that didn’t touch health care — on the floor of the House.

Meanwhile, conservatives were also in revolt. The Senate Conservatives Fund sent an email to its supporters denouncing “the Republican establishment in Washington” for telling “lies to help them fund Obamacare.” It accused GOP leaders of using the mandate delay as cover to disguise the fact that they were allowing the rest of the law to go into effect — something the group called unacceptable.

Many in the Beltway Bigtop Office of Promotions are eager to sell the narrative that the clowns have cracked up and become completely dysfunctional, creating new norms for governance.

Many of the contributing media outlets in the Beltway Bigtop’s Office of Promotion apparently can’t seem to remember previous government shutdowns as they swoon from the vapors from their, “discovery” of the, “new governing norms.”

In the past the blue clowns have been quite willing to press their advantage as a majority to protect their constituency just as the red clowns are doing now:

There were four shutdowns over abortion funding in the 1970s, a Democratic-led shutdown over funding for the notorious MX missile in 1982, a Democratic-led shutdown over a Supreme Court civil rights ruling in 1984, a Democratic-led shutdown over expanding Aid to Families with Dependent Children (that’s welfare) in 1986, and a Democratic-led shutdown over aid to the Contras and the Fairness Doctrine(!) in 1987. So shutdowns were for quite a while part of the normal business of government. And as I said, there’s a cruel logic to them. When Congress and the White House are held by different parties, Congress has no bigger chip at their disposal than the power of the purse. So they use that, over and over again, to extract often unrelated policy concessions from the executive branch. It may have stopped for a while for various reasons, but it’s back because it’s a very inviting way for a Congressional majority to assert their will.

Weirdo with a hula hoop.

Why Can’t the Blue Clowns Play the Game?

While one set of red clowns stalks the Ringmaster holding out hoops for him to jump through, another group of red clowns is sneaking out towards the fringes of the tent brandishing torches and threatening to burn the Bigtop down.

The Ringmaster remains impassive and, out of one side of his mouth refuses to negotiate, while out of the other makes promises to negotiate, but, on his terms:

Placing blame squarely on House Republicans, Obama said “the bottom line is that the Senate has passed a bill that keeps the government open, does not have a lot of extraneous issues to it, that allows us then to negotiate a longer-term budget and address a range of other issues but that ensure that we’re not shutting down the government and we’re not shutting down the economy at a time when a lot of families out there are just getting some traction in digging themselves out of the hole that we’ve had as a consequence of the financial crisis.

Given that the blue clowns control both the Main Ring and Ring 3, one would assume that the party of the Four Freedoms and the Great Society, friend of the working man and the underprivileged, would have pressed their advantage to make some serious gains for their constituency.

Instead, the blue clowns, in concert with the Ringmaster have been working to apply increasing levels of austerity to their constituency while their policies reward the Beltway Bigtop funderswho want austerity.

And the blue clowns aim to please their masters:

Virtually all of the services that will go unfilled during this shutdown, for example, are services for the poor or near-poor. A sclerotic governing system empowers a status quo that is biased toward elites, who are often the only ones able to break the gridlock, when it suits them and their pocketbooks.

Consider also how the nature of the gridlock itself empowers elite goals in this case. Democratic pundits and allies have talked themselves blue about the doomed Speakership of John Boehner, the lunacy of Ted Cruz, and whether the Republican fever will break. Precious few words, by contrast, have been written about the fact that the SOLUTION here, the position that Democrats have been pushing, is a “clean” continuing resolution, which will enforce sequestration limits, a spending cap below societal need and economic demand, into Fiscal Year 2014. And while that would only hold for a couple months, anyone who thinks sequestration will somehow be cancelled (or even “replaced,” which does the economy next to no good from a macro standpoint) by the same people who just shut down the government over “defunding” Obamacare, which is by its nature mandatory spending and not defunded today, is nuts. But Democratic politicians benefit from the virtual silence about how the country is doomed to austerity spending caps for what could be an entire decade. And elites enjoy advantages from such a state of affairs as well.

When the Ringmaster speaks of, “negotiat[ing] a longer-term budget and address a range of other issues,” he’s not talking about a bold plan to meet his constituency’s demands.  The Ringmaster is talking about another round of his “Grand Bargain” negotiations.  

The Ringmaster’s base constituency is certainly not demanding cuts to Social Security, Medicare, Medicaid, Tricare or other similar cuts to social programs.

American People Fight Obama’s Treacherous Cuts to Social Security and Medicare

The vast majority, left, right and in-between, have repeatedly made it clear that they do not want cuts to either of these vital programs. A CBS News poll conducted last month shows that 80 percent of Americans, regardless of political affiliation, opposed cutting spending on Medicare to reduce the budget deficit, while 79 percent were against cutting Social Security for that reason.

The people don’t want the cuts, and the facts don’t support them. There are certainly no economic excuses: The federal deficit politicans howl about is shrinking, as none other than Goldman Sachs’ chief economist has attested. And even if it wasn’t, Social Security doesn’t affect it – a fact that many Americans have copped onto despite the best efforts of politicians to deceive them. Clearly, in a time of growing economic inequality, there is no justification for taking more money out of the hands of the elderly and the vulnerable.

 

The only people demanding entitlement cuts are, hmmmm… the Beltway Bigtop funders:

Mark Thoma has an excellent column at the Fiscal Times linking the fight over the debt ceiling to the larger issue of extreme inequality. … I’d like, however, to suggest that the reality is even worse than Thoma suggests.

Here’s how Thoma puts it:

Rising inequality and differential exposure to economic risk has caused one group to see themselves as the “makers” in society who provide for the rest and pay most of the bills, and the other group as “takers” who get all the benefits. The upper strata wonders, “Why should we pay for social insurance when we get little or none of the benefits?” and this leads to an attack on these programs.

How, then, are things even worse than he says? Because many of the rich are selective in their opposition to government helping the unlucky. They’re against stuff like food stamps and unemployment benefits; but bailing out Wall Street? Yay! …

The point is that the superrich have not gone Galt on us – not really, even if they imagine they have. It’s much closer to pure class warfare, a defense of the right of the privileged to keep and extend their privileges. It’s not Ayn Rand, it’s Ancien RĂ©gime.

And this just in… the red clown leadership is taking the bait!

Boehner to GOP: Grand Bargain in the Works

House Republicans tell me Speaker John Boehner wants to craft a “grand bargain” on fiscal issues as part of the debt-limit deliberations, and during a series of meetings on Wednesday, he urged colleagues to stick with him.

The revelation came quietly. Boehner called groups of members to his Capitol office all day, taking their temperature on the shutdown and the debt limit. It became clear, members say, that Boehner’s chief goal is conference unity as the debt limit nears, and he’s looking at potentially blending a government-spending deal and debt-limit agreement into a larger budget package.

“It’s the return of the grand bargain,” says one House Republican, who requested anonymity to speak freely. “There weren’t a lot of specifics discussed, and the meetings were mostly about just checking in. But he’s looking hard at the debt limit as a place where we can do something big.”

But can the red clown leadership bring along the rank and file?

The Red Clowns Try To Put Their Scary Monster Back In the Closet

The Ringmaster is clearly ready to do the business and the bidding of the Beltway Bigtop funders.  

In order to signal this to one and all, the Ringmaster has taken to the center ring, lit a fire and is sending up smoke signals to announce that he has appointed his former “opponent,” Mitt T. Redclown’s policy director, currently a fellow at the Hoover Institution Clown College, to the Social Security Advisory Board.

Given the red clowns’ expressed desire to “roll back the new deal,” will they come to the table to take down the programs that red clown funders and the blue clown funders both want gone?

It looks like the red clowns will have to deal with the remnants of a rather unweildy stage prop that they made for previous shows in order to get down to business:

Frankenstein 1 by Mazzastick[T]here is no doubt that the Republican right in the age of Obama, and to some extent before that, in its desire to roll back what’s left of the welfare state, what’s left of the New Deal, and back in the Reagan era, in order to crush what was left of the New Deal era, did call, has called into being an almost Frankenstein-like monster in the form of Fox News, a far right-wing talk radio network, and has really created a kind of almost frothing constituency in these very tightly gerrymandered, often rural, white congressional districts. …

And these people seem to have gone just completely off of the reservation. And it’s gotten to the point that the big capitalist elites that called them into being are now sort of horrified of them. And you see The Wall Street Journal in particular, and some of the old-line more centrist type of Republicans like John McCain and Senator Corker from Tennessee, calling them “wacko birds” and being horrified by them. But, you know, the GOP establishment created all of this in many ways. …

[T]hey’ve really cultivated a group of people who are motivated by some pretty dark, almost proto-fascistic, certainly racist … people who don’t seem to know where to stop and really are just sort of, you know, Ted Cruz stand your ground, who are willing to go all the way, you know, go to the wall to stop this horrific Obamacare, which they have been told by Fox News and Rush Limbaugh and the rest of the right-wing talk machine noise machine is some sort of incredible socialist government intervention in the health care system, which is, of course, completely preposterous, ’cause Obamacare is a fairly center-right corporate-friendly health care intervention. It was designed in part to head off the real social democratic and majority-supported health reform, which was single-payer.

Ironically it is the red clowns’ “Frankenstein Monster” (courtesy of the Koch Clowns, Rupert T. Redclown and Rush T. Redclown among others) that has so far saved the audience from the implementation of cuts to “socialist” entitlement programs which are opposed by the vast majority of the audience.

As the clock ticks down to the Debt Limit Doomsday, can the red clowns tame their Fractious Frankenstein monster?

The Ringmaster and most of the blue clowns are happy to enact much of the red clowns’ agenda (because it is also the blue clowns’ agenda) so long as the red clowns can conveniently be the final recipient of the hot potato of blame. The blue clowns are just too cowardly to enact the corporate agenda of the Beltway Bigtop funders all at once; they mean to implement it in tiny pieces, much like the effect of the Ringmaster’s chained cpi, in hopes that the slow implementation will suppress audience outrage.

Stay tuned! And stay tuned after the main event, because the  blue clowns and the red clowns are already making plans for a joint project to benefit the Union of Pickpockets and Banker Bozos just as soon as the center ring goes dark between acts.

Wall Street Deregulation Bills Likely To Attract Bipartisan Support After Shutdown Negotiations

Attention aux PickPockets (dans La Tour Eiffel) by dullhunkWhen the drama surrounding a government shutdown abates, the House of Representatives expects to take up legislation to expand taxpayer support for derivatives, the complex financial products at the heart of the 2008 meltdown. And while traditionally straightforward tasks like funding the federal government have become raucously contentious in recent weeks, a bill subsidizing Wall Street banks is likely to garner significant bipartisan support.

Also on the post-shutdown agenda is legislation that would prevent the Department of Labor and the SEC from implementing new consumer protection standards for 401(k) accounts and other retirement funds.

Both bills are efforts to roll back reforms that passed under the 2010 Dodd-Frank financial reform bill. A small cadre of liberal Democrats are marshaling opposition to the bills, but still expect dozens of Democrats to join a united Republican Party in passing the legislation.

“As we’re trying to forestall a government shutdown, we’ve got these ugly financial services bills on the horizon,” said Rep. Keith Ellison (D-Minn.), co-chair of the House Progressive Caucus. “It’s a multi-pronged attack on the middle class.”

Sep 30 2013

Grand Bargain Circus – Midnight on the Highwire

Midnight on the Highwire

tight rope bike

Welcome back circus fans!  The drama under the Beltway Bigtop is rising ever higher as the antics of the red clowns have captured the show.  The clowns are still refusing to get in their car and leave the stage.  

Sep 27 2013

Economic Populist: Consol Bonds are the Debt Ceiling Walk Off Home Run

cross-posted from Voices on the Square

The Debt Ceiling debate is Yet Another GOP Abuse of the System, but the entire debate runs under the pretense that the Treasury cannot sell new bonds if the Debt Ceiling is not raised.

Look at the history of the debt ceiling, and its easy to see where people get that idea. Way back when, the Treasury went to Congress for each and every new bond issue. Then in 1917, with war breaking out in Europe, Congress reformed the system to give the Treasury more freedom of action, establishing an overall ceiling within which it could issue bonds. It was like moving from a series of individually negotiated loans with a bank to obtaining an approved credit line with the bank.

From 1917 to 2010, the increase of the debt ceiling when required was a routine transaction. But after the radical reactionary wing of the Republican party ran under the successful “Tea Party” branding, a number of radical reactionary GOP Congressmen balked at this routine transaction, and took the full faith and credit of the US Government hostage. This resulted in the “sequester” debacle, in which spending cuts that were deliberately designed to punish the American people in case Congress could not agree on the insane policy of cutting spending in the middle of what is now a five year old Depression. Congress could not agree, and so the brain-dead punitive spending cuts were put in place instead.

After that experience, turning out as badly as progressive populist critics at the time said it would, now there are bold words from the White House demanding a clean debt ceiling vote, without any hostage taking.

The good news is that if the Treasury turns to Consol Bonds, they can win this fight no matter what the radical reactionary wing of the House Republicans decide to do.

Sep 21 2013

Calling the Debt Ceiling Bluff: Taking It To The Owners

Joe Firestone has written an excellent piece at New Economic Perspectives on the phony fear mongering about the risk that the Republicans might not vote to raise the debt ceiling. He uses as his point of departure exquisitely fraudulent framing that Ezra Klein adopted for the proposal to trade a budget continuing resolution without defunding Obamacare, for taking the fight to the debt ceiling.

The reason the Republican leadership is making the case for that trade is that a continuing resolution has to pass both Chambers, and the version that defunds Obamacare is Dead On Arrival in the Senate, which will amend the bill to restore Obamacare funding and refuse to budge in reconciliation. So sooner or later, the House will have to pass a continuing resolution that includes funding for Obamacare, or else shoulder the political blame for shutting down government.

But what Joe focuses on is the framing of trading off a budget fight for a debt ceiling fight, in which Ezra says:

his is terrifying that this is the argument. And the analogy I would use is this is like trading a bad flu for septic shock. it is the worst trade in the history of all trades you could imagine . . .

Trading a bad flu for septic shock might be the worst trade in the history of all trades, but the only thing that makes the debt ceiling dangerous is the administration’s refusal to call the bluff. As Joe lays out, there are not one, not two, not three, not four, but five options, and three of them would succeed in eliminating the threat that the debt ceiling vote can every again be used for political blackmail.

Sep 19 2013

The Congressional Game of Chicken: Debt Ceiling, Default, Crash the Global Economy

Here we go again. The feral children of the House of Representatives, better known as Republicans with a few Democrats added for interest, have decided that they will not raise the debt ceiling  unless the Affordable Care Act (aka Obamacare) is defunded. They realized that just attaching the amendment to the stop gap funding bill to prevent the partial shutdown of the government on October 1 would never pass muster in the Senate. So they decided to go one better:

GOP leaders telegraphed that they would likely concede to the Senate’s demand for a stopgap spending bill shorn of the Obamacare provision but that they would carry on with the fight on legislation to increase the government’s borrowing cap.

“There should be no conversation about shutting the government down,” House Speaker John Boehner, R-Ohio, said. “That’s not the goal here.”

The debt-limit measure, required to allow the government to pay all of its bills on time, would be brought to the House floor as early as next week and would allow the Treasury to borrow freely for one year.

Republicans vow to load that bill with a GOP wish list, including another assault on the health care bill and a provision to force the construction of the Keystone XL pipeline from Canada to Texas Gulf Coast refineries, a project that environmentalists oppose and that the Obama administration so far has refused to approve. Other elements will reflect different Republican budget priorities, including as-yet-undisclosed savings from health care and government benefit programs and steps to speed work on an overhaul of the tax code.

If this sounds familiar,it should. We’ve been down this road in 2011 with the great debate ending in narrowly avoided default and led to the first ever downgrade of America’s credit rating.

At New Economic Perspectives, Joe Firestone, pointed out in his article President Barack Obama has stated that he would not negotiate on raising the debt ceiling but that he was willing to negotiate with the Republicans on the budget on matters including entitlements. He also highlights an exchange that took place on MSNBC’s “NOW with Alex Wagner,” including Alex Wagner, David Corn, Sam Stein and Ezra Klein:

  Sam Stein: . . . you can see the contours of a deal that would upset both parties but palatable. something like in exchange for changes to social security payments, cpi, chained cpi. you could get a reprieve from sequestration. something like that along the lines where both parties are like, well, we don’t really want to do it, but for the sake of making sure we pay our bills – that’s why the republicans keep going there. they know obama care defunding isn’t going to happen, but there are other hostages.

   Alex: why does president obama come to the table at all?

   Ezra: i think that’s the kind of deal they would come to the table on. they would consider that a deal over sequestration. i’m not sure if they would do that exact deal, but the two deals they won’t do are the ones the republicans want. they don’t want that sequestration deal. they want an obama care deal or a debt ceiling deal. they won’t come to the table on those. . .

So, Sam Stein thinks the zombie “chained CPI” lives again, and Ezra agrees, but also thinks that the Republicans will not agree to that unless they get the deals they want. So, once again, the right wing, through their intransigence, may save us from President Obama’s continuing insistence that seniors must suffer now, and future seniors must suffer as well, for the sake of an illusory long-term debt/insolvency problem that doesn’t really exist, and that he can dispel at any moment by minting a $60 T coin.

Meanwhile, the four Versailles “progressives” on this panel laugh at the stupidity of the Republicans who are marching to the doom of their party, while refusing to call attention to the fact that this “funding” crisis, and the previous ones since 2010 were and are all kabuki, since the President could and still can dispel the illusion of possible insolvency any time he chooses to use the power Congress has given him to mint that coin.

So pull up a chair for the latest installment of “The Congressional Game of Chicken.” I’m betting on Curtain 2 with another filibuster threat to make it a really fun and interesting game.

Mar 06 2013

Yes, the Sequester is President Obama’s Fault. These are facts.

This won’t be FP material everywhere, but it’s the truth. That is, unless one just hasn’t paid attention to the events and Congressional deals facilitated by this administration in response to said events that led up to the sequester. If one did pay attention, this conclusion is undeniable. The sequester was basically an invention of Gene Sperling and Jack Lew.

In case we all need a refresher, Gene Sperling was and still is the Director of the National Economic Council under President Barack Obama. In case the denial is too thick with regard to Jack Lew, Jack Lew was head of Obama’s Office of Management and Budget when the first grand betrayal was written only to be fall apart by John Boehner’s doing in 2011. For that, and his time on Wall St helping Citigroup as OCC crash our economy while denying that deregulation was a problem, he is insultingly being rewarded with a post as our next Treasury Secretary.

These are the people that were hired by and work in the Obama administration that wrote the damn Sequester! It’s pretty hard to deny, but some will try.

This was during the debt ceiling debacle many of us warned about but were ignored in favor of 11th dimensional chess. In reality, this is a vile violent rigged chess game that makes seniors starve to death through lack of meals on wheels. This form of deficit terrorism also threatens many of my friends and their relatives through layoffs and furloughs while slowing all essential government operations down.

Feb 27 2013

The Sequester: Bipartisan Craponomics at Its Worst

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.

Feb 06 2013

John T. Harvey: “The Coming Recession: How Fiscal Responsibility is Economic Suicide”

As you might have heard the economy is contracting while unemployment remains high inching higher especially in real terms again while Washington is too stupid or corrupt across the board to notice. I can’t say I didn’t see this coming even as just an above average layman. All this focus on austerity is detrimental. After all, spending is actually income and so are deficits which are the life blood of the private sector in the economy when it comes to those sectoral balances you hear me always harping about.

And on that point I refer to Post Keynesian economist Wynne Godley as he along with MMT economist L. Randall Wray predicted this crisis in 2000 and that matters. Therefore it’s safe to say the Post Keynesian school is pretty much vindicated. And part of this tradition can be read in Forbes magazine every month. Imagine that! I have thanks to discovering the work of the most excellent Post Keynesian/MMT economist John T. Harvey.

I have to thank NY brit expat for introducing me to John whom is not only a brilliant economist, but an all around cool guy who is very approachable and has an awesome taste in music. He stresses that the economics discipline hasn’t made economics very understandable to the general public and he’s right; however, you wouldn’t know that by reading his many excellent pieces on why everything people think they know about debt and deficits is absolutely wrong. As John points out, it’s not only wrong, it pervades this entire ignorant and corrupt political debate happening right now over this stupid sequester that was a creation of the White House and Congress.  

As you will read down below, this horrible self induced debt ceiling pro austerity political show where never is heard an encouraging word like full employment, but instead for Peter Peterson’s enjoyment, idiotic words praising deficit terrorism(budget balance and cutting our safety net) rule the day. It only amounts to economic decay and a likely recession on the way depending on how much deficit spending is cut in the coming days.

Jan 30 2013

Grover Norquist is Winning Thanks to a Debt Ceiling Crisis Every Few Months

That’s right. I don’t know in what world some people are living in, but they should pay attention. Yes they should actually pay attention to what Grover Norquist is saying and how much these stupid debt ceiling crisis I predicted are playing into his hands. (h/t Addison)

Norquist: Republicans Should Hold Federal Government Hostage Every Month

And so this constant state of crisis and delayed/short term appropriations are going to be official soon.

House passes short-term debt limit deal

The Republican-led House today passed a bill to “suspend” the nation’s debt limit until May, which if passed by the Senate and signed into law, would stave off for a few months the risk of letting the U.S. government default on its loans.

{…….}

House Democrats, meanwhile, grumbled that the short-term bill amounts to political gimmickry that keeps Washington in crisis mode.

{…….}

“The premise here is pretty simple,” House Speaker John Boehner said on the House floor. “It says there should be no long-term increase in the debt limit until there’s a long term plan to deal with the fiscal crisis that faces our country. Every hardworking taxpayer in America knows that they have to do a budget. Every hardworking taxpayer understands that you can’t continue to spend money that you don’t have.”

{……..}

House Democrats also complained that the bill prolonged the debate over the debt limit rather than solving it.

“The good news is that our Republican colleagues finally realized that America should pay its bills and dropped their condition that that be matched by cuts,” Rep. Chris Van Hollen, D-Md., said in a news conference. “The bad news is they’ve decided that America only needs to pay its bills for three more months.”

Yes, even when that 3 month suspension becomes a raise only every few months more down the line it won’t be close to normal standard procedure as some have tried to claim. This is true for a number of reasons; past raises of debt ceilings were never crisis showdowns and always were routine until Obama put them on the table as something to be negotiated. So given the completely different context comparing past debt ceiling raises to now I needn’t go any further, but I will.  What happened in 2011 was unprecedented and we are still dealing with the fallout right here and right now. It almost happened to former President Bill Clinton in the 90s but even Jonathan Chait admits Clinton was much more politically savvy in dealing with it than Obama so it was averted.  

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