Debt-Ceiling Deal’s Cuts Could Crash Economy

Negotiating with crazy people is always a bad idea and negotiating with hostage-takers is dangerous. But negotiating with crazy hostage-takers is worse than dangerously bad. The “debt-ceiling” deal being negotiated to keep the economy from being crashed could crash the economy anyway. Making draconian cuts could throw us into another recession — one that would be much, much harder to get out of because we have used up many of our recession-fighting tools.
Withdrawing government spending literally “takes money out of the economy.” Democrats should instead offer the country a plan to invest in We, the People by modernizing our infrastructure, improving our schools, making us energy self-sufficient, improving our social safety net and restoring our manufacturing and key industries thereby making American businesses more competitive in the world economy. Propose this instead of painful cuts the benefit only the rich and take it to the country.
From Paying Off Debt To Massive Debt In Ten Years
Ten years ago the government had huge surpluses and was on a path to paying off the entire debt. What changed? Ten years ago last week the Bush tax cuts passed. Republicans promised the tax cuts would create jobs and grow the economy. Instead the economy had one of the slowest periods in our history, creating very few new jobs and causing stagnant wages, leading to huge personal debt. (But the rich got dramatically richer.) And those cuts, along with huge military increases, two wars all leading up to an economic crash caused by deregulation and mismanagement, caused the country’s debt to exploded. Taking office with a surplus of more than $250 billion, Bush left office with a $1.4 trillion budget deficit for his final budget year.

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Debt Limit Reached
Now the United States has reached the Congressionally-authorized borrowing limit and is heading towards default. The White House is negotiating an increase in this limit with the very people who exploded the debt, people who have a vested interest in killing the economy so they can win the next election, and their budget-cut proposals would do just that. It is suddenly dawning on lots of people that this whole enterprise of austerity, taking trillions out of the budget – and therefore out of the economy – is a very, very dangerous proposition.
Cuts Make Economy Worse
Withdrawing government spending literally “takes money out of the economy.” We have a crisis because of lack of demand. Republican solutions of giving the wealthy and corporations even more money and tax cuts obviously will not work because the rich don’t create jobs, we do. The rich are already richer than ever, with a greater share of the income and wealth than ever, and giant corporations are already sitting on tons of cash.
So with the stimulus winding down, and state and local budget cuts causing layoffs of teachers, firefighters and other government employees, Republicans are demanding even more layoffs from federal budget cuts as a “cure.” But cutting government as a prescription for creating jobs sounds a lot like their claim that cutting taxes increases revenue. The problem is a lack of demand, and budget cuts taking hundreds of billions out of the economy only makes that worse.
In a front-page story last week, Economy’s Woes Shift the Focus of Budget Talks, the NY Times sounded the alarm that things are not going well,

Recent signs that the economic recovery is flagging have introduced a new tension into the bipartisan budget negotiations, giving rise to calls especially from liberals to limit the size of immediate spending cuts or even to provide an additional fiscal stimulus.
… More broadly, however, the signs of an economic slowdown in past weeks — not least Friday’s report showing weak job growth in May — have altered the climate for those talks. Amid the emphasis in Washington on significant deficit reductions, … some Democrats, economists and financial market analysts are raising concerns that too much fiscal restraint this year and next could further undermine the recovery.

Democrats are also noticing that agreeing to cuts demanded by Republicans could well have an effect on their chances in the next election.

“I think Obama himself is going to have to move or he’s going to risk losing the next election,” said Mark Weisbrot, a liberal economist and a co-director of the Center for Economic and Policy Research. “He’s going to have to say clearly that the federal government has to step in when the economy is so weak,” regardless of whether his proposals can pass in the Republican-controlled House.

Republican economist Martin Feldstein’s recent op-ed in the Wall Street Journal, The Economy Is Worse Than You Think, also warned how bleak the economy looks and what the prospects are. (Of course, Feldstein argues for Republican plutocratic solutions: cut taxes, Social Security and Medicare.) From the op-ed:

The drop in GDP growth to just 1.8% in the first quarter of 2011, from 3.1% in the final quarter of last year, understates the extent of the decline. Two-thirds of that 1.8% went into business inventories rather than sales to consumers or other final buyers. This means that final sales growth was at an annual rate of just 0.6% and the actual quarterly increase was just 0.15%—dangerously close to no rise at all. A sustained expansion cannot be built on inventory investment. It takes final sales to induce businesses to hire and to invest.
The picture is even gloomier if we look in more detail. Estimates of monthly GDP indicate that the only growth in the first quarter of 2011 was from February to March. After a temporary rise in March, the economy began sliding again in April, with declines in real wages, in durable-goods orders and manufacturing production, in existing home sales, and in real per-capita disposable incomes. It is not surprising that the index of leading indicators fell in April, only the second decline since it began to rise in the spring of 2009.
The data for May are beginning to arrive and are even worse than April’s. They are marked by a collapse in payroll-employment gains; a higher unemployment rate; manufacturers’ reports of slower orders and production; weak chain-store sales; and a sharp drop in consumer confidence.

Feldstein even agreed that the stimulus was not enough,

As for the “stimulus” package, both its size and structure were inadequate to offset the enormous decline in aggregate demand. The fall in household wealth by the end of 2008 reduced the annual level of consumer spending by more than $500 billion. The drop in home building subtracted another $200 billion from GDP. The total GDP shortfall was therefore more than $700 billion. The Obama stimulus package that started at less than $300 billion in 2009 and reached a maximum of $400 billion in 2010 wouldn’t have been big enough to fill the $700 billion annual GDP gap even if every dollar of the stimulus raised GDP by a dollar.

The investment community is taking notice, too. From Reuters: Deficit cut would trim growth: BlackRock’s Fink,

A $4 trillion reduction of the U.S. budget deficit, if enacted by Congress, would trim economic growth by one percentage point a year for the next decade, BlackRock (BLK.N) Chief Executive Laurence Fink said.
With analysts already forecasting modest growth of 2 percent to 3 percent annually, that would leave the United States with an economy expanding at only about 1 percent a year, Fink said at the Morningstar investment conference on Friday.

Fink, however, argues that the government should do it anyway, along with cutting corporate taxes.
Cuts Make Deficit Worse
In a blog post, Thoughts on Voodoo, Paul Krugman explains (with some math) why austerity right now doesn’t help, and only makes deficits worse,

There’s a quite good case to be made that austerity in the face of a depressed economy is, literally, a false economy — that it actually makes long-run budget problems worse.
[. . .]How big do these negative effects have to be to turn austerity into a net negative for the budget? Not very big. In my example, the real interest payments saved by a 1 percent of GDP austerity move are less than .02 percent of GDP; if the marginal tax effect of GDP is 0.25, that means that a reduction of future GDP by .08 percent is enough to swamp the alleged fiscal benefits. It’s not at all hard to imagine that happening.
In short, there’s a very good case to be made that austerity now isn’t just a bad idea because of its impact on the economy and the unemployed; it may well fail even at the task of helping the budget balance.

My recent post, See WHY Austerity Can’t Reduce The Deficit links to the equations that explain the background of Krugman’s (and others’) concusion,

OK, so we have a $100 GDP with $10 deficits and we want to cut that to $5. Kash explains that a $5 spending cut means (by definition) that GDP immediately drops $5, and this (by definition) $5 drop in consumer income makes tax revenue drop as well (as well as a further drop in GDP). After some calculations (go to the post) Kash shows that a $5 cut makes deficits drop to 7.4%, not 5%, but GDP also drops quite a bit – maybe 7 or 8%. Seriously, go see the calculations, they are not difficult.

Just cutting people out of the economy doesn’t fix the problem, it shifts the problem and eventually will kill the economy.
Stimulus Worked — But Was Not Enough

Private Sector Jobs - May 2011

Here is the timeline you see on this chart:

  • First, there is the Bush freefall, from the policies Republicans want to return to
  • then the effect of the stimulus spending reverses the decline, bringing back job growth
  • then the stimulus winds down, and job growth levels out
  • and combined with state & local budget cutbacks — spending cuts, which Republicans want more of — job growth stalls. (Note that this chart is private sector only doesn’t show effect of government job losses.)

Jobs Fix Deficits
Jobs fix deficits. Restoring good-paying jobs starts to restore the tax base and stops the emergency spending on the unemployed. The increased demand as people find work and paychecks revives retail and manufacturing. Housing recovery, for example, depends on more jobs. But with unemployment high and wages are low, so many people just can’t afford to buy — or keep — a house.
Only The “Pain Caucus” Benefits From Cuts
In the recent op-ed, Rule by Rentiers, Krugman explains that these budget-cut austerity policies help a small, select group. He calls them “the pain caucus.”

The latest economic data have dashed any hope of a quick end to America’s job drought, which has already gone on so long that the average unemployed American has been out of work for almost 40 weeks. Yet there is no political will to do anything about the situation. Far from being ready to spend more on job creation, both parties agree that it’s time to slash spending — destroying jobs in the process — with the only difference being one of degree.
. . . Consciously or not, policy makers are catering almost exclusively to the interests of rentiers — those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else’s expense.
. . . While the ostensible reasons for inflicting pain keep changing, however, the policy prescriptions of the Pain Caucus all have one thing in common: They protect the interests of creditors, no matter the cost. Deficit spending could put the unemployed to work — but it might hurt the interests of existing bondholders. More aggressive action by the Fed could help boost us out of this slump — in fact, even Republican economists have argued that a bit of inflation might be exactly what the doctor ordered — but deflation, not inflation, serves the interests of creditors.
[. . .] No, the only real beneficiaries of Pain Caucus policies (aside from the Chinese government) are the rentiers: bankers and wealthy individuals with lots of bonds in their portfolios.

Cuts Cold Cost Election
Policies of austerity cause large-scale suffering — done now to avoid restoring tax rates at the top. Budget cuts are asking the public to take the hit, through cuts in programs for us, for among other things the cost of bailing out Wall Street.
Republicans understand that the public will blame Obama for the cuts and are certainly planning on using the resulting lack of jobs in the next election. Remember, in the 2010 midterms they campaigned and won using a theme that Democrats were to blame for “$500 billion in Cuts to Medicare”.
The conservative noise machine is already claiming that Obama is harming Social Security. For example, see last week’s Obama busting Social Security by conservative Don Surber,

Having cut employee contributions by one-third, the president now wants to cut employer contributions in a desperate CYA to cover up the Obamess Economy.

Public Wants A Different Solution
The American Majority wants the same solutions that economists agree work better for more people. The public wants tax increases on the rich. They want direct job creation by government. They want a revival of American manufacturing. They want a national industrial/economic policy. They understand that growing the economy reduces the deficits.
Austerity is about intentionally causing suffering, so a wealthy few benefit. But investing in our country to create jobs, modernize our infrastructure, improve our schools, make us more energy self-sufficient will not only make our country more competitive in the world economy will improve the lives of We, the People. Obviously this is the better choice, and a significant percentage of the public will have Democrats’ back if they offer this plan.
The Congressional Progressive Caucus’ People’s Budget is the template for a job-creating deficit solution. The Progressive Caucus is a group of progressives in the Congress who have put together a budget that fixes the deficit and grows the economy, providing jobs. It is called The PEOPLE’S Budget Plan. You can read the plan at: Congressional Progressive Caucus : FY2012 Progressive Budget,

The CPC proposal:
• Eliminates the deficits and creates a surplus by 2021
• Puts America back to work with a “Make it in America” jobs program
• Protects the social safety net
• Ends the wars in Afghanistan and Iraq
• Is FAIR (Fixing America’s Inequality Responsibly)
What the proposal accomplishes:
• Primary budget balance by 2014.
• Budget surplus by 2021.
• Reduces public debt as a share of GDP to 64.1% by 2021, down 16.5 percentage points from a baseline fully adjusted for both the doc fix and the AMT patch.
• Reduces deficits by $5.6 trillion over 2012-21, relative to this adjusted baseline.
• Outlays equal to 22.2% of GDP and revenue equal 22.3% of GDP by 2021.

Beyond the people’s budget we need a massive investment in infrastructure modernization. This infrastructure work has to be done anyway, no matter what. The longer we delay it the more our country falls behind. It is millions of jobs that need doing at a time when millions need jobs! (And by the way the government can borrow at nearly zero interest rates right now — one more reason to do it now.)
The Republicans are demanding that we cut and gut our government and therefore our economy in exchange for keeping the country from defaulting on its debts. The deal they are demanding will do just as much harm as default. Instead we need to invest in We, the People with jobs and infrastructure that enable us to grow our way out of this mess.
Actions
Tell President Obama to put the People’s Budget on the table.
10 years of Bush tax cuts is enough! Click here to demand your representative supports the Fairness in Taxation Act so the rich contribute their fair share.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Concern Over Republican Embrace Of The Ayn Rand Poison

Some say that maybe it is a bad idea to base a political party’s ideology on a belief that altruism, democracy and Christianity are “evil.” Others say that maybe it is a bad idea to base a country’s policies on fictional novels rather than science and history. Still others say is it a bad idea for national leaders to think of most of the public as “parasites” while saying people with tons of cash are “producers” who should govern. I am talking about the Republican Party’s embrace of Ayn Rand and her cruel philosophy.

Disciples of Ayn Rand’s philosophy of selfishness now dominate the thinking of the leadership of the conservative movement and the Republican Party. There is no way around it. Republican budget leader Rep. Paul Ryan says Rand is his guide. Senator Ron Johnson (R-WI) says Rand’s Atlas Shrugged is his “foundation book.” Senator Rand Paul is named after her (or not). Clarence Thomas requires his law clerks to watch The Fountainhead. Fox News promotes Rand. Conservative blogs promote Rand. Glenn Beck has been promoting Rand for years. So has Rush. This isn’t recent, Alan Greenspan lived with the Rand cult and promoted and implemented her ideas.
A Philosophy Based On Admiring A Psychopath
Rand believed that a lot of things most of us use as our moral base are “evil.” But Rand’s writings are the origins of modern Republican philosophy. In Alan Greenspan And Things Forgotten I wrote about the origins of this philosophy:

Rand’s work is very popular among conservatives now. It forms a core justification for their “on your own” philosophy praising the wealthy and discarding the rest. So it is useful to explore the formation and core of this philosophy. Early in her writings Rand became fascinated with a serial killer named William Hickman. Rand wrote that the serial killer was an “ideal man,” a superior form of human because he didn’t let society impose their morals on him. He didn’t worry about what others thought and just did as he pleased.
Other people do not exist for him, and he does not see why they should,” Rand wrote. Hickman had “no regard whatsoever for all that society holds sacred, and with a consciousness all his own. He has the true, innate psychology of a Superman. He can never realize and feel ‘other people.'” She considered these to be good qualities! And so does her cult.
This is the foundation of the modern “tea party” conservative thinking. So when you look at the modern capitalism that has grown up around Rand’s philosophy and the big corporations that are chewing up the planet to enrich a very few at the expense of the rest of us, and think it seems sort of psychopathic, maybe that’s because it literally is.

See also: Ayn Rand, Hugely Popular Author and Inspiration to Right-Wing Leaders, Was a Big Admirer of Serial Killer.
More And More Concern
More and more, people are becoming aware of the influence of Ayn Rand on current Republican thinking. Amy Sullivan writing at Time’s Swampland, Paul Ryan’s Ayn Rand Problem and Ayn Rand: The GOP’s Godless Philosopher; Michael Tomasky at The Daily Beast, Ayn Rand: The GOP’s Favorite Bonkers Demagogue; Garance Franke-Ruta at The Atlantic, The Echoes of Ayn Rand in Paul Ryan’s Budget Plan. (Digby a few years ago: Randy Conservatives and Rand To The Rescue.)
Religious Leaders Sound Alarm

Religious leaders and writers are increasingly sounding the alarm about the Republican embrace of Ayn Rand and what it really means. Examples: Conor Friedersdorf in The Atlantic, Must Christian Voters Choose Between Ayn Rand and Jesus?; Jim Newell at Gawker: Catholics Take on the Republican Cult of Ayn Rand; Stephen Prothero at Tuscon Citizen: You can’t reconcile Ayn Rand and Jesus, Frank Cocozzelli at Talk to Action with Is Ayn Rand the Secular Saint of Selfishness? (Is the Pope Catholic?), Frederick Clarkson and Frank Cocozzelli also at Talk to Action with The Randian Fault That Could Shake Conservatism, Joe Parko in an op-ed at the Crossville,Tennessee Chronicle writes We the People: Ayn Rand and the Tea Party Christians and Michael Sean Winters in the National Catholic Reporter, with Pushback from the Religious Left, (please click through to read it all),

This past weekend, Ralph Reed of Christian Coalition and Jack Abramoff fame, hosted a conference of conservative religious leaders here in Washington. They hope to energize conservative Christian voters to turn out at the polls en masse next year, although one wonders whether some GOP leaders will look up from their copies of “Atlas Shrugged” long enough to recognize the deep intellectual schizophrenia within the conservative political ranks today.
The progressive religious group Faith in Public Life organized an event at a nearby hotel to push back against the religious right’s agenda. Among others, Father Clete Kiley of the Archdiocese of Chicago addressed the group. Here is the text of his speech as prepared for delivery:

Today we are gathered here to sound an alarm. The proposed federal budget developed by Chairman Paul Ryan, and being pushed by folks at the Faith and Freedom Coalition across the street, reflects a profound crisis for American working families and American values.
There was a time in this country when we all believed in something called the common good. And we believed that if we all put in our fair share, we would be a just country, a strong country, a nation at peace with itself.
There was a time in this country when we all believed it was right to take care of our elderly; to secure their retirement; to provide them with health care; to give them a dignity and quality of life.

In this video Ayn Rand attacks altruism as evil and explains her philosophy of objectivism:

From The Sideshow this week,

The spiritual leader of the modern Republican Party is Ayn Rand, who said: “I am against God. I don’t approve of religion. It is a sign of a psychological weakness … I regard it as evil. … I am the creator of a new code of morality; a morality not based on faith.” If I had a lot of money, I’d commission a poster with Ayn Rand’s face on it and her name and those words in very big letters and put it on every billboard I could buy space on. And after it had been up long enough for a few “faith-based” people to feel they had to disavow her, I’d slowly, one by one, change the poster for one with the words of a different author: “For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.”

Paul Ryan Confronted
Watch as Rep. Paul Ryan refuses to accept a Bible from James Salt of Catholics United. The Bible was specially marked with passages about helping the poor. This occurred at the Faith and Freedom Coalition conference last week in DC.

“Why did you choose to model your budget on the extreme ideology of Ayn Rand rather than the faith of economic justice in the Bible?”
So Republicans have a lot of explaining to do. And not just to their Christian”base.”
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Businesses Hire When Customers Are Coming In The Door

Another bad jobless claims report… and this time Washington seems to have finally noticed that there are some unemployed people out here in the sticks. But instead of jobs programs the geniuses are proposing … what else? … even more tax cuts. (And after a few hours they’ll go back to complaining about deficits but blame “spending.”) And of course, they are once again trying to “appeal to Republican lawmakers” without getting it that Republican lawmakers are doing everything they can to slow job growth so they can win the next election.
Bloomberg: Payroll-Tax Break Said to Be Discussed by Obama Aides Amid Slowing Economy,

President Barack Obama’s advisers have discussed seeking a temporary cut in the payroll taxes businesses pay on wages as they debate ways to spur hiring amid signs that the recovery is slowing, according to people familiar with the matter.
. . . The talks reflect the political constraints the White House is operating under with the Republican majority in the U.S. House pushing to cut federal spending. A hiring stimulus based on a tax break for employers may appeal to Republican lawmakers, many of whom have called for measures to help businesses.

Companies Only Hire When Customers Are Coming In The Door
Here is something the geniuses haven’t noticed, in all their geniosity: It doesn’t matter how much more money you give to business owners, businesses are not going to hire any more employees until they have a REASON to – and that reason is customers coming in the door.
OK, That was bold and italicized. Maybe if I make it ALL CAPS the geniuses will see it? Let’s see: BUSINESSES ARE NOT GOING TO HIRE ANY MORE EMPLOYEES UNTIL THEY HAVE A REASON TO AND THAT REASON IS CUSTOMERS COMING IN THE DOOR.
Businesses are not going to hire people just to sit around and listen to iPods or read the paper, waiting for a customer.
Terrance Heath, in America’s Unhappy Anniversary: Ten Years Of The Bush Tax Cuts For The Wealthy,

Republicans claim that preserving the Bush tax cuts for the wealthy is in the interest of small businesses, but small business owners are starting to demand a repeal of the Bush tax cuts.

We are fed by our consumers, not by our tax breaks,” says Rick Poore, owner of Designwear, Inc., a screen-printing business based in Lincoln, Neb. “If you drive more people to my business, I will hire more people. It’s as simple as that. If you give me a tax break, I’ll just take the wife to the Bahamas.

Businesses are fed by their customers, not by tax cuts. Tax cuts only feed deficits. Customers coming in the door is what causes businesses to hire. In case you missed that: Customers coming in the door is what causes businesses to hire.
Direct Job Creation Is Needed
Until there are more customers businesses are not going to hire. Why should they? So it is up to us (government: We, the People…) to create some customers. The way to do that is to hire people to do some of the things that it is government’s job to do anyway, but government has been putting off because of so many tax cuts.
Fix the infrastructure: Our infrastructure is crumbling. In Obama Should Call Chamber’s Infrastructure Bluff I linked to an Urban Land Institute report on the country’s infrastructure, showing how we are falling behind countries like Brazil, China and India, and to the American Society of Civil Engineers (ASCE) Infrastructure Report Card, that says a $2.2 trillion investment is needed just to bring the country’s infrastructure back up to current standards.
This infrastructure work has to be done no matter what. The longer we delay it the more our country falls behind. It is millions of jobs that need doing at a time when millions need jobs! (And by the way the government can borrow at nearly zero interest rates right now — one more reason to do it now.)
Green jobs: And then there are the green jobs you should be creating. You should be hiring people to retrofit every home and building in the country to be more energy efficient. This pays for itself because we stop sending so much money to the oil-producing countries, stop putting so much carbon in the air, and our economy becomes more efficient. And put more money into alternative energy, too. I mean, jeeze, geniuses, what part of this is hard to get?
Jobs fix deficits: Hiring people to fix up the infrastructure takes them off the unemployment rolls and off the other assistance programs, lowering government spending on those programs. Having those jobs means they are paying taxes again, raising government revenue. And fixing up the infrastructure makes our businesses more competitive again, growing the economy. It’s a no-brainer which should mean even the DC geniuses can figure it out.
Fix Trade
Because of bad trade deals, much of any revival of our economy just means that we send more money out of the country. The trade deficits, especially with China, are also economy deficits. We are not just sending jobs and money out of the country, we are sending our chances of coming out of this economic slump out of the country as well.
And these trade deals pit exploited, underpaid workers in non- or weak democracies against our workers who had been benefiting from the good wages, workers protections and other non-“business friendly” things that democracy brings along with it.
Our trade deals have made our democracy and the resulting high standard of living into a disadvantage. Who were the geniuses that let that happen?
Restore Long-Term Incentives
Tax cuts have cut the incentive for long-term business models. It used to take time to build a fortune, so businesses had to place themselves within healthy communities with good schools, well-maintained infrastructure and solid, well-funded public structures like the court system. Cutting top tax rates changed business models to make more sense “harvesting” those things in a hurry and moving on to the next community with resources to plunder. Low top tax rates encourage quick-buck schemes.
Propose The Right Thing
Propose the right thing and do it publicly, instead of trying to appease a political ideology bent on destroying government. Doing the right thing is also the right thing politically. If the job situation doesn’t get better you’re going to be thrown out of office. So come one, geniuses, get smart and start hiring people to fix up the infrastructure and make the economy more energy efficient.
10 years of Bush tax cuts is enough! Click here to demand your representative supports the Fairness in Taxation Act so the rich contribute their fair share.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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10 Years Since Bush Tax Cuts: Why The Onion Was Right

It is 10 years since the Bush tax cuts passed. When Bush took office (and never forget the Supreme Court’s 5-4 role in that) The Onion famously declared, “Our long national nightmare of peace and prosperity is finally over.” They had no way to know how prescient they were. Now we are living the real nightmare.
10 years of Bush tax cuts is enough! Click here to demand your representative supports the Fairness in Taxation Act so the rich contribute their fair share.
The Onion satire had Bush declaring,

“My fellow Americans,” Bush said, “at long last, we have reached the end of the dark period in American history that will come to be known as the Clinton Era, eight long years characterized by unprecedented economic expansion, a sharp decrease in crime, and sustained peace overseas. The time has come to put all of that behind us.”
Bush swore to do “everything in [his] power” to undo the damage wrought by Clinton’s two terms in office, including selling off the national parks to developers, going into massive debt to develop expensive and impractical weapons technologies, and passing sweeping budget cuts that drive the mentally ill out of hospitals and onto the street.

Everything the Onion declared in jest became true right down to the Bush administration proposing to sell national parks. Pushed through using “reconciliation,” the Bush tax cuts — along with the Bush wars and military increases — have nearly bankrupted the country. As Roger Hickey writes in, 10 Years Of Bush Tax Cuts Is Enough,

Cutting taxes on the wealthy did not create jobs as conservatives promised. … the Bush Administration [had] the “worst track record on record” for jobs, according to the Wall Street Journal. Bush declared that “the surplus is the people’s money,” and proceeded to give the surplus away to very few people. Now that we face chronic deficits, it’s long past time for millionaires and billionaires to starting giving back.

10 years of Bush tax cuts is enough! Click here to demand your representative supports the Fairness in Taxation Act so the rich contribute their fair share.
Deficits: “Incredibly Positive News”
Ten years ago we had a huge budget surplus. Then came the Bush tax cuts, immediately pushing us into terrible budget deficits. What did Bush say about that? Bush said that turning from surplus to deficit was “Incredibly Positive News,”

President Bush said today that there was a benefit to the government’s fast-dwindling surplus, declaring that it will create “a fiscal straitjacket for Congress.” He said that was “incredibly positive news” because it would halt the growth of the federal government.

“Incredibly positive news” — never for a minute think that these deficits and the resulting debt were anything but intentional, a scheme to gut government and force us toward the current rigged and one-sided discussion of cutting Medicare, etc.
Bring Back Peace And Prosperity
It would be so simple to bring back peace and prosperity. First and foremost: undo the Bush tax cuts.

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But the Supreme Court helped lock in the Bush nightmare, with the “Citizens United” ruling, allowing unlimited corporate money to interfere in our elections. In the 2010 Congressional midterms more than $300 million was pumped into those nasty smear-ads by corporations, half of it from secret donors, according to Common Cause. How much of that came from, say, China? We don’t get to know.
P.S. A Simple Plan To Fix The Jobs Emergency — And The Economy, Too
Take Action
10 years of Bush tax cuts is enough! Click here to demand your representative supports the Fairness in Taxation Act so the rich contribute their fair share.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Trade Agreements Kill Jobs, Wages, Democracy

Our trade agreements have pitted working people in countries that do not protect rights or people against the working people here who fought to win the protections of democracy. The result has been devastating to our communities, our economy and our democracy.
America is (was, anyway) a democracy governed by We, the People. As Monday’s Memorial Day ceremonies remind us Americans fought and sacrificed to build and keep the protections and benefits that democracy offers. Those include good jobs with good wages, worker safety laws, rules preventing companies from polluting, and so many other things that companies complain make us less “business-friendly.” But we got involved in “trade” deals that let countries get around democracy’s protections, pitting employees here against people who have no voice, no power and no money. You can see the results all around us.
Korea, Panama, Columbia … and China
Now we’re looking at new trade agreements with Korea, Panama and Columbia. The President is holding out for assistance for all the workers who will be displaced while Republicans say, “Why bother?” Neither side is holding out for agreements that lift workers on both sides of the border.
But these agreements will hurt American workers and communities by lowering wages and killing jobs. For example, the National Council of Textile Organizations, American Manufacturing Trade Action Coalition, National Textile Association, American Fiber Manufacturers Association, U.S. Industrial Fabrics Institute got together to warn that,

We have analyzed the agreement carefully and come to the unfortunate conclusion that the textile portions of the KORUS agreement are seriously flawed. If passed in its current form, the agreement will open the U.S. market to a massive one-way flow of sensitive textile products from South Korea, as well as illegal Chinese imports, while providing no new export business to our textile manufactures and workers.

And more clearly, there are …uh … labor rights “problems” in Columbia, too: Colombian Labor Rights Lawyer in Critical Condition after Assassination Attempt,

On May 13, 2011, armed men on motorcycles fired five bullets into labor rights lawyer Hernán Darío in the heart of downtown Cali, Colombia. Mr. Darío is the lead attorney in a high-profile case defending the leaders of a group of sugarcane workers who led a labor strike in 2008 from criminal charges. While no one has taken responsibility for this shooting, it is widely believed to be connected with the sugar strike and Mr. Dario’s defense of the sugar workers.
The shooting comes only weeks after the Colombian government agreed to implement a “U.S.-Colombia Labor Action Plan,” a plan to make improvements in labor rights conditions in Colombia, in connection with U.S. Congressional consideration of a Free Trade Agreement (FTA) between the U.S. and Colombia. The shooting underscores the continuing and serious labor rights problems in Colombia. It also calls into question whether there has been real progress on the labor rights situation in Colombia.

Of course, arguments over these are really proxies for our trade relationship with China, which is the real problem because it is the biggest problem. Our trade deficit with China is in the hundreds of billions – meaning they sell to us and don’t buy from us, costing jobs, lowering American wages and increasing our debt. And China not only cheats, they really cheat. This is from Another Reason CEOs Should Rethink Outsourcing and Offshoring,

Fellowes Inc., one of the world’s largest makers of office and personal paper shredders, is witnessing the destruction of its business, as its large Chinese manufacturing plant has been shut down by its joint venture manufacturing partner.
The company’s Chinese joint venture firm has barred 1,600 employees from entering the plant, stolen all of its proprietary manufacturing production equipment and forced the venture into bankruptcy. The contracts Fellowes signed with its Chinese production company meant nothing. For Fellowes, there is no such thing as rule of law in China.
The Itasca, Ill.-based company has lost $168 million worth of business and is no longer able to produce personal shredders for the world market. It has taken its case to Chinese courts, to no avail. It has pleaded with members of Congress and federal agencies, with no results.

Wrong Turn On Trade
“Trade” is when you … uh … trade with others. A country might be able to grow bananas, and need machine tools, so you set up a deal to trade with them. And you both benefit!
But “trade” is not supposed to mean you just let a company just close their factories here because they don’t want to pay reasonable wages or protect worker safety or the environment, or pay taxes to support the communities that provide workers and services and customers. You don’t just let them send those jobs across a border to a “business-friendly” country that will let them pollute at will or treat employees like slaves and then think they can just bring the same products they used to make here back here to sell.
Somewhere along the way we made a wrong turn that has taken down a road toward ruin. Somewhere along the way we made a deal with the devil to let a very few people here get extremely wealthy at the expense of the rest of us.
The Cost To Communities
These trade agreements have had a terrible effect on our manufacturing communities, particularly in the midwest. From last year’s post, Lorain, OH Keep It Made In America Town Hall Meeting,

As you drive from town to town in Michigan and Ohio you see one after another a ring of the “big box” stores and national chain stores around each city. You also see the “brownfields” of rusted-out, closed factories, empty, falling-down buildings. Then you go to the downtown and you see boarded up houses, empty storefronts, deteriorating and deteriorated communities, idle people standing on corners. As you drive into these towns you can just see what is happening in a nutshell.
… Here are some pictures from the inner Lorain area but you see it all around: (click for large)
P1000784P1000802 P1000791P1000795P1000789P1000787

The Cost To Sovereignty
Our trade treaties prevent us from governing our own country with the laws We, the People want to pass, even when we can get them passed around the money of the corporate gatekeepers.
The World Trade Organization (WTO) says says we cannot require Country Of Origin Labeling (COOL)
WTO rules against U.S. COOL program

A World Trade Organization panel has issued a preliminary ruling on the case that Canada and Mexico filed against the U.S. country-of-origin-labeling law, charging that the mandatory rule violates WTO trade standards.
Specifically, the WTO ruling upholds that requirements tied to U.S. mandatory COOL violate provisions of WTO’s agreement on Technical Barriers to Trade or TBT. The WTO panel also ruled that the mandatory COOL requirements to not meet the United States’ stated objective that the labeling law informs and helps U.S. consumers make purchasing decisions regarding the origin of meat, produce and other products covered by the labeling law.

Just over a week ago the WTO ruled that we can’t even make companies tell consumers whether tuna they buy is “dolphin-safe.” David Sirota writes about this in Salon, When “free” trade trumps U.S. law

… so-called free trade agreements (i.e., NAFTA, bilateral NAFTA replicas, the WTO regime, etc.) are free only of protections for human beings — that is, free of provisions that preserve, say, labor rights, human rights and the environment. But those deals’ “hundreds of pages” are chock-full of protectionist provisions for multinational companies — provisions that, for example, allow foreign firms to sue governments for lost profits and empower international panels to unilaterally override a nation’s domestic laws if those laws reduce corporate revenues.

According to Public Citizen’s Eyes On Trade,

For the second time in a week, reports have surfaced about the WTO clobbering a U.S. consumer labeling policy. Last week, the U.S. voluntary dolphin-safe tuna label was deemed a WTO violation. This week, Reuters is reporting that the WTO has ruled that U.S. beef labels are a WTO no-no.
Corporate meatpackers are rejoicing…
. . . Consumers, ranchers, farmers and legislators worked hard to pass the labeling rules after seeing ground beef horror stories in Schlosser’s movie and book Fast Food Nation.
Heck, even free marketeers will be upset with the WTO ruling, since labeling transparency allows the consumer to make the free choice as to what kind of product they want to buy without the government dictating the outcome.
[. . . ] Unlike the U.S. Constitution and legal system, the WTO puts maximization of trade volumes first – ahead of consumer safety or the environment. As if corporations needed any more incentive to destroy local food production.

The Cost To Democracy
People watch these trade agreements take away our jobs and lower our standard of living. The see China cheating, taking everything and know that they can’t buy things in stores that are made in the USA. People clearly see this smashing the middle class and don’t understand why our political leaders don’t step in to defend the country. They don’t understand why government is not addressing these things that are costing jobs, and then see government making even more trade deals when it is obvious that trade with China is costing us jobs.
People understand this is big-company corruption buying politicians and making economic change impossible. They watch the big corporations take over the government, telling the Congress and administration what to do while they are unable to do anything about it. They come to believe the game is rigged. The result of all of this is that many people feel powerless and tune out.
The frustration over this is being channeled into a belief that it is government and democracy that are responsible, and that government spending is why they have no money. This loss of faith is dangerous to our society and our political system.
To Fix The Economy And Budget , Fix Trade
We have to fix our trade relationships if we hope to fix our economy and out budget problems. Ian Fletcher explains, in Why the Budget Is the Wrong Thing to Fight About,

So… what is the solution? What do we have to fix?
The number one thing is trade. Free trade collapsed a very long time ago. What we have today is not free trade at all, it’s ruthlessly manipulated trade — manipulated by America’s big trading partners, starting with China but including many others. And we’re doing nothing to stop them.
America’s titanic ($497 billion last year) trade deficit is ripping the guts out of industry after industry, but we have no answer. And you can’t gut industry after industry and expect not to reduce your GDP.
If we didn’t have this horrendous trade deficit, we simply wouldn’t be fighting many of these budget battles. Why? because we’d have a larger GDP, so tax revenues would be higher. Spending on public benefits would be lower, and painlessly so, because fewer people would be poor and middle-class people would have more money to take care of themselves.

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Jobs Fix Deficits

Polls show that the American Majority is much more concerned about jobs than deficits. So why is DC talking only about deficits instead of jobs, when jobs are the medicine for deficits? And why is DC only talking about budget cuts as a path to fixing the deficits, when the deficits were caused by tax cuts and lack of jobs? In fact most of the “deficit cures” being discussed in DC don’t make the deficit better, they make deficits worse because they kill jobs.
Stimulus Ends And Job Growth Ends, Too
Now that the stimulus is running out, so is any sign of a jobs recovery. The stimulus stopped the economic freefall that was occurring under the prior administration, and restored at least some job growth. It worked, but it was not big enough. Much of it was wasted on tax cuts that leave behind only debt, and it is running out. At the same time, state and local government cutbacks are working against any current economic rebound. For the longer term, badly-needed restructuring of trade deals, development of a national industrial policy and removal of the plutocratic tax and regulatory changes that led to intense concentration of wealth have not occurred, keeping the economy from moving forward. See for yourself in the following chart:

All Jobs - April 2011

Follow the timeline on this chart:

  • First, the Bush freefall,
  • then the effect of the stimulus spending,
  • then the stimulus winds down,
  • combined with state & local budget cutbacks.

Until needed changes are made the economy remains mired in the failed Reagan/Bush/Bush plutocratic, everything-to-the-top structure and cannot sustain itself without stimulus. The worst thing that could happen now is federal budget cutbacks on top of the state and local government cutbacks. Pulling that much out of the economy, laying off all those government employees, and ceasing to invest in the infrastructure and education that make us competitive in the world would be a tragic mistake.
Jobs In The News
Stimulus winding down, state and local governments cutting back, trade deficit increasing again… Which brings us to to this week’s economic news. Reuters: Private sector job growth slumps in May,

The ADP report showed private employers added a scant 38,000 jobs last month, falling from a downwardly revised 177,000 in April and well short of expectations for 175,000. It was the lowest level since September 2010.
… A separate report showed the number of planned layoffs at U.S. firms rose modestly in May with the government and non-profit sectors making up a large portion of the cuts.
… The housing market, meanwhile, continued to struggle as a report from an industry group showed applications for U.S. home mortgages fell last week, pulled lower by a decline in refinancing demand.

And, Manufacturing growth slowest since September 2009: ISM

The pace of growth in the manufacturing sector tumbled in May, slackening more than expected to its slowest since September 2009, according to an industry report released on Wednesday.
… New orders fell to 51.0 from 61.7 in April, the lowest since June 2009. The index for prices paid fell to 76.5 from 85.5, below expectations of 82.0.

Forbes: Double Dip in Housing; Could Double Dip Recession Be Next?

This chart from Business Insider shows what the Standard & Poor’s Case-Shiller Index looks like on a graph chart: bad. National home prices are back to their 2002 levels, according to the index data released May 31.
. . . Moreover, consumer confidence unexpectedly declined in May to its lowest level in six months due to the lackluster job market and declining home values.

Austerity Cuts Jobs
But DC is not only not talking about jobs, they are talking about austerity — cutting the very things that create jobs. History and the experience of other countries as they struggle to crawl out of the economic collapse has shown again and again that government investment in infrastructure and education and scientific research and manufacturing are the path to recovery. England, Greece and others trying austerity are falling back into recession. Meanwhile China is investing hundreds of billion in high-speed rail and other infrastructure. Germany is investing in manufacturing. Others are investing billions more in infrastructure. All are pursuing green energy sources.
Mired in austerity ideology we are doing none of these. For example, on a PBS NewsHour discussion of the House vote rejecting a “clean” debt-ceiling bill Tuesday, Rep. Peter Roskam said,

…any raising of the debt ceiling has to be preconditioned upon cuts that drive towards a real economic recovery and long-term growth and prosperity and job creation.

Rep. Roskam actually claimed that cutting the things that have proven to drive growth and job creation will drive growth and job creation.
Austerity Can’t Cut Deficits
The other day I wrote about calculations that shows that cutting budgets does not cut deficits. From See WHY Austerity Can’t Reduce The Deficit, (click through to see the calculations that prove austerity can’t reduce deficits),

Austerity — cutting government benefits and services — is not the path to fixing deficits. In fact, economists warn that trying to fix a sluggish economy by cutting government spending will just make things worse. Worse yet, this approach can have damaging effects that last into the future. This can be easily shown with simple calculations.

Jobs First In Democracy
In a democracy jobs would be the first topic of discussion and the only toipic until plenty of good-paying jobs are available. But in a plutocracy — government by the wealthy — jobs for regular people would be of little concern. Which are we seeing here?
The American Majority clearly, absolutely, firmly and primarily want jobs as government’s — our — first priority (click through to see the polling), while our leaders are talking about doing things that cut jobs and cut the thing that We, the People do for each other.
The solution to the huge post-collapse jump in deficits is to restore the jobs. Restoring good-paying jobs starts to restore the tax base and stops the emergency spending on the unemployed. The increased demand as people find work and paychecks revives retail and manufacturing. Housing recovery, for example, depends on more jobs. With more jobs and better pay. Unemployment is high and wages are low, so many people just can’t afford to buy — or keep — a house.
Just cutting people out of the economy doesn’t fix the problem, it shifts the problem and eventually will kill the economy.
Jobs First In Election
One thing is for sure: jobs will be the first concern of voters in the coming 2012 elections. And Republicans understand that making things worse now helps Republicans later. The question is why aren’t Democrats and the President focusing on making things better now to help themselves and all of us later?
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Close The Social Security “Cap” Tax Loophole!

Most people don’t know that there is a huge loophole in the Social Security tax. Believe it or not, after $107K income you don’t pay the Social Security tax at all. This loophole is called the “cap.” The “cap” loophole is bigger than the looholes that let big corporations get out of paying their taxes because while not all corporations avoid taxes the “cap” applies to everyone making over $107K. Closing this loophole would fix all of Social Security’s so-called “problems.”
The “Cap”
Working people pay into their Social Security account from every dollar they earn but high-income earners only pay on a fraction of what they earn. Most people don’t make enough to take advantage of this loophole, so they don’t even know about this loophole. But once you reach $106,800 of income you stop paying anything into Social Security.
The Social Security “Problem”
Social Security has built up a huge trust fund of money that people have set aside for their retirement. This trust fund covers everyone’s Social Security benefits well into the future. But under some economic assumptions and with continuing concentration of wealth this trust fund begins to run out, and could be gone by approximately 2037. After 2037 the amount coming in from money people set aside could fall short of the amounts going out, and predictions are that without some changes the amounts paid out could be as much as 25% short. Of course, because of cost-of-living adjustments (COLA), benefit checks will be larger than now, even with this potential 25% cut. But this will be a blow to retired people, and should be avoided.
Proposed Solutions
There are several proposals to solve the problem of this potential cut in benefits in the year 2037. Many of these solutions involve schemes to cut benefits now, instead of in 2037, to avoid having to cut in 2037. But for some reason many people are skeptical and do not see the logic of making big cuts in Social Security now in order to avoid possible small cuts later.
Other solutions involve raising the retirement age beyond the current retirement age of 67. People who do not sit at desks in their jobs and have to stand, lift, bend or use their hands worry that they will be unable to work until they die, and would rather see a solution to fixing the problem of a potential shortfall way off in the future than making them continue to work. Also, longevity studies show that people in higher incomes — the very people receiving the “cap” loophole — are living longer but not people who make less.
Still other solutions involve “means testing” — excluding some people from receiving benefits everyone has paid for. This is undemocratic — we are all in this together and have an equal stake and are entitled to equal benefits. That is what the word “entitlement” means: in a democracy we are all equally entitled to certain things.
These proposals all involve cutting or delaying benefits for recipients. But there is another solution that does not involve benefits: raising the cap on the level of earnings that pay into Social Security.
Raise The Cap
The one solution that is seemingly off the table in plutocratic circles is called “raising the cap.” This means fixing the loophole that lets people making over $106,800 stop paying into the Social Security fund. This would, of course, solve the problem of any potential shortfall in Social Security and could even enable restoring a lower retirement age, which would help alleviate the chronic unemployment problem as well.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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