Paying a Fair Share or the Buffett Rule
12 Apr 2012 Leave a Comment
in Budget, Congress, Economics, Obama Administration, Politics Tags: Buffett Rule, Economics, Ezra Klein, John Kerry, President Obama, Scott Brown, Shelden Whitehouse, Warren Buffett
I’ve gotten several email recently from the President, from Elizabeth Warren and from other progressive organizations about the Senate vote on the Buffett rule. Since I’m pretty sure that Senator John Kerry will vote for the bill and Senator Scott Brown will vote against it, I haven’t called, emailed or written either of them about it.
I have, however, wondered what the bill actually does. So thank you to Ezra Klein’s Wonkblog in the Washington Post this morning for his explanation. The big vote everyone is talking about is actually a bill introduced by Senator Sheldon Whitehouse from Rhode Island. He explained the bill to Ezra who explains it to us.
In other words: The “Paying a Fair Share Act” doesn’t mean someone making $1,500,000 will pay at least the same percentage of his income in taxes as the average middle-class family. It means he would pay a somewhat higher marginal rate on the income he earns over $1 million — in this case, on the excess $500,000.
Moreover, that higher marginal rate would only reach 30 percent on income over $2 million. Between $1 million and $2 million, the Buffett rule phases in so as to avoid a sharp “tax cliff” at the million-dollar mark.
But would it still raise money to help ease the deficit?
Another misconception: The proposal doesn’t raise $47 billion over 10 years. Or, rather, it does, but only if you use the “current law baseline” that assumes the full expiration of the Bush tax cuts. No one really uses that baseline. If you look at Paul Ryan’s budget, for instance, its appendix tables use a “current policy baseline,” which assumes, among other things, that the Bush tax cuts are extended.
Compared with that baseline, the Paying a Fair Share Act actually raises about $160 billion. Still not enough to solve our deficit problems on its own, but nothing to sneeze at.
So as usual it is a little more complicated than the President makes it sound, but still a good thing to support.
Creating Jobs: which party does better
10 Apr 2012 Leave a Comment
in 2012 Election, Economics, Economy, Obama Administration, Politics Tags: 2012 Election, Democrats, George W. Bush, Jobs, John Boehner, Politics, President Obama, Republicans, Ronald Reagan
The Republicans will campaign on the idea that lowing taxes on the wealthy (I think Romney wants to keep the Bush tax cuts and even cut more) creates jobs because the money the wealthy do not pay in taxes goes to create jobs. Fay Paxton has looked at the history of job creation and posted an analysis on Winning Progressive. Her conclusion: Democrats create more jobs. These charts describe private sector job creation.
Yes, the first months of the Obama Administration were rough, but as the chart shows, we started bleeding jobs under George W. Bush.
Ronald Reagan wins among Republicans, but he wasn’t afraid of raising taxes.
So what about federal public sector jobs? The Republicans always claim that the Democrats are the party of big government. Is this true? Paxton says
Republicans talk about being conservatives who believe in small government and reducing the federal workforce. The numbers don’t bear out their claims. In a press conference, House Speaker John Boehner said, “In the last two years, under President Obama, the federal government has added 200,000 new federal jobs.” The Republicans even advanced legislation calling for a reduction of 200,000 federal employees.
Here’s the truth:
According to the Office of Personnel Management, it is true that the federal workforce increased by 237,000 employees. What Boehner does not tell…150,000 of the employees added to the roles were uniformed military personnel, no doubt to accommodate the wars in Iraq and Afghanistan. The 237,000 figure also includes temporary Census workers.
Despite claims of huge government expansion, historically, Democratic presidents reduced the size of the federal government workforce. The federal employment numbers, according to the U.S. Office of Personnel Management, the department charged with tracking the number of employees, the data shows the following:
Paxton summarizes
If we combine the totals for all federal employees, including the military:
Reagan began office with a total of 4,982,000 employees and ended his term with 5,292,000 employees. While President Obama took office with a federal employee roster of 4,430,000 employees (fewer than Reagan). At the end of 2010 President Obama’s federal workforce numbered 4,443,000; that’s 849,000 fewer employees than Reagan, the advocate of small government! Add to this the fact that President Reagan governed during peacetime, while President Obama inherited two wars.
So the figures don’t lie: Democrats do a much better at creating new private sector jobs and reducing the size of the federal government.
Ryan’s Budget and the 2012 Election
04 Apr 2012 Leave a Comment
in 2012 Election, Budget, Economics, Iraq War, Obama Administration, Politics Tags: 2012 Election, Andrew Rosenthal, Dan Wasserman, George W. Bush, Mitt Romney, Paul Krugman, Paul Ryan
Dan Wasserman sums up the Ryan Budget.
President Obama called the Ryan Budget “Social Darwinism” quoting that wise Republican, Newt Gingrich. Mitt Romney called it “marvelous”. Paul Krugman calls it “Pink Slime Economics”
And when I say fraudulent, I mean just that. The trouble with the budget devised by Paul Ryan, the chairman of the House Budget Committee, isn’t just its almost inconceivably cruel priorities, the way it slashes taxes for corporations and the rich while drastically cutting food and medical aid to the needy. Even aside from all that, the Ryan budget purports to reduce the deficit — but the alleged deficit reduction depends on the completely unsupported assertion that trillions of dollars in revenue can be found by closing tax loopholes.
And we’re talking about a lot of loophole-closing. As Howard Gleckman of the nonpartisan Tax Policy Center points out, to make his numbers work Mr. Ryan would, by 2022, have to close enough loopholes to yield an extra $700 billion in revenue every year. That’s a lot of money, even in an economy as big as ours. So which specific loopholes has Mr. Ryan, who issued a 98-page manifesto on behalf of his budget, said he would close?
None. Not one. He has, however, categorically ruled out any move to close the major loophole that benefits the rich, namely the ultra-low tax rates on income from capital. (That’s the loophole that lets Mitt Romney pay only 14 percent of his income in taxes, a lower tax rate than that faced by many middle-class families.)
This budget fight and the election to come are about what we want the country to be. The Republicans have that much right. Will we become a country with the rich hiding in gated communities and getting richer or will we a a country where everyone has a chance to succeed, where the less fortunate get help, and where there is a robust middle class? Democracies thrive in countries with an educated middle class. Look at the driving forces behind the Arab Spring. The choices this election will be clear.
The budget fight is also about whether or not a deficit is important right now. Yes, we can’t continue to grow the deficit indefinitely, but it seems to this non-economist, that the way to deal with the deficit is not through draconian cuts to the domestic budget, but spend on things that result in jobs. When people work they pay taxes and the deficit can begin to come down. But cutting food stamps, unemployment insurance, job retaining programs, aid to education, are all key to growing jobs or helping those who can’t find them.
Andrew Rosenthal put it better in today’s New York Times.
He ticked off some of the budget’s most near-sighted assaults: financial aid cuts to nearly 10 million college students; 1,600 fewer medical grants; 4,000 fewer scientific research grants. Starting in 2014, it would cut around 200,000 children from the Head Start program and 2 million mothers and their young children from a food assistance program. “We wouldn’t have the capacity to enforce the laws that protect the air we breathe, the water we drink or the food that we eat,” he said.
Medicaid would be gutted, Medicare would be turned into a voucher program – but the Republicans would still cut taxes by $4.6 trillion over the next decade. The cuts, as usual, would mostly benefit the wealthy.
Mr. Obama noted that the stated purpose of the Republican budget is to reduce the federal budget deficit, but he called it a Trojan horse and “thinly veiled social Darwinism.” The real purpose is to cripple government. And he said, because it guts “the very things we need to grow an economy that’s built to last – education and training, research and development, our infrastructure – it is a prescription for decline.”
The Republican response to Mr. Obama – that the nation is in a debt crisis and the president doesn’t get it – just made his point for him. We don’t have a debt crisis. We have a medium- to long-term budget problem, driven largely by rising health costs combined with an aging population. Health care reform is an honest attempt to deal with that. Letting the Bush tax cuts expire, starting with the high-end ones, would be an honest attempt to deal with that. Then there’s our lack of jobs, lack of income growth, diminishing prospects and dwindling opportunities.
And we shouldn’t forget that George W. Bush told us we didn’t need to raise taxes to pay for the war in Iraq because it would pay for itself through oil revenue. He cut taxes for the 1% instead and created a deficit. This probably wouldn’t have been so catastrophic except that the economy collapsed in 2008. Here is a link to a nice chart.
So the Ryan Budget will be at the heart of the election this fall – especially if Paul Ryan is Romney’s VP. It will be interesting.
Understanding Health Care Reform
15 Mar 2012 Leave a Comment
in Books, Politics, Economics, Supreme Court, Health Care Reform Tags: Supreme Court, President Obama, Health Care, Mitt Romney, Jonathan Gruber, Health Care Reform
Health Care reform is coming before the Supreme Court soon and in an effort to really understand what it is all about I picked up a copy of Jonathan Gruber‘s book “Health Care Reform“
It is a nifty graphic novel which does an excellent job of explaining why we need health care reformm what the reform will do and when, and how is will help reduce the deficit. This last is the most complicated and I’m not sure I got it all in a single reading.
Gruber uses several characters in differing circumstances to illustrate the law’s impact. On the whole, very nicely done and highly recommended if you want to understand what the Affordable Health Care Act is all about. Gruber is an economist who worked first with Mitt Romney on reform in Massachusetts and then with President Obama and his team.
Who is really European?
20 Feb 2012 Leave a Comment
in 2012 Election, Economics, Politics Tags: 2012 Election, Democrats, Economics, Mitt Romney, Newt Gingrich, Paul Krugman, President Obama, Republicans
I was reading Paul Krugman’s column in the New York Times this morning and I started thinking. The Republicans accuse President Obama of trying to make us more like European Socialists, but in reality it is they who want to make us European. Think about it a minute.
Krugman writes
Last week the European Commission confirmed what everyone suspected: the economies it surveys are shrinking, not growing. It’s not an official recession yet, but the only real question is how deep the downturn will be.
And this downturn is hitting nations that have never recovered from the last recession. For all America’s troubles, its gross domestic product has finally surpassed its pre-crisis peak; Europe’s has not. And some nations are suffering Great Depression-level pain: Greece and Ireland have had double-digit declines in output, Spain has 23 percent unemployment, Britain’s slump has now gone on longer than its slump in the 1930s.
Worse yet, European leaders — and quite a few influential players here — are still wedded to the economic doctrine responsible for this disaster.
What is that doctrine? Basically you gut the retirement system, layoff workers, cut wages, and increase taxes. Krugman puts it this way
Specifically, in early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.
Image via Wikipedia
Thomas Wright in a column published in the Financial Times brings in the Republicans. He points out the while Mitt Romney and Newt Gingrich want to deal immediately with the debt crisis – like the Europeans – Democrats and, in particular the President, believe that the debt is a long term issue and not a near term crisis.
I’m certainly not an expert, but it does appear that the European Hooverism is being largely driven by Germany. It will be interesting to see how that works out for them in the long run. What happens when the Greek economy continues to sink and they decide to pull out of the Euro?
Back to Krugman again.
Meanwhile, countries that didn’t jump on the austerity train — most notably, Japan and the United States — continue to have very low borrowing costs, defying the dire predictions of fiscal hawks.
…
So what will it take to convince the Pain Caucus, the people on both sides of the Atlantic who insist that we can cut our way to prosperity, that they are wrong?
After all, the usual suspects were quick to pronounce the idea of fiscal stimulus dead for all time after President Obama’s efforts failed to produce a quick fall in unemployment — even though many economists warned in advance that the stimulus was too small. Yet as far as I can tell, austerity is still considered responsible and necessary despite its catastrophic failure in practice.
The big question: Will the Congress pass the President’s new jobs bill? Or will it stick to slash, slash, slash? Increasing aid to local governments for police, fire, schools and programs like the Community Development Block Grant (CDBG) will prevent layoffs and enable hiring. Take CDBG for example. The City of Boston uses the funds to assist human services programs like afterschool and youth recreation, to assist small businesses and nonprofits make repairs and improvements, and help low income homeowners make repairs. There are rules about who can get assistance. Jobs are ceated when the business or nonprofit hires staff or a contractor to make repairs and improvements. Assistance to homeowners also creates jobs. Many other localities use CDBG to improve roads and sidewalks. I think everyone understand how keeping teachers, police, and firefighters employed helps local governments. It also increases the tax base for all levels of government and will eventually help lower the debt. Or am I being too simplistic?
Krugman ends this way
Look, I understand why influential people are reluctant to admit that policy ideas they thought reflected deep wisdom actually amounted to utter, destructive folly. But it’s time to put delusional beliefs about the virtues of austerity in a depressed economy behind us.
So it seems that it is really the Republicans who are more European with their belief in continued austerity. They need to look around and see what is happening in Europe and decide if they – and us – really want to be like them or continue to pursue the President’s American exceptionalism.
Rich Mitt just doesn’t get it
02 Feb 2012 2 Comments
in 2012 Election, Culture, Economics, Politics Tags: Mitt Romney, Republicans, Ruben Bolling
Mitt Romney is extremely wealthy. Theodore Roosevelt, Franklin Roosevelt, John Kennedy and Lyndon Johnson also all had money. But they also had something else that Mitt just doesn’t have: empathy for people who have to work for a living and sometimes can’t even make it with a job (or jobs) and certainly empathy for those who can’t find a job, are in fear of losing their homes, and for whatever reason are poor.
Let’s look at selected quotes from Mitt compiled by AshleyParker in the New York Times.
On Wednesday morning in an interview with CNN, Mr. Romney said, “I’m not concerned about the very poor,” a sound bite that ricocheted around the Web and cable news channels, and which Mr. Romney felt the need to clarify with reporters as he flew to Minnesota.
Taking in the full context of his remarks, as Mr. Romney urged reporters to do, his statement seems more benign: “I’m not concerned about the very poor. We have a safety net there. If it needs a repair, I’ll fix it. I’m not concerned about the very rich; they’re doing just fine.” He is most concerned about the middle class, he said. [Of course Romney has already endorsed the Ryan budget which would rip craters into that safety net he wants to repair.]
But for a campaign that has itself been accused of taking President Obama’s words out of context, the remark about the poor immediately became cataloged in a growing list of awkward comments by Mr. Romney, including a remark that his speaking fees last year of $374,327 were “not very much” and his line that “corporations are people.”
And we know that Romney would make a better President than others because he has “lived on the streets” I think meaning he hasn’t lived in Washington. If I remember correctly he asked some homeowners facing foreclosure to have empathy for the banks because like corporations they were people, but I may have just dreamed that.
Last June, he told a group of unemployed workers in Florida, who had just finished telling him their stories, that he understood their plight.
“I’m also unemployed,” Mr. Romney said as a joke. “I’m networking. I have my sight on a particular job.”
At a debate, he offered Gov. Rick Perry of Texas a $10,000 wager — an amount that, even if facetious, reminded voters just how much disposable income Mr. Romney has.
Speaking to crowds in New Hampshire, Mr. Romney claimed that he, too, had feared the “pink slip” during his life.
I think when Romney says these things, going off script, he is showing his true colors. He really doesn’t understand or care about how the 99% live. Just like Hollingsworth.
The complicated deficit deal
03 Aug 2011 Leave a Comment
in 2012 Election, Budget, Congress, Economy, Obama Administration, Politics Tags: 2012 Election, Democrats, John Boehner, Nancy Pelosi, Politics, President Obama, Republicans
I know I’ll be writing more about the imact of the “compromise” in the days to come, but for now here a summary. The Atlantic Wire has the best written summary I’ve been able to find.
The basic plan, as explained by The New York Times‘ Carl Hulse and Helene Cooper, Politico’s David Rogers, and The Hill‘s Alexander Bolton, goes something like this:
1. Raise the debt limit by $900 billion and cut spending by the same amount over 10 years. Members of Congress can vote to show they don’t like the increase but Obama can veto their disapproval.2. Create a bipartisan committee with three members of each party from each chamber of Congress to find spending cuts the size of a second debt limit increase of $1.5 trillion. As a special holiday treat, the plan must be presented to colleagues by Thanksgiving and voted on by Christmas.3. If the plan passes, Obama can raise the limit by $1.5 trillion.4. If the cuts committee can’t come up with a plan, Obama can get only a $1.2 trillion debt limit increase, and Congress must either:a. Pass a balanced-budget amendment to the Constitution, orb. Allow spending cuts the size of the debt limit increase over the next 10 years, with at least half coming from cuts to defense spending. These cuts would be automatic by the end of 2012.
Watching the circus
29 Jul 2011 Leave a Comment
in Budget, Congress, Economy, Obama Administration, Politics Tags: Budget Deficit, Democrats, Eugene Robinson, Paul Krugman, President Obama, Republicans
Watching the circus in Washington used to be a fun activity, but right now it is just depressing. I got home from work last night expecting to watch the Republican vote on the Speaker’s plan only to learn that it had been postponed. When I went to bed at 10 it was still pending. At 5 this morning, I learned it didn’t happen because the Republican leadership didn’t have the votes. All this for a bill that is DOA in the Senate.
We are all being held hostage by a handful of tea partiers and other Republicans who are convinced that their election gave them some kind of mandate to kill the country. As they are learning in Wisconsin, people are beginning to have buyer’s remorse. On the other hand, the tea partiers are threatening to run against the very people they elected if the new Congressmembers don’t come through. Among those making the threats are Sarah Palin and the founder of the Texas Tea Party on Al Sharpton’s MSNBC show last night. So I don’t think the 20 or so votes that Boehner is looking for will materialize, but then again, this whole spectacle is full of surprises so one never knows.
Everyone, including President Obama, has let this small faction define the fight. I think Eugene Robinson is right: The Republicans have one easily stated idea: Reduce the deficit (and deny Obama a second term) while the Democrats and particularly Progressives don’t have an easily stated idea.
Those who would chronicle events in Washington can find no richer source of analogy and metaphor than the Three Stooges. These days, I’m thinking of the times when an exasperated Moe, having suffered the indignity of an accidental spritzing or clobbering, turns to Larry or Curly and demands, “What’s the big idea?”
The premise of the debt-ceiling fight is too far-fetched for a Stooges film, since no audience could imagine leaders of a great nation stumbling into such a mess. Moe’s trademark line is still relevant, however, even if it’s not followed by the two-fingered poke in the eyes that our elected officials richly deserve.
It is clear that unless President Obama ends up taking unilateral action to break a hopeless deadlock, Republicans will win. The House, the Senate and the White House are all working within GOP-defined parameters: New tax revenue is off the table, painful budget cuts are a given, everyone seems to accept the principle that a debt-ceiling increase — which allows the Treasury to pay bills Congress has already incurred — must be tied to reductions in future spending.
Besides not having an easily stated idea that everyone repeats, the Democrats have done all the compromising. And it hasn’t worked out so well. Look back at the retention of the Bush tax cuts: Do you see any jobs? Robinson concludes
Obama talks about “winning the future,” but that’s too nebulous. I’d suggest something pithier: jobs, jobs, jobs.
People may dislike paying taxes, but they dislike unemployment more. Progressives should talk about bringing the nation back to full employment and healthy growth — and how this requires an adequately funded government to play a major role.
The next time Moe asks about the big idea, Democrats, say “jobs.” You might avoid a slap on the noggin and a poke in the eyes.
I think it maybe time for the President to stop trying to compromise, to get together with Reid and Pelosi and make a real proposal. To quote Paul Krugman
Some of us have long complained about the cult of “balance,” the insistence on portraying both parties as equally wrong and equally at fault on any issue, never mind the facts. I joked long ago that if one party declared that the earth was flat, the headlines would read “Views Differ on Shape of Planet.” But would that cult still rule in a situation as stark as the one we now face, in which one party is clearly engaged in blackmail and the other is dickering over the size of the ransom?
The answer, it turns out, is yes. And this is no laughing matter: The cult of balance has played an important role in bringing us to the edge of disaster. For when reporting on political disputes always implies that both sides are to blame, there is no penalty for extremism. Voters won’t punish you for outrageous behavior if all they ever hear is that both sides are at fault.
,,,
So what’s with the buzz about a centrist uprising? As I see it, it’s coming from people who recognize the dysfunctional nature of modern American politics, but refuse, for whatever reason, to acknowledge the one-sided role of Republican extremists in making our system dysfunctional. And it’s not hard to guess at their motivation. After all, pointing out the obvious truth gets you labeled as a shrill partisan, not just from the right, but from the ranks of self-proclaimed centrists.
But making nebulous calls for centrism, like writing news reports that always place equal blame on both parties, is a big cop-out — a cop-out that only encourages more bad behavior. The problem with American politics right now is Republican extremism, and if you’re not willing to say that, you’re helping make that problem worse.
Time for the President to not only talk the talk as he did last week, but also walk the walk. Compromise by only one side has lead to this circus that is not even very entertaining. At the very least, round up enough votes in the Senate to pass the Reid plan so the Democrats can at least say they did something. You can compare plans here. And please, let there be only one vote. I don’t think anyone can take this again in 6 months.
If you don’t laugh, you have to cry
24 Jul 2011 1 Comment
in Budget, Congress, Culture, Obama Administration, Politics Tags: Budget Deficit, Dan Wasserman, Eric Cantor, John Boehner, Ruben Bolling, Scott Bateman, Tom the Dancing Bug
After John Boehner decided to walk out on the debt talks on Friday (and John, we know that it was not because of the President, but because Eric Cantor said no taxes even if you call them tax reform), we moved even closer to default. So a little humor (from the left) on the situation for Sunday morning.
First up, Ruben Bolling and my favorite, Tom the Dancing Bug
Then ( I have to say I love it that Daily Kos collects the Comics), we have Matt Weurker’s Tea Party Tango
To tango or to compromise, it takes two, Mr. Cantor.
Speaking of Mr. Cantor, you can hear him yourself at this animation by Scott Bateman.
And to end, two editoral cartoons.
The President has taken himself out of the talks, telling Congress to come up with a solution. We shall see.
The “gang of six” plan and the debt ceiling
21 Jul 2011 1 Comment
in Budget, Congress, Economy, Obama Administration, Politics Tags: Bernie Sanders, Dean Baker, Debt-to-GDP ratio, Democrats, Economics, Gang of Six, President Obama, Republicans
In case you are wondering what it is, the New York Times has published a summary. It is really a budget and deficit reduction plan and not something to raise the debt ceiling which still has to be done. And time is running out.
A couple of interesting comments about the plan on Politico’s Arena.
First from Jeff Smith, professor at the New School and former Missouri State Senator:
The one real piece missing from this entire conversation? The piece that would make the numbers work and dramatically reduce the pain?
Comprehensive immigration reform. That’s right. There’s only one pool of 15 million people begging to be able to pay more into the system, and this country has spent the last several years fighting to make sure they can’t.
We need to get over our xenophobia, give them a path to citizenship, and let them start paying in to the system at regular rates in regular intervals. The nation’s immigrant population tilts much younger than the native-born population and is predominantly in the workforce, and would reverse the trend of a rising retiree-to-worker ratio, thereby shoring up both major entitlement programs
The immigrants would pay taxes, pay into social security, and Medicare.
Bernie Sanders (D-VT) points out
While the spending cuts for programs that working people desperately depend upon are enforced by specific spending caps, there is no such enforcement or clarity regarding the $1.1 trillion to be raised in revenue over 10 years.
What happens if that revenue target is not reached? There is no language that deals with that. Where does the revenue come from? That very important issue is kicked to the tax writing committees with no guarantee that hundreds of billions of dollars in new revenue will not come from the pockets of low- and moderate-income Americans. While nobody knows for certain what provisions might be adopted, there is reason to expect that some of the areas that the House and Senate will be looking at include the home mortgage deduction for middle-class families, taxes on health care benefits, and increased taxes on retirement programs such as 401(k)s and IRAs. In other words, while there is a reasonable degree of specificity in terms of cuts there is only vagueness in terms of revenue.
But Dean Baker from the Center for Economic and Policy Research asks the questions I’ve been wondering about: What is wrong with the deficit at a time when we have no jobs and isn’t there a solution besides massive budget cutting?
The arithmetic is clear as day. The United States does not now, nor will it in the near future, face a serious problem meeting its debt obligations. It had a debt to GDP ratio of 116 percent after World War II. The baseline projections have it getting to 90 percent by 2021. 116 percent is much larger than 90 percent. (The difference will be more than $5 trillion in 2021.) This should be understandable even to a 6-figure Washington policy wonk or budget reporter.
Other countries had and have much higher ratios of debt to GDP and still face no problem paying their bills. In Japan, the ratio of debt to GDP is more than 220 percent, yet private investors are willing to lend the country money long-term at interest rates of less than 1.5 percent. Of course investors are also willing to put their money on the line in the U.S., lending us money long-term at interest rates close to 3.0 percent. So the people who actually have money on the line are saying as clearly as they can that the debt is not a serious problem.
Furthermore, there are many ways to deal with the debt that do not require attacking ordinary workers, who have been the victims of Wall Street greed and economic mismanagement by the deficit hawks. (People like Kent Conrad held positions of responsibility in the years of the build-up of the housing bubble, but were so utterly incompetent they either did not see it or recognize its danger.)
We could just have the Fed hold $3 trillion in government debt indefinitely. It would then refund more than $1 trillion in interest payments to the Treasury over the next decade. The inflationary impact of the additional reserves could be offset by raising bank reserve requirements. What could be more simple and costless than this mechanism? But the Gang of Six would rather cut Social Security and Medicare.
We could follow the example of England and impose a financial speculation on trades of stock, futures, options, credit default swaps and other financial instruments. This could raise more than $1. 5 trillion over the next decade. But the Gang of Six would rather cut Social Security and Medicare.
It is my understanding that we didn’t have a debt ceiling until World War I and that no many countries have one so why not do away with our? Politico had this piece about that from Moody’s a few weeks ago.
The United States should do away with the debt ceiling altogether to bring greater certainty to investors in U.S. Treasury bonds, Moody’s suggested Monday.
With the August 2 deadline for raising the debt ceiling barely more than two weeks away, the bond-rating agency issued a report Monday noting that the U.S. is one of just a few countries that has a statutory borrowing limit and saying that the limit creates “periodic uncertainty” for investors, Reuters reported.
Rather than continuing to use the debt ceiling in an effort to keep U.S. borrowing down, the government should look toward Chile, Moody’s suggested. There, “the level of deficits is constrained by a ‘fiscal rule,’ which means the rise in debt is constrained though not technically limited.” Chile is considered to be Latin America’s most fiscally sound country.
And, the report noted, it’s not like the debt ceiling has been effective in keeping U.S. debt down: Congress has in the past raised it often and has not linked it to spending levels.
So the bottom line is that the Gang of Six plan may be a place to start talking budget and deficit reduction, but we should do something about the debt ceiling first – like abolish it.
