Deficit Commisson's Most Realistic Goal: Scaring The Hell Out Of Americans

The co-chairs of President Obama's deficit-cutting task force acknowledged today that the chance of their group actually reaching any substantial conclusions is slim.

"Both of us agreed we may only be able to move the football a yard," said Alan K. Simpson, a former Republican senator, sitting alongside Erskine Bowles, former Clinton White House chief of staff. Obama's rules require any proposal the group needs to win support from 14 of its 18 members.

Asked about the prospect of a deadlock, Bowles, sounding reconciled to it already, declared "that won't be victory, but we will have made real progress."

The progress, Bowles said, will come in having educated the American people about the dangers of the deficit. And that, judging from the co-chairs' rhetoric, will involve scaring the heck out of people.

If the federal budget remains on autopilot, "everything you deeply love," Simpson said, muttering something about the "the children and the poor" is "not gonna be there."

Bowles warned that the United States could face actual bankruptcy.

People, he said, worry about the Chinese no longer buying our debt. "What if they start to sell it?" he asked. "My God! The crisis is going to be incredible. Greece just went through it." Investors have lost confidence in Greece's ability to repay its bonds and the country is in utter economic chaos.

Simpson and Bowles, along with a slew of the other members of their commission, spoke at today's "Deficit Fest", a swanky, nearly day-long symposium on "fiscal responsibility" sponsored by billionaire investment banker and deficit hawk Peter G. Peterson's eponymous foundation.

The symposium's core conviction is that "everybody" (as moderator Leslie Stahl put it) recognizes what needs to be done to cut the long-term deficit. But the only concrete areas of agreement seem to be that cuts in Social Security and Medicare must be a part of deficit
reduction, while cuts in military spending are (as moderator Gwen Ifil put it) "never an option."

It's a fundamentally banker-friendly agenda that glosses over the current unemployment crisis and puts the burden of balancing the budget most obviously on the poor, the sick and the elderly.

To the symposium's credit, a few insurgents were invited to appear on its panels. Center of Budget and Policy Priorities Executive Director Bob Greenstein repeatedly reminded the audience of the enormous cost of tax giveaways to the wealthy and corporations.

Economic Policy Institute President Lawrence Mishel argued that cutting Social Security benefits, for instance by increasing the retirement age, would unduly affect lower-income people.

And, he added: "One of my concerns about the deficit discussion is the excitable nature of the fear-mongering."

Comments

[DAWK]

09:07 PM on 06/11/2010

THERE IS ONE WAY TO PROTECT AMERICAN DOLLARS FROM INFLATION; USE SILVER BACKED NEW DOLLARS MINT BILLIONS OF THEM,BUT BEFORE DOING THIS,THE FED GOVERMENT WOULD NEED TO BUY MASSIVE AMOUNTS OF SILVER. BY DOING THIS QUIETLY,VIA SOME KIND OF BLACK-OP OPERATION,EVEN BUYING UP-NATIONALISE ALL SILVER MINES,THE IDEA WOULD MAKE MONEY FOR THE GOVERNMENT PRINTING PRESSES.
WE HEAR ABOUT THE 'AMERO' DOLLAR AS REPLACEMENT TO THE FAILING DOLLAR,ESPECIALLY IF WE DEFAULT TO ALL DOLLAR HOLDERS.CHINA WOULD BE THE BIGGEST LOSER,ALONG WITH OIL TRADING COUNTRIES TRADING WITH DOLLARS,BUT NEW SILVER BACKED DOLLARS WOULD BE ''EXCHANGED' FOR THE DEFUNCT DOLLAR,BUT ON A VERY STINGY BASIS.CREDITORS WOULD HAVE TO EXCHANGE,SORT OF LIKE WHAT WAS DONE FOR FORMER SILVER AND GOLD DOLLAR NOTES.
THE BASIC IDEA IS TO MAKE 'SILVER' A METAL WORTH 500 AN OUNCE. BUT THE USA MINT BUYS UP SILVER BEFORE IT RISES,AND USES IT AS THE NEW PRINTED MONEY,REPLACING THE OLD DOLLAR.DOLLAR HOLDERS WOULD BE SHORTED,BUT PERHAPS SOME SORT OF BALANCE COULD COME OF IT. OFFERING BOTH 'AMEROS' AND SILVER-BACKED DOLLARS WOULD SOON POSSIBLLY STABLIZE AMERICAN MONEY?
ONE MIGHT BUY A LOT OF SILVER,IF THIS HAPPENS. I SEE THIS HAPPENING-SOON ...

[VoteThemAllOut]

11:27 PM on 04/29/2010

You might want to look at: http://en.wikipedia.org/wiki/United_States_public_debt


You will note that in 2000 ( the begining of G W Bush Admin.) and see that the percentage of National Debt to GNP was -- 35.1%

In 2008 the ratio was 40.8% (the end of the Bush Admin.)

In 2009 (the Obama Admin.) the ratio is 54.7%

The Estimate ratio for 2010 is listed at 67.1%

Which is the party that borrows and spends - in 8 years Bush increased the ratio from 35.1% to 40.8% or an increase of 5.7%.

In 2009, Obama increased it from 40.8% to 54.6% or an increase of 13.8% in one year and is estimated to increase it from 54.6% to 67.1% or an increase of 12.5% for 2010.

So who is the borrow and spend president/party?

[Cailte]

06:31 AM on 04/30/2010

The 2009 budget is Bush's. The outgoing president sets the budget for the next year after he leaves office and the new president's first budget is for the year after he assumes office.

[DoinMyHomework]

02:18 AM on 04/29/2010

And when we started 2 wars, off balance sheet, and didn't pay for them, gave 2 trillion in tax cuts to the rich and didn't pay for them, gave away 2 trillion in free drugs for seniors and didn't pay for them, where exactly were the alarm bells????

[StuManChu]

09:37 AM on 04/29/2010

So why are they worried about the effect on the middle class when the tax cuts expire at the end of the year if they were just for the "rich"?

[Skyblue22]

01:05 AM on 04/29/2010

How about scaring the filthy rich by having them pay their fair share of taxes? Nah, let's keep instilling fear in the poor and middle classes.

[sdiaz]

02:55 AM on 04/29/2010

yeah
taxes are for the little people

[Jayk4444]

11:26 AM on 04/29/2010

The progressive US tax system does have the higher incomes paying a higher percentage. About 47% of those filing returns have $0 or negative tax liability (getting a refund of more than they paid in). Is that 'paying a fair share' ?

[Mark Hayden]

01:12 AM on 04/30/2010

Figures lie and liars figure.
Yes, because of very low wages, you may be right that 47% don't pay income tax, but they do pay FICA, Medicare, property tax, state income tax, federal and state excise taxes, sales tax...so much so that their total tax bill as a percentage of their income is higher than the top 1% of income earners. If not, it certainly affects their standard of living more than the wealthy's relatively light tax burden.
Let's take Blanfein for example...million dollar salary, 9 million bonus plus tens of millions in stock options. Even if he had to pay 33% on his income (he doesn't), he is still richer than god. Boo-fricken-hoo.
Do you know why Democrats want to tax the wealthy? Because that is where the money is.

[Mark Harker]

10:34 PM on 04/28/2010

we need to cut our budget now- yes- i was one of the few that thought this during bush so don't accuse me of being hypocritical yes we could cut our war budget in fact i would encourage it.

the republicans made this mess but the democrats aren't helping to clean it up. it will be your party's job to clean it up. i know it sucks. you might not even get every thing you want to do done. life isn't fair. but the budget is the most important issue we are facing.

[TheRLeePost]

12:17 AM on 04/29/2010

I was greatly bothered by the national debt in 1980. I was 23 years old. I drank the Republican Kool Aid, voted against J. Carter (though a Georgian myself and lean Dem), because He campaigned on cutting the national debt. Well, I'm 53 now, lived through five Republican admins., all of which made Carter and Clinton appear to be the most frugal presidents ever.

-RLee
http://therleepost.blogspot.com

[TheRLeePost]

12:19 AM on 04/29/2010

Sorry, by 'He campaigned" I of course meant Reagan.

[doubtingdavid]

10:31 PM on 04/28/2010

Of course their goal is to scare the american public. Trouble is that's all they can do and the liberals will go rith on spending us into oblivion.

[Mark Hayden]

01:20 AM on 04/30/2010

We aren't in trouble today or next week...we are in a recession/depression, and the worst thing you can do, outside of doing another Smoot–Hawley Tariff Act, is to cut spending. All that will do is worsen the economy.
Does anyone remember, back in the late '90's, that Greenspan warned of the negative effects of a budget surplus? When a sorta-liberal Democrat was in the White House?

[Derek Spisak]

08:13 PM on 04/28/2010

A trillion here, a trillion there... soon you are talking about real money. Why not cut our War budget?

[PotomacOracle]

06:25 PM on 04/28/2010

None of the Commission members will tell America that the most efficient way to cut the deficit is to monetize it by simply paying it off with cash. The Federal Reserve has been in crisis management mode to take toxic assets off bank balance sheets. This resort tby the Fed to crisis managment for commercial banks is also apt for the Federal Government.

Treasury would issue a new U.S. currency, interest free. The Fed would no longer be the issuer of U.S. debt-currency, charging the government for that issue..as is current practice. That's right for every dollar in your wallet you pay interest to the private owners of the Federal Reserve. We would not borrow the dollars to pay the debt. Continuing that practice is just stupid.

Reference: JFK's Executive Order 11110, June 4, 1963.

Issuing $7 trillion in new U.S. dollars over a thee year period would not be inflationary. The Fed would be ordered to liquidate the reedemed bonds that represent the debt. That leaves the money supply unchanged.

But the Commission will not mention monetization because it eliminates long term income streams that would go to bank and bondholders most of which are not found on mainstreet.

[Jayk4444]

11:33 AM on 04/29/2010

Monetizing the debt would produce inflation and devalue every asset. Doesn't sound like a good idea to me.
The money supply would change by $7t in your scenario - you have to pay the bondholders the amount of the bonds - which would put more money in the money supply.

[PotomacOracle]

02:51 PM on 04/29/2010

You didn't read the entire post. Inflation would not be the result when "the Fed liquidates rather than rolls-over the fiat currency bonds" it created in the first place. The money supply is unchanged it's a swap. The bond holders get cash and the Fed gets its paper back and takes it out of circulation. Debt payed. No more debt service payments. No inflation. No need for a Federal Income Tax. What's the rationale under this alternative for an income tax?

Moreover, it is so stupid for the Federal Government to borrow its own money at interest when there is no fundamental profit motive underlying the need for the funds. It's only the privately owned Fed that needs the profit. Sure they return a penny on the dollar to the Treasury, but who really knows how much should be returned by the Fed to the people. \They've never been audited.

Moreover, since we have 50 mil unemployed and underemployed the Treasury can, thereafter, issue currency to absorb idle resources to the point of full employment. No inflation. So many have supped from the cup of conventional Keynesian koolaid they reject workable solutions because they do not conform.

[FarOutFish]

06:23 PM on 04/28/2010

"One of my concerns about the deficit discussion is the excitable nature of the fear-mongering." Economic Policy Institute President Lawrence Mishel

This seems this is going to be a 'stalking horse' for a Value Added Tax in addition to the Income and other Federal Taxes. If there were any chance the additional revenue would be actually used to reduce the deficient a VAT would be a good vehicle. The problem ii when Congress finds more money they always find ways to spend it. Given the history of attempts to control Congressional spending, laws like the Gramm-Rudman. Deficient Reduction Act. designed to prevent deficit spending have always been ignored by the Congress. One of the best examples was the agreement by President Reagan and House Speaker Tip O'Neil to cut three dollars in spending for every dollar raised by a new tax hike. The taxes were collected, and Congress spent them just as fast as they could and the deficit continued to soar,. Giving the propensity of Congress to spend as much as possible, it's gets them reelected, there is virtually no chance any new tax revenue will really be used to pay off the dept.

[Whale]

05:32 PM on 04/28/2010

Both of them on a forum sponsored by Peter g Peterson!!! 'Nuff said. Grab your wallet, your Social Security, your Medicare and hang on for dear life. These dudes are out to rob you blind for the benefit of their benefactors in the military-medical-industrial complex.

[PotomacOracle]

06:30 PM on 04/28/2010

The first order benefactors are the banks. They provide the money to the rest of the MMI you mention. We need to spread the word that if the Fed can monetize the toxic mortgages/assets of banks it can do the same for the Federal government, since it holds $7 t in public debt.

[JeromeHoward]

07:44 PM on 04/28/2010

Thank you for including medical. Shows some, a very few, are wide awake and have their eyes open.

[Wahchintonka]

05:29 PM on 04/28/2010

You should remember the last POTUS that made an earnest attempt to compete with the Fed. June 4, 1963. That didn't last very long. Interestingly, your government can do this anytime they want, but they don't? Wonder why none of you care about that?

[JeromeHoward]

07:47 PM on 04/28/2010

I wasn't aware of him doing that. Add that to the list of things that brought about his end.

[America free]

05:10 PM on 04/28/2010

How are they going to scare Americans when these same Americans
put a 50 inch TV on their Credit Cards
take a loan out on a car for 72 months
Buy a home they cannot afford and sign loan papers they don't even read from
banks that are crooks.

so see American people do the same thing the Govt. does with their money spend more then they have

[bradent]

05:13 PM on 04/28/2010

Most seem to believe that consumption if the fuel of the economy.

[Wahchintonka]

05:26 PM on 04/28/2010

Since your country switched from an industrial economy to a financial economy, YES.
The Fed YOU right where they want you!!

[meglon978]

05:52 PM on 04/28/2010

Consumption is the fuel of the economy, something made obvious by this recession. When people stop buying things (for whatever reason), businesses no longer can operate, which leads to unemployment, which cycles back to even fewer people being able to buy things.

The problem is, how are people buying things. if it's on debt, unless they have an unlimited ability to incur debt, that avenue eventually dries up... leading to the above scenario.

If they're making a good living wage, and buying from cash on hand, or very short term debt, they can continue that as long as they continue to make those wages. As long as they continue to be able to buy, businesses will continue to be able to operate.

Unfortunately, a bunch of morons got together and pushed the opposite of that onto this country 30 years ago. Supply doesn't matter if no one is capable of buying.

We need a demand side economy. We need everyone employed, with good living wages. If they create a demand for anything, someone will be there to fulfill it... that's the way business works.

[breakingpoint]

06:09 PM on 04/28/2010

President Bush told people to do that - in fact he did it too.

There's only one solution left

[Marie Green]

11:51 PM on 04/28/2010

Yep! Under President Reagan, He SHOWED US how he knows a lot about this subject since our former President was one of the fellows that helped our 5% on a saving account go to .01 % of today; he's really good at this thing called economics. So we should have followed him blindly over the cliff.

[motoboy]

05:09 PM on 04/28/2010

Alan Simpson has been pushing to "means test" Social Security since he was in Congress. In other words, if you save for your retirement he wants to give your SS money to someone who didn't save.

[sarabono]

05:06 PM on 04/28/2010

ALL Federal Government Spending will have to be reduced. Every Category of Spending.
At the same time ALL Federal Government Tax Rates, every category, will have to be increased.

That is the only way out of our own mess.

[PotomacOracle]

06:58 PM on 04/28/2010

Wrong.

www.webofdebt.com

This site is the definitive work on other fiscal and monetary policy alternatives. We have a crisis and Americans should demand that we use crisis management solutions to eliminate the threat to the future of our children and grandchildren.

The debt is created by borrowing not spending. The Fderal Government should not have to borrow to provide services for the commons. Borrowing is necesqary for the private sector because it seeks profits. The government is not a profit seeking institution. Lincoln saw it as the fountain of capital to spur the growth of services and institution vital to the progress of the nation. therefore, he not only won the Civil War with interest free/debt free Greenbacks, Those greenbacks paved the way for the American Industrial Revolution.

[motoboy]

05:05 PM on 04/28/2010

Cut military spending to the bone!

We pay 47% of the world's military spending, according to Fox's own Glenn Beck. And Beck doesn't know about all the "black" (secret) military programs. No one does.

Are we THAT paranoid? No, it's a subsidy to Big Business.