The debt ceiling fracas was an insanity-inducing syllabus of everything that's wrong with the American political system. Everything.
The very serious cable news media (and a considerable chunk of the blogosphere for that matter) were preoccupied with safe, superficial sports and/or poker metaphors: who won, who lost, who "doubled-down" and so forth. After all, covering the wonky aspects of the policy itself is no fun and involves math.
The Republican Party, meanwhile, having been responsible for the bulk of the debt in the first place, was allowed to get away with sabotaging the stability of the global economy as the centerpiece of its plan to subsequently sabotage the president. At the same time, one of its congressional leaders, Eric Cantor, was short selling government bonds -- a blindingly outrageous conflict of interest that ought to vindicate Pete Rose for any comparatively trivial wagering sanctions he continues to endure.
The Democratic Party and the White House, paralyzed by fear (fear of taking an aggressive posture for fear of losing the fickle, insufferable middle), helped to push the Overton Window farther to the right.
Far-right conservatives and tea party activists continued to illustrate their willful inability to grasp an even grade-school level understanding of the economy and governing.
The progressive left was out-hustled by far-right activism yet again.
And a for-profit, publicly traded corporation, Moody's, became the ultimate judge as to the viability and strength of the United States of America's credit rating. Think about this while trying to fall asleep tonight: several for-profit corporations, with Moody's at the helm, possess a staggering level of control over America's ability to borrow money, and therefore they essentially controls the pulse of the American economy. Sleep tight!
But none of these observations match up to the super-colossal problem with the debt ceiling debate and the inexplicable outcry for deficit reduction. Simply put: deficit reduction during a slow-growth recovery from an historically deep recession, with continued high unemployment and a housing market still in crisis, is just phenomenally stupid.
When has deficit reduction ever stimulated economic growth during a difficult recovery, and especially considering the disturbing economic indicators we're experiencing today (sluggish GDP, high unemployment, housing crisis, etc)? Never. In fact, the next nearest example -- the conservative budget cuts of 1937 during the recovery from the Great Depression -- damned us to another major recession, which spiked unemployment by nearly 10 percentage points and required another three years for the economy to return to its pre-austerity levels.
So regardless of the deal's content, this shouldn't have been an issue in the first place and we're all going to pay the price irrespective of political party or ideological affiliation.
We never should have been taking seriously the malevolent and utterly premature demands for deficit reduction -- not until the economy was back on solid footing. In fact, and in the best of circumstances, all of the sturm und drang we've endured this year should have been over the magnitude of a second stimulus plan, because if there's one thing that can be proved by historical precedent is that stimulus creates jobs and economic growth, which, in turn, increases government revenue. Indisputable fact.
When fewer of us are pumping money into the economy because, for example, we're unemployed or our house is underwater or, if we own a business, sales disappear, the government is in a unique position to fill in the void with additional spending until the economy is stabilized and growing steadily. There's nothing wrong with deficit reduction, but only when economic strength will allow it, and only if the wealthiest one percent, who disproportionately own 40 percent of the nation's wealth, are willing to contribute in accordance with their means rather than saddling the least fortunate and the nation's workers with the burden.
And the debt ceiling deal leaves those rich people unharmed, while, despite the president's assurances, the rest of us will bear the cost.
Here's how.
There are renewed warnings of another recession. The Financial Times reports that we're "one false move" away from recession. In the same piece, Jim Reid, a strategist at Deutsche Bank, warned of a "1937 moment." Well, of course. Harvard economist Martin Feldstein is predicting a 50/50 chance of another recession. According to the Huffington Post, Bill Gross, co-chief investment officer of the financial services company PIMCO, says we're at the tipping point of another recession. Wall Street, for what it's worth, is also bracing for another recession. Personally, I experienced the stinky ass-end of the previous recession, and, suffice to say, I'm not thrilled with the prospect of a sequel.
The deal will reduce job growth by millions. The nonpartisan Economic Policy Institute reports that the debt ceiling deal will reduce GDP by 0.3 percent in 2012. Not good considering current growth of around 1, or 1.5 percent at best. Plus, the real cuts don't kick in until 2013. That means we'll be hitting the serious cuts while teetering on increasingly unstable footing. But that's not the grim news. The EPI is calculating that 1.8 million jobs will be killed in 2012 due to the big debt deal.
Poor people will, indeed, bear the cost. Due to the discretionary spending cuts in the deal, the states, which are limping through their own budget calamities, won't be receiving enough federal money for crucial social programs. CBS News reports that the cuts will hurt "everything from the Head Start school readiness program, Meals on Wheels and worker training initiatives to funding for transit agencies and education grants that serve disabled children." Additionally, "There also was concern among governors, state lawmakers and state agency heads that Congress would make deep reductions or changes in federal aid for health services for the needy, most notably through Medicaid. That could shift more of the costs onto states that already are having trouble balancing their budgets."
I'm not sure how this deal does anything short of adding, at the very least, another major obstruction in the path to recovery in the best case scenario, and, in the worst case scenario, another 1937.
CNN's Ali Velshi gets credit for the quote of the week:
"While Republicans and Tea Party members have been very effective at painting this as the single biggest problem that the U.S. economy is facing and that helped them succeed in the last mid-term elections, economically, it isn't. It was always a distant second to jobs and economic growth. So the problem is we've got way too many unemployed people. Look, there's three things affect you, right, your ability to earn a living, your ability to have your investments increase in value, and your home. This isn't going to do anything for housing whatsoever. This does nothing for jobs. And in terms of investment, all this has done is cost us because of this game they've been playing in Washington."
Remarkable. A cable news guy who wasn't necessarily talking about who won or lost.
On second thought, strike that. Velshi was talking specifically about who lost.
We lost. Middle and working class Americans. We're the losers here. Not President Obama or the Democrats. And it was always going to be this way. As soon as deficit reduction and austerity became the very serious issue to tackle inside the D.C. cocktail party circuit, completely ignoring major polls showing the priorities Velshi outlined above by the way, the rest of us were pretty much screwed. We never stood a chance.
This should never have been a thing -- not now. And shame on everyone involved for getting it so brutally wrong.
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The numbers are simple, but scary. Each day, on average, the federal government spends about $10 billion, collects about $6 billion, and has to borrow about $4 billion to pay its daily bills. We need much more revenue to close that gap. Either we end the wars and sharply reduce our military, or we need to find another $4 billion per day to pay for these. There is no other way. We need to pay to play, so to speak. It is a lie to say that we have a spending problem, not a revenue problem. We have both, and bulk of the spending, probably $1.2 trillion or more, is for the wars, the military, etc.
he would be wise to declare tomorrow that he will not run for reelection and let this political process somehow work its way out
He is lost,befuddled and put his trust in the wrong man, Axelrod which i warned about in a daly kos diary in 2007
When an entire Party cares more about destroying the President than saving this Country...we are in big trouble.
When the media allows ignorant analogies like comparing the US 14 TRILLION DOLLAR economy and someone's house budget.... we are in big trouble.
When the majority of the GOP sign pledges by un elected people (Grover Norquist) to save their political careers..... we are in big trouble
When talk radio is over 90 percent rightwing hateful, fearmongering propaganda that manipulates the masses to protect the status quo of the corporate titans all day, every day coast to coast reaching 30 plus million each day.....we are in big trouble
When there is NO accountablilty for lying or inciting hatred, anger and distrust towards Muslims, gays, immigrants, the Government and especially the President BASED ON NOTHING....we are in big trouble.
All of the above is happening now. We allow misinformation, cherry picked facts and down right lying to inform our citizens. Until that changes, we will continue toward the path of a fascist corporatocracy and away from a democratic republic. It is ironic that the tea party patriots are tools of the corporate titans and yet they love to waive the Constitution around. Their passion is real, but their ignorance is dangerous to us all.
The motto for 90% of America:
Tread on me, and tax me without representation, and rob the poor, give to the rich.
A true idiocracy!
http://current.com/shows/countdown/videos/al-gore-on-why-america-needs-a-non-violent-tahrir-square-part-one
The government is not a household. Its actions affect the economy in ways a family doesn't. If Uncle Sam stops spending in a recession, we all go hungry because of the deceleration. It happened in the US in 1937, it's happening in Britain today. It's basic macroeconomics. Government spending as a huge multiplier effect, and cutbacks have a negative multiplier effect.
That's why Glenn Beck, the central voice of the backlash against Obama, doesn't like the idea of an American Spring (see above).
http://www.glennbeck.com/2011/08/04/gore-we-need-an-american-spring/
Progressives need to wake up and realize that the Tea Party is influenced by a reactionary blowhard who wants to roll back the mixed economy and undermine social security.
You missed the "does not" in the statement above. Stimulus DOES NOT create jobs and economic growth. Even if you believe it does, claiming it is indisputable, is just wrong. A lot of economists, even some with Nobel prizes dispute your claim.
Keynesian stimulous has failed every time it has been tried. Every time the Keynesian economists are pressured into providing proof the fall back on WWII finally getting us out of the great recession. Reducing unemployment vie the draft and claiming the economy has recovered while food was being rationed is a huge stretch.
On the other hand at the end of WWII the Keynesian's where claiming that cuts in government spending and the return of 10 million military personel to the job market would crash the economy. Instead the economy boomed.
Keynesian economics was totally disproved as a serious theory in the 70s when it's recommended policies caused stagflation ( something that was impossible under this theory) the true believers have been struggling to save the theory ever cense.
However, their theories, like Voodoo Economics, need to be tried and applied not matter how often and how badly they have failed in the past.
Germany built roads and re-armed in the 30's while the rest of the world was saying govt spending does not create jobs.
When the New Deal was proposed the classical non-keynesian view was the same.
Stagflation as a keynesian problem was proposed by the neo classical economists such as Friednman who ultimately was responsible for the new/old trickle down theories.
The trend of free markets is towards monopolies and the crowding out of competition. Globalism has provided trans-national companies to pay less and less tax while exploiting world wide resources.
What is certain is that the owners of resources are paid excessively in comparison to others, which in the end is the issue here what is fair, in a modern post industrial society. What is certain is that the pendulum has swung in favor of the wealthy and they are living in a marie Antoinette fantasy world immune from the paucity of jobs in main street.
The tax breaks where used by individuals to increase savings. ( not a bad thing but not the government desired spending)
The money returned to the states was used to instead of taking on debt so just transferred the debt from the states to the Federal level.
The direct spending by the Federal Gov, much of it has not been spent yet. They can not double the road and bridge building that quickly. The capacity to build roads can not be expanded by adding brick layers from home construction. Road building requires skills and equipment different from home construction.
The rest of your post is about the general structure of the economy not stimulus spending. Someone else can comment on that.
This is not some esoteric historical debate. The US is on the edge of a double dip recession, partly because of its own austerity fever, and also because of the European debt crisis. The August Stock Market meltdown eerily reflects 2008. If the market drops to 2008 levels, expect more layoffs within 6 months that will bring unemployment to 1982 levels of 13% or higher. Many Americans have been barely holding on, waiting for the recovery to come. Many have already exhausted their unemployment benefits and personal savings. The public has no taste for bailouts, so the fall could be precipitous. If we have a double dip recession, expect a surge in homelessness, crime and our hospitals overrun with uninsured.
I think most people are sick of voting for the lesser of two evils and abdicating their power to liars, cheaters and thieves. I prefer the idea of We the People "EXECISING our RIGHT to CONSENT" to any proposed law and any law enacted and enforce against us... with the power to fire the turkeys in Congress BEFORE their term is up.
Double spending in a decade . . . then cut back 1% and you're crying about austerity . . .
Hilarious.