Right but wrong

By Capt. Fogg



You could fault Ron Paul for stating the obvious, but hey, somebody has to do it. Should the country try to save it's triple A rating with Moody's? Why bother when those helium-filled bond ratings proved to be based on politics and greed and by giving investors false confidence, helped precipitate the market collapse of 2008?

“I always wonder about this ratings, the bond ratings before the crash three years ago wasn’t helpful, so sometimes I wonder if it’s political theater to build up the fear.”

said Dr. Paul on Bloomberg TV yesterday. Of course it is, but is he doing the same thing?



But I'm not sure that I agree with the rest of his assessment: that the country is insolvent and bankrupt and got that way by excessive spending on the health and welfare of Americans. It's a bit like telling your spouse that the family could go to Disneyland more often if they weren't saddled with life insurance and a retirement savings plan, but I don't think one can rightly compare the financial problems of an individual or a family with the problems of a country in such a simplistic fashion.



One becomes insolvent and enters bankruptcy because one's income is insufficient to be able to manage one's debt. An individual does not always have control over how much money he makes; can't always find a job, can't always be healthy enough to work, can't always pay medical bills.



That's not so with a government. Our revenue shortfall is in some large part voluntary; an effort to "starve the beast" by thwarting its ability to run programs that the electorate voted for. That attempt is also a bit of political theater with a lot of smokey pyrotechnics and a bit of dramatic hand waving involved so as to obscure the fact that very low taxes on large incomes do not raise revenue, by magic transfer from the people who put much of their incomes into hedge funds and equities to the people who spend most of their incomes on food and shelter.



So yes, Social Security, a government program that did much to create the Middle class and take tens of millions of older people out of abject poverty, is going to run out of funds eventually because they're going to make it run out of funds so that they can do away with it. So yes, it's also political theater designed to create fear and panic, but perhaps the word 'theater' isn't quite strong enough. I'd call it a scam.



(Cross posted from Human Voices)

Paul Ryan's newfound interest in revenues (or, what a difference a day makes)

By Richard K. Barry

Is it possible that the S&P downgrading of U.S. debt will be the one thing to convince Republicans that some form of revenue growth, i.e., tax increases, must be a part of their plan for deficit reduction?

Clearly the GOP in Washington has been adamant that the only approach they will consider is to slash and burn government programs while completely ignoring even a serious discussion about the revenue side. And so far they've had real success, as evidenced by the debt ceiling deal.

But then S&P came along and said, apparently with the kind of authority that the business minded Republicans feel uncomfortable ignoring, that revenues have to be in the mix.

In the S&P report there were several mentions of the damage being done to the economy by Republicans unwillingness to consider revenues.

With regard to the debt ceiling deal, S&P said the following: 

• The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. 


• It appears that, for now, new revenues have dropped down on the menu of policy options. 


• The act contains no measures to raise taxes or otherwise enhance revenues. 


• The majority of Republicans in Congress continue to resist any measure that would raise revenue.

And, as ThinkProgress reports:

Standard & Poor's indicates that they could improve their rating for the U.S. if "the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards," as the Administration is advocating.

It is perhaps not surprising then that House Budget Chairman Paul Ryan (R-WI) is now saying that he is open to revenue increases as part of a deal to reduce the deficit, which would be a significant change for the Republicans, who have so far been insistent that they would not support revenue increases.



As part of the debt ceiling negotiations, President Obama proposed several plans that would have cut $4 trillion in spending, but that would also have included modest revenue increases. Every time, the Republicans refused to go along.



In the short term, Republicans have been able to criticize Obama in the abstract, saying that it has been his poor stewardship that has lead to the S&P downgrade. But given the fact that S&P is laying much of the blame at the feet of the GOP for their rigidly ideological rejection of tax increases, the tide may be turning. The GOP may be starting to understand that the facts will clearly suggest they must shoulder much of the blame.



The American people expect politicians to work together for the best outcomes. As hard as the S&P report may have been for Obama this past weekend, the fact that Paul Ryan blinked on the topic of revenues may mean that the current logjam is busting open a bit.



Many of us have been screaming that Tea Party economics is not just bad for equity and fairness and social justice, but that it is also bad for the country's economy as a whole. So, Tea Partiers, if you don't want to listen to us, maybe you'll want to listen to S&P, who may be a lot harder to dismiss as a bunch of socialists out on the campaign trail.



They seem to have gotten Paul Ryan's attention.



(Cross-posted at Lippmann's Ghost.)

Debt and taxes

By Carl 



It never ceases to amaze me, the ability of the uberrighteous to shoot themselves in the foot: 

Greenspan said he expected more turmoil on Wall Street.



"Considering the momentum in which the market went down over the last week, it's very unlikely — if history is any guide — that this isn't going to take a while to bottom out. So the initial reaction, in my judgment, is going to be negative," Greenspan said of S&P’s downgrade.



Treasury Secretary Timothy Geithner tried to reassure investors in a Sunday night interview but conceded he could not predict the reaction.



"It's hard to know what'll happen in this context," Geithner said on CNBC. "But, again, I think that everyone can be confident, both here and around the world, that treasuries are the most — these days — the most liquid — the strongest place to put your money at a time like this."

He said S&P "has shown really terrible judgment" and "a stunning lack of knowledge about basic U.S. fiscal budget math."

Actually, Mr.
Secretary, I think the S&P has this just right. After all, it's a
temporary arrangement that will have to be revisited sooner than you
expect, since the Federal tax on gasoline expires next month and budget
projections included that in the debt ceiling agreement. It is very
likely that tax will be at least scaled back if not eliminated, thanks
to the Teabaggers. You can't say this. S&P can.

We get the government we deserve. We are officially a banana republic.

A lot of fingerpointing went on this weekend, but ultimately, the blame rests in two places: The Bush administration and the Teabaggers.

After all, the only significant spending the Obama administration passed was the $787 billion stimulus package, a thickly-wrongheaded attempt to shore up the banking system when that banking system was responsible for the mess we found ourselves in AND will suffer now from the debt ceiling debacle, as interest rates will ratchet up.

Better he should have spent the money here, at home, on works projects designed to get people permanent jobs. There's so much we can use idle labor for, from replacing the national grid to upgrading bridges and tunnels, to just cleaning the damned streets. Jobs = income = spending = more jobs. It's not a hard calculation to make, and given how the banks rebounded better than expected...

How the Bush administration fits into all this? Well, the national debt in 2001 was somewhere around $6 trillion. It's now $14 trillion. Obama can rightly be blamed for $1 trillion or so (let's credit -- debit? -- him with the unnecessary extension of the Bush tax cuts, too), leaving... carry the one... $7 trillion dollars that Bush spent without the income to show for it.

Republicans: they do spend big.

The Teabagger mantra with respect to the debt ceiling was basically nihilist from the get-go: burn it down, let God sort it out.

All we have ever had to do was to roll back the Bush tax cuts, restore the Clinton tax rates (proven job creator, that) and history would have been happy and marked this as a remarkable time when the US yet again ducked a bullet. The idea of minimalist government is so ludicrous, so stupid, so moronic, that I seriously believe the "libertarians" who propose this ought to be locked away in a cage and put on display in the Coney Island freak show.

(Cross-posted to Simply Left Behind.)

The S&P downgrade and the GOP's apparent disdain for America

By Richard K. Barry

Three things caught my eye this morning on the S&P downgrade of U.S. debt.

The first was the helpful timeline provided by Steve Benen at the Washington Monthly describing how we got to this point. Benen

provides facts that point to the Republicans as the villain in this drama. If you don't like his facts, offer your own, but do try to stick to facts.

The second is the comment by publisher Steve Forbes, a one-time GOP presidential hopeful, who said the following of the downgrade:

I think in a narrow sense it is a political move... an outrageous move. The government can pay its debts, it is legally obligated to do so, its got the wherewithal to do it. But I am surprised S&P would play politics -- the U.S. government can pay the interest and principle on the bonds -- but in a broader sense we do have severe economic troubles, but we will be able to pay the interest and principle on the bonds.

The third was Greg Sargent's comment that, holding aside whether we should give any credibility to the downgrade, it is hard to see how the Republicans can claim victory in any of this, citing the S&P report:

The political brinksmanship of recent months highlights what we see as America's government and policymaking becoming less stable, less effective, and less predictable, than we have previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.

Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting disagreement fell well short of the comprehensive fiscal consolidation program that some proponents have envisioned until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.

As Sargent points out, S&P explicitly cites the GOP threat of default as leverage for policy ends as an indication American governance is becoming less stable and predictable.

To sum up: The downgrade was precipitated by clearly identifiable Republican actions over the past 30 years; it was a cynical, politically motivated action on the part of S&P; and, the current inability of Washington to effectively govern the nation can be traced to irresponsible GOP maneuvering beholden to a radical right-wing ideological agenda.

Obama is right on this one. The GOP drove the country into a ditch, have done everything they can to make sure the current administration can't get it back on the road, and are having great fun blaming the president for the shape we're in.

I am always amazed that Republicans claim the high ground on how much they love their country. It seems to me they have little claim to this high ground as long as they continue to be such an obstacle to improving the state of the nation. How else to explain their actions?

(Cross-posted at Lippmann's Ghost.)