Archive for the ‘Federal Budget and Economy’ Category

16 Nov

5-Point Guide To The Fiscal Showdown

Posted by James O'Rourke in Federal Budget and Economy, Politics As Usual, Poppycock. Tagged: .

Sourced from MoveOn.org

Nov. 16, 2012

Republicans, led by House Speaker John Boehner, want to scare Americans into accepting yet another extension of the Bush tax cuts for the wealthiest 2% and deep cuts to Social Security, Medicare, and Medicaid. So they’ve created a “fiscal cliff” boogeyman.

Unfortunately, if you’re following the media story, you may believe Republican claims that the world’s about to end. But the only thing going off a cliff on December 31 is the ability of Republicans to hold our economy hostage for the sake of the rich (read below to find out why!).

1. The “Fiscal Cliff” Is A Myth. As Paul Krugman put it, “The looming prospect of spending cuts and tax increases isn’t a fiscal crisis. It is, instead, a political crisis brought on by the G.O.P.’s attempt to take the economy hostage.”1 Republicans are manufacturing this crisis to pressure Democrats to extend the Bush tax cuts for the wealthy and accept painful cuts to Social Security, Medicare, and Medicaid.

 2. The Bush Tax Cuts Finally End December 31. If Congress does nothing, the ax will fall on all the Bush tax cuts on New Year’s Eve.2 Then, on January 1, the public pressure on John Boehner and House Republicans to extend the middle-class tax cuts (already passed by the Senate and waiting to be signed by President Obama) will become irresistible.3 So the middle-class tax cut will eventually get renewed, and we’ll have $823 billion more revenue from the top 2% to do great things with.4

 3.The Sequester. The sequester is another political creation, forced on Democrats by Republicans in exchange for lifting the debt ceiling last year to avoid crashing our economy.5 It’s a set of cuts (50% to a bloated military budget and 50% to important domestic programs) designed to make both Republicans and Democrats hate it so much that they’d never let it happen.6 And the cuts can be reversed weeks or months into 2013 without causing damage.7

 4.The Big Three. Nothing happens to Social Security, Medicare, and Medicaid benefits on January 1—unless Republicans force painful cuts to beneficiaries in exchange for tax increases on the wealthy, which are going to happen anyway if Congress does NOTHING.8 So, there’s literally no reason benefits cuts should be part of the discussion right now.

5.We Should Be Talking About Jobs. The real crisis Americans want Congress to fix is getting people back to work. And with just a fraction of that $823 billion from the wealthiest 2%, we could create jobs for more than 20,000 veterans and pay for the 300,000 teachers and 52,000 first responders, which our communities so desperately need.9 That’s not to mention jobs from investing in clean energy and our national infrastructure.

Please share this with your friends and family—and talk about it at the dinner table next week. The first step to winning this showdown is making sure we’re all armed with the facts.

Thanks for all you do.

–Ilya, Emily, Mark, Tate, and the rest of the MoveOn.org team

Sources:

1. “Hawks and Hypocrites,” The New York Times, November 11, 2012
http://www.moveon.org/r?r=284476&id=57918-7212362-H404vux&t=5

2. “Bush-Era Tax Cuts,” The New York Times, November 9, 2012
http://www.moveon.org/r?r=284477&id=57918-7212362-H404vux&t=6

3. “Boehner Is Bluffing,” Slate, November 9, 2012
http://www.moveon.org/r?r=284478&id=57918-7212362-H404vux&t=7

4. “CBO: Ending High-Income Tax Cuts Would Save Almost $1 Trillion,” Center on Budget and Policy Priorities, August 24, 2012
http://www.moveon.org/r?r=284479&id=57918-7212362-H404vux&t=8

5. “The sequester, explained,” The Washington Post, September 14, 2012
http://www.moveon.org/r?r=284480&id=57918-7212362-H404vux&t=9

6. Ibid.

7. “Let’s Not Make a Deal,” The New York Times, November 8, 2012
http://www.moveon.org/r?r=284484&id=57918-7212362-H404vux&t=10

8. “How the Across-the-Board Cuts in the Budget Control Act Will Work,” Center on Budget and Policy Priorities, April 27, 2012
http://www.moveon.org/r?r=284489&id=57918-7212362-H404vux&t=11

9. “Veterans’ Jobs Bill Blocked in the Senate,” The New York Times, September 19, 2012
http://www.moveon.org/r?r=284488&id=57918-7212362-H404vux&t=12

“Jan Schakowsky Announces New Budget Plan With Focus On Jobs,” The Huffington Post, August 10, 2011
http://www.moveon.org/r?r=263135&id=57918-7212362-H404vux&t=13

“Fact Sheet: The American Jobs Act,” The White House, September 8, 2011
http://www.moveon.org/r?r=264021&id=57918-7212362-H404vux&t=14

27 Oct

Republican Debt

Posted by James O'Rourke in Federal Budget and Economy. Tagged: .

Sourced from zfacts.com

Republican National Debt: $12 Trillion and Counting

US-national-debt-GDP
This page explains

[#the green line]

January 11, 2012. Republicans blame the “Democratic Congress” for their debt increases. The trouble is that Congress was only Democratic 8 out of the 20 years, and in those 8 years, on average, Congress passed smaller budgets than the Republican presidents requested. The specifics are all right here: It Was the Republicans.

So, let's add up the debt under Reagan and the Bushes. We can't blame Reagan for the debt's increase until his first budget took effect, October 1, 1981. Then, for 12 years until Sept. 30, 1993, the Republicans ballooned the debt. Later, George W. Bush took over.

  • Under Reagan and Bush: $3.4 Trillion increase in the debt.
  • Under George W. Bush: $6.1 Trillion.[#1]
  • Total: $9.5 Trillion. (without counting interest)

But wait, there's interest on that debt … continued below the graph.

Reagan-Bush-National-Debt
The debt went up during Clinton's years only because of $2.2 Trillion interest on the Reagan-Bush debt. Otherwise Clinton would have paid off most the remaining WWII debt. G.W.Bush got [#sand-bagged] by Reagan.

Just like a mortgage, the debt earns interest, and so the Reagan-Bush-I debt grew during the Clinton years. The average debt interest rate in those years was about 6.5%, which would increase it over 50% without compounding, but with compound interest the total debt – including interest – increased by $2.2 trillion.

  • Total Republican debt from above: $9.5 trillion
  • Interest on Reagan-Bush debt under Clinton: $2.2 trillion
  • Interest on $11.7 trillion after G. W. Bush: $0.3 trillion
  • (detailed calculation)
  • Grand Total Reagan-Bushes Debt: $12 trillion (as of Sept. 30, 2010).

If the Republicans had not run up this $12 Trillion debt, we could easily have pulled out of the Great Recession.

PopNotes used above:

[=1]Stimulous
The Obama stimulus package spent $36 billion ($0.036 trillion) before the end of Bush's final budget years. This has been subtracted.
[=the green line] The Green Line
on the graph above shows what the debt would have been if Reagan and the Bushes had balanced their budgets. (Full-size graph)
[=sand-bagged] Not as Bad as He Looks
Almost half of the debt that Bush II ran up was from interest on the Reagan-Bush-I debt, but it was still all Republican.

 

Congress? No.

Conservatives are embarassed by the way Reagan and the Bushes ran the debt up and out of control. So they have invented a cover story: The Democratic Congress did it. I have run into this lie dozens of times. So, I dug deep to set the record straight.

zFacts-Reagan-Not-Congress.png

As the figure shows, Reagan and Bush senior got almost exactly the budgest they requested in each of their 12 budget years.

  • Reagan:
  • The first budget — passed by all Republicans and a few conservative Southern Democrats.
    • This increased the debt by [#$144 Billion].
  • The next 5 budgets — passed by the Republican Senate and signed by Reagan.
  • The last 2 budgets — passed by a Democratic Congress
    • Totalled slightly less than Reagan requested.
  • G. H. W. Bush:
  • Democratic Congresses under Bush passed smaller budgets than he requested in 3 out of 4 years.
  • These four Democratic budgets totalled $14.6 Billion less than Bush requested.
  • G. W. Bush:
  • The first two budgets — Senate was split 50/50 and the House was Democratic.
    • Bipartisan and totalled $20 Billion less than Bush requested.
    • The biggest cause of deficits was Bush's enormous tax cut, mainly for the rich.
  • The next 4 budgets — the Congress was solid Republican.
  • The last 2 budgets — [#Bush vetoed] modest Democratic attempts at spending.

In summary: Democrats controlled Congress during 8 out the 20 years. During 4 of those years, Democrats decreased the budgets proposed by the Republican presidents. Their total effect during those 8 years was to reduce Republican budgets by $17 Billion (which is only 0.2%).

Sources:

September 20, 2010. I finally tracked down exactly what Congress did. There were a few scattered cites on the web to a mysterious House report from 1992, but I could never find it., So a few days ago, I pulled together my best clues and wrote to the help desk at the Library of Congress. They nailed it in less than a day. Amazing. There is no such report, but they found a table with that name that is published annually and has all the budget results going back to the 1920s or so. (From the government printing office.xlnk.gif)

You can read in Time magazinexlnk.gif how Reagan outmanuevered the Democrats to get his first budget passed. This is the budget that ended the 32 year payoff of the WWII debt and sent the national debt spinning out of control (except for a brief turn-around under Clinton).

From the G. W. Bush White House: The Reagan-Bush Debt Explained

“The traditional pattern of running large deficits only in times of war or economic downturns was broken during much of the 1980s. In 1982 [Reagan's first budget year], partly in response to a recession, large tax cuts were enacted. However, these were accompanied by substantial increases in defense spending. Although reductions were made to nondefense spending, they were not sufficient to offset the impact on the deficit. As a result, deficits averaging $206 billion were incurred between 1983 and 1992. These unprecedented peacetime deficits increased debt held by the public from $789 billion in 1981 to $3.0 trillion (48.1% of GDP) in 1992.” [emphasis added]

From “Historical Tables, Budget of the U.S. Government, Fiscal Year 2006.” Downloaded from www.whitehouse.gov/omb/budget/fy2006/pdf/hist.pdf. Page 5.

[#PopNotes]

[=$144 Billion] The previous record, $90 Billion, was set the year before by Carter. That was only $3 Billion higher than the record set by Ford.
[=Bush vetoed] WASHINGTON — President Bush vetoed another children’s health bill on Wednesday, effectively killing Democrats’ hopes of expanding a popular government program aimed at providing insurance to youngsters in lower- and middle-income families. (December 13, 2007)
[=PopNotes] Just hover over green-underline links above to see the “pop” notes.

G. H. W. Bush

The 1990 budget deal, in which President George H.W. Bush formally went back on his “No new taxes!” pledge and cut a sweeping deficit reduction deal with congressional Democrats. It ended up haunting Bush in varying ways for the rest of his presidency.

The '90 agreement was the product of more than six months of negotiations between Bush and a bipartisan group of congressional leaders. Deficits were soaring and Democrats, who controlled both houses of Congress, demanded that any plan include a significant revenue component. Despite his '88 rhetoric, Bush had always been more of a pragmatist and was willing to go along, and so were Bob Dole and Bob Michel, the pragmatic conservatives who led the GOP in the Senate and House.

The drama unfolded in two phases. In the first, a plan was drawn up that relied heavily on fees, excise taxes, cuts in social welfare programs, and new restrictions on tax deductions. The aim was to cut the deficit by $500 billion over five years, and the idea was for Bush to be able to say that he hadn't raised income tax rates on anyone — and to keep conservative Republicans, particularly in the House, in line. But this ended up infuriating Democrats, who believed the deal put far too much of the burden on middle- and lower-income Americans. At the same time, conservatives in the House — urged on by a rising star named Newt Gingrich — still rallied in opposition. In early October '90, the deal went down to defeat in the House by a 254-179 margin. A majority of Republicans (by a 105-71 margin) and Democrats (149-78) opposed it.

This triggered a brief government shutdown and a sharp drop in Bush's approval ratings, which had been almost unnaturally high during his first two years on the job. With the midterm elections approaching, Bush then compromised further with Democrats, who had majorities in both chambers, agreeing to a plan that shifted more of the burden to the wealthy by raising the top marginal income tax rate from 28 to 31 percent.

A full-scale revolt from the right ensued, with conservative leaders branding Bush a sellout. When the new deal came up for a vote, the partisan divide on Capitol Hill was clearer. In the House, Republicans overwhelmingly opposed their own president's plan by a 126-47 margin. Democrats backed it by a 181-74 spread. It passed the Senate, where the GOP's ranks weren't as conservative, on a 54-45 vote and was signed by Bush in early '90.

To the anti-tax right, all of this served to confirm their long-held suspicion that Bush wasn't really one of them. He'd run for president in 1980 as a moderate Republican, deriding the supply-side theory that Ronald Reagan championed as “voodoo economics.” At that time, Bush's wing of the GOP was still a force, but Reagan's was the future. By the end of the decade, supply-side theory had become GOP gospel, and Bush had reinvented himself as a true believer. This was the backdrop for his “Read my lips: No new taxes” proclamation at the party's 1988 convention. It was all enough to convince conservative leaders to put their doubts aside and to help Bush succeed Reagan.

But Bush, with the '90 budget, showed that he'd been faking it — a fact that one conservative voice after another was happy to point out.

George W. Bush

Former Treasury Secretary Paul O'Neill was told “deficits don't matter” when he warned of a looming fiscal crisis.

O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from “the corporate crowd,” a key constituency.

O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. “You know, Paul, Reagan proved deficits don't matter,” he said, according to excerpts. Cheney continued: “We won the midterms (congressional elections). This is our due.” A month later, Cheney told the Treasury secretary he was fired.

The vice president's office had no immediate comment, but John Snow, who replaced O'Neill, insisted that deficits “do matter” to the administration.

The economy, growing at an annual rate of 3.5 percent to 4.0 percent, is hardly in need of further fiscal stimulus. Yet the budget that the president sent to Congress last week promises deficits as far ahead as the eye can see–if the eye is practiced in reading these massive documents. –The Weekly Standard (very conservative), Feb. 14, 2005.

“It [this new approach] will retire nearly $1 trillion in debt over the next four years. This will be the largest debt reduction ever achieved by any nation at any time. It achieves the maximum amount of debt reduction possible without payment of wasteful premiums. It will reduce the indebtedness of the United States, relative to our national income, to the lowest level since early in the 20th Century and to the lowest level of any of the largest industrial economies.”
–George W. Bush, Feb. 28, 2001
President's Message to Congress

Voodoo Economics

Voodoo Economics, as George H.W. Bush named it in 1980, is what caused most of our national debt. It came from Wall Street and goes by the name “supply-side economics.” Here's where you can find out about it.
More Voodoo-Economics Information:

Voodoo versus Republican:

The debt problem comes from Wall Street supply-siders taking over the Republicans. Ike, Nixon and Ford, all good Republicans, brought the debt down 11 out of 16 years. supply-siders brought it down 0 out of 20. That's batting 688 versus batting 0. And G.W.H. Bush was no supply-sider — he called it voodoo economics. He just got trapped by Reagan's supply-side policies. He passed a tax increase trying to partially undo Reagan's damage, but the supply-side Republicans turned on him, and he was not re-elected.

So supply-sides are far from traditional Republican balanced-budget values. Cheney, a supply-sider, said “Reagan proved deficits don't matter.” Unfortunately the supply-siders have now pretty much captured the Republican party.

What is Supply-Side “Economics” ?
Supply-side economics was started by the the Wall St. Journal opinion editor, Robert Bartley and his right-hand man Jude Wanniski. They worked with two economists, Arthur Laffer and Robert Mundell. But Bartley took the lead, and much of supply-side economics was developed by him and Laffer at a series of dinners at Michael 1, a posh restaurant a few steps from Wall Street.
They viewed it as an attack on Keynesian economics, which described how to get out of a depression by having the government increase demand for goods and services from the private sector. This is how we got out of the Great Depression during World War II (though Keynesian economics does not suggest war as even a possible policy measure). Since Keynes focused on the demand side, Bartley and Laffer focussed on the supply side (remember “supply and demand”) and call their theory “supply-side economics.”
In a nutshell, Keynesian (demand-side) economics, says that when a country is in a recession, it's because businesses don't have enough business. That is, people are not buying as much as usual, so they can't sell enough, so they lay people off, and then the people who are laid off, or are afraid of being laid off, buy even less. To get things going, we need something to increase demand. Conservative economists tend to say — have the Fed reduce interest rates so people and businesses will borrow and spend more. Liberal economists tend to say have the government cut taxes for the poor, because they will spend, or have the government borrow and spend more to help business get started again.
The right answer, is that in a regular recession, monetary policy works and is much easier to use so that is best. But in a terrible recession or a depression, the interest rate goes down to about zero and can't go any lower, so then monetary policy stops working. Then you need Keynesian economics — like the spending for World War II>
Both conservative (monetarist — like Milton Friedman) and liberal (Keynesian) economists say that the government needs to stimulate demand in a recession. But the two “supply-side” economist say both are wrong, that we need to give tax cuts to the rich and then the rich will be stimulated to work much harder and they are the ones who are most productive and that will make the economy hum again. Laffer drew his famous “Laffer curve” to try to prove this point (but it is just plain silly). It claims that if the government cuts their tax rate, the rich will make so much more money that they will pay more taxes not less. It also claims that if you cut the tax rate for the bottom 98% of the population this won't happen.
So this was tried under Reagan. Big tax cuts for the rich. And G. W. H. Bush called this “voodoo economics,” because only two economists believed it (or at least they often said they did), and because the idea that cutting taxes for the rich would collect more money not less. Of course it never worked, and that's one reason the supply-siders ran up the debt (even compared to GDP) for 20 out of 20 years, while other Presidents, both Republicans and Democrats did not have this problem.

 

Debt Strategy

Why Supply Siders Like a rising Debt

Six keys to understanding supply-side debt strategy

  1. Eventually they want it to come down, but first they want it to go up.
  2. What they [#really care about:] ♦ Lower taxes, and ♦ Smaller government.
  3. Lower taxes cause rising debt (no, the [#voodoo] does not work).
  4. Rising debt causes pressure to cut spending and raise taxes.
  5. The Republicans pledge not to raise taxes, so spending must be cut.
  6. The Republicans block military cuts, so middle-class programs must be cut.
  • That's smaller government. And this is how supply siders use debt to “strangle” the American government.

April 17, 2006. The first year, under Reagan, it was an accident—the supply siders actually believed their own nonsense, but it soon became a plan. That's why it has gone on for 16 [now 20] years under Republicans. The national debt is aimed at Social Security, Medicare and other government programs for the middle class. If left unchecked it will kill them. So far the federal deficit has borrowed more than $1.6 trillion [now $2.5 T] from the Social Security Trust Fund, and Republicans are warning that it's going to be hard or impossible to pay it back.

Why? Because, with the national debt high and rising, taxes cut and tax increases blocked, repaying the debt to Social Security (and the workers and businesses who put their money into it) would require unacceptable borrowing or impossibly large cuts in military spending.

National Debt under Clinton

Clinton stopped the bleeding in just three years and then dropped the debt from 67% to 57% in his last five years. Bush wasted no time in reversing this progress and is now forecasting that he will achieve the highest ratio of debt to GDP in 50 years.

[#PopNotes]

[=really care about:] Dick Cheney summed it up: “Reagan proved that deficits don't matter.” This is how he justified the huge tax cuts for the rich at the start of G. W. Bush's presidency. This shows that he knew the voodoo does would not work and that tax cuts would turn budget surpluses in to deficits.
[=voodoo] The voodoo part of supply-side economics
is the claim that reducing tax rates cause rich people to pay more tax. Of course the rich like this theory a lot. The “idea” is that with lower tax rates, the rich will be inspired to work harder and this will make them so much richer that they will actually pay more taxes. Instead, the government just had borrow.
[=PopNotes] Just hover over green-underline links above to see the “pop” notes.

$12 Trillion Calc

zFacts-Reagan-Bush-National-Debt.gifFull-Sized Graph and Overview

This page provides the detailed calculation of the $12 Republican national debt. To see the full-sized graph and why this makes sense click back to $12 Trillion.

Complete Proof of the $12 Trillion Republican Debt

Just below you can see the calculation and the documentation links for the Reagan-Bushes $12 Trillion ($12,049 Billion) national debt as of September 30, 2010. You can download this as an excel spreadsheet by clicking:Download as XLS.

Their debt has 4 parts, but the bulk of it is calculated from 4 inputs (yellow and tan) that you can check with the color coded links to the treasury at the bottom. This will verify the $3.4 Trillion Reagan-Bush debt and the $6.1 Trillion G.W. Bush debt. Together that's $9.5 Trillion. Now some of G.W. Bush's debt is really interest on the Reagan-Bush debt, so he is not as bad as he looks, and Reagan-Bush are lot worse because of all their interest. You can see that in the graph above.

Interest is calculated on the second sheet (tab at bottom). But you know that 17 years of compound interest on 3.4 Trillion is going to add a lot. So a $12 Trillion total is very believable, and if you want to spend 10 minutes you can check it easily.

And if you think Congress did it, you better have a look here. Under Reagan and Bush-I, Congress actually made the debt a tiny bit smaller than what both presidents asked for. And G.W. Bush passed his supply-side tax cuts with a Republican Congress. There is just no wiggle room. The Republicans did it.

About the Graph

On the Graph above, the Reagan+Bush debt is the gap between the red line and Clinton's green line at the bottom. As it shows, if America had not had to pay the Reagan-Bush interest, Clinton's budget balancing would have nearly paid off the remaining debt from WWII–and we would have been in fabulous shape when the Great Recession struck.

Documentation

Here is the slide-by-slide documentation for The Supply-Side Story slide show.

(in progress Oct. 10)

2. The Supply-Side “Revolution“

3. How Not to Be Tricked: Everything's bigger, not just the debt.

4. Go Easy on Reagan

5. Was Congress to blame?

7. G. W. Bush's promise

8. Debt Confusion Other web sites are still using misleading graphs.

9. $9.2 Trillion: Dowload spreadsheet: whose-national-debt.xlsxlnk.gif

10. The Problem The supply-sider's stealth agenda

11. What Fooled Reagan The Laffer-Curve “theory”

2. The Supply-Side Revolution
David Stockman, Reagan's first budget director, considered himself a leftist revolutionary when young, but then became a leading supply-side revolutionary a couple of years before Reagan was elected. In his book “Triumph of Politics,” recounting the failure of the “Reagan revolution,” he frequently refers to the supply-siders agenda as revolutionary — for example, “The GOP rank and file's reservations about the Kemp-Roth tax cut really bothered me. That was the political gravy — the easiest part of the revolution” (p.55).
During Reagan's campaign he tells us “Reagan had been converted to supply-side — so for better or worse, Reagan now was the the voice of the revolution” (p. 50).
In the prologue however he tells us “In the final analysis, there has been no Reagan Revolution” (p. 15). In fact he realized this by the end of Reagan's first year in office. The problem was, that Stockman wanted the budget cut, and that did not happen. Instead only taxes were cut and this produced the huge deficits.
Stockman explains how this happened. “Jack Kemp liked the sound of their [the supply side gurus, Laffer and Wanniski] music on this issue. They were leading him, too, into a shriller and shriller anti-balanced-budget, the-tax-will-pay-for-itself, and deficits-don't-matter-that-much position” [emphasis added]
And here are some quotes by the press of the day:
“A few of the recently appointed sub-Cabinet officers will be on the cutting edge of the change Reagan has promised for the Federal Government. Their fervent beliefs are a radical departure from the policies of past Administrations, Democratic or Republican. Says one moderate White House aide: “The revolution is happening and nobody is noticing.” –Time Magazine, Mar. 16, 1981.
President Reagan would not be proposing business as usual. The President had in mind what Stockman saw as “fiscal revolution.” –The Atlantic, December 1981.
“Reagan Wins his Budget; the Revolution Begins” –Time Magazine headline, July 6, 1981

4. Reagan's Promises
During his campaign Reagan promised to balance the budget by FY 1983, but on March, 2 1981, Time reports that Reagan changed that to FY 1984. Of course even his FY 1989 was still sending the debt through the roof.

7. Bush's Promise Was Made More than Once
It will retire nearly $1 trillion in debt over the next four years. This will be the largest debt reduction ever achieved by any nation at any time. It achieves the maximum amount of debt reduction possible without payment of wasteful premiums. It will reduce the indebtedness of the United States, relative to our national income, to the lowest level since early in the 20th Century and to the lowest level of any of the largest industrial economies. –PRESIDENT'S BUDGET PLAN: “A BLUEPRINT FOR NEW BEGINNINGS”–February 28, 2001, President's Message To the Congress of the United States: www.ssa.gov/history/ gwbushstmts.html
———-
Read Mr. Bush's speech when he presented his first budget in February 2001. He foresaw a $5.6 trillion surplus over 10 years and emphasized that much of that would go to paying down the debt.

''I hope you will join me to pay down $2 trillion in debt during the next 10 years,'' Mr. Bush said then, between his calls for tax cuts. ''That is more debt, repaid more quickly, than has ever been repaid by any nation at any time in history.'' His budget message that year promised that the U.S. would be ''on a glide path toward zero debt.'' –A Glide Path To Ruin, By NICHOLAS D. KRISTOF, June 26, 2005, New York Times.

11. What Fooled Reagan: The Laffer Curve
“Jack Kemps bill would keep the income tax progressive by cutting substantially the income tax across the board in every bracket. People would have more of their money to spend as they wish and there would be more for investment to expand our industry. And government would reduce the deficit which causes inflation because the tax base would be broadened by increased prosperity.” –Regan in his own Hand, p. 277

There are several mistakes here, but the one we are focussed on is the idea that cutting taxes would “reduce the deficit.” This was a completely hypothetical idea put forward by Laffer, and was based on no empirical evidence. This is what George H. W. Bush called “voodoo economics,” and so it proved.

Also note that the top rate was cut from 70% to 50% (and then later to 38.5% under Reagan), while the bottom rate was cut from 14% to 12%.

It is also wilding wrong to believe that deficits cause inflation, as G. W. Bush recently proved with the the largest deficit every and inflation hitting it's slowest since the great depression.

 

Adding Up the Debt

October 30, 2010. The method for adding up the $12 T Republican debt, is simple. Just add up the dollars and don't make any fancy economic adjustments. Is that the right way? I have chosen this method because it's based on the Republican approach to debt and because it's simple. It seems fair that they should be judged by their own rules.

From Reagan's first speech as President: “A trillion dollars would be a stack of thousand-dollar bills 67 miles high. The interest on the public debt this year we know will be over $90 billion, and unless we change the proposed spending for the fiscal year beginning October 1st, …“

Well he changed it all right, and when he left office the stack of $1000 bills was 191 miles high.

So what did Reagan tell us about calculating his debt? (1) Start on October 1, 1981, and (2) Don't forget the interest costs of the debt.

October 1, 1981 is the beginning of his first budget year (fiscal year). He's right. He is not responsible for Carter's last budget year that runs until Oct. 1. But Reagan is responsible for his own last budget year, which ran until Sept. 30 1989. That's eight years, which is right for two terms. Reagan was right and fair about this, and that's what the spreadsheet above does.

And, like he said, the interest on the debt matters. And since he and Bush-I left us $3.4 Trillion of extra debt when Bush-I's last budget year ended on Sept. 30, 1993, that debt started collecting interest, and it still is. Clinton, G.W. Bush and Obama are not responsible for that interest. So the spreadsheet actually over-states G.W. Bushes debt because quite a bit of that was interest on the Reagan-Bush-I debt. But shifting that responsibility to Reagan-Bush (as the graph shows) does not affect our total for Reagan and the Bushes.

G.W. Bush took control of the budget on Oct. 1, 2001, when the debt was $5.8 Trillion and his last budget year ended Oct. 1, 2009, with the debt at $11.9 Trillion. During that last year, Obama got a stimulus bill passed, but that's the only significant change he was able to make in federal spending. (You can see it subtracted above.) Spending the stimulus money was slow, so only $36 Billion ($0.036 Trillion) contributed to Bush's deficits. So instead of raising the debt $6.10 Trillion, he only raised it $6.06 Trillion.

About $0.2 Trillion is still left from WWII, and Obama has $1.25 Trillion that's his. Of course half of that is from the Bush-II tax cuts and most of the rest is because of the Great Recession.

20 Oct

What my peers are letting me get away with

Posted by James O'Rourke in Opinions and Other Issues, Federal Budget and Economy. Tagged: , , .

Sourced from TheMoneyIllusion.com – A slightly off-center perspective on monetary problems

By Scott Sumner , Oct. 19, 2011

I’m a bit frustrated because I probably won’t be able to do much blogging for the next few weeks, and yet I have a large backlog of issues I’d like to address.  I guess the big news today is Paul Krugman’s very generous comments on David Beckworth and I (and by implication the others who have also been pushing the nominal GDP target):

“Market monetarists” like Scott Sumner and  David Beckworth are crowing about the new respectability of nominal GDP targeting. And they have a right to be happy.

…

At this point, however, we seem to have a broad convergence. As I read them, the market monetarists have largely moved to an expectations view. And now that we’re almost four years into the Lesser Depression, I’m willing, out of a combination of a sense that support is building for a Fed regime shift and sheer desperation, to support the use of expectations-based monetary policy as our best hope.

And one thing the market monetarists may have been right about is the usefulness of focusing on nominal GDP. As far as I can see,the underlying economics is about expected inflation; but stating the goal in terms of nominal GDP may nonetheless be a good idea, largely as a selling point, since it (a) is easier to make the case that we’ve fallen far below where we should be and (b) doesn’t sound so scary and anti-social.

I still believe that the chances of success will be a lot larger if we have expansionary fiscal policy too; but by all means let’s try whatever we can.

That makes me want to take back all the negative Krugman posts I wrote.  (Although in fairness, I often called him “brilliant,” and on one occasion argued we’d be much better off if the FOMC had 12 Paul Krugman clones.  But I suppose his supporters have noticed the negatives more than the positives.)

Continue reading »

6 Oct

Three Charts To Email To Your Right-Wing Brother-In-Law

Posted by James O'Rourke in Federal Budget and Economy, Obama Administration. Tagged: , , .

Sourced from Campaign for America’s Future

By Dave Johnson

August 28, 2011 – 12:08pm ET

Problem: Your right-wing brother-in-law is plugged into the FOX-Limbaugh lie machine, and keeps sending you emails about “Obama spending” and “Obama deficits” and how the “Stimulus” just made things worse. Solution: Here are three “reality-based” charts to send to him. These charts show what actually happened.

Spending

wpid-6088811201_96839c6977-2011-10-6-14-42.jpg

Government spending increased dramatically under Bush. It has not increased much under Obama. Note that this chart does not reflect any spending cuts resulting from deficit-cutting deals.

Deficits

wpid-6089355018_3eea3fa4be-2011-10-6-14-42.jpg

Notes, this chart includes Clinton’s last budget year for comparison.

The numbers in these two charts come from Budget of the United States Government: Historical Tables Fiscal Year 2012. They are just the amounts that the government spent and borrowed, period. Anyone can go look them up. People who claim that Obama “tripled the deficit” are either misled or are trying to mislead.

The Stimulus and Jobs

wpid-6088811219_7177d24faa-2011-10-6-14-42.jpg

In this chart, the RED lines on the left side — the ones that keep doing DOWN — show what happened to jobs under the policies of Bush and the Republicans. We were losing lots and lots of jobs every month, and it was getting worse and worse. The BLUE lines — the ones that just go UP — show what happened to jobs when the stimulus was in effect. We stopped losing jobs and started gaining jobs, and it was getting better and better. The leveling off on the right side of the chart shows what happened as the stimulus started to wind down: job creation leveled off at too low a level.

It looks a lot like the stimulus reversed what was going on before the stimulus.

Conclusion: THE STIMULUS WORKED BUT WAS NOT ENOUGH!

More False Things

These are just three of the false things that everyone “knows.” Some others are (click through): Obama bailed out the banks, businesses will hire if they get tax cuts, health care reform cost $1 trillion, Social Security is a Ponzi Scheme or is “going broke”, government spending “takes money out of the economy.”

Why This Matters

These things really matter. We all want to fix the terrible problems the country has. But it is so important to know just what the problems are before you decide how to fix them. Otherwise the things you do to try to solve those problems might just make them worse. If you get tricked into thinking that Obama has made things worse and that we should go back to what we were doing before Obama — tax cuts for the rich, giving giant corporations and Wall Street everything they want — when those are the things that caused the problems in the first place, then we will be in real trouble.

6 Oct

Ronald Reagan, Father of the ‘Buffett Rule’

Posted by James O'Rourke in Federal Budget and Economy. Tagged: , , , , , , , .

Sourced from Center for American Progress

Sound Familiar? Conservative Icon Railed Against Loopholes that Let ‘Millionaires’ Pay Lower Tax Rates than ‘Secretaries’

President Ronald Reagan works at his desk in the Oval Office of the White House as he prepares a speech on tax revision.

SOURCE: AP/Scott Stewart

By Seth Hanlon, Michael Linden | October 3, 2011

See also: Video: Reagan Called For An End To ‘Crazy’ Tax Loopholes That Let Millionaires Pay Less Than Bus Drivers (Think Progress)

We’re going to close the unproductive tax loopholes that have allowed some of the truly wealthy to avoid paying their fair share. In theory, some of those loopholes were understandable, but in practice they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying 10 percent of his salary, and that’s crazy. It’s time we stopped it.

That was the president, making the case for why our tax code—riddled with unfair breaks, loopholes, and subsidies that disproportionately benefit the wealthy—requires fundamental reform that ensures the wealthy pay their fair share.

But it wasn’t President Barack Obama. It was President Ronald Reagan. In 1985.

By that year, as President Reagan began his second term, the tax code had become shot through with lobbyist-carved loopholes and was widely regarded as being stacked in favor of the powerful and against the middle-class. Sound familiar?

It should. Our current code is likewise weighed down with similar loopholes and special provisions that tilt heavily toward the wealthy. In fact, just last week, President Obama laid out several principles that Congress should use to fundamentally reform the current tax code.

One of those principles—in a clear echo of Ronald Reagan—was that no millionaire or billionaire should pay lower taxes as a share of their income than middle-class Americans. Obama named it the “Buffett Rule” after billionaire investor Warren Buffett, who has disclosed he pays a smaller percentage of his income in federal taxes than does his secretary.

Obama’s embrace of this common sense principle unleashed an unhinged tirade from conservative politicians and pundits, who in sound bite after sound bite labeled it “class warfare.” Grover Norquist, head of the extreme antitax movement, even went so far as to attack Buffett himself.

Continue reading »

6 Oct

Occupy Wall Street Catches Fire

Posted by James O'Rourke in Federal Budget and Economy. Tagged: , , , , , .

Sourced from The Progressive

By Ruth Conniff, October 5, 2011

It started in New York’s financial district. Now it has spread to cities all across the United States. Students, pilots, transit workers, teachers, tenants–thousands of people who work every day and keep our country going are marching and sitting in to protest the looting of our national wealth, a huge spike in poverty, and the liquidation of the middle class.

Like the rallies last spring in Wisconsin, the Occupy Wall Street protests feature a cross-section of society, as do similar marches now taking place in the financial districts of Boston, Chicago, Los Angeles, and other cities.

The scenes of huge crowds outside offices of investment houses and major banks graphically show how the majority of Americans’ interests are directly opposed to the financial powerhouses that run our economy.

Bank deregulation, the non-payment of corporate taxes, austerity for the poor and middle class, and a lack of accountability for criminal activity that caused the current financial crisis are the facts that sparked these protests.

Most of all, people are protesting the pernicious economic theory called neoliberalism: welfare for the banks and austerity for the people.

Why should we be contemplating cuts in Social Security and Medicare while we are keeping taxes at a historic low for massive corporations–many of which now manage to pay no taxes at all?

Continue reading »

28 Sep

Economists Say Jobs Act May Actually Prevent Recession

Posted by James O'Rourke in Federal Budget and Economy. Tagged: .

Sourced from Washington Monthly

By Steve Benen |

Guess What? Economists Say Jobs Act May Actually Prevent Recession. Can We Pass It?

 Almost immediately after President Obama unveiled the American Jobs Act, some of its biggest fans were economists and economic forecasters. Moody’s Analytics estimated that the plan would boost economic growth by 2 percentage points and create 2 million jobs. Macroeconomic Advisers wasn’t quite as optimistic, but its analysis projected that the White House plan “would give a significant boost to GDP and employment over the near-term.”

Three weeks later, support for the American Jobs Act continues to be much stronger among economists than members of Congress. Indeed, I suspect the White House will be awfully pleased with this Bloomberg News headline this morning: “Obama Jobs Plan May Prevent 2012 Recession.”

President Barack Obama’s $447 billion jobs plan would help avoid a return to recession by maintaining growth and pushing down the unemployment rate next year, according to economists surveyed by Bloomberg News.

In fairness, the economists surveyed had widely divergent estimates, and some were far more optimistic about the proposal’s impact than others. But the overall consensus among the experts is that the Americans Jobs Act would create hundreds of thousands, if not millions, of jobs, and boost economic growth. Some projected a pretty significant boost: “Goldman Sachs Group Inc. estimated the plan would add 1.5 percent to the economy, while Macroeconomic Advisers LLC said 1.3 percent and UniCredit Research, up to 2 percent.”

Reactions to the Republican approach were far less kind.

A reduction in government spending, the end of the payroll- tax holiday and an expiration of extended unemployment benefits would cut GDP by 1.7 percent in 2012, according to JPMorgan Chase & Co. chief U.S. economist Michael Feroli in New York.

Feroli doesn’t expect big results from the White House proposal, but he nevertheless makes clear the Republican policy would quickly push the economy backwards.

As a practical matter, I don’t imagine this will matter to Congress. Republicans, after all, “do not accept the legitimacy of scholars and intellectual authorities,” even though they occasionally claim “every economist” agrees with the GOP agenda.

But the Bloomberg report once again brings the debate into focus. The economy is struggling, there are fears it may start to shrink, and the nation needs Washington to act. The president has presented a credible plan that, according to knowledgeable experts who get paid to answer these questions correctly, would give the economy a much-needed boost at an important time.

The choice for Congress seems to down to recovery and jobs vs. negligence and ignorance.

 

11 Aug

Harry Reid’s Appointments: Social Security And Medicare Now At Risk

Posted by James O'Rourke in Federal Budget and Economy, Policy, Politics, and Politicians, Seniors. Tagged: , .

Sourced from Campaign for America’s Future

By Robert Borosage
August 10, 2011 – 8:28am ET

According to reports, Senate Majority Leader Harry Reid plans to announce today that his appointees to the super committee Gang of 12 will be Sens. John Kerry, Patty Murray and Max Baucus. Reid apparently has chosen not to appoint Sens. Bernie Sanders or Sherrod Brown or Jeff Merkley, who have forcefully stood with the majority of Americans who want Medicare and Social Security protected and who favor raising taxes on the rich to help reduce the deficit.

Baucus, the chairman of the Senate Finance Committee, is a conservative Democrat. He has been a consistent supporter of Social Security, playing a key role in blocking President George W. Bush’s attempt to privatize the program. He was on President Obama’s deficit commission but sensibly voted against the plan put forth by the co-chairs, which would have cut deeply from Social Security and Medicare.
On the other hand, Baucus is a leading recipient of contributions from the drug companies and the health insurance industry. He has voted against repealing the tax benefits for companies that ship jobs overseas. He voted for the Bush tax cuts and voted to repeal the estate tax. He is not a champion of sensible health care policy or progressive tax reform.

Kerry, according to The Washington Post, is supposed to “appease liberals.” He ran for president in 2004. In that campaign, he pledged to protect Medicare and Social Security, arguing that we should not balance the budget on the backs of seniors. In recent months, he has spoken forcefully against the Republican efforts to turn Medicare into a voucher program.

But, like Obama, he is fatally attracted to the notion of a grand bargain, sacrificing cuts in Medicare and Social Security in exchange for increased revenues to reduce long-term deficits. And he is simply wrong-headed about what the nation must do in order to get the economy on track.

In a now infamous interview on Meet the Press, Kerry touted the $4 trillion “bigger deal” that Obama and House Speaker John Boehner nearly reached, with “a mix of reductions and reforms in Social Security, Medicare and Medicaid but also recognize we needed to do some revenue.”

The “real problem for our country,” Kerry argued, “is not the short-term debt… It’s the structural debt of Social Security, Medicare, Medicaid measured against the demographics of our nation.”

This is the essence of Pete Peterson, establishment nonsense. Yes, as every projection shows, we have a long-term debt problem. It is entirely a question of our broken health care system. Its soaring costs will bankrupt everything – families, businesses, state and federal governments – unless they are brought under control. That requires not cutting Social Security and Medicare and Medicaid, which simply transfers those out-of-control costs to the most vulnerable and least able to pay. That requires taking on the drug and insurance companies, the private hospital complexes, the way we deliver medicine that leaves us with a system that costs nearly twice as much per capita as every other industrial system and delivers worse results.

Kerry goes on to say that a growth plan requires that “number one, we’ve got to deal with this debt and deficit, send Wall Street and the marketplace a message that the United States of America is deadly serious about dealing with this long-term structural deficit…”

Dealing with the debt and deficit in the midst of the recession, with Europe sinking and the recovery stalled, is a recipe for a renewed decline. Look at Britain, with riots on the streets. Look at Greece, with demonstrations throughout the country. Austerity bites. It costs jobs; it exacts pain on an economy already sick. It is like bleeding a patient already weak from loss of blood.

Kerry’s appointment will alarm, not appease liberals – for he is the most dangerous of politicians: someone who doesn’t understand what he doesn’t understand.
Patty Murray is the head of the Democratic Senate Campaign Committee. This has led good government groups to protest that her interests in fund-raising will skew her positions on taxes and military spending (reinforced by being from the state of Washington, once the headquarters of Boeing). It has led Republicans to call for her to be withdrawn as too political.

A little political sense would be a good thing for Democrats on the committee. What is striking about the grand bargain that the president and House Majority Leader John Boehner allegedly were close to negotiating is how far removed it was from the priorities of the vast majority of Americans. It reportedly involved an exchange of cuts in Medicare (raising the eligibility age by two years) and Social Security (by lowering its inflation adjustment to cut benefits over time) for lower rates on taxes for the rich and corporations and limiting deductions on big-ticket items like employer-based health care or mortgages.

Americans, by overwhelming majorities, want Social Security and Medicare protected. And they favor tax increases on the rich and the closing of corporate tax havens as the first step in getting deficits under control. Democrats with a sense of social decency or a sense of self-preservation would be wise to stand with that majority. That opinion represents both good policy and good politics – something Tea Party Republicans scorn and Democrats would be wise to defend.

If these three are in fact Harry Reid’s appointees, progressives must mobilize. Social Security and Medicare, the basic promises we make to one another, the programs that workers pay into in order to have a modicum of security after a life of hard work, are now clearly at risk.

1 Aug

The People’s Budget Balances The Budget — Why Isn’t It Part Of These “Deficit” Talks?

Posted by James O'Rourke in Federal Budget and Economy. Tagged: .

Sourced from Campaign for America’s Future

By Dave Johnson

July 30, 2011 – 7:14pm ET

The Congress is fighting over how to cut the 10-year deficit, and this fight is at the edge of putting the country into

  • default. The thing is, all of the things that polls show the public wants our government to do are off the table in these discussions. The public is not stupid — the very things the public wants our government to do will actually get rid of the deficit and grow the economy. There is a budget plan before Congress that does just what the public wants our government to do. It’s called The People’s Budget.

Why isn’t The People’s Budget part of the deficit discussions in Washington? The answer is because it doesn’t give huge favors to Wall Street, multinational corporations or the wealthy. It just helps We, the People have a better life, while growing our economy so our smaller businesses and startups can have a chance to compete.

The People’s Budget
The Congressional Progressive Caucus has offered The People’s Budget — a responsible budget that does not just cut the deficit, it eliminates the deficit, balancing the budget and begins to pay down the debt. And it does this while investing in the very things that we need to do to grow our economy, without cutting Social Security, Medicare and Medicaid.

How does The People’s Budget accomplish this? It look at the things that caused the deficits, and reverses them. What a surprise! Before we started having these huge budget deficits taxes were higher on the wealthy, the military budget was much lower, and we invested in the things that grow the economy, including infrastructure, education and science. Then we cut taxes dramatically for the wealthy, and everything started to go haywire.

  1. The People’s Budget creates a fairer tax system, but without putting rates back to where they were before Reagan. It:
  2. Ends the recently passed upper-income tax cuts and lets Bush-era tax cuts expire at the end of 2012
  3. Extends tax credits for the middle class, families, and students
  4. Creates new tax brackets that range from 45% starting at $1 million to 49% for $1 billion or more
  5. Implements a progressive estate tax
  6. Eliminates corporate welfare for oil, gas, and coal companies; closes loopholes for multinational corporations
  7. Enacts a financial crisis responsibility fee and a financial speculation tax on derivatives and foreign exchange

The Bottom Line

The People’s Budget:

  1. Deficit reduction of $5.6 trillion
  2. Spending cuts of $1.7 trillion
  3. Revenue increase of $3.9 trillion
  4. Public investment $1.7 trillion
  5. Isn’t this exactly what both sides in DC say they want?

1 Aug

Capitulation

Posted by James O'Rourke in Federal Budget and Economy. Tagged: , , , , , .

Sourced from Campaign for America’s Progress

By Robert Borosage
August 1, 2011 – 6:54am ET

The raw deal on the budget ceiling has been cut. The Tea Party terrorists – the extremist faction willing to hold the economy hostage to get their way – have won. The Republic, common sense and decency have been trampled.
With the economy deeply depressed, 25 million people in need of full time work, the raw deal will impede any recovery. It precludes any serious action on jobs from the federal government. It will cost jobs as spending is cut. Instead of getting serious about a plan to revive this economy and put people back to work, Washington will remain fixated on what and how much to cut. From the President to the Tea Party zealots, politicians will tell Americans that this agreement is “important to our economy.” Yes, it is important – important in the way a virus is important to a sickly patient. It will make things worse.

With Gilded Age inequality, and hedge fund billionaires paying a lower effective tax rate than their secretaries, the deal contains no tax hikes. Poor and working Americans are asked to pay to clean up the mess that Wall Street’s excesses created.

Although the terms of the agreement are complicated, the capitulation is clear. There will be deep cuts in discretionary spending—$900 billion over 10 years, one-third from the Pentagon—in the first step. There are no tax revenues, much less higher taxes on millionaires in that mix. (The President touts that domestic discretionary spending will be slashed to levels not seen since the Eisenhower administration, presenting a travesty as if it were a victory.)

Then a rump congressional committee—a gang of 12, split between Republicans and Democrats—will be given the charter and extraordinary powers to find another $1.5 trillion over 10 years, from cuts in Medicare and Medicaid or possibly with revenues from closing loopholes (raising tax rates seems to be off the table.) Republicans have already pledged to allow no revenue increases.

If the committee gridlocks, there will be an automatic $1.2 trillion in across the board spending cuts, with the Pentagon and Medicare on the chopping block, while Medicaid, Social Security, veteran’s pay and programs for the poor are exempted.

The raw deal sets a precedent that Republican leaders are already celebrating: from now on, they boast, every debt ceiling vote will be the occasion for holding the economy hostage to more extreme demands. A balanced budget constitutional amendment. A two-thirds vote for any tax hike on the rich. Privatization of Social Security. The demands will get more extreme over time.

No progressive can or should vote for this capitulation. Republicans have won big. They should be forced to produce the votes to pass this in the House. If they can’t, the president should do what he should have done from the beginning. Stop the negotiations, demand a clean lift of the debt ceiling, and invoke his constitutional powers to avoid default.

If the deal passes the Congress, then congressional Democrats should insure that no Democrat named to the Gang of 12 will accept any agreement that does not include more revenues than spending cuts, while defending Medicare, Medicaid and Social Security from a rump process.

Given Republican intransigence, that will force deadlock, triggering deep spending cuts that won’t go into effect until January of 2013. Americans can then decide in the election whether they want to vote for those who would gut Medicare and Social Security to protect tax breaks for the wealthy.

The media will trumpet the agreement; the markets will exhale; the pressure to fall in line will be great. But when the dust clears, the economy will still be in trouble, and the federal government will be less able to help. Americans will see investments in schools, research, public health, clean energy, transportation cut back. Inequality will grow; poverty will spread.

Voters will have to decide. They know Republicans are prepared to go to the mat to protect the wealthy from tax hikes, even to the point of endangering the economy. Will voters have any clue about what Democrats are prepared to fight for?

1 Aug

Four Ways The Debt-Ceiling Deal Will Affect You Personally

Posted by James O'Rourke in Federal Budget and Economy. Tagged: , , , , , , , .

By Richard (RJ) Eskow
August 1, 2011 – 3:42pm ET

How is this deal likely to affect your household? If you’re in the top 1% of earners, there’s no need to read any further because it probably won’t affect you personally. Here are five ways it’s likely to affect the rest of us:
1. You’ll be less likely to find a job if you’re looking. If you’ve got a job, you’re less likely to earn more money – and more likely to lose it.
The New York Times report of a secret agreement not to help the economy only confirms what we already knew: The President won’t aggressively push a jobs program, and the Republicans don’t intend to pass one in any case.
This is bad news if you or anyone close to you is currently unemployed — especially if you live an a hard-hit area, have been unemployed for a long time, are African American, or are older. It’s equally bad news if you’ve just graduated from college. This “grand bargain” won’t even extend your Federal unemployment insurance.
If you’re not working enough hours or haven’t seen your salary go up very much, this will hurt you too. Under-employment is also a symptom of an economy in need of stimulus, and that stimulus isn’t coming. And wages are stagnating, even for fully-employed people, too. There are several reasons for that — with high unemployment, employers don’t have to give raises to keep people. And a lot of employers are strapped, too, because they’re not making as much money as they used to.
In other words, of you’re one of the 22 to 24 million people in the country who are un- or under-employed, this deal is bad news. And if you’re one of the tens of millions of people with stagnant income, it will hurt you too.
By all means, please keep looking for a job and try not to surrender to despair. But this bill is a step backward for you.I know it’s going to be tough, and I feel for you. But hang in there and don’t give up. Join us in pressuring Washington to address unemployment. That will give you added purpose – and we sure could use the help.
2. Your housing value is likely to suffer.
The bipartisan coalition that bailed out Wall Street has agreed to exclude any help for suffering homeowners in their “grand bargain.” That means that a wave of foreclosures will continue unabated, driving down housing value, ruining millions of households, and depressing the local economy in tens of thousands of cities, towns, and neighborhoods.
The tax provisions we’ll describe in a minute are likely to make that problem even worse.
3. Your old age just got scarier.
A “chained-CPI” benefit cut will reduce Social Security by nearly ten percent by the time you’re 80 — and that’s if you retire right away. If you’re young the cuts will be even greater. Raising the retirement age is a huge benefit cut, too.
The right-wing “bipartisan” consensus isn’t willing to attack the real drivers of health care cost in this country, most of which come from our over-dependence on for-profit hospitals, insurance companies, and drug companies. That means benefit cuts are likely to be recommended by the “Super Congress” and implemented by that other body. (What should it be called from now on – the “Lesser Congress,” perhaps?)
That’s likely to mean an old age with more financial insecurity – unless this deal can be stopped, or the “Super Congress” is staffed with Democrats who believe in the higher good and not a deal for expediency’s sake.
Again, don’t despair. Join us in fighting to protect entitlement programs – or in electing politicians who will.
4. Your tax bill is likely to go way up.

You may have heard the phrase “revenue enhancement” and wondered why they don’t just say “tax increase.” Or heard the words “tax expenditure” and wondered why they didn’t just say “tax deductions.” Here’s why: The phrase “tax increase” is understood to mean raising tax rates, which would discommode the wealthy. But “revenue enhancement” also includes eliminating tax deductions that benefit the middle class but mean very little to the wealthy.
But it’s too direct and honest to simply say “eliminate tax deductions.” They’d rather say that the Super Congress will “review tax expenditures.” Two of the biggest are the home mortgage interest deduction and the tax deduction for employer-sponsored health care.
What will happen if they’re eliminated? If the mortgage deduction goes, even more homes will go into foreclosure, leading to even more severe drops in home prices. Those families who can keep their homes will face a steep increase.
If you get your health benefits through your employer, you’ll pay a lot more for coverage if they eliminate or reduce the health benefit deduction . You’ll also get a lot less coverage in return — as your employer shifts even more of the health bill back to you. Many small employers may drop coverage altogether — which means that more households will be required to purchase it on the individual market. That could cost a middle class family ten thousand dollars or more per year under the current health bill.
But wait. There’s less …
That’s not all, folks.
Education will be cut under this plan, which means your children will get less of an education and will have less money for college, closing one more avenue to a better life.
And what about lower-income Americans? It’s too early to know all the particulars, but it will be bad. We know you’ll get much less health care, which means you and those you love are likely to be sicker. But it will get a lot worse than that. As the most vulnerable among us, you make the easiest target.
Overall, economic growth is likely to be reduced from its current crawl to a complete standstill, causing spikes in unemployment and other economic hardships.
Is this a done deal?
Pretty close, but there are still things that can be done. First and foremost, people can call today and demand that your Senators and representatives reject this deal.
If the deal does pass, demand that only people who represent you are appointed to the extra-legislative Super Congress that’s been empowered with deciding your fate.
And don’t forget how your elected officials behave as this deal makes its way through the process. Write it down if you need to, but be sure you remember everything when you vote next November.

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1 Aug

Democrats will lose now. But they can win later.

Posted by James O'Rourke in Federal Budget and Economy, Politics As Usual. Tagged: , .

Sourced from wapo.com

By Ezra Klein  |  11:36 AM ET, 07/31/2011

wpid-taxincreasesover10years-2011-08-1-10-34.jpg

Democrats are going to lose this one. The first stage of the emerging deal doesn’t include revenue, doesn’t include stimulus, and lets Republicans pocket a trillion dollars or more in cuts without offering anything to Democrats in return.

The second stage convenes a congressional “Supercommittee” to recommend up to $2 trillion in further cuts, and if their plan doesn’t pass Congress, there’s an enforcement mechanism that begins making automatic, across-the-board cuts to almost all categories of spending. So heads Democrats lose, tails Republicans win.

It’s difficult to see how it could have ended otherwise. Virtually no Democrats are willing to go past Aug. 2 without raising the debt ceiling. Plenty of Republicans are prepared to blow through the deadline. That’s not a dynamic that lends itself to a deal. That’s a dynamic that lends itself to a ransom.

But Democrats will have their turn. On Dec. 31, 2012, three weeks before the end of President Barack Obama’s current term in office, the Bush tax cuts expire. Income tax rates will return to their Clinton-era levels. That amounts to a $3.6 trillion tax increase over 10 years, three or four times the $800 billion to $1.2 trillion in revenue increases that Obama and Speaker John Boehner were kicking around. And all Democrats need to do to secure that deal is…nothing.

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