Category Archives: Economy

Why Do We Have A Debt Ceiling Anyway?

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Following the Tea Party-forced government shutdown and near default, it’s worth considering doing away with the debt ceiling. It serves absolutely no purpose other than providing recalcitrant congressional representatives the opportunity to hold our government hostage in order to “negotiate” their pet issues.

Since the debt ceiling is a measure of money already spent by Congress, it has no real impact on congressional budgeting and government spending.

If we really want to limit government spending, what we need is a spending ceiling based on a percentage of the Gross Domestic Product (GDP) and an absolute deadline for the House, the Senate and the White House to agree on a federal budget. Such a law would force Congress to negotiate the federal budget without threat of our government defaulting on its debts.

It would also be far more sensible than the Teapublican-sponsored balanced budget amendment that could lead to greater dysfunction than we’re already experiencing.

A spending ceiling would allow the budget to increase along with the GDP, and presumably the population, while maintaining fiscal discipline. Moreover, Congress and the White House could be given the flexibility to temporarily override the ceiling in special or extreme circumstances, such as the Great Depression or the Great Recession, as long as there was a commitment to offset the overrides within five years. This would allow the federal government to stimulate the economy for a year or two, or to increase spending in wartime. But, in most years, the political debate would be confined to how the money should be spent. Not the amount of money to be spent.

Such a system might allow citizens to more clearly track their representatives’ priorities. It might also make it difficult for representatives to speak in broad generalities about the budget and force them to address specific programs. And, if properly implemented, it might be easier to tell if a representative favored corporate welfare over human needs; or whether or not a representative was voting in support of special interests versus the interests of his, or her, constituents.

In other words, Congress would be forced to do something unprecedented…create a budget and live with its consequences.

GOP Put “Obamacare” Tantrum Above Infrastructure And Jobs.

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In March of this year, President Obama called for Congress to approve a $21 billion package designed to update our crumbling infrastructure and create jobs. “Let’s get this done. Let’s rebuild this country we love. Let’s make sure we’re staying on the cutting edge,” Obama said, calling for a “partnership to rebuild America.”

As part of the package, Obama proposed creating an infrastructure bank to help seed major projects. In addition, his proposal would invest $4 billion to support the Transportation Infrastructure Finance and Innovation Act (TIFIA) designed to leverage private and non-federal funding for projects of regional or national significance through loans, loan guarantees and lines of credit. The proposal also called for tax incentives meant to support state and municipal bonds for infrastructure modernization projects. The president noted that both the U.S. Chamber of Commerce and labor unions back infrastructure spending.

It was met with indifference by Republicans in Congress.

Speaker John Boehner questioned how such projects would be funded. “It’s easy to go out there and be Santa Claus and talk about all the things you want to give away, but at some point somebody has to pay the bill,” he said.

Keep in mind the cost of the package was $21 billion…$3 billion less than Republicans and their Tea Party parasites squandered by shutting down the government for 16 days! Who’s going to pay that bill?

Wait! I already know the answer. If the GOP follows it’s usual protocol, the money will be taken from food stamps, kids and the working poor.

The $24 Billion Tantrum.

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Following the Teapublican-caused government shutdown and threatened US default, it’s fair to look at what this pointless exercise cost us. Not including the human costs, economists at Standard & Poors estimate the cost of the government shutdown at $24 billion.

That’s larger than the entire annual budget for NASA ($17.8 billion) or the Department of the Interior ($13.5 billion). Put another way, it’s larger than the budget for the Environmental Protection Agency ($8.9 billion), the National Science Foundation ($7.5 billion), the Small Business Administration ($1.4 billion), the Corporation for National and Community Service ($1.1 billion) and the Disaster Relief Fund ($2 billion) combined.

It’s nearly double the annual revenue collected through the Estate and Gift Tax ($13 billion). It’s nearly half of the entire budget for Homeland Security. And, in more human terms, it would feed 1.6 million American families of four for an entire year!

Now imagine what would happen if Democrats proposed spending $24 billion to help the working poor or to rebuild our crumbling infrastructure. Teapublicans would cry, scream and hold their breath. They would fill the airwaves and the newspapers with paranoia. They would say that Democrats were mortgaging our children’s future. Yet they were willing to spend $24 billion on nothing…absolutely nothing.

Worse yet, 144 Teapublican Congressional Representatives and 18 Senators voted no on the bill to reopen the government and to prevent default! That’s 162 Teapublican votes to pour even more money down a rat hole. 162 votes to send the US government into default…risking a worldwide economic calamity!

And what might that have accomplished? Most economists feared that a failure to increase the debt ceiling would not only downgrade the rating of US bonds, it would create a collapse worse than the Great Recession of 2008 and 2009…maybe worse than the Great Depression. To put that into perspective, in a research paper for the Federal Reserve Bank of Dallas, economists David Luttrell, Tyler Atkinson and Harvey Rosenblum calculated that the total cost of the Great Recession to the U.S. was on the order of $6 trillion to $14 trillion. The larger figure is roughly one full year of U.S. economic output and nearly equal to the entire federal debt!

Do you still think the Republican Party is the champion of fiscal responsibility?

Who’s Really Responsible For Our National Debt?

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It’s popular for the Republican Party to blame our $16.7 trillion debt on President Obama. Certainly, like all presidents, he has some responsibility for it. But a much larger share of the responsibility goes to President Reagan, President George H.W. Bush and, most especially, President George W. Bush.

You see, the increase in spending in 2009 following the economic collapse of 2008 should rightfully be attributed to the Bush administration. That’s because the 2009 deficit was the result of a spending bill, including the Troubled Asset Relief Program (TARP), authorized by Congress in October of 2008 and signed by President Bush months before Obama took office. In fact, spending in the first year of any administration is always the result of the previous administration. Properly credit 2009 spending to Republicans, and you’ll discover that President Obama has been responsible for the lowest spending increases since Eisenhower. Similarly, he is responsible for the most rapid cuts to our deficit in more than 50 years!

While it’s true that the debt has increased 18.5 percent since Obama became president, as discussed, he should not be held responsible for most of that increase. Even so, it’s still less than the 20.7 percent increase in national debt that accrued during George W. Bush’s second term. And it’s only marginally greater than the 13 percent increase during Bush Sr’s term, and the 11.3 percent increase during Reagan’s first term.

A better measure of Obama’s spending comes courtesy of Rick Ungar, a contributor to Forbes Magazine (hardly a bastion of liberalism). According to Ungar, in President Obama’s first term, overall government spending grew just 1.4 percent as compared to 7.3 percent in George W. Bush’s first term and 8.1 percent in Bush’s second term!

So why do Republicans continue to place the blame on Obama? First, it’s a matter of political convenience to portray Obama as a “tax and spend” liberal. Second, the narrative is relatively believable since government spending skyrocketed during the first year of the Obama administration. Third, the media has done a very poor job of countering Republican misinformation.

In order to truly understand the federal debt, you have to look at the history of US borrowing.

Following the Revolutionary War, the US debt stood at roughly 35 percent of Gross Domestic Product (GDP). It again reached that level following the Civil War. In both instances, the debt was brought down by a combination of increased revenues and spending restraint. During WW I, the US debt again rose to approximately 35 percent of GDP. Before it could be paid down, our economy collapsed leading to the Great Depression. That was quickly followed by WWII. The two events caused the debt to soar to more than 117 percent of GDP. But, through a combination of post-war prosperity and income tax rates of up to 91 percent during the Eisenhower administration, the debt was again brought under control.

By the end of the Carter administration, the national debt had been reduced to 32.5 percent of GDP.

President Reagan’s expansive military spending during the Cold War once again caused the debt to soar, reaching more than 66.1 percent GDP. Under Clinton, it was reduced to 56.4 percent of GDP. Then, under George W. Bush, two wars (one of which was a war of choice) and lax government oversight led to the Great Recession – the worst economic calamity in nearly 80 years. At the same time, a Republican-led Congress cut taxes (and, therefore, revenue), particularly for the wealthy.

President Obama inherited a debt of more than 84 percent of GDP, along with a worldwide economic collapse, double-digit unemployment, spiraling health care costs, two wars estimated to have cost more than $6 trillion, a Congress that refused to rescind the Bush tax cuts, and a uniquely obstructionist Republican Party.

All of this was roughly the equivalent of combining the costs of World War II and the Great Depression without the primary mechanism needed to reduce the debt – taxes!

President Obama was left with few choices. He had to stimulate the economy through loans and tax cuts in order to put people back to work. This led to reduced revenue. He had to wind down the war of choice in Iraq as quickly as possible. He needed to stabilize the war in Afghanistan that had been allowed to languish under Bush at a cost of $1 million per soldier per year. Moreover, since few Americans had been asked to sacrifice for the wars in Iraq and Afghanistan, unlike World War II, they felt no need to pay for the wars through increased taxes. Indeed, even though federal income taxes were at a 50-year low, extremists funded by billionaires created the TEA (Taxed Enough Already) Party.

All of this led to the growth of our debt, which now equals nearly 102 percent of GDP.

Certainly, this debt is of great concern. But it’s not the short-term crisis Teapublicans would have you believe. (It’s the equivalent of a family earning $100,000/year holding a $102,000 mortgage.) And, without modest tax increases, there are few ways to reduce the debt.

One is to grow the economy, and according to most economists, including Lloyd Blankfein of Goldman Sachs, the economy is on the verge of significant, sustained growth if the nitwits in Congress would just get out of the way and stop dragging us from one self-inflicted crisis to another.

Two is to make cuts without adding to unemployment. (For example, we squander tens of billions each year on weapons systems that our military doesn’t even want, but Congress refuses to defund them because doing so would cost jobs.) And, once the economy shows sustained growth, programs such as food stamps can be cut – especially if we raise the minimum wage to reduce the large number of working poor who have little choice but to rely on government assistance.

In summary, contrary to what Teapublicans would have you believe, our national debt is not Obama’s debt. It’s the result of decades of wars, tax cuts, regulatory indifference, a struggling worldwide economy, out-of-control health care costs, greedy corporations that off-shore both jobs and profits, and a dysfunctional Congress that not only fails to help the economy. It makes decisions that are actually preventing economic recovery!

As a matter of fact, the Tea Party seems determined to force our nation into default. And, like the debt, they would have you believe that it’s all Obama’s fault.

Falling Behind Russia.

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For those Americans who still consider Russia a rival of the US, I have bad news. We have fallen behind the Great Russian Bear in one important economic category: Russia is one of the few nations on the planet with more economic disparity than ours.

In the US, the top one percent own 40 percent of the nation’s wealth, while the bottom 80 percent own just 7 percent. But in Russia, just 110 people own 35 percent of the nation’s wealth! According to a report by Credit Suisse, “Russia has the highest level of wealth inequality in the world, apart from small Caribbean nations with resident billionaires.”

Damn those Russians! We used to be number one!

Of course, this means our greedy billionaires will need to step up their game. We know they’re trying. The Koch brothers funded the government shutdown over “Obamacare” in order to maintain the status quo. Wall Street, the health care industry, and defense contractors have increased their lobbying groups in Washington. And the US Supreme Court is currently hearing a court case that may allow the obscenely wealthy to better purchase politicians and political favors under the guise of free speech.

But even that may not be enough. So the bought-and-paid-for Teapublicans are working overtime to privatize Social Security, Medicare, our military, prisons, schools and every other institution in the US. The claim is that this will make the institutions run more efficiently and more cheaply. But, in reality, privatization merely makes these institutions less responsive while adding to their costs and the corporations’ bottom lines.

But who are the poor and the middle class to complain? This is about national pride. We’re exceptional!  We have to be number one. USA! USA! USA!

GOP’s Age Warfare.

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Teapublicans always whine about what they refer to as “class warfare” whenever anyone wants to level the playing field between the wealthy and the middle class. But now they are waging a war on those 50 and older by trying to privatize Social Security and Medicare. To push their agenda of destroying “entitlements,” the Tea Party says these safety net programs are unfair to millennials who have to contribute to the programs.

Would the millennials rather contribute to their parents when the safety nets fail?

Would they rather take in their elderly parents and grandparents? Would they prefer to offer them transportation, feed them, clothe them, provide elder care, track their meds, and bathe them? Would they like to cover their health care costs?

There’s a reason that most civilized nations have safety nets, such as Social Security and Medicare. It’s because most compassionate people would rather not see the elderly broke, hungry, sick and homeless. The large corporate masters of the Republican Party and its Tea Party parasites, on the other hand, only care about their bottom lines. If increasing profits hurts some people, so what? Their overpaid and overstuffed executives won’t have to worry about retirement, and neither will their parents. In most cases, they can simply send a check to help out poor ol’ Mom and Dad.

Has it really come to this? Is the new GOP strategy to pit one generation against another? Has the GOP tired of taking money from the working poor and food stamps from children? Are the elderly the last people standing between them and the tax-free government they desire?

These words may seem cynical. But that’s far better than the cynical actions of today’s GOP.

How To Shut Up Teapublicans.

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John Boehner, Ted Cruz, et al are fond of blaming President Obama and Sen. Harry Reid for the government shutdown. In doing so, they claim that the Democrats “refuse to negotiate.”

Negotiate what?

The only thing Teapublicans want to “negotiate” is the Affordable Care Act, a bill that was duly passed by both houses of Congress, signed into law by the President and found to be constitutional by the US Supreme Court. That simply cannot be negotiated. It can be repealed. But that would take an act of both houses of Congress and the signature of the President, and that’s simply not going to happen.

So how about this? What if Obama and Reid offer to delay some aspects of the Affordable Care Act for a year in exchange for Teapublican agreement to pass a strict gun control bill that will ban all semi-automatic weapons and a bill to provide federally-funded abortions for any woman who needs one? I’m sure a majority in the Senate would agree to that, as well as the President.

What’s that you say? That’s unreasonable? Really?

It’s no more unreasonable than what Teapublicans are asking. So tell you what. When Teapublicans finally decide that they want to negotiate the federal budget in good faith, they should pass a temporary funding bill to restart the government. Then they should sit down with Democrats to discuss the budget like adults. That means both sides need to compromise.

Until then, the President and Senator Reid should stand pat.

Why You Can’t Negotiate With Terrorists.

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Long ago, our law enforcement agencies learned that you can’t negotiate with terrorists, especially those who take hostages. The reason is that their demands are always unreasonable and they never live up to the negotiated agreement.

House Republicans are no different.

The President and Senate have been negotiating the federal budget for more than four years, trying to strike a fine balance between keeping our fragile economic recovery going and bringing deficits under control. Under President Obama, the deficit has dropped faster than at any time in history. And Democrats reluctantly agreed to make permanent the $70 billion in cuts to the federal budget that were part of the sequester. But after agreeing to the cuts, Speaker of the House betrayed the Senate Majority Leader by allowing the defunding of the Patient Protection and Affordable Care Act to be included in the budget bill.

When the President and Senate refused to agree to the measure, the House offered a ”compromise” by attaching an amendment that would delay “Obamacare” for one year. Some compromise.

Since House Republicans have already voted to repeal or defund “Obamacare” more than 40 times, what assurance is there that they won’t vote to repeal the law another 40 times over the coming year?

After all, terrorists seldom live up to their word. And if they are willing to take our government and economy hostage once, they’re likely to do it again. Indeed, this is at least the third time in my lifetime that Republicans have shut down the government.

Republicans and their Tea Party parasites are always quoting the Constitution. It’s time they actually read it. Not just the 2nd and 10th Amendments…but the entire Constitution. If they would, they’d find that the House is only one part of the federal government, and it doesn’t have veto power. If they want to have a bill passed, they have to find agreement with the Senate and gain the signature of the President.

Only the President has veto power.  And the House doesn’t have the votes to override a presidential veto.

That means the House terrorists have only one option – to fund the government, at least temporarily, and then demonstrate that they can negotiate in good faith.

I, for one, don’t think they’re capable of that.

House Teapublicans Throw A Snitfit.

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Recognizing that out-of-control medical costs represented a growing threat to the health of Americans and the health of our nation, then-candidate, Barack Obama, vowed to overhaul our health care system if elected president in 2008.  Almost immediately after being sworn into office, President Obama challenged the Democratic-led Congress to deliver a health care reform bill for his signature.  After much debate and many Republican-sponsored amendments, Congress passed the Patient Protection and Affordable Care Act promising to contain health care costs and to provide health insurance to nearly 50 million uninsured Americans. The president signed the bill into law. More than a year later, a conservative Supreme Court ruled the law constitutional. And in 2012, the public showed its approval by re-electing President Obama and Senate Democrats.

That’s how democracy works. Or, at least, that’s how it’s supposed to work.

Despite all of this, the Republican majority in the House of Representatives refuses to accept the law, having voted to repeal or defund it 41 times. In a final lack of defiance, they refused to fund it as part of their government funding resolution despite statements by Senate Majority Leader, Harry Reid, that the bill would be “dead on arrival” in the US Senate and statements by President Obama that he would veto the bill.

They passed the bill anyway, trying to place the blame on President Obama and Democrats.

In response, Congressional Republicans claimed to compromise by passing a spending bill that would delay funding of “Obamacare” for a year. Apparently, they believed that Democrats would be stupid enough to think that the delay was any more than a public relations attempt to deflect blame for the government shutdown.

So here we are. Our entire government has come to a standstill because of a Teapublican tantrum against a health care law their own party proposed during the 1996 presidential campaign to counter President Bill Clinton’s universal health care initiative.

Ironically, the Teapublican snitfit has not affected the implementation of “Obamacare.” Millions of Americans have signed up for health insurance exchanges since the government shutdown. Moreover, although the budget passed by the House does not fund “Obamacare,” it includes the savings which will be realized by the law.

Without “Obamacare,” the government budget being pushed by Republicans doesn’t add up! In other words, it’s ideological. But not mathematical. Indeed, it has been estimated that the government shutdown will cost taxpayers $10 billion per week! And that doesn’t even include losses by individuals.

Obviously, House Teapublicans need a time-out.

How long will Teapublicans whine, scream and cry before voters lose patience and slap them on their considerable behinds? No one knows. While tens of thousands of government workers go without paychecks, the congressmen behind the shutdown will continue to collect theirs. And, if you think that they will feel threatened by their constituents, think again. Most congressional districts have been so gerrymandered, they will likely be re-elected no matter how bad their behavior.

Despite this, there is reason to hope. Yesterday, it was announced that 17 moderate Republicans are willing to vote for a clean bill that would fund the federal government and “Obamacare.” Assuming that all House Democrats would vote for such a bill, that’s enough votes to end the government shutdown. But it requires Speaker Boehner standing up to the Tea Party parasites in his caucus and bringing the bill to a vote.

In other words, don’t hold your breath.

Another Debt Ceiling Debacle?

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Teapublicans are always fond of relating government budgets to your household budget. It’s a lousy analogy. But let’s use it for the purposes of the debt ceiling debate.

Imagine if your family, concerned about its spending and debt, had a meeting and decided that you no longer wanted to pay any debts above…let’s say, $10,000.  And let’s say that your family couldn’t agree on spending cuts. For example, the father just doesn’t want to stop collecting expensive guns and driving luxury cars, the mother doesn’t want to give up health insurance and the 401K, and the kids don’t want to give up school and food.  So your family agrees to stop paying the mortgage, the utilities and the credit card companies.

What do you think would happen?

The mortgage company would foreclose on your home, the utilities would cut off electricity, water and gas, and the credit card companies would cut off any new purchases in addition to adding large penalties and interest to your outstanding balance.  Moreover, your family would be unable to borrow money from anyone else. And, if someone else was willing to risk loaning your family money, it would be at exhorbitant interest rates.

Does that sound like something you want to intentionally do to your family? No? Then why would you want to do that to your country?

What we have is a Republican Party that doesn’t want to give up the world’s most lavish military budget or tax cuts and welfare for our largest corporations. The Democratic Party doesn’t want to give up Social Security, Medicare, and access to health care and food stamps for the working poor. And the Tea Party parasites don’t want to spend anything because they don’t like the government anyway.

During the 2012 presidential election, we had a national debate about the direction of our nation and its budget. On these issues, the voters overwhelmingly supported the Democratic Party.  The results of that election should direct the conversation about government spending. Most important, there should be a conversation with all parties sitting down together and having an adult conversation about our nation’s future.

Unfortunately, the Tea Party parasites don’t want to do that, and the gutless Republican leaders are kowtowing to them.