Newt’s Tax Plan, and Why His Polls Rise the More Outrageous He Becomes

December 15, 2011 by · Leave a Comment 

By Robert Reich, Robert Reich’s Blog

Newt Gingrich has done it again. With his new tax plan he has raised the bar from irresponsibility to recklessness.

Every dollar estimate I’m about to share with you comes from the independent, non-partisan Tax Policy Center – a group whose estimates are used by almost everyone in Washington regardless of political persuasion.

First off, Newt’s plan increases the federal budget deficit by about $850 billion – in a single year!

To put this in perspective, most forecasts of the budget deficit cover ten years.  The elusive goal of the White House and many on both sides of the aisle in Congress is to reduce that ten-year deficit by 3 to 4 trillion dollars.

Newt goes in the other direction, with gusto. Increasing the deficit by $850 billion in a single year is beyond the wildest imaginings of the least responsible budget mavens within a radius of three thousand miles from Washington.

Imagine what Standard & Poor’s or Moody’s or Fitch would do if it became law. We’d go directly from a triple-A credit rating to triple X – the veritable porn star of fiscal mayhem. Interest on our debt would become larger than most of the rest of the budget.

Most of this explosion of debt in Newt’s plan occurs because he slashes taxes. But not just anyone’s taxes. The lion’s share of Newt’s tax cuts benefit the very, very rich.

That’s because he lowers their marginal income tax rate to 15 percent – down from the current 35 percent, which was Bush’s temporary tax cut; down from 39 percent under Bill Clinton; down from at least 70 percent in the first three decades after World War II. Newt also gets rid of taxes on unearned income – the kind of income that the super-rich thrive on – capital-gains, dividends, and interest.

Under Newt’s plan, each of the roughly 130,000 taxpayers in the top .1 percent – the richest one-tenth of one percent – reaps an average tax cut of $1.9 million per year. Add what they’d otherwise have to pay if the Bush tax cut expired on schedule, and each of them saves $2.3 million a year.

To put it another way, under Newt’s plan, the total tax bill of the top one-tenth of one percent drops from around 38 percent of their income to around 10 percent.

What about low-income households? They get an average tax cut of $63 per year.

Oh, I almost forgot: Newt also slashes corporate taxes.

I’m not making this up.

This might be amusing if Newt were just being old Newt – if this were another infamous hot-air bubble emerging from an always provocative, sometimes clever, often bizarre mind.

But it’s the tax plan of the leading candidate for president of one of the two major political parties of the United States.

And it comes at a time when America’s super rich are raking in a larger portion of total income and wealth than at any time over the last eighty years, and when their marginal taxes are lower than they’ve been in three decades; a time when the nation’s long-term budget deficit is causing cuts in education and infrastructure which will impair our future and that of our children, and when safety nets and social services are being slashed.

Can Newt get away with this?

Probably — because his plan also comes at a time when Americans are so cynical about the major institutions of our society that someone who offers huge, outrageous plans holds a special fascination: The whole system is so awful, people tell themselves, why not just jettison everything and start from scratch? Let’s throw caution to the winds and do something really big – even if it’s colossally stupid.

This is why the more outrageous Newt can be, the better his polls. The more irresponsible his bomb-throwing, the more attractive he becomes to a sizable portion of Americans so fed up they feel like throwing bombs.

History is full of strong men with dangerous ideas who gain power when large masses of people are so desperate and disillusioned they’ll follow anyone who offers big, seemingly easy solutions.

At times like this a nation must depend on its wise elders – people who have gained a reputation for good judgment and integrity, and who are broadly respected by all sides regardless of political affiliation or ideology – to call out the demagogues, speak the truth, and restore common sense.

The great tragedy of America today is the paucity of such individuals when we need them the most.

13-51

Wall Street and Islamophobia

November 3, 2011 by · Leave a Comment 

By Geoffrey Cook, TMO

Oakland–October 31st–I lived in this curious city across from San Francisco for most of my thirty-one years here in the East Bay.  Unlike that City across the Bay, which is more of a dreamland where one goes when one is young, but Oakland is a gutsy –mainly Black – working class city.  It is, also, the third largest port on the West Coast.  Most of the Muslims here, too, are native born Afro-American converts with a considerable number of Eritrean refugees and a noticeable contingent Yemeni with Palestinian and other miscellaneous groupings.

What created Oakland in the Nineteenth Century was the fact that the trans-Continental railway ended here and its passengers would get off, and be put on ferries to the City on the Golden Gate.

Curiously, in the recent “Occupy Wall Street” Movement, more than New York or even the Western financial hub across San Francisco Bay, the seemingly provincial and small (400,000) peripheral urban space of Oakland has become a center of the battle against the financial collapse of “free” enterprise that the George W. Bush Administration accelerated through his anti-Islamic Colonial Wars.  As evil as that was, the administration of those Wars, were managed so incompetently that they failed to finance their martial adventures – contrary to the history of Foreign adventurism which usually leads to a stimulation of a national economy temporarily – in that the Bush Regime gave financially unsound tax-breaks to the upper 1% of the population – the economy shrank instead — as the national debt plummeted.  (Now, let it be noted, that I do not advocate preventative War in any way!)  

Many in the Muslim community here have suffered even more than the general citizenry.  Homes have been foreclosed, jobs have been lost and not regained, lifetime savings have slithered away, and, yes, despite residency in this land of plenty, there is even hunger.

Notwithstanding, President Barrack Hussein Obama’s attempted to prod a budget through Congress earlier this year that would begin to alleviate the suffering of the grand majority of Americans, which was obfuscated by the largely anti-Muslim “Tea Party.”  The latter have hindered relief to suffering American citizens / residents including those who attend the Mosques. 

Under Section Four of the Fourteenth Amendment, which was largely instituted as one of the Reconstruction Amendments, to prevent any future attempts to reverse the Thirteenth Amendment passed during the U.S. Civil War (1860s) to irradiate the deplorable institution of slavery, also, raises the question of what monetary powers Section Four of the Fourteenth Amendment gives to the President.  “The validity of the public debt of the United States, authorized by law…shall not be questioned…”  Therefore, it is argued that Section 4 gives the President unilateral authority to raise or ignore the national debt ceiling (like in a national such as World War II, the Great Depression or the current financial crisis).

President Obama made a grave error in not invoking Section 4, and regulating by decree last February, and, hopefully, when the budget comes up again, and (economic) Keynesian solutions are called for, the Administration will block the reactionaries of the Lower house, for, according to the Economist Intelligence Unit, an upcoming worldwide economic collapse is brewing due to the Euro-zone National Debt Crisis and the “Tea Party” fiscal interference in the States.  Therefore, to avoid this, drastic measures are indicated.

To counter this, a populist movement has arisen in America in protest against the corruption of the American system deregulated over the past several decades by interspersed right-wing governments.  In a letter, Keith Ellison of Minnesota, the only Muslim in Congress sarcastically writes, “…if you exercise your right to free speech against the excessive power and greed of Wall Street…they say you’re ‘dangerous’ and engaging in ‘class warfare.’”

The disproportionate importance of the Oakland demonstrations to the national movement is the reaction by incompetent elite who essentially stole an election by a conspiratorial manipulation of rank-choice voting.  (This minor city’s last two mayors had remarkable resumes – one a former Governor and the last a leading former Congressman.  It was expected that the last President Pro Temp of the California [State] Senate in Sacramento who represented Alameda County of which Oakland is the seat, who won a plurality of the first round vote, would be the next Mayor, but lost because three of the other candidates campaigned to have their supporters list two of the others as their second and third choices; thus, thwarting democracy with incompetency.  The result of which is that the current Mayor represents only one small ethnic element of the city; therefore, Muslims, who largely belong to the ethnic plurality, are denied political recognition here.)

Be that as it may, this Op-Ed is to state that the “Occupy Wall Street” Movement is related to Islamophobia because the same crisis that created hatred against Muslims in the States gave reign to the greed in America’s financial structure.  In a way, maybe Islam’s non-usury system has a lot to teach the West which, by the way, renounced a similar system in the Renaissance.

Some commentators have equated the “Occupy Wall Street” Movement to America’s version of the Arab “Spring.”  It is true that Islam and democracy can find a compatible form, but – like the case with Soviet Socialism – it may not be able to co-exist with American Capitalism as “written.”   I believe that the Koran and Hadith have much to teach the West in ways to reform its financial institutions and dealings.

13-45

The Fatal Distraction

September 8, 2011 by · Leave a Comment 

By Paul Krugman

Friday brought two numbers that should have everyone in Washington saying, “My God, what have we done?”

One of these numbers was zero — the number of jobs created in August.

The other was two — the interest rate on 10-year U.S. bonds, almost as low as this rate has ever gone. Taken together, these numbers almost scream that the inside-the-Beltway crowd has been worrying about the wrong things, and inflicting grievous harm as a result.

Ever since the acute phase of the financial crisis ended, policy discussion in Washington has been dominated not by unemployment, but by the alleged dangers posed by budget deficits. Pundits and media organizations insisted that the biggest risk facing America was the threat that investors would pull the plug on U.S. debt. For example, in May 2009 The Wall Street Journal declared that the “bond vigilantes” were “returning with a vengeance,” telling readers that the Obama administration’s “epic spending spree” would send interest rates soaring.

The interest rate when that editorial was published was 3.7 percent. As of Friday, as I’ve already mentioned, it was only 2 percent.

I don’t mean to dismiss concerns about the long-run U.S. budget picture. If you look at fiscal prospects over, say, the next 20 years, they are indeed deeply worrying, largely because of rising health-care costs. But the experience of the past two years has overwhelmingly confirmed what some of us tried to argue from the beginning: The deficits we’re running right now — deficits we should be running, because deficit spending helps support a depressed economy — are no threat at all.

And by obsessing over a nonexistent threat, Washington has been making the real problem — mass unemployment, which is eating away at the foundations of our nation — much worse.

Although you’d never know it listening to the ranters, the past year has actually been a pretty good test of the theory that slashing government spending actually creates jobs. The deficit obsession has blocked a much-needed second round of federal stimulus, and with stimulus spending, such as it was, fading out, we’re experiencing de facto fiscal austerity. State and local governments, in particular, faced with the loss of federal aid, have been sharply cutting many programs and have been laying off a lot of workers, mostly schoolteachers.

And somehow the private sector hasn’t responded to these layoffs by rejoicing at the sight of a shrinking government and embarking on a hiring spree.

O.K., I know what the usual suspects will say — namely, that fears of regulation and higher taxes are holding businesses back. But this is just a right-wing fantasy. Multiple surveys have shown that lack of demand — a lack that is being exacerbated by government cutbacks — is the overwhelming problem businesses face, with regulation and taxes barely even in the picture.

For example, when McClatchy Newspapers recently canvassed a random selection of small-business owners to find out what was hurting them, not a single one complained about regulation of his or her industry, and few complained much about taxes. And did I mention that profits after taxes, as a share of national income, are at record levels?

So short-run deficits aren’t a problem; lack of demand is, and spending cuts are making things much worse. Maybe it’s time to change course?

Which brings me to President Obama’s planned speech on the economy.

I find it useful to think in terms of three questions: What should we be doing to create jobs? What will Republicans in Congress agree to?

And given that political reality, what should the president propose?

The answer to the first question is that we should have a lot of job-creating spending on the part of the federal government, largely in the form of much-needed spending to repair and upgrade the nation’s infrastructure. Oh, and we need more aid to state and local governments, so that they can stop laying off schoolteachers.

But what will Republicans agree to? That’s easy: nothing. They will oppose anything Mr. Obama proposes, even if it would clearly help the economy — or maybe I should say, especially if it would help the economy, since high unemployment helps them politically.

This reality makes the third question — what the president should propose — hard to answer, since nothing he proposes will actually happen anytime soon. So I’m personally prepared to cut Mr. Obama a lot of slack on the specifics of his proposal, as long as it’s big and bold. For what he mostly needs to do now is to change the conversation — to get Washington talking again about jobs and how the government can help create them.

For the sake of the nation, and especially for millions of unemployed Americans who see little prospect of finding another job, I hope he pulls it off.

13-37

The Enemy is Washington: An Economy Destroyed

July 28, 2011 by · Leave a Comment 

By Paul Craig Roberts

Recently, the bond rating agencies that gave junk derivatives triple-A ratings threatened to downgrade US Treasury bonds if the White House and Congress did not reach a deficit reduction deal and debt ceiling increase.  The downgrade threat is not credible, and neither is the default threat.  Both are make-believe crises that are being hyped in order to force cutbacks in Medicare, Medicaid, and Social Security.

If the rating agencies downgraded Treasuries, the company executives would be arrested for the fraudulent ratings that they gave to the junk that Wall Street peddled to the rest of the world. The companies would be destroyed and their ratings discredited. The US government will never default on its bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are payable in its own currency. Regardless of whether the debt ceiling is raised, the Federal Reserve will continue to purchase the Treasury’s debt.  If Goldman Sachs is too big to fail, then so is the US government.

There is no budget focus on the illegal wars and military occupations that the US government has underway in at least six countries or the 66-year old US occupations of Japan and Germany and the ring of military bases being constructed around Russia.

The total military/security budget is in the vicinity of $1.1-$1.2 trillion, or 70 per cent -75 per cent of the federal budget deficit.

In contrast, Social Security is solvent.  Medicare expenditures are coming close to exceeding the 2.3 per cent payroll tax that funds Medicare, but it is dishonest for politicians and pundits to blame the US budget deficit on “entitlement programs.”

Entitlements are funded with a payroll tax.  Wars are not funded. The criminal Bush regime lied to Americans and claimed that the Iraq war would only cost $70 billion at the most and would be paid for with Iraq oil revenues. When Bush’s chief economic advisor, Larry Lindsay, said the Iraq invasion would cost $200 billion, Bush fired him. In fact, Lindsay was off by a factor of 20. Economic and budget experts have calculated that the Iraq and Afghanistan wars have consumed $4,000 billion in out-of-pocket and already incurred future costs.  In other words, the ongoing wars and occupations have already eaten up the $4 trillion by which Obama hopes to cut federal spending over the next ten years. Bomb now, pay later.

As taxing the rich is not part of the political solution, the focus is on rewarding the insurance companies by privatizing Medicare at some future date with government subsidized insurance premiums, by capping Medicaid, and by loading the diminishing middle class with additional Social Security tax.

Washington’s priorities and those of its presstitutes could not be clearer. President Obama, like George W. Bush before him, both parties in Congress, the print and TV media, and National Public Radio have made it clear that war is a far more important priority than health care and old age pensions for Americans.

The American people and their wants and needs are not represented in Washington. Washington serves powerful interest groups, such as the military/security complex, Wall Street and the banksters, agribusiness, the oil companies, the insurance companies, pharmaceuticals, and the mining and timber industries. 

Washington endows these interests with excess profits by committing war crimes and terrorizing foreign populations with bombs, drones, and invasions, by deregulating the financial sector and bailing it out of its greed-driven mistakes after it has stolen Americans’ pensions, homes, and jobs, by refusing to protect the land, air, water, oceans and wildlife from polluters and despoilers, and by constructing a health care system with the highest costs and highest profits in the world.

The way to reduce health care costs is to take out gobs of costs and profits with a single payer system.  A private health care system can continue to operate alongside for those who can afford it.
The way to get the budget under control is to stop the gratuitous hegemonic wars, wars that will end in a nuclear confrontation.

The US economy is in a deepening recession from which recovery is not possible, because American middle class jobs in manufacturing and professional services have been offshored and given to foreigners.  US GDP, consumer purchasing power, and tax base have been handed over to China, India, and Indonesia in order that Wall Street, shareholders, and corporate CEOs can earn more.
When the goods and services produced offshore come back into America, they arrive as imports. The trade balance worsens, the US dollar declines further in exchange value, and prices rise for Americans, whose incomes are stagnant or falling.

This is economic destruction. It always occurs when an oligarchy seizes control of a government. The short-run profits of the powerful are maximized at the expense of the viability of the economy.
The US economy is driven by consumer demand, but with 22.3 per cent unemployment, stagnant and declining wages and salaries, and consumer debt burdens so high that consumers cannot borrow to spend, there is nothing to drive the economy.

Washington’s response to this dilemma is to increase the austerity! 

Cutting back Medicare, Medicaid, and Social Security, forcing down wages by destroying unions and offshoring jobs (which results in a labor surplus and lower wages), and driving up the prices of food and energy by depreciating the dollar further erodes consumer purchasing power.  The Federal Reserve can print money to rescue the crooked financial institutions, but it cannot rescue the American consumer.

As a final point, confront the fact that you are even lied to about “deficit reduction.”  Even if Obama gets his $4 trillion “deficit reduction” over the next decade, it does not mean that the current national debt will be $4 trillion less than it currently is.  The “reduction” merely means that the growth in the national debt will be $4 trillion less than otherwise.  Regardless of any “deficit reduction,” the national debt ten years from now will be much higher than it presently is.

Paul Craig Roberts was Assistant Secretary of the US Treasury, Associate Editor of the Wall Street Journal, and professor of economics in six universities. His latest book, HOW THE ECONOMY WAS LOST, was published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com/Counter punch.

13-31

ISNA Unites with Interfaith Leaders to Protect Federal Funding for Poverty Assistance Programs

July 21, 2011 by · Leave a Comment 

July 14, 2011 – Representing a growing movement of Americans concerned that the Administration and Congress are enacting a budget deal that will place an undue burden on the poor “while shielding the wealthiest  from any additional sacrifice,” ISNA leadership and other leaders representing Christian and Jewish faiths today launched a new campaign to encourage policymakers to maintain a robust U.S. commitment to domestic and international poverty programs.

More than 25 heads of communion and national religious organizations are spearheading an 18-month faith-based public policy campaign to urge Congress and the Administration to exempt programs that assist at-risk families and children in the U.S. and abroad from budget cuts.  The campaign will consist of high-level meetings with policymakers, a Washington fly-in of religious leaders and daily prayer vigils among other actions.

The daily prayer vigils are being held on the front lawn of the United Methodist Building (100 Maryland Avenue, NE, Washington, DC) near the U.S. Capitol Building.  Led by a different religious organization each day at 12:30 p.m. EDT, the prayer vigils will continue throughout the White House led budget negotiations.  ISNA led a prayer vigil for the leaders on Tuesday, July 12.

More than 25 heads of communion and national religious organizations are spearheading an 18-month faith-based public policy campaign to urge Congress and the Administration to exempt programs that assist at-risk families and children in the U.S. and abroad from budget cuts.  The campaign will consist of high-level meetings with policymakers, a Washington fly-in of religious leaders and daily prayer vigils among other actions.

In their letters to President Obama and Congress, the religious leaders stated, “People who are served by government program – those who are poor, sick, and hungry, older adults, children, and people with disabilities – should not bear the brunt of the budget-cutting burden.”

They further explained that “Houses of worship and communities of faith cannot meet the current need, much less the increased hardship that would result from severe cuts in federal, and consequently, state programs.  We need the public-private partnership that has for decades enabled us as a nation to respond to desperate need, both human and environmental.”
During the briefing, Dr. Sayyid M. Syeed, ISNA National Director of Interfaith and Community Alliances, spoke first about our responsibility to stand up for those who cannot speak for themselves.
He said, “It is our religious duty as part of the faith communities to convey our concerns about the problems of the budget cuts that will directly impact low income individuals and the dispossessed. We are asking for a budget that should be just and equitable.  It is our Islamic duty because this is one of the pillars of Islam.”

Christian, Jewish and Muslim institutions and faith-based organizations, united by shared beliefs to lift up the nation’s most vulnerable, are mobilizing across the country to impact the national budget dialogue by demonstrating that America is a better nation when we follow our faiths’ imperative to promote the general welfare of all individuals.

Contact: Adam Muhlendorf, Rabinowitz/Dorf Communications adam@rabinowitz-dorf.com; (202) 265-3000

13-30

Bernanke Glum on Growth–But No stimulus Hints

June 9, 2011 by · Leave a Comment 

By Matt Bigg (Reuters) –

Federal Reserve Chairman Ben Bernanke on Tuesday acknowledged the economy has slowed but offered no hint the U.S. central bank is considering any more stimulus to accelerate growth.

He also warned members of Congress who might be planning aggressive budget cuts that they have the potential to derail the recovery if cuts in government spending take hold too soon.

A recent spate of weak economic data, capped by Friday’s report showing anemic job creation last month, had renewed speculation the Fed might again come to the economy’s aid.

Bernanke gave no such indication but did say the recovery was fragile enough to warrant keeping in place the extraordinary monetary support the Fed has already provided.

Speaking to a banking conference, the Fed chairman said that while he expects the economy to strengthen in the second half of the year, the job market bears close monitoring.

“The economy is still producing at levels well below its potential,” he said. “Consequently, accommodative monetary policies are still needed.”

Richard Gilhooly, an interest rate strategist at TD Securities in New York, called the speech “pretty downbeat.”

“It means that the Fed’s on hold for longer,” he said.

Stocks closed lower after Bernanke’s sober assessment, while longer-term bonds erased losses.

Bernanke repeated his view that a spike in U.S. inflation, while worrisome, should prove fleeting as commodity prices moderate. In addition, weak wage growth and stable inflation expectations should help keep prices down, he said.

On the budget, Bernanke repeated his call for a long-term plan for a sustainable fiscal path but warned politicians against massive short-term cuts in spending.
“A sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still-fragile recovery,” he said.

“By taking decisions today that lead to fiscal consolidation over a longer horizon, policymakers can avoid a sudden fiscal contraction that could put the recovery at risk,” he said.

All Tapped Out

The central bank has already slashed overnight interest rates to near zero and purchased more than $2 trillion in government bonds to pull the economy from a deep recession and spur a recovery.

With the central bank’s balance sheet already bloated, officials have suggested there would be a high bar for any further Fed easing. The Fed’s current $600 billion round of government bond buying, known as QE2, is due to end this month.

Sharp criticism in the wake of QE2 is one factor likely to make policymakers reluctant to push the limits of unconventional policy.

“QE3 is still not an option right now, more because of the political ramifications,” said Kathy Lien, director of currency research at GFT in New York. “We need to see much more significant deterioration in the economy and consistent weakness in non-farm payrolls before that can happen.”

In a Reuters poll of U.S. primary dealer banks conducted after the employment data, analysts saw only a 10 percent chance for more government bond purchases by the Fed. They also pushed back the timing of an eventual rate hike further into 2012.

Hurdles to better economic health have emerged overseas as well. Europe is struggling with a debt crisis, while Japan still reels from the effects of the earthquake and tsunami.

In emerging markets, China is trying to rein in red-hot growth to prevent inflation.

Fed policymakers have admitted to being surprised by how weak the economy appears, but none have yet called for more stimulus.

In an interview with the Wall Street Journal, Chicago Federal Reserve Bank President Charles Evans, a noted policy dove, said he was not yet ready to support a third round of so-called quantitative easing. His counterpart in Atlanta, Dennis Lockhart, also said the economy was not weak enough to warrant further support.

While Boston Fed President Eric Rosengren told CNBC on Monday the economy’s weakness might delay the timing of an eventual monetary tightening, the head of the Dallas Federal Reserve Bank, Richard Fisher, said the Fed may have already done too much.

Evans and Fisher have a policy vote on the Fed this year while Rosengren and Lockhart do not.

13-24

Who’s Serious Now?

April 21, 2011 by · Leave a Comment 

By Paul Krugman

2011-04-05T160723Z_1858491697_GM1E74600HJ01_RTRMADP_3_USA-BUDGET

House Budget Committee Chairman Paul Ryan (R-WI) speaks at a news conference held to unveil the House Republican budget blueprint in the Capitol in Washington April 5, 2011. The plan calls for sweeping changes to government health programs as it slashes taxes for corporations and individuals. 

REUTERS/Kevin Lamarque

Paul Ryan, the chairman of the House Budget Committee, sounds upset.

And you can see why: President Obama, to the great relief of progressives, has called his bluff.

Last week, Mr. Ryan unveiled his budget proposal, and the initial reaction of much of the punditocracy was best summed up (sarcastically) by the blogger John Cole: “The plan is bold! It is serious! It took courage! It re-frames the debate! The ball is in Obama’s court! Very wonky! It is a game-changer! Did I mention it is serious?”

Then people who actually understand budget numbers went to work, and it became clear that the proposal wasn’t serious at all. In fact, it was a sick joke. The only real things in it were savage cuts in aid to the needy and the uninsured, huge tax cuts for corporations and the rich, and Medicare privatization. All the alleged cost savings were pure fantasy.

On Wednesday, as I said, the president called Mr. Ryan’s bluff: after offering a spirited (and reassuring) defense of social insurance, he declared, “There’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. And I don’t think there’s anything courageous about asking for sacrifice from those who can least afford it and don’t have any clout on Capitol Hill.” Actually, the Ryan plan calls for $2.9 trillion in tax cuts, but who’s counting?

And then Mr. Obama laid out a budget plan that really is serious.

The president’s proposal isn’t perfect, by a long shot. My own view is that while the spending controls on Medicare he proposed are exactly the right way to go, he’s probably expecting too much payoff in the near term. And over the longer run, I believe that we’ll need modestly higher taxes on the middle class as well as the rich to pay for the kind of society we want. But the vision was right, and the numbers were far more credible than anything in the Ryan sales pitch.

And the hissy fit — I mean, criticism — the Obama plan provoked from Mr. Ryan was deeply revealing, as the man who proposes using budget deficits as an excuse to cut taxes on the rich accused the president of being “partisan.” Mr. Ryan also accused the president of being “dramatically inaccurate” — this from someone whose plan included a $200 billion error in its calculation of interest costs and appears to have made an even bigger error on Medicaid costs. He didn’t say what the inaccuracies were.

And now for something completely wonkish: Can we talk, briefly, about politicians talking about drugs?

For the contrast between Mr. Ryan last week and Mr. Obama on Wednesday wasn’t just about visions of society. There was also a difference in visions of how the world works. And nowhere was that clearer than in the issue of how Medicare should pay for drugs.

Mr. Obama declared, “We will cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency.”

Meanwhile, Mr. Ryan held up the existing Medicare drug benefit — a program run through private insurance companies, under legislation that specifically prohibits Medicare from using its bargaining power — as an example of the efficiencies that could be gained from privatizing the whole system.

Mr. Obama has it right. Medicare Part D has been less expensive than expected, at least so far, but that’s because overall prescription drug spending has fallen short of expectations, largely thanks to a dearth of new drugs and the growing use of generics. The right way to assess Part D is by comparing it with programs where the government is allowed to use its purchasing power. And such comparisons suggest that if there’s any magic in privatization, it’s the magical way it makes drug companies richer and taxpayers poorer. For example, the Department of Veterans Affairs pays about 40 percent less for drugs than the private plans in Part D.

Did I mention that Medicare Advantage, which closely resembles the privatized system that Republicans want to impose on all seniors, currently costs taxpayers 12 percent more per recipient than traditional Medicare?

But back to the president’s speech. His plan isn’t about to become law; neither is Mr. Ryan’s. And given the hysterical Republican reaction, it doesn’t look likely that we’ll see negotiations trying to narrow the difference. That’s a good thing because Mr. Obama’s plan already relies more on spending cuts than it should, and moving it significantly in the G.O.P.’s direction would produce something unworkable and unacceptable.

What happened over the past two weeks, then, was more about staking out positions than about enacting policies. On one side you had a combination of mean-spiritedness and fantasy; on the other you had a reaffirmation of American compassion and community, coupled with fairly realistic numbers. Which would you choose?

13-17

Wars Sending US into Ruin

February 11, 2010 by · Leave a Comment 

Obama the peace president is fighting battles his country cannot afford

By Eric Margolis, QMI Agency

2010-02-10T142132Z_01_BTRE61913W200_RTROPTP_3_NEWS-US-AFGHANISTAN-ASSAULT

U.S. Marines walk during a dust storm in a U.S Marines camp near the town of Marjah in Nad Ali district of Helmand province, February 8, 2010.    

REUTERS/Goran Tomasevic

U.S. President Barack Obama calls the $3.8-trillion US budget he just sent to Congress a major step in restoring America’s economic health.

In fact, it’s another potent fix given to a sick patient deeply addicted to the dangerous drug — debt.

More empires have fallen because of reckless finances than invasion. The latest example was the Soviet Union, which spent itself into ruin by buying tanks.

Washington’s deficit (the difference between spending and income from taxes) will reach a vertiginous $1.6 trillion US this year. The huge sum will be borrowed, mostly from China and Japan, to which the U.S. already owes $1.5 trillion. Debt service will cost $250 billion.

To spend $1 trillion, one would have had to start spending $1 million daily soon after Rome was founded and continue for 2,738 years until today.

Obama’s total military budget is nearly $1 trillion. This includes Pentagon spending of $880 billion. Add secret black programs (about $70 billion); military aid to foreign nations like Egypt, Israel and Pakistan; 225,000 military “contractors” (mercenaries and workers); and veterans’ costs. Add $75 billion (nearly four times Canada’s total defence budget) for 16 intelligence agencies with 200,000 employees.

The Afghanistan and Iraq wars ($1 trillion so far), will cost $200-250 billion more this year, including hidden and indirect expenses. Obama’s Afghan “surge” of 30,000 new troops will cost an additional $33 billion — more than Germany’s total defence budget.

No wonder U.S. defence stocks rose after Peace Laureate Obama’s “austerity” budget.

Military and intelligence spending relentlessly increase as unemployment heads over 10% and the economy bleeds red ink. America has become the Sick Man of the Western Hemisphere, an economic cripple like the defunct Ottoman Empire.

The Pentagon now accounts for half of total world military spending. Add America’s rich NATO allies and Japan, and the figure reaches 75%.

China and Russia combined spend only a paltry 10% of what the U.S. spends on defence.

There are 750 U.S. military bases in 50 nations and 255,000 service members stationed abroad, 116,000 in Europe, nearly 100,000 in Japan and South Korea.

Military spending gobbles up 19% of federal spending and at least 44% of tax revenues. During the Bush administration, the Iraq and Afghanistan wars — funded by borrowing — cost each American family more than $25,000.

Like Bush, Obama is paying for America’s wars through supplemental authorizations ­– putting them on the nation’s already maxed-out credit card. Future generations will be stuck with the bill.

This presidential and congressional jiggery-pokery is the height of public dishonesty.

America’s wars ought to be paid for through taxes, not bookkeeping fraud.

If U.S. taxpayers actually had to pay for the Afghan and Iraq wars, these conflicts would end in short order.

America needs a fair, honest war tax.

The U.S. clearly has reached the point of imperial overreach. Military spending and debt-servicing are cannibalizing the U.S. economy, the real basis of its world power. Besides the late U.S.S.R., the U.S. also increasingly resembles the dying British Empire in 1945, crushed by immense debts incurred to wage the Second World War, unable to continue financing or defending the imperium, yet still imbued with imperial pretensions.

It is increasingly clear the president is not in control of America’s runaway military juggernaut. Sixty years ago, the great President Dwight Eisenhower, whose portrait I keep by my desk, warned Americans to beware of the military-industrial complex. Six decades later, partisans of permanent war and world domination have joined Wall Street’s money lenders to put America into thrall.

Increasing numbers of Americans are rightly outraged and fearful of runaway deficits. Most do not understand their political leaders are also spending their nation into ruin through unnecessary foreign wars and a vainglorious attempt to control much of the globe — what neocons call “full spectrum dominance.”

If Obama really were serious about restoring America’s economic health, he would demand military spending be slashed, quickly end the Iraq and Afghan wars and break up the nation’s giant Frankenbanks.

12-7

California Dodges Bullet with Budget Deal–for Now

July 23, 2009 by · Leave a Comment 

By Peter Henderson and Jim Christie

SAN FRANCISCO (Reuters) – California’s state budget deal is a bet its economy, the world’s eighth-largest, will rebound — but that’s not likely to happen soon.

Governor Arnold Schwarzenegger and top lawmakers agreed Monday to close a $26 billion budget gap, largely with $15 billion in spending cuts, with many pushed into future years.

“They are waiting for the economy to bail them out,” said Chris Ryon, a fund manager at Thornburg Investment who sees “a lot of risk” for investors in California debt.

The budget deal would let the state start traditional borrowing again, although state officials were waiting for the legislature to pass the deal before saying when they will tap the debt market.

Meanwhile, the state is still paying its way with IOUs and must contend with the financial effects of double-digit unemployment and foreclosures dominating its housing market.

“Unemployment, unfortunately, probably hasn’t peaked yet,” said Nuveen Investments fund manager Paul Brennan, who views the budget as a bet that better times are around the corner.

California’s revenues rely heavily on personal income taxes and tend to swing strongly. Google Inc’s initial public offering helped fuel a bumper year for taxes, so if the state economy recovers, revenue could grow quickly.

But economist Steve Levy says California’s economy likely will remain weak for some time and the state government’s main problem will persist — that its citizens and government can not agree on the level of public services to provide.

“We are a state in gridlock, in disagreement,” said Levy, director of the Center for the Continuing Study of the California Economy.

Lawsuits Ready

Around the state, uncertainty greeted the budget agreement. Its details were sparse while rank-and-file lawmakers reviewed the deal for potential votes in the state Assembly and Senate by Thursday.

But opposition formed quickly to some of the plan’s proposals, such as taking roughly $4 billion from cities and counties for state needs. The Los Angeles County Board of Supervisors, for instance, voted Tuesday to sue the state to stop proposed cuts to the county’s share of the state highway tax and community redevelopment funds.

The California State Association of Counties said it would mull a lawsuit as well and San Jose Mayor Chuck Reed told Reuters that his city, the 10th-largest in the nation, also is “committed to participating in a lawsuit” to keep the state from grabbing its money.

“They are probably in violation of the (state) Constitution in taking our redevelopment funds, in violation of the law in taking our highway users tax,” Reed said.

In addition to concerns about losing money to the state, county officials fear losing state aid for health and human service programs they must provide.

“Make no mistake, under this budget scenario counties cannot uniformly ensure the delivery of critical health, public safety and other vital local services,” said Paul McIntosh, executive director of the California State Association of Counties.

To Buy or Not

Once a budget is signed, state finance officials will decide on the kind of short-term debt the state will need to sell to raise money for cash-flow purposes.

Until then, plans for selling either revenue anticipation notes or revenue anticipation warrants are on hold, said State Treasurer Bill Lockyer.

Nevertheless, the budget deal came just in time, Lockyer told Reuters, and he sees lawmakers endorsing it. “Most of them understand we’re getting real close to the edge of the cliff here and we’d better wrap it up quickly.”

Standard & Poor’s analyst Gabriel Petek said the deal averted a certain downgrade next month by his rating agency, which has the state’s general obligation debt at A and CreditWatch with negative implications. “That was the trajectory it was on,” Petek said.

Investment analysts were split over the budget agreement and whether to buy California’s existing or new debt.

Dick Larkin, director of credit rating analysis at Herbert J. Sims Co Inc, said he suspects the agreement will end up deferring hard decisions about the state’s finances and a budget deficit will reemerge. “This is a pretty crappy budget to try to make the case to borrow billions of dollars over the next three months,” Larkin said.

Tom Tarabicos, a financial adviser at Wells Fargo Financial Advisors, said the deal failed to sway him from his dim view of California’s finances and their effect on the state’s bonds.

“This appears to me to be just a short-term reprieve,” Tarabicos said. “We’re going to maintain our distance.”

By contrast, Ken Naehu, head of fixed income at Bel Air Investment Advisors in Los Angeles, said the agreement should end speculation over whether California would not make payments on its debt service to bondholders.

Naehu said debt service payments were never in doubt as they are the state’s No. 2 payment priority as required by law and because the state’s revenues, albeit weak compared with a year earlier, were strong enough to support them.

“Why in the world would you cut your arm off and not make debt service payment when it’s such a small part of the budget?” Naehu said.

11-31