A lot of Americans have the feeling that those who have and supply big money to candidates, office holders, lobby groups, think tanks, and media have bought politics. That it is they who are determining the agendas that office holders act upon and even the specific decisions they make in passing laws and rendering executive and even judicial decisions. This short post won’t debate the extent to which big money has perverted democratic processes in the United States. Instead it will offer a simple, perhaps an oversimple, solution to the problem that will really work. Here it is.
|By: letsgetitdone Friday February 21, 2014 2:28 pm|
How do we restore the good name of government spending, which is especially important during periods of high unemployment and slow growth like these? First, by supporting those politicians who are unafraid to make the case. Second, by demanding that the reluctant ones take a bolder stand – without mixing their messages between spending and premature austerity. Third, by rejecting the insanity that today’s Republican Party represents. Some in the GOP are even opposing infrastructure spending – as America’s bridges, schools, highways and dams decay around us.
Underwhelming, right? Why? First, because there aren’t too many politicians who are unafraid to make the case. Second, because people who are reluctant aren’t likely to respond to only “demands” from people who fiercely desire more government spending. Third, because merely rejecting Republican insanity is very unlikely to cut it, since that is what Democrats have been doing and it seems to be having little or no effect. And fourth, because the only way to restore faith in Government spending is to take actions that have consequences that are highly visible and unambiguously good for the vast majority of people. In other words, those who want to restore faith in Government spending have to get the Government to take actions delivering things for people that they see as important. So, how can this be done?
At this juncture, little can be done that involves the Congress because Republicans and Democratic corporatists won’t let it happen. They won’t legislate anything useful before the election.
Nor will they legislate anything useful after it unless 1) Democrats get a majority in both Houses and 2) Democrats who constitute those majorities are willing to move away from corporatism and legislate in the interests of people. So, if something can be done in this area, it must be done by the President. There are four very important things he can do before the elections of 2014 that would help to restore some faith in Government and, as a by-product, at least tentative trust in the possibility that renewed Government deficit spending may help people.
1. The President can re-institute the rule of law in the area of national security and secrecy by ending mass surveillance of the US population immediately, ceasing all investigations and attempts at prosecutions of journalists who have been trying to tell the public about the overreach of our intelligence agencies, beginning investigations and prosecutions of intelligence operatives who have broken existing laws in gathering intelligence, ending current prosecutions of whistle blowers, and issuing pardons for those who already have been tried, convicted, and jailed.
2. The President can re-institute the rule of law in the area of FIRE sector control and mortgage frauds by beginning investigations and prosecutions of high level executives at too big to fail FIRE sector organizations who have committed fraud including those that caused the financial collapse of 2008, which, in turn, led to the Great Recession and the destruction of so much middle class wealth.
These first two initiatives are supremely important because they will deliver a very visible presidential message that the Government is re-instituting honest government and a single system of law, which, in turn, will give people some reason to believe that renewed spending by the Government will be carried out honestly for the benefit of people, and not for the benefit of FIRE, health care, energy and other elite corporations. Giving people this is an essential step in restoring faith in additional spending, since from their point of view, it looks like the financial power of Government has been used to save big corporations and Wall Street and see to it that they prosper, while leaving working people and home owners to twist slowly in the economic winds of “the long depression” (Eskow’s memorable phrase). How can they believe that renewed spending will help them if they believe that the Government promising good results from new spending is a corrupt government, in the pocket of the 1% or perhaps even the 0.001%?
3. The President can next do something that is very essential to developing widespread support for renewing spending, because it will make plain that the US Government has and always will have whatever amount of funds it will take to create full employment and to finally end the long depression. The President has to remove the perceived problem of the national debt from the consciousness of the public by paying off a large proportion of it WITHOUT running economy-destroying surpluses. There’s only one way that can be done by the President acting alone right now, in time to affect the campaign environment in the 2014 election by eliminating the debt as an issue backing continued austerity propaganda.
That way is to cause the US Mint to create and deposit a platinum coin with a face value high enough to repay the debt subject to the limit entirely as it falls due, and to cover deficit spending for a long period of time thereafter. If the President does that, and sees to it (as he has the power to do) that the Mint’s account, and ultimately the Treasury’s spending account are credited with reserves equal to the value of the seigniorage resulting from the Mint’s deposit at the Fed; and also, if he follows that up by immediately paying off a large percentage of the debt, then everyone will know that the seigniorage is being used to get rid of the debt quickly.
When people know this they will know two other things. One, that the Treasury is easily paying off the debt, and two, that it has and always can easily create whatever funds it needs to follow through on its promises to end the long depression without either cutting spending or raising taxes. This will be a revelation to people which the President and the Democratic Party must drive home.
4. The White House and the Democratic Party must then run a campaign advocating a list of programs people will immediately view as likely to solve their economic problems. These must promise full employment recovery within a year using full payroll tax cuts and a Job Guarantee program at a living wage with good fringe benefits, strengthening social security and other trust fund programs by guaranteeing their annual spending regardless of the size of their trust fund balances, and by greatly increasing the size of safety net benefits and the protections they afford in case of inflation, truly universal and comprehensive health care using enhanced Medicare for All, revenue sharing for states on a proportional basis by population, fixing US infrastructure over 5 years, fixing the Housing crisis with various specific measures redressing the injustices done to homeowners by the big banks since 2007, fixing the student loan crisis with a “debt jubilee” and a grant program covering post-secondary education, and, lastly, dealing with environmental, climate change, and sustainability issues with a massive 5 year transition away from fossils fuels and nuclear and to renewable energy.
Democrats must then meet the cynicism and ridicule greeting these campaign promises by guaranteeing that if people give them a victory, then they will get rid of the Senate filibuster and other impediments to rapid action, and will legislate their program within the two year period of the next Congress without fail. These guarantees must be backed with a further promise not to run for re-election if they break any of their promises. Only then will some of the cynicism greeting their promises be dispelled.
Finally, these Democratic promises will surely be met with a campaign emphasizing the bogeyman of hyperinflation. Democratic promises will be estimated in a primitive way totaling up what will they cost over the two year period. The assumption will be made that they won’t be countered by automatic stabilizers producing increasing fiscal drag as the US approaches full recovery.
Democrats will have to respond with their own projections estimating that drag. It will come from gradual and automatic re-imposition of payroll tax cuts calibrated to kick in gradually as unemployment decreases, and gradual shrinking in Government spending on the Job Guarantee (JG) program as the private sector responds to increased demand by hiring people from the JG rolls.
In addition, it will come from increasing private sector savings and increasing trade deficits as recovery moves forward. It will also come from the White House working with Congress to phase in some of the programs I’ve mentioned gradually and in response to increasing fiscal drag.
The bottom line is that if the Democrats are successful in winning the Congress in 2014, and in legislating these programs, then faith in Government will be restored. But, there will be a fly in the ointment, as there is always is in life. The debates over fiscal policy will shift to debates about the likelihood of inflation, and managing the economy to avoid inflation at full employment will become a prime concern. We will have traded increasing government illegitimacy, chronic unemployment, stagnation, and “long depression” problems for renewed faith in government, full employment, prosperity, and inflation concerns.
That’s a great trade-off for all of us, I think. And I will take it anytime over the current neoliberal evolution toward a feudal/fascistic order.
(Cross-posted from New Economic Perspectives.)
Photo by l’ennui d’ennui, used under Creative Commons license
|By: letsgetitdone Wednesday February 19, 2014 9:54 pm|
On Valentine’s Day, Senator Bernie Sanders sent a letter to the President, authored by himself and signed by 15 other Senators, all Democrats. The letter was a response to the rumors that the President intends to include his Chained CPI proposal to cut Social Security benefits in the budget he will soon send to Congress. It summarized:
Mr. President: These are tough times for our country. With the middle class struggling and more people living in poverty than ever before, we urge you not to propose cuts in your budget to Social Security, Medicare, and Medicaid benefits which would make life even more difficult for some of the most vulnerable people in America.
We look forward to working with you in support of the needs of the elderly, the children, the sick and the poor – and all working Americans.
The letter also stated a number of the usual talking points made in arguments against cuts to Social Security. In addition, it also contained praise for the President for his actions in improving the economy, creating jobs, and reducing the deficit, and it mentioned some specifics, including reduction of the Federal deficit to less that half of the $1.4 Trillion deficit he began with. The letter also asserted the need to do much more, especially in the areas of the economy, reducing unemployment and wealth and income inequality, and reducing the deficit “. . . in a fair way.”
It is a positive development that a group of Senators decided to preempt the President’s budget offering stating their disagreement with any proposed cuts to SS, Medicare, and Medicaid, but I think there were a number of ways in which the letter could have been done more effectively. First, It would be great if progressives urging the President not to cut the safety net would stop reinforcing the frame that lower deficits are good and that the President is due praise for cutting the deficit so sharply (CBP projects a 3.0% of GDP deficit this fiscal year). It is not good that he has cut the deficit so much, because in doing so, he has subtracted from Federal Government additions of Net Financial Assets (NFAs) to the economy. These contributions are projected to be so low this year that they will only compensate for the demand leakage due to the trade deficit, leaving no additional NFAs for net aggregate private sector savings.
Given the presence of unequal economic power to collect financial assets in the hands of economic elites, the implication of this is that the lower deficits will only further exacerbate inequality in the United States as well as contribute to continued high and long-term unemployment and stagnation (low growth) in the economy. In short, the austerians, including the President and other Democrats and Republicans who have been insisting on lower deficits are responsible fr the stagnation we see all around us.
Second, the letter would also have been more effective, if it had more than 15 signatures on it. Many Democratic Senators are running for re-election this year. Do they really want to be running as one of the faces of a party whose head is advocating for cuts to Social Security? Is this really good for Kay Hagan, Jeanne Shaheen, Mary Landrieu, Mark Pryor, Mark Warner, Cory Booker, Tom Udall, Mark Udall, Chris Coons, and John Walsh? So why haven’t they signed the letter? Do they really expect to re-elected if they decide to support a budget that contains chained CPI, and, even if they don’t support it, will they benefit if their party leader is proposing chained CPI? So why wasn’t Bernie Sanders able to get these additional signatures from Democrats who face challenges and are running this year?
And third, this letter would have been much, much stronger if the Senators who signed it said to the President directly that they know that there is no short or long-term debt problem and hence no further need to worry about cutting the deficit to achieve fiscal sustainability or ficsal responsibility. And that they also know that any debts that the Treasury has incurred in the past, or deficits that it incurs in the future, can be either paid off as they fall due, or covered completely by revenues from High Value Platinum Coin Seigniorage (HVPCS) used under the authority provided by legislation on denominations, specifications, and design of coins, passed in 1996. (Full details and issues surrounding HVPCS are given in my e-book.) They also should have added that since there is never any need based on the idea that “we’re running out of money,” to cut any safety net programs, that they want the President to know that everyone signing the letter is committed to voting to kill any budget offered by the President including the chained CPI, or any other provision cutting safety net programs.
A letter enhanced in the three ways I’ve just outlined would have been a damn sight more effective in warning Obama off the chained CPI, than the one Bernie Sanders and the other 15 Senators sent. And it also would have been much more effective in getting those Democratic Senators who signed it and are running, elected in November.
Cross-posted from New Economic Perspectives.)
|By: letsgetitdone Thursday February 13, 2014 8:35 pm|
Paul Krugman can’t explain why the deficit issue has suddenly dropped off the agenda. He says:
. . . quite suddenly the whole thing has dropped off the agenda.
You could say that this reflects the dwindling of the deficit — but that’s old news; anyone doing the math saw this coming quite a while ago. Or you could mention the failure of the often-predicted financial crisis to arrive — but after so many years of being wrong, why should a few months more have caused the deficit scolds to disappear in a puff of smoke?
Why indeed are they so quiet? Could it be because the deficit hawks have succeeded in getting the short-term result they want, which is a likely deficit too small to sustain the private savings and import desires of most Americans, and also because the political climate is such right now that they cannot make progress on their longer term entitlement-cutting program until after the coming elections have resolved the issue of whether there will be strong resistance to such a campaign if they renew it? Let’s look at the budget outlook first.
Here’s CBO projecting deficits of 3.0% of GDP this fiscal year, followed by 2.6%, 2.8%, and 2.9% for fiscals 2015, 2016, and 2017. Those deficits are mostly smaller than Warren Buffett’s and the Eurozone’s favorite deficit target of 3.0%. They are the same too small deficit targets that have prevented the Eurozone’s PIIGS from responding effectively to the crash of 2008, and the prolonged depression and astronomical unemployment rates which have engulfed them since. When one considers that CBO’s projections are usually too conservative when it comes to projected deficits, so that the reality of these is likely to be smaller, as it has been regularly, for the past few years, then it’s even more apparent that Peter G. Peterson and his other austerian friends have gotten where they want to go for the time being.
Nor are there any other major influences in Washington, DC advocating higher deficits. Even “progressive” groups and politicians always talk about “pay fors” and offer 10 year deficit reduction plans that envision deficits averaging far less than the 3% target.
So, the deficit hawks have already gotten to their short – term goal. Their long – term goal of hollowing out the social safety net has met with increasing resistance over the past four years. And the resistance is strong enough that the Democrats have no stomach for bipartisan compromises cutting Medicare or Social Security for the present.
The deficit/debt hawks now need a breather. They needed to go into wait-and-see mode to see what the elections of 2014 produce.
If they produce the right mix of tea partiers, and Republican and Democratic debt hawks. They may be able to produce a new “Grand Bargain” early in 2015 before 2016 election pressures become intense, and the influence of Hillary Clinton’s candidacy on Democrats in Congress becomes too great. I say this not because I think that Clinton will necessarily oppose any such bargain in the long term; but because such a bargain would be risky for her candidacy and the Democrats in the run-up to the elections of 2016.
So, from my viewpoint I don’t think the time is propitious for the deficit/debt hawk forces to keep pressuring for entitlement reforms and a long-term solution to their favorite, and non-existent, financial problem of excessive public debts in fiat sovereign nations like the United States. And I think they know that.
Instead, it is a good time for them to regroup and plan their next attack on entitlements. That will come under cover of the Republicans’ next debt ceiling attack, which is a good possibility for March of 2015.
So, I see the Peterson forces beginning to beat the drums again towards the end of the year and build up the intensity of their appeals from January to March. I don’t see a strong move to cut entitlement spending in the lame duck session, since there will be no debt ceiling cover then to generate leverage heavy enough to get Democrats to accept part of the blame for cutting entitlements.
Cross-posted from New Economic Perspectives.
|By: letsgetitdone Tuesday February 11, 2014 8:34 pm|
Today, John Boehner bowed to the inevitable logic of the impending political season and placed a “clean” debt ceiling increase bill on the floor of the House. At this writing, the bill passed with 28 Republican and 193 Democratic votes. Now it moves on to the Senate, where it is expected to pass in time to allow the Treasury to keep issuing debt instruments.
So, now we have had agreement on a budget partially rolling back the sequester, and the Republican leadership appears to have decided not to have another debt ceiling crisis. I wrote a post called “What Happens Now?” just after the Government shutdown ended last October. There I analyzed the political situation and made a number of predictions about the short-term future. Here’s how I answered the question: “Growth and Jobs or Shutdowns and Debt Ceiling Crises?”
|By: letsgetitdone Thursday January 30, 2014 7:03 pm|
Lately, the word out of Washington, DC from the plugged in people is that there will be no debt ceiling crisis coming up before the election. Politico says so, and so does the National Journal. MSNBC also agrees.
But not so fast, says the Washington Post, echoing the Wall Street Journal provided the House Republicans can agree on “. . . an extortion demand.” If they can, then we wll have another debt ceiling crisis.
Here’s a statement from Dave Johnson at the Center for the American Future (CAF) characterizing the possible crisis from a “progressive” point of view.
“Republicans voted for a budget that caved in to many of their economy-sabotaging, hostage-ransom austerity demands. Now the “debt ceiling” has to be raised in February so the government can pay for that budget that Republicans voted for. Republicans are saying no way without a new ransom. Or they’ll blow up the economy. Even hinting at this is economic sabotage.
This is a false statement. The false part of it is the flat unqualified claim that the debt limit must “. . . be raised in February so the Government can pay for that budget the Republicans voted for.”
By now it’s common knowledge that the President can order the Treasury to mint platinum coins with very high face values to fill the Treasury’s spending account with seigniorage. It’s also somewhat less well-known that the Treasury can use consols, a type of security whose principal never needs to be paid back by the Government to generate revenue violating the debt limit. There are other probably less effective options the President might use to avoid breaching the debt ceiling too. Seven options are evaluated in this series and one or more of these options are proposed in many other places and have been discussed for a few years now. There’s no excuse for Dave Johnson not to know about these alternatives. Yet he’s characterizing the crisis falsely, unless we think he can show that none of these other options can work, and certainly he didn’t even attempt to do that in his post, and has never considered them anywhere else.
Johnson goes on:
Treasury Secretary Jack Lew has announced that Congress must increase the debt ceiling by late February. Extreme measures that the Treasury takes to put off the need to sell some bonds to pay bills (authorized by Congress) will be used up and the country will no longer be able to honor its obligations.”
And this is another, at least misleading, statement, since there are other “extreme measures” left for the Treasury to use, including the previously mentioned platinum coin seigniorage and consols. Treasury has not used these measures, but an analysis of the situation that ignores them and leaves the impression that ALL “extreme measures” will shortly be used up is at best incomplete; at worst, misleading; and also lets the Administration off the hook when they do have alternatives to either letting the Republicans push the Government into default; or giving in to or compromising with them on their demands.
Over my last few posts, I’ve focused on “progressives” mis-characterizing fiscal issues rather than on Republicans or conservatives doing so. Why is this important? Because the only chance for change that helps the 99% is for people who care about them to get the education right and tell them the truth. I don’t know if Washington villagers aren’t doing that because they’re ignorant, or bought, or are afraid they’ll look silly if they tell the truth, or are just trying to put forward short statements about issues that they think must inevitably oversimplify the landscape of thought about issues. But whatever the motivation is for their very filtered communication, its systematic nature, with all the denizens of DC, with the exception of Chris Hayes avoiding certain subjects since the President declared them “off the table”, even at the cost of factual errors in their statements, is unacceptable because it damages democracy by unduly limiting the frames and alternatives that they “broadcast” to people; damaging their ability to learn and to make their own personal choices about what they will think.
It’s one thing for conservatives to do this, because they believe in Plato’s noble lie anyway. But for progressives it’s simply a travesty and must stop now. Bloggers at CAF must know by now that there are such things as platinum coins and consols and governments that, even without further debt issuance, cannot run out of money unless they deliberately choose to do so. To believe otherwise is to believe that they live under a rock. They need to begin recognizing these possibilities in their writing, because the progressives they are writing for need to go beyond taxing, borrowing, and spending, when they think about fiscal policy and our spending limits.
(Cross-posted from New Economic Perspectives.)
|By: letsgetitdone Sunday January 26, 2014 4:51 pm|
The New Populism, if it exists, and isn’t just a creation of Washington villagers wanting to give an attractive name to the new feint of the Administration toward the progressive base of the Democratic Party, can be a turning point for America’s domestic economy, but only if it can avoid certain tropes, shibboleths, and myths that people associated with it, such as Bernie Sanders, and various other supposedly “left” members of the Democratic Party in Congress seem to delight in reinforcing. Again, Robert Borosage’s little piece on “The New Populism” provides more examples of such tropes:
Much of this debate has been framed around the faltering recovery, as the Congress perversely punted on the opportunity to rebuild America when we could borrow money for virtually nothing, with construction workers idle and eager to work. But in the end, this is a question of making the public investments we need, and paying for it by ending the tax dodges and tax breaks that enable the rich and the multinationals to avoid paying their fair share of taxes. The Congressional Progressive Caucus budget shows what is possible, while still bringing our long-term debt under control.
Well, Congress did that, and the Treasury certainly could have borrowed “money for virtually nothing,” and spent it on infrastructure and the public commons while creating many millions of new jobs and cutting greatly into our massive unemployment problem. However, why should Borosage and others writing about the new populism assume that such deficit spending has to be accompanied by borrowing money?
|By: letsgetitdone Saturday January 25, 2014 11:12 am|
Let’s look again at the new populism through the lens provided by Robert Borosage in his recent attempt to tell us what it is about. He says:
The apostles of the new inequality have unrelenting sought to starve the public sector. President Reagan opened the offensive against domestic investments. Perhaps the hinge moment was in the final years of the Clinton administration when the budget went into surplus, and Clinton, the finest public educator of his time, pushed for paying down the national debt rather than making the case for public investment. He left the field open for George W. Bush to give the projected surpluses away in tax cuts skewed to the top end.
The hinge moment wasn’t then. It was when he decided, either early in his first term, or even before he took office, to rely on deficit reduction coupled with low interest rates from Alan Greenspan, on the advice of Robert Rubin and Larry Summers, rather than on deficit spending on human capital investments as advocated by Robert Eisner and Robert Reich. Rubin’s victory in the internal debates within the Administration was well-known at the time (1993), and set the deficit reduction course that played along with the Fed’s bubbles to create the private sector debt-fueled “goldilocks” prosperity, and surpluses of his second term. By the time Clinton faced the choice Borosage refers to, the die had already been cast. It was very unlikely that Clinton would turn away from further Government austerity policy, and turn instead toward investments in infrastructure, public facilities and “human capital.”