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The Fiscal Summit Counter-Narrative: Part Two, Defining Fiscal Sustainability

2:44 pm in Uncategorized by letsgetitdone

(Cross-posted from Correntewire.com)

'Reject Fear: Austerity Stops Here' sign at a protest.

Austerity / Household Tax protest. Photo by William Murphy.

One of the most irritating things about the deficit hawk/austerity literature, is that it uses the ideas of “fiscal sustainability” and “fiscal responsibility” in an ideological way, without ever really analyzing or explaining these labels. It’s almost as if the austerians know that if they clearly and directly stated what they meant by these terms, and how their meanings were actually related to the ideas of “sustainability” and “responsibility”, then flaws in their whole ideological and policy framework would be very clear to everyone else.

Of course, if you read any of the austerian literature you soon learn that they think fiscal sustainability and responsibility both relate to the impact of government spending on the federal deficit, the public debt subject to the limit, and the debt-to-GDP ratio, and to no other impacts of fiscal policy.” But the austerians never really explain why these three numbers are relevant for fiscal sustainability and responsibility. Instead, they take the relationship as obvious to all, and start evaluating fiscal policies on the basis of past and projected deficit, debt, and debt-to-GDP ratios. Invariably, regardless of the nation in which you find them, they end up advocating for lower taxes for the wealthy, less regulation for corporations, and sacrifices of Government programs and the social safety net; all this based on the ideas of fiscal sustainability and fiscal responsibility that they’ve never even explained to an incurious and uncritical media, but very bought media, or to the public.

Because of the very great importance of the fiscal sustainability/fiscal responsibility/fiscal crisis/solvency rhetoric, the first session of the Fiscal Sustainability Teach-In Counter-Conference covered the topic “What Is Fiscal Sustainability?” and the primary speaker was Professor Bill Mitchell of the University of Newcastle. Audios, videos, presentation slides, and transcripts for the presentation are available at selise’s site and a slightly different version of the transcripts is available from Corrente as well.

Bill Mitchell’s Presentation on Fiscal Sustainability

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The Fiscal Summit Counter-Narrative: Part One

8:58 pm in Uncategorized by letsgetitdone

(Cross-posted from Correntewire.com)

Well, it’s Springtime in DC. Time for the Peter G. Peterson Foundation’s annual event. The Fiscal Summit, to be held on May 15, better named the Fiscal Cesspool of distortions, half-truths and lies, is a propaganda extravaganza designed to maintain and strengthen the Washington and national elite consensuses on the existence of a debt crisis, the long-term ravages of entitlement spending on America’s fiscal well-being, and the need for long-term deficit reductions plans to combat this truly phantom menace. The purpose of maintaining that consensus is to keep an impenetrable screen of fantasy intact in order to justify policies of economic austerity. that have been impoverishing people and transferring financial and real wealth to the globalizing elite comprised of the 1% or far less of the population, depending on which nation one is talking about.

Austerity Road Sign

Photo by 401K

 

The 2010 Fiscal Summit

The first “Fiscal Summit” was held in Washington, DC on April 28, 2010. It was lavishly funded by the Peter G. Peterson Foundation, and included many “big names” associated with “fiscal sustainability” and “fiscal responsibility,” including Bill Clinton, who appeared along with personalities from Peterson’s stable of deficit hawks such as David Walker, Alice Rivlin. Robert Rubin, Alan Simpson, Erskine Bowles, and Paul Ryan. Its purpose was to spread the deficit hawk message of Peter G. Peterson, including various myths of the world-wide austerity movement:

The 2011 Fiscal Summit

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The Procrustean Democracy of AmericaSpeaks: Part Seven (Conclusion)

11:49 pm in Uncategorized by letsgetitdone

In my last post, I continued my analysis of the June 26th AmericaSpeaks Community Conversation event I attended in Falls Church, VA, focusing on Step Five in the decision process used in the meeting. In that post I presented the specific option choice frameworks AmericaSpeaks presented to participants in the categories of Non-Defense and Defense spending, and revenue raising, and also analyzed the biases inherent in the way they were structured. In this post, I’ll wind up this analysis of the AmericaSpeaks event, the materials provided to participants, and the biases in their process as I saw them.

Remaining Step 5 Process

For the deficit reduction workbook options exercise, the community conversation group split into two groups. One much smaller group of perhaps 25% of the attendees, listened to the web-streamed introduction to the exercise. They then, filled out their worksheets selecting options and left perhaps 15 minutes to a half hour before the rest of us. Since they weren’t included in the larger discussion, I cannot report on the views of the individuals in this group at all. Most of the other participants, including my daughter and I, gathered around a very large table with one of the two facilitators, and without much introduction, got right to the task of making our choices of options for reducing expenditures and raising revenues. After we made our choices, the facilitator asked us to report them, and moved around the table receiving reports form everyone. Once again, I tried to introduce the option of ceasing to issue debt and saving nearly all of the projected interest costs by 2025. This option wasn’t recorded in any notes, nor was it presented to the group for serious discussion. One woman talked about wanting to cut defense spending by much more than the 15% allowed in the worksheet and also talked about much more progressive taxation than represented in the options work sheet. She claimed she could save much more than the target amount of $1.2 Trillion, but as far as I could see her proposals were not noted for reporting to AmericaSpeaks either.

Two people in the group were very aggressive in both their spending cuts and their revenue raising. They believed that deficits must be stopped and that the Government’s budget, like any household budget, must be balanced. The lack of discussion prevented them from hearing any criticisms of the idea that the Government is like a household. Most people in the group however, seemed to concentrate their savings on having FICA extended to 90% of earnings. Four or five people favored raising the age for full Social Security eligibility to 69, and some favored raising FICA rates to 14.4% by 2025. A majority were for cutting Defense Spending by 10%, and also for cutting Medicare and Medicaid by 5% by 2025. Two or three were for tax reform and saving as much as $642 Billion that way, a small minority of the group. New taxes were somewhat popular, but not the Value-Added Tax (VAT) which had only one or two supporters. In contrast, a securities transaction tax had majority support, and a carbon tax had appreciable table support, but seemed short of 50% of the people at the table. In all, the majority of people around the table favored a broad combination of cuts and taxes to raise revenues, but the average view seemed quite a bit short of the 1.2 Trillion target and clustered at around $900 Billion. This number has to be viewed as a loose estimate, because I was not in as good a position as the facilitators to get a clear figure of total savings from everyone in the panel. I did have the impression however, that there was not a lot of enthusiasm for Social Security and Medicare cuts, but that people would grudgingly select these options if they believed in the idea that there really was a deficit crisis.

The process leading to the many judgments made by participants about options and the above results was, in my community conversation, remarkably devoid of discussion. Once our facilitator, very briefly, introduced the exercise, we made our judgments and then reported on them to the group. There was hardly any discussion of what people reported. Everyone gave reasons for some of their judgments, but there wasn’t time to discuss them, since the big table had about 18 -19 people, and there was only about an hour for the whole options workbook activity, and everyone had to report on their choices and reasons during that time.

When the reporting period was over, the facilitator provided a narrative of what the participants, taken as a whole, thought about spending cuts and revenue measures. But there was no time for discussion of this narrative either.

This part of the process brought us to 3 PM and it was nearly time to adjourn the meeting. The facilitators then ended the meeting with step 6, which, once again, is:

Conduct End of Day Survey and close the meeting.

In our case, this survey was very truncated compared to the exercises outlined in the worksheets, another casualty of the abbreviated process. It became a request for the participants to record the most important message they wanted to send to AmericaSpeaks. There were diverse messages expressed. To the extent there was a common message, a number of people expressed the view that they thought it was important that those who were most responsible for creating the economic disaster resulting in our economic mess, should be the ones to pay for it, and there was support for taxes that would recoup money lost to bailing out the banks and the financial industry. Finally, the facilitators thanked everyone for participating and called the end of the meeting. Then people took another 15 minutes to discuss the activities among themselves, to socialize a bit and to help the primary facilitator clean up the room we were using, and carry her materials outside the building.

The List of Biases

In my analysis of the various steps in the AmericaSpeaks process, along with the materials they used to direct and guide participants through the process, I focused on the various places where bias could be found and on identifying these biases. Altogether, I found 32 instances of bias distributed across every major step in the event process. I think it’s important that all of the biases I found be available in one place. So I’ve listed and summarized them below. For a full description of the biases see the previous posts in this series.

1. The very selection of the problem, along with the characterization that we face a deficit crisis, indicates a bias. The US is in the midst of its most severe recession since the Great Depression, and a recession that we were far from out of on the date of the meeting. It’s clear that “the deficit problem” has been imposed by AmericaSpeaks, and was not selected as the problem that most merited examination based on a national poll.

2. The group attending the meeting was biased demographically, and also was characterized by disproportionate representation of professionals and highly educated participants. In addition, the meeting was truncated to 3.5 hours, leaving no time to question the problem frame of the meeting and reduce its bias toward deficit reduction.

3. An opening discussion questioning the problem frame of the meeting and the facilitator’s reaction to it, showed that the facilitator intended to drive the group according to the pre-planned agenda and orientation to provide information that would be structured in the way that AmericaSpeaks wanted. Not only was the topic pre-selected to fit the preferences of AmericaSpeaks, but participants in the event would not be allowed to revise it in any serious way to fit their needs, and they would also be run through an agenda of exercises, designed to produce results within a certain range, and in a compressed time.

4. A biased event narrative was created focused on the deficit crisis as a very serious problem demanding action to avoid fiscal disaster in the long term, along with a failure to consider alternative views that there is no crisis at all, or that deficits don’t matter at all in nations having non-convertible currencies owing no debts in foreign currencies, because they have no solvency risk. This bias was reinforced by a slick Federal Budget 101 booklet and web streamed introductions and speeches.

5. AmericaSpeaks used an extension of CBO projections of the fiscal and economic future without questioning, or developing, alternatives to these that better reflect historical growth rates in the United States, and without considering that economic projections like CBO’s even a few years out, and certainly 15 – 35 years out, are frequently subject to massive errors. The bias towards CBO-based projections is a big factor in supporting the case that there is a deficit problem. Alternative projections, depending on assumed growth rates might well project surpluses, rather than severe deficits, debts, and debt-to-GDP ratios. In focusing on CBO-based projections alone, AmericaSpeaks is telling people only one fairy tale, the one, among a very large number, that will scare the pants off them.

6. AmericaSpeaks commits to the view that growth in the national debt, if not controlled, risks that one day ”lenders” (the bond market) will be unwilling to lend US Dollars to the United States, or failing that would require higher interest rates from the Government. This ignores the alternative view that 1) the US doesn’t have to borrow money in the bond market and 2) the US can structure its debt issuance so that interest rates can be driven down to zero. The bias is not a matter of its accepting the bond market risk view and presenting it to participants, but its failure to present the alternative suggesting that there’s no solvency or sustainability problem, and also that there’s no interest problem, since interest costs could be going down to near zero very soon, if the Government chooses not to issue debt after spending.

7. There’s also bias in making the assumption that the national debt is the sum of deficits and surpluses since the founding of the country. This equates debts and total deficits, and conflates Government spending with Government debt issuance. They’re not the same, so total deficits may not equal total debts. If the Government stops issuing debt, but keeps on deficit spending, total debts and total deficits will vary greatly. Neglecting to inform participants of this possibility biased the decision process since participants were led to accept the AmericaSpeaks view that spending must be accompanied by debt, which, of course, probably led them to suggest cuts in Government spending, they otherwise would have not have suggested.

8. The constant emphasis on the desirability of balancing the budget, if possible, and achieving surpluses is another instance of bias. In the absence of inflation, surpluses are bad, not good, for the American Economy. The historical record shows that they always precede serious recessions or even depressions. By not considering the view that surpluses may be bad for the economy, and not educating the participants about this view, and by also constantly driving home the message that surpluses are good and deficits, while they may be necessary during recessions, are somehow negative and less than moral, AmericaSpeaks introduced still more bias into the the Town Meetings and Community Conversations. The ratings made by people in the various meetings might have been very different, if they had been informed about the historical correlation between surpluses and recessions or depressions.

9. Presenting rising health care costs as just due to the aging of the American population, with the implication being that we ought to control these costs by cutting Medicare and Medicaid is another instance of biasing the process. What about considering other factors in rising health care costs over time? How much are rising costs due to health insurance company behavior and provider behavior? Both insurance costs and provider costs are far lower in other wealthy nations than they are in the United States. So why didn’t AmericaSpeaks discuss these factors and their role in rising costs? Is it because they’re trying to suggest solutions that ask working Americans to sacrifice, but not insurance companies or providers?

10. AmericaSpeaks tells us that the corporate bailouts were one-time events and will have no impact on future deficits. But clearly this view neglects the cumulative political effects of the bailouts. The bailouts have created a moral hazard and an expectation that the Government will bail out companies that are “too big to fail.” Why isn’t this recognized as a cumulative effect? Was this an attempt by AmericaSpeaks to persuade people that corporate bailouts aren’t so bad because, according to AmericaSpeaks, they have little to do with long-term fiscal problems, and, consequently, participants should not select workbook options that increased corporate taxes too much?

11. The assumption that we can’t grow our way out of the deficit crisis, assuming also that there is a crisis, is an indicator of bias because it wasn’t accompanied by presenting the possibility of a return to growth patterns of earlier decades, which would produce much more tax revenue and either end high deficits, or cut into them deeply enough that “the problem” could be solved with savings in interest costs produced from new debt issuance policies. Did AmericaSpeaks push the “we can’t grow our way out of it” view on participants because of its bias against the possibility than restoring very active Government intervention in the economy could raise growth rates enough to eliminate or partly eliminate the perceived deficit problem?

12. There’s more bias in the framing of a pre-survey suggesting that deficits could only be cut by raising taxes or cutting spending. Neither increasing economic growth and reaching full employment, nor ceasing to issue debt after Government spending, were included among the six propositions provided in the pre-survey.

13. In a question about sources of deficits, failing to mention continuing to issue debt instruments following Government spending, continuing foreign wars, and recurring recessions or depressions, is another instance of bias. And, in asking that question the way they did, implying that corporate bailouts don’t create a moral hazard that can increase deficits in the future, is yet another.

14. Asking people to “share your greatest hope for the future of the country that your children, grandchildren and future generations will inherit,” without making clear that the idea that our children will have to pay down the national debt is a highly controversial statement which many economists think is not true.

15. Asking a question to get people to think about projecting the future in the context of their feelings about the present, without asking them to exchange views about why they felt one way or another about the recovery and its importance relative to deficit spending, and whether there is a deficit spending problem or not, is another instance of clear bias in framing the decision process.

16. Asking the question: ”What are the core values that should guide decisions about our country’s fiscal future?” and then structuring the reply by imposing three value dichotomies imposing a conservative values framing in order to maintain the bias in the proceedings toward deficit reduction and self-sacrifice, is another very obvious way of directing the process to create the desired outcome.

17. The failure of AmericaSpeaks to include growth-oriented policies in the options workbook, such as a full employment-oriented Federal Job Guarantee (FJG) policy option, due to denial of the possibility that the US could possibly grow its way out of its deficits, reinforces the framing that deficit reduction is necessary.

18. AmericaSpeaks’s selection of the year 2025 as the target year for deficit reductions realizing $1.2 Trillion in Federal budgetary savings when projections of conditions 15 years out are known to be entirely unreliable suggest bias in design of the process. And failure to provide several equally likely alternative projections embodying other than the pessimistic growth scenario based on extension of CBO projections through 2020, confirms that bias.

19. Perhaps the most important aspect of bias in the AmericaSpeaks options workbook and ensuing discussion, and in the whole design of the decision process, was excluding the topic of whether an activity aimed at choosing revenue raising or spending cut options for the purpose of reducing the deficit is a legitimate exercise at all. In not asking this question, AmericaSpeaks implicitly takes a policy position. It is saying that an important aspect of Government activity must always be to manage the deficit, the national debt, and the debt-to-GDP ratio and that this is the meaning of fiscal sustainability and fiscal responsibility.

There is a counter to that policy position. It is that for a government that is sovereign in its own non-convertible fiat currency, in the sense that it has the constitutional authority to issue an unlimited amount of it without the need for any commodity backing and also that it has no external debt in foreign currencies, there is no solvency risk from the simple fact of Government expenditures. And also no Governmental Budgetary Constraints (GBCs) that are not self-imposed — beyond constraints that arise from the effects of Government Spending such as employment levels, economic growth, price stability, environmental and climatological outcomes, national security outcomes, education outcomes, etc. The deficit, national debt, and debt-to-GDP ratio are not important in themselves, and should not viewed as policy concerns or policy targets. They are not indicators of anything that ought to be managed, or constrained, or otherwise influenced. They are a distraction from the real issues, the real outcomes of Government spending such as those listed above.

This policy position was not considered in the supposedly neutral, non-partisan, and unbiased decision process run by AmericaSpeaks. Had it been, the option conversation wouldn’t have been about options for reducing the deficit in 2025. Instead it would have been about options for creating a new economy by 2025, and options for creating greater equality of opportunity in American society, or options about creating a new energy foundation for our economy. In other words, it would have been an entirely different conversation.

20. Participants are constrained by the options workbook from considering options relating to either premium support or single-payer approaches to health care reform. In particular, the single payer approach is the most important one, since there is much survey evidence suggesting that 2/3 of the population prefers Medicare for All to any other approach. The excuse given for this is that America doesn’t seem ready to support fundamental reform including single-payer. However, the exercise asks the participants to suggest options that would save $1.2 Trillion by 2025. So what is politically feasible right now in 2010 isn’t really relevant to this task. The mood of the nation could easily change by 2011, 2012, or by 2014, and certainly by 2020, in ample time to save substantial Federal expenditures on Health Care through single-payer. By constraining participants from considering single-payer options, AmericaSpeaks hews to the orientation of the President’s Fiscal Commission and their narrow and false notion of fiscal responsibility.

21. Due to very limited information provided about the impact of health spending cut options, participants are largely flying blind in selecting options, and when they are further constrained by the workbook about selecting other options whose consequences they may understand much better, the exercise in selecting options departs even farther from either objectivity or reasonableness.

22. A major assumption underlying the workbook structure is the view that Government can only pay its Social Security obligations by bringing in more revenue, reducing benefits, or borrowing more, and adding to the debt, and these are the only ways for Social Security to avoid insolvency, so that’s why hard choices have to be made by the participants in the workbook exercise and by the US Government itself. The only problem with this argument is that Government doesn’t have to either raise more revenue, or reduce benefits, or borrow to pay its Social Security obligations. It can just spend, and even though this will increase the deficit, it won’t increase the national debt, unless it insists on continuing its practice of issuing debt after it spends money. However, this alternative view of how Government can spend was never presented to the participants in the community conversations or the meetings in 19 cities. So no one had an alternative view of how to meet Social Security obligations other than by raising revenue through taxation, cutting spending, or borrowing. As a result they entered the process of selecting options relevant to the future of Social Security with a limited and biased perspective.

23. The option, “create personal savings accounts within the system,” was included among the revenue options relating to Social Security. According to the scorecard distributed at all the meetings, the potential deficit reduction attached to this proposal by 2025 is negative $61 Billion. That is, it adds to the deficit, a very clear indication of bias in the decision process. Peter G. Peterson whose foundation is a major supporter of AmericaSpeaks has advocated privatization of Social Security for many years. What can this option be except a concession to a funder’s pet notions, and a concession that is totally inconsistent with the avowed purpose of cutting deficits in this exercise?

24. Together the Social Security options in the workbook add up to a projected total of $92 Billion in savings by 2025. Considering that the projection of GDP for that year is $27.3 Trillion, the savings are less than 0.3 of one percent of GDP, and only 1.3% of the projected Federal Budget for that year. The question is: why bother? Why get people angry for such a small saving, especially since the Government has no solvency risk in continuing to pay all benefits at the present level forever? Surely, including Social Security in this scorecard is nothing but an ideological bias of right-wing funders who have always been against that program.

25. A conservative bias is also visible in the option calling for raising the limit on taxable earnings to 90% of all such earnings. On its face that seems like a concession to progressivism, but there are two glaring questions about this. First, why are any taxable earnings exempt from FICA taxes? If the deficit problems are so serious, then why have any exemptions? And secondly, why not make FICA contributions progressive? If we’re really so much in need of revenue because Social Security is becoming insolvent then why shouldn’t everyone pay their fair share according to their income as in progressive taxation? I’m not so much advocating these options as asking why they’re not among those considered. They’re obvious options, and the decision to exclude them suggests ideological bias in the process.

26. The option to increase spending across all Non-Defense categories, and to do so on a detailed scorecard was not provided to participants. It was assumed that the task was to cut spending in Other Non-Defense areas. The counter assumption that much heavier spending is needed in these areas was not represented. Why not? Republicans and Blue Dog Democrats have been starving non-defense Federal programs since the days of Jimmy Carter to pay for tax cuts and, more recently, expensive wars, so these programs have been short-changed in every category, and there is also a need for new programs, not even conceived here.

27. There’s a not so subtle bias against the sub-categories within the Non-Defense category, relative to the other major categories, because it’s assumed for example that Health Care, Social Security, and Defense, are important enough to get their own category, while, for example, Energy, the Administration of Justice, and Education are not.

28. The options workbook presents a choice framework that is far too narrow to accommodate the possibilities inherent in reality. It has the kind of conservative bias we saw in economic projections prior to 2008 which could not envision the existence of a housing bubble and the possibility of a crash of the global economy. The thinking underlying the AmericaSpeaks options framework, which it imposed on participants is completely devoid of Black Swan considerations, and hedges to guard against Black Swans. To take account of these in Defense Spending, their framework had to be much broader and participants had to be allowed a much greater range of choices with respect to the defense budget and both increases and deeper cuts had to be allowed.

29. The way AmericaSpeaks channels its bias into the options decision process is through its selection, or lack of selection of options for decision, and also through its wording of options. Here, the most obvious bias is in the exclusion of options for decreasing taxes. This would not necessarily lead to declining revenue, because in the past it has often led to the opposite result. In addition, however, the assumption being made is clearly that the Government needs to collect revenue from citizens in order to fund its spending, and that the more revenue it collects the more it will reduce both the size of the deficit and the growth in the national debt. I’ve already pointed out that deficit increases are not the same as debt increases, and that they need not be accompanied by debt issuance. Also, however, the US Government has no need to collect revenue from its citizens to fund its spending, since the Government can just spend and in the process create money. So, participants in the AmericaSpeaks process should not have had their choices framed as either raising taxes or making no changes. They also should have been given options about how they might have cut taxes if they preferred to do that.

30. Why aren’t there options for creating new tax brackets? Setting the top two brackets at $209,250 and $373,650, is a vast concession to wealthy people, which is way, way, outdated given the recent size of incomes we’ve seen produced in various industries. Specifically, why aren’t $500K, $1,000,00, $2,500,000, $5,000,000, and $10,000,000 and over tax brackets, with marginal tax rates set at 45%, 50%, 55%, 60%, and 65% respectively, specified as options for people to select? Also, why were the options for raising personal income taxes phrased as percent increases from present levels? Was it because a 20% increase over present taxes sounds like a much larger increase than an increase from 35% to 42% in marginal tax rate? Earlier when talking about increases in the payroll tax rate, the increase was expressed as 12.4% to 14.4% and not as 16% increase. Was AmericaSpeaks trying to make the proposed income tax rate rise seem large and the Social Security tax rise seem small?

31. The option selection seems arbitrary and biased toward reducing marginal tax rates, something more well-off people would dearly love to do. Also, what is the basis for selecting VAT, Carbon, and Securities Transaction taxes for the new tax category? Why not other taxes? Why a 0.5% tax on securities transactions? Why not a 1.0% tax, or even a 1.5% tax? Is it because larger tax rates would place too much of a burden on well-off traders like Peter G. Peterson?

32. Since the treatment of options in my community conversation was limited to an hour and roughly 18 people were involved, there was no time for any meaningful discussion of the views of participants. Since any criticisms of the structure or introduction of new options was dependent on this discussion, its brief duration biased the process against introducing new options, or even making people think very deeply about their own choices of options. This bias in the process is certainly reflected in a bias in the results, which were constrained by the choices in the workbook and scorecard-like worksheet

Conclusions

Let’s recall what AmericaSpeaks claims about itself and its orientation to its processes and events.

AmericaSpeaks takes pride in its reputation as an honest and neutral advocate for public participation. We play a unique role in the policymaking process by serving as a non-partisan convener of forums that provide the public with an opportunity to make decisions about important issues without fear of manipulation or bias. Our ability to help citizens and elected officials come together around tough public issues is dependent on our commitment to maintaining this neutral role. . . .

AmericaSpeaks does not take positions on policy issues. AmericaSpeaks strives to ensure that only balanced and neutral facts are used to inform discussions on policy issues. We stand by these basic principles that protect the integrity of our process and the faith that participants and decision-makers place in our work.”

AmericaSpeaks raises the issues of its honesty and neutrality in advocacy, its use of “balanced and neutral facts,” and “the integrity of our process.” My attempt to analyze its biases in this series is an attempt to evaluate these claims.

I think the list of biases shows that AmericaSpeaks was neither neutral nor honest in the design of its process for its “Our Budget, Our Economy” event. With one exception, which itself reflected ideological bias, it seems that whenever AmericaSpeaks had a choice about how to introduce a segment of the event, to create a video, to structure a set of options, to construct an instrument, or to facilitate a discussion, it chose to do so in such a way that the process would be constrained and and the participants directed toward making choices to either cut Government spending, or raise taxes. In addition, a very important area for possible deficit cutting, namely interest costs, was completely left out of account by AmericaSpeaks, and within each area, options for choice that would have been uncomfortable for certain interests including one of its prominent funders, simply never appeared. The list of biases covers nearly every part of the AmericaSpeaks process; there was no part of the process that was free of bias. There was no part of the process that was neutral and honest.

In addition, AmericaSpeaks, rather than using “balanced and neutral” facts, in fact used very few facts, and instead relied on projections about a future it developed from CBO projections that are both, based on past performance, subject to the likelihood of severe errors, and also very biased in a pessimistic direction when it comes to projecting economic growth and tax revenues, and therefore likely deficits or surpluses. AmericaSpeaks’s projections are little better than a gloomy fairy tale, that will never have any chance of coming true unless the United States makes the mistake of implementing the austerity programs that the funders and allies of AmericaSpeaks favor.

AmericaSpeaks and its allies are bent on creating a self-fulfilling prophecy of slow growth, austerity, and unmanageable deficits of their own making, and they’re not using “balanced and neutral facts” as their way of making that happen. We’ve been seeing over the past decade that organizations claiming to be “fair and balanced” in the stories they tell, are often exactly the opposite. And like Fox News, AmericaSpeaks, is doing exactly the opposite of what it claims to be doing.

It doesn’t have a neutral and honest process, and opinion generating instruments, and it doesn’t provide “balanced and neutral facts” to its participants. Instead, it designed and implemented the “Our Budget, Our Economy” event to so all it could to elicit results that would support the case for deficit reduction. The event was not a process of free democratic interaction, but a procrustean bed that tried to compress participants into a deficit terrorist mold and manipulate them into regurgitating deficit terrorist talking points.

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

The Procrustean Democracy of AmericaSpeaks: Part Six

9:55 pm in Uncategorized by letsgetitdone

In Part 5, I continued my analysis of the June 26th AmericaSpeaks Community Conversation event I attended in Falls Church, VA, focusing on Step Five in the decision process used in the meeting. In that post the specific option choice frameworks AmericaSpeaks presented to participants in the categories of Health Care and Social Security spending, and analyzed the biases inherent in the way they were structured. Here once again is a statement describing step 5.

Working through the Options Workbook and arriving at decisions about what cuts in Federal Expenditures or tax increase to make in order to cut the projected Federal Budget. Reporting to the group about the choices made by each participants and something of the reasoning behind these choices. Summing up by facilitator highlighting the most popular choices of options for reducing the deficit.

Other Non-defense; and Defense Spending are the two remaining categories of Government spending presented to participants in the community conversation and national meeting processes. In the Other Non-defense spending category, AmericaSpeaks provided a very short summary description of 14 categories of spending and the projected amounts to be spent on them in 2025, including: Administration of Justice ($71 B); Agriculture ($ 20 B); Commerce and Housing Credit ($6 Billion); Community and Regional Development ($21 B); Education, Training, Employment, and Social Services ($159 B); Energy ($3 B); General Government ($39 B); General Science, Space, Technology ($42 B); Health (other than Medicare and Medicaid) ($44 B); Income Security ($552 B); International Affairs ($68 B); Natural Resources and Environment ($37 B); Transportation ($117B); and Veteran’s Benefits and Services ($180 B).

”The following options include reductions in spending of 5%, 10%, or 15% or no reductions at all. For each of the first three options, you could assume either across-the-board cuts (e.g. every program is cut by the same percentage) or that cuts will fall primarily on a smaller number of programs. If the latter, spending on other programs could either stay the same or even increase (though, of course, by smaller amounts than the overall cut). By targeting the reductions, policymakers could preserve funding for higher-priority programs. But they also would have to choose more carefully where to spend fewer dollars and look for ways to meet their goals more efficiently. The deeper the cuts (5%, 10%, or 15%), the more likely that policymakers would have to eliminate some lower priority programs altogether.”

There are two very salient aspects of this set-up for the options exercise. First, only the most cursory summary description was given for each of the 14 areas, so it was very hard for a participant to be able to evaluate the value of each of these 14 areas. That is, the exercise is calling for cuts in programs that the participants know very little about in terms of their impact on people, so how can they rationally decide among the four choices provided? Moreover, no choice is provided for people who want to increase spending across all non-defense categories. Why not? My own reaction to the projected 2025 budget figures was that Other Non-Defense spending ought to be increased over the projections. It’s not that I had any clear picture of the details of programs in any of the areas. But I know that Republicans and Blue Dog Democrats have been starving non-defense Federal programs since the days of Jimmy Carter to either avoid deficits, or pay for tax cuts and, more recently, expensive wars, so I’m sure that these programs have been short-changed in every category, and that there is also a need for new programs, not even conceived here. For example, our infrastructure has been deteriorating for many years, and now we have a backlog of renewal work that will cost $2.4 Trillion to accomplish. Where is that in the projections? I didn’t see where it would fit. In the area of energy, the spending projections given were pitifully small. In Education they were also much too small. Regulatory expenses are sadly in need of expansion for obvious reasons. The natural resources and climate budget is far too small. Even the Administration of Justice is ridiculously small in my view. I don’t know how many other participants felt the way I do, but I do know that the option to increase expenditures, and to do so on a detailed scorecard was not provided to participants. And therein lies one type of bias in the exercise and the workbook. It was assumed that the task was to cut spending in Other Non-Defense areas. The counter assumption that much heavier spending is needed in these areas was not represented.

In addition, the scorecard allowed only gross judgments about cutting or remaining at the same spending level across all programs in the Other Non-Defense category, and there was nothing else in the workbook or scorecard that allowed a participant to evaluate the priority of the public purposes represented by each of the areas, both absolutely and relative to each other. Also, there was no way presented to allow participants to provide judgments about the relative importance of each of the major categories of expenditures. The scaling methodology in this part of the decision process was totally inadequate for measuring relative or absolute priorities, even though that kind of scaling methodology is well-known.

Also, there’s a not so subtle bias against the sub-categories within the Non-Defense category, relative to the other major categories, because it’s assumed for example that Health Care, Social Security, and Defense, are important enough to get their own category, while, for example, Energy, the Administration of Justice, and Education are not.

Moving to Defense Spending, the workbook again provides very little guidance to participants about what choices to make about this category. Here is some historical context provided in the workbook.

”Defense spending has ebbed and flowed dramatically over the years, largely due to whether the nation was at war, where defense ranked as a national priority, and other factors. Over the last half-century, defense spending has fallen as a share of the budget more or less gradually from nearly 50% to today’s 19%. As a share of the economy, it has ranged from nearly 10% to 3% around the year 2000. Today, boosted by the wars in Afghanistan and Iraq, defense stands just below 5% of the economy, although it will fall in the coming years as those wars end.”

The workbook also makes very brief statements about an approach to defense based on a commitment to world leadership, and the opinion of some that we have gaps in our defense that need to be filled by spending the Administration is not planning, and others who think that substantial cuts can occur without affecting our war fighting capability or performance. These general statements pale in significance beside the above quote which suggests that the level of defense spending is subject to change without notice depending on 1) events over which we have little control, and 2) the general orientation we have toward leadership. Given the combination of the two, we can be drawn into very expensive war efforts unexpectedly, and find our projections for defense spending completely superceded by events, and our desire to respond to them as a world leader with special obligations should.

The question is: in such a context how can AmericaSpeaks possibly project that only 12% of the Federal Budget in 2025 would be devoted to Defense Spending? And how can participants in the options exercise make meaningful decisions about cuts in Defense Spending while having very little basis for imagining what the world will look like in 15 years, and what events may have occurred that will call for expensive military interventions? Moreover, AmericaSpeaks asked the participants to choose among 1) 5%, 2) 10%, 3) 15%, cuts in spending and 4) no change at all? But how can a person do that when events might require a 100% increase in Defense Spending, or more, by 2025, or even by 2016 or earlier, if current economic conditions grow still more serious and begin to spawn multiple militarily aggressive regimes? Still further, what if the US changes its overall orientation toward foreign policy, and decides to consider itself not as the leader, the sole superpower, but as the first among equals within a group of major powers, having overwhelming influence in their respective regions of the world, but having to deal with other over worldwide issues. Such a re-orientation might imply a far larger decrease in spending than envisioned in the choice framework presented by the workbook. Military spending could suddenly decrease by 50% within a few years, and could easily come in at 6% of the budget in 2025.

These admittedly speculative thoughts show once again that the options workbook presents a choice framework that is far too narrow to accommodate the possibilities inherent in reality. It has the kind of conservative bias we saw in economic projections prior to 2008 which could not envision the existence of a housing bubble and the possibility of a crash of the global economy. The thinking underlying the AmericaSpeaks options framework, which it imposed on participants is completely devoid of Black Swan considerations, and hedges to guard against Black Swans. To take account of these in Defense Spending, their framework had to be much broader and participants had to be allowed a much greater range of choices with respect to the defense budget and both increases and deeper cuts had to be allowed.

The options workbook dealt with options for raising revenue as well options for cutting spending. Here’s the overall framework of revenue raising options:

”There are at least four general approaches to raising revenues that are explored in the following pages. First, policymakers could raise rates on existing taxes. Second, they could eliminate or reduce many current deductions and credits. Third, they could eliminate enough deductions, credits, and exclusions to generate enough revenue not only to reduce the deficit, but also to lower income tax rates. Finally, they could establish new taxes.”

Within this framework, AmericaSpeaks lays out the following options. Raising taxes: 1) Raise personal income tax rates by 10% for everyone; 2) raise personal income tax rates by 20% for everyone; 3) raise personal income tax rates by 10% for taxpayers in the top two tax brackets; 4) raise personal income tax rates by 20% for taxpayers in the top two tax brackets; 5) Create an extra 5% tax for people earning more than one million dollars a year; 6) Raise the tax rate on capital gains and dividends; 7) raise the top corporate income tax rate to 40% from 35%; and 8) make no changes.

Reduce Deductions and Credits: 1) limit the value of itemized deductions to 28%; 2) convert the mortgage interest deduction into a credit; 3) limit the deduction for state and local income, real estate, and personal property taxes to 2% of a person’s adjusted gross income; 4) limit the corporate depreciation for equipment; 5) end the business deduction for producing goods in the United States; and 6) make no changes.

Tax reform eliminating enough deductions, exclusions and credits to both raise substantial revenues, and lower tax rates: 1) use 90% for lowering tax rates, and 10% for reducing the deficit; 2) use 80% for lowering tax rates and 20% for reducing the deficit; 3) use 70% for lowering tax rates and 30% for reducing the deficit; and 4) make no changes.

Establish new taxes: 1) Create a 5% Value Added Tax (VAT); 2) Create a Carbon Tax; 3) Create a Securities Transaction Tax; and 4) make no changes.

As we’ve seen previously, the way AmericaSpeaks channels its bias into the options decision process is through its selection, or lack of selection of options for decision, and also through its wording of options. Here, the most obvious bias is in the exclusion of options for decreasing taxes. This would not necessarily lead to declining revenue, because in the past it has often led to the opposite result. In addition, however, the assumption being made is clearly that the Government needs to collect revenue from citizens in order to fund its spending, and that the more revenue it collects the more it will reduce both the size of the deficit and the growth in the national debt. I’ve already pointed out in this series that deficits are not the same as debt increases, and that they need not be accompanied by debt issuance. Also, however, the US Government has no need to collect revenue from its citizens to fund its spending, since the Government can just spend and in the process create money. So, participants in the AmericaSpeaks process should not have had their choices framed as either raising taxes or making no changes. They also could have been given options about how they might have cut taxes if they preferred to do that. As it was, however, everyone who participated in the revenue raising exercise through taxation was given a lower bound of zero revenue, and was constrained from selecting tax cuts as better options for the economy. This is not just a theoretical possibility. Warren Mosler, independent candidate for The US Senate in CT, advocates a payroll tax holiday, along with other measures to quickly end the recession. That kind of choice was excluded from the options exercise, and if participants favored that kind of option it would have been very hard to integrate it into the proceedings

Even ignoring the selective presentation of options for only raising revenue or making no changes, the options are still restricted in scope. For example, take the raising taxes category, why aren’t there options for creating new tax brackets? Setting the top two brackets at $209,250 and $373,650, is a vast concession to wealthy people, which is way, way, outdated given the recent size of incomes we’ve seen produced in various industries. Specifically, why aren’t $500K, $1,000,00, $2,500,000, $5,000,000, and $10,000,000 and over tax brackets, with marginal tax rates set at 45%, 50%, 55%, 60%, and 65% respectively, specified as options for people to select? Also, why were the options for raising personal income taxes phrased as percent increases from present levels? Was it because a 20% increase over present taxes sounds like a much larger increase than an increase from 35% to 42% in marginal tax rate? Earlier when talking about increases in the payroll tax rate, the increase was expressed as 12.4% to 14.4% and not as 16% increase. Was AmericaSpeaks trying to make the proposed income tax rate rise seem large and the Social Security tax rise seem small?

Other seemingly arbitrary choices presented to the participants include the option to limit the value of itemized deductions to 28%, the option to limit the deduction for state and local taxes, real estate, and personal property taxes to 2% of a person’s adjusted gross income, and the options used under the category of tax reform. Why limit those to 10/90, 20/80, and 30/70 splits between raising revenue and lowering tax rates? Why not include 50/50 and 60/40, for example, or even 0/100, for matter. Of course, I’m holding out no brief for these alternatives, but just pointing out that the option selection seems arbitrary and biased toward reducing marginal tax rates, something more well-off people would dearly love to do. Also, what is the basis for selecting VAT, Carbon, and Securities Transaction taxes for the new tax category? Why not other taxes? Why a 0.5% tax on securities transactions? Why not a 1.0% tax, or even a 1.5% tax? Is it because larger tax rates would place too much of a burden on well-off traders like Peter G. Peterson?

I’ve nearly reached the end of my detailed analysis of workbook options and how I think they biased the decision process of AmericaSpeaks meetings and community conversations. But I think there is one more important point to make about bias and the probability of easy misinterpretation of the results from the workbook options process, and that is that participation in the process may not mean what AmericaSpeaks is likely to suggest it means. That is, AmericaSpeaks sees the process as one in which people are making choices with the intention of reducing the deficit, but some who participated in the process, such as myself, may have done so to express our preference for certain options that we wanted to see enacted because they created a greater measure of social justice, or because they accomplished other things, rather than because of any money they saved.

For example, I chose only one item in the Social Security category: “Raise the limit on taxable earnings so it covers 90% of total earnings in America.” I did that because I have always despised the regressivity in the FICA system, and I thought this would make FICA less regressive. I also selected the 30/70 Tax Code Reform option, not because I cared about saving the money, but because I wanted to create more progressivity in the tax system. I couldn’t make any choice about military spending, but if I had made a choice it would not have been because I wanted to save money. Finally, I tried to add an option to the process, namely ending most Federal debt issuance, resulting in projected interest savings of $1.4 Trillion in 2025. I didn’t advocate this to save money, however. I just didn’t want to make interest payments because I felt such payments contribute to income and wealth inequality in America and that we have far too much of that already.

I don’t know of course, how many other people participated in the process and made choices based on other intentions than a desire to cut the deficit. And I doubt that AmericaSpeaks knows that either. Had these people and myself been provided options for increasing spending and lowering taxes for the middle class, however, or if we could easily have added such options, we might well have selected those, and ended the process with no deficit reduction savings at all to report. This is very likely in my case, because my Modern Monetary Theory (MMT) approach to economics tells me that our deficits are, generally not large enough to offset the private sector’s desire to save, and that the result of that has been higher unemployment and underemployment than we need to have in the United States, for 40 years now.

So, I have no doubt that AmericaSpeaks will report the results of its meetings in terms of some large number of people who voted for deficit cutting options averaging so many dollars of projected savings in 2025. So, yet another aspect of bias in such a result is the truncation of options that wouldn’t allow people like myself to come up with results that reported negative savings and a desire to increase deficits.

That brings me to the end of today’s post. In Part Seven, I’ll briefly discuss step 6, the final one in the process, and then I’ll summarize this series and provide some conclusions about the supposedly neutral and unbiased process used by AmericaSpeaks

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

The Procrustean Democracy of AmericaSpeaks: Part Five

10:23 am in Uncategorized by letsgetitdone

In my last post I continued my analysis of the June 26th AmericaSpeaks Community Conversation event I attended in Falls Church, VA, focusing on Step Five in the decision process used in the meeting. In that post I was critical of the overall bias in the general orientation toward the options workbook and the choices to be made in the process. In this post I’ll continue with my examination of step five of this process, shifting my attention to the specific option choice frameworks and the bias inherent in the way they were structured by AmericaSpeaks. Here once again is a statement describing step 5.

Working through the Options Workbook and arriving at decisions about what cuts in Federal Expenditures or tax increase to make in order to cut the projected Federal Budget. Reporting to the group about the choices made by each participants and something of the reasoning behind these choices. Summing up by facilitator highlighting the most popular choices of options for reducing the deficit.

There were four categories of Government spending that organized the items in the options workbook: Health Care; Social Security; All Other Non-defense; and Defense Spending. The workbook provides an introductory discussion of each category giving the line of reasoning used to arrive at the options for cutting spending offered to participants in the options exercise.

In the health care category, AmericaSpeaks provided a summary of the background of the current situation of Federal expenditures, with brief descriptions of how Medicare and Medicaid work. The workbook goes on to describe rising health costs and opines that rising health care costs and the aging of the population will greatly increase Federal spending on health care from 5.1% of GDP, to 7.5% of GDP by 2025, and then says:

”Federal health care costs are closely tied to cost trends in the overall health system, so the key to controlling federal health care spending over the long term is to bring overall health care costs under control. The new health care reform law includes measures that could help move in the direction. In this exercise, however, we are not asking that you reopen or revise that law. Instead, we ask that you focus on how to reduce Medicare and Medicaid spending. Some of the options outlined below hold the promise of encouraging wider reforms across the health care system that could help to tame overall health spending. Others may reduce federal costs but increase private costs. . . .

”Generally, the nation could fundamentally change the health care system in at least three basic ways. Each of them could slow the growth of health care spending, but none of them is guaranteed to do so. First, we could replace the current system of employer-provided coverage and public programs with one known as premium support – in which the federal government gives Americans a certain amount of money each year to cover their health care costs, but allows them to choose their insurance coverage from carriers that meet minimum federal requirements. Second, we could replace the current system with one known as single payer – in which the federal government pays for health care in a similar fashion to which it currently runs Medicare. Third, we could maintain the current system but achieve savings through more regulation – relying on policymakers to achieve savings by regulating the system more heavily. . .

”At the moment, the nation does not seem prepared to consider fundamental reform of the kind suggested in the first two approaches above – premium support or single payer. As a result, the options outlined below would enable you to achieve savings through changes within the existing system.”

And right there is the bias in the set-up of the health care cost-cutting options. The participants are constrained by the workbook from considering options relating to either premium support or single-payer approaches to health care reform. In particular, the single payer approach is the most important one since there is much survey evidence suggesting that 2/3 of the population prefers Medicare for All to any other approach. The excuse given for this is that America doesn’t seem ready to support fundamental reform including single-payer. However, even assuming this is correct (and it seems much more likely that only Congress and the President are not ready for single-payer) the exercise asks the participants to suggest options that would save $1.2 Trillion by 2025. So what is politically feasible right now in 2010 isn’t really relevant to this task. The mood of the nation could easily change by 2011, 2012, or by 2014, and certainly by 2020, in ample time to save substantial Federal expenditures on Health Care through single-payer.

AmericaSpeaks rightly calls out rising costs in health care at a rate much greater than general inflation as a major problem, but it says nothing about the fact that rising costs are being driven by the private sector insurance companies and providers. Medicare for All would take the insurance companies out of the health insurance picture for basic and necessary health care services and would leave the Government in a position to see to it that costs do not exceed the rate of inflation. Just as importantly, a national Medicare program could regulate practices in health care to greatly increase both efficiency and effectiveness. Right now there is little incentive for providers to adopt “lean” process practices well-known in other industries to decrease the frequency of medical errors and the costs associated with those, since those costs are passed on to the insurance companies and consumers. But a Government program regulating medical practices and also keeping cost increases at the general rate of inflation would provide incentives for everyone in the Medical system to improve practices and reduce costs.

While all nations have had problems with increasing medical costs, since the 1960s cost increases in other nations with tightly regulated or single-payer systems have proceeded much more slowly than in our system. With the effect that the nation that spends the most on health care other than the United States spends only 2/3 of what we do for health care systems that are more effective than ours, as measured by the most important indicators of health care quality. Some performance rating systems put the United States down as low as 37th in the world in the effectiveness of our system and some of the top rated systems are spending only half as much as we are, measured as the % of GDP they spend on health care.

By the way, I’d be remiss here, if I didn’t mention that the AmericaSpeaks projection that Federal Health care expenditures will be 7.5% of GDP is dependent on their 2025 projection of GDP at roughly $27.3 Trillion. A projection that assumes more historically normal rates of growth for the economy in the next 15 years puts the projected GDP at $42.1 Trillion. Assuming, that the level of projected Federal health care spending remains at $2 Trillion, without any cuts in the amount projected, that figure would be about 4.8% of GDP or less than it is now. This suggests that the so-called emergency in rapidly rising Federal health care expenditures is due much more to GDP projections based on CBO models than it is the rising Federal health care costs themselves.

Moving back to the workbook and its framing biases, by constraining participants from considering single-payer options, AmericaSpeaks hews to the orientation of the President’s Fiscal Commission and their narrow and false notion of fiscal responsibility. In the short run, single-payer would increase our budget deficits, because it would probably increase Federal health care costs to as much as $1.8 Trillion annually from the present level of about $745 Billion. On the other hand, single payer would also increase FICA revenues by creating 2.4 million new jobs according to an econometric study conducted by the California Nurses Association.

Even in 2025, assuming general inflation is at 2% per year, Federal expenditures for Medicare for All would probably be at $2.5 Trillion. But that expense would be less than 10% of GDP in 2025 even using the pitiful GDP level projected by AmericaSpeaks for that year, and that will be nearly all of our health care expenses, whereas if we stick with the present system, as much as 25% of GDP could be consumed by both private and public health care expenditures, again assuming the AmericaSpeaks GDP projection in 2025. So, real fiscal responsibility here, lies in Government spending to create a health care system that will be more effective and will not eat up so much of our economic activity, not in figuring out how to cut Government health care expenditures, while doing very little to contain the rapidly accelerating increases in the cost of health driven by the financialization of the health care industry.

In any event, the approach to health care expenditures taken in the workbook and the community conversation I attended considered four options for Government cuts in health care spending: 1) cut by 5%; 2) cut by 10%, 3) cut by 15%, and 4) no change from what the cost would otherwise be in 2025. That cost was estimated at: $2 Trillion. How would the cost be cut, if at all? The workbook suggests this would happen by: a) raising the Medicare premium for higher income beneficiaries; b) raising deductibles, or coinsurance, or both for Medicare beneficiaries; c) increasing the Medicare eligibility age; d) replacing the Medicare program with a voucher for beneficiaries
to buy insurance; e) limiting eligibility for Medicaid; and f) using Federal block grants to states for Medicaid, rather than matching payments. This is a very limited framework within which to think about options and it provides no way for participants to evaluate the impact of any cuts they select on American society and public purposes. But this is characteristic of the workbook’s approach to all categories. AmericaSpeaks starts by assuming that deficit and debt statistics must be controlled, and it directs participants toward choosing particular options which it assumes will do that. But, it provides no way for participants to assess the real costs to Americans of the choices they are making about spending cuts, except for brief and very abstract arguments for or against costs in the workbook. So, participants are largely flying blind in selecting options, and when they are further constrained by the workbook about selecting other options whose consequences they may understand much better, the exercise in selecting options departs even farther from either objectivity or reasonableness.

The second expense category of the workbook is Social Security. The workbook provides a historical context for Social Security, and then claims that it has a problem of solvency. It puts the problem this way:

”The surpluses that Social Security has been generating over the past two decades have been invested in Special Issue Treasury Bonds. The bonds represent the debt that the United States owes to its citizens and which it must pay back, with interest, when the funds are needed to pay benefits. Although the bonds cannot be sold on the open market, they are backed by the full faith and credit of the United States, just like bonds sold to private investors.

”As the baby boom generation begins to retire, Social Security will need to redeem the bonds in order to pay benefits. Because the government is spending more than it brings in from revenue, policymakers will need to find the money by raising new revenue, reducing benefits, or borrowing more, which will add to the deficit. Ensuring the solvency of the system is the core challenge of Social Security reform.”

Of course, here is the bias of neo-liberal economic thought, once again. Government, it contends, can only pay its Social Security obligations by bringing in more revenue, reducing benefits, or borrowing more, and adding to the deficit, and these are the only ways for Social Security to avoid insolvency, so that’s why hard choices have to be made by the participants in the workbook exercise and by the US Government itself. The only problem with this argument is that Government doesn’t have to either raise more revenue, or reduce benefits, or borrow to pay it Social Security obligations. It can just spend. And even though this will increase the deficit, it won’t increase the national debt, unless the Government insists on continuing its current irrational practice of issuing debt after it spends money.

However, this alternative view of how Government can spend was never presented to the participants in the community conversations or the meetings in 19 cities. So no one had an alternative view of how to meet Social Security obligations other than by raising revenue through taxation, cutting spending, or borrowing. As a result they entered the process of selecting options relevant to the future of Social Security with a limited and biased perspective, which was very likely the intention of the designers of the process, or a measure of their lack of qualifications to carry it out in the first place.

Here are the options that were offered to the participants at the meetings: 1) for future beneficiaries, gradually raise the age for receiving full benefits to 69 by 2028; 2) for future beneficiaries, limit increases in starting benefits for all but the lowest earners; 3) For current beneficiaries, change the formula for raising benefits each year to reflect a lower measurement of inflation; 4) raise the 12.4% payroll tax gradually to 13.4% by 2025; 5) raise the 12.4% payroll tax gradually to 14.4% by 2025; 6) raise the limit on taxable earnings, so it covers 90% of total earnings in America; 7) create personal savings accounts within the system; and 8) make no changes. Now, the first thing that strikes one about these options is why option 7 is offered here at all. According to the scorecard distributed at all the meetings, the potential deficit reduction attached to this proposal by 2025 is negative $61 Billion. That is, it adds to the deficit. This is a relatively minor matter in the whole picture, but it is a very clear indication of bias in the decision process. Peter G. Peterson whose foundation is a major supporter of AmericaSpeaks has advocated privatization of Social Security for many years. What can this option be except a concession to a funder’s pet notions, and a concession that is totally inconsistent with the avowed purpose of cutting deficits.

The second striking thing about these options is that taken together they add up to a projected total of $92 Billion in savings by 2025. Considering that the projection of GDP for that year is $27.3 Trillion, the projected savings are less than 0.3 of one percent of GDP, and only 1.3% of the projected Federal Budget for that year. The question is: why bother? Why get people angry for such a small saving, especially since the Government has no solvency risk in continuing to pay all benefits at the present level forever? Surely, including Social Security in this scorecard is nothing but an ideological bias of right-wing funders who have always been against that program.

Third, that same bias is also visible in the option calling for raising the limit on taxable earnings to 90% of all such earnings. On its face that seems like a concession to progressivism, but there are two glaring questions about this. First, why are any taxable earnings exempt from FICA taxes? If the deficit problems are so serious, then why have any exemptions? And secondly, why not make FICA contributions progressive? If we’re really so much in need of revenue because Social Security is becoming insolvent then why shouldn’t everyone pay their fair share of taxes according to their income, just the way they pay taxes? I’m not so much advocating these options as asking why they’re not among those considered. They’re obvious options, and the decision to exclude them suggests ideological bias in the process.

This completes my discussion of workbook biases in the health care and Social Security categories. In my next blog I’ll cover the remaining workbook categories and also analyze the dynamics of the community conversation occurring around the workbook.

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

We Did It! Or At Least Got Through the First Stage!

12:42 pm in Uncategorized by letsgetitdone

A little more than three weeks ago on April 7, I posted an idea here, here, and here, calling for a Teach-In Counter-Conference on April 28th to oppose the message of austerity in social programs being formulated by the President’s National Commission on Fiscal Responsibility and Reform, and The Peter G. Peterson Foundation, by bringing forward an alternative message based on a coherent economic approach. That approach has acquired the name Modern Monetary Theory (MMT) over the years.

My call for the Teach-In Counter-Conference wasn’t answered by a formal organization, but by netroots bloggers who blog primarily at correntewire.com, and some of whom also cross-post at The Seminal at Firedog Lake. Lambertstrether, selise, BDBlue, DCBlogger, hipparchia, and I, worked together with no formal structure, each taking on what we had time for and thought we could accomplish. With lambertstrether as webmaster, we created a conference web site, gained the support of other netroots bloggers and local organizations in the DC area, generated a coherent set of Conference Topics reflecting various aspects of the MMT approach to fiscal sustainability, joined with a stellar group of MMT researchers, teachers, and consultant practitioners which ultimately gave us 6 wonderful speakers (Professors Bill Mitchell, L. Randall Wray, Stephanie Kelton, and Pavlina Tcherneva, and International Financial Consultants Warren Mosler and Marshall Auerback) for our day-long event, gained the sponsorship of The George Washington University’s Department of Management, through it acquired a great venue at The Marvin Center Amphitheater, raised about 60% of our budget from small progressive donors, designed the dynamics of the conference around a combined, lecture, panel and conference participant approach to interaction, attracted coverage from many bloggers before, during, and after the Conference, including an article at New Deal 2.0, and an article in The Huffington Post, (which has received 943 comments at this writing) by the Editor of New Deal 2.0, received press coverage of our event from therealnews.com and other news services, and, of course, held a wonderful satisfying conference loved by participants, panelists, and organizers alike, that accomplished exactly what we wanted it to in developing the alternate narrative we were looking for, and in providing us the material we need to produce conference artifacts we can use to spread the conference message and explode its impact over the coming weeks and months. We did this in three weeks time, by self-organizing each other into an informal team and then riding the waves of the netroots to create the momentum we needed to have this event.

Some have referred to this as a small miracle. But it wasn’t really that. It was just some determined individuals (the small group of organizers, joining with another group of potential speakers committed to MMT) who came together using the collaborative and signaling tools of the Internet to multiply their influence many times, over the short space of a few weeks, by tying into other already existing groups and individuals, making common cause with their interests, and receiving their help in mobilizing some of their supporters to generate the Teach-In. By organizing and generating the Conference in this way, we were able to create our counter-narrative with less than 1 % of the resources The Peterson Foundation is rumored to have spent on its "Fiscal Summit."

I think we can yet neutralize or defeat the Peterson austerity message, because not only do we have a message that is far closer to the truth than Peterson’s, but also, the Internet and the netroots can be the great equalizer; spreading our memes from the bottom up, until our message of hope gets through the smoke and fog spread by the mainstream media, and the Peterson and Administration PR minions, and creates a new public perception that Government can spend in the service of public purposes. And that when it spends in this way, it can help create full employment, achieve Medicare for All, re-create our economy’s energy foundation, reconstruct our failed educational system, sustain our environment, increase our fiscal capacity and sustainability, and do all of this while avoiding inflation, too.

But whether we can do this or not, now hangs on the success of the next stage of our effort. Some members of the organizing group are working very hard now to get Conference artifacts to the Internet quickly and with them the narrative of the Counter-Conference. Not only will there be many blogs by ourselves and others. But there are already presentations, coupled with audio recordings of each session of the Teach-In on selise’s blog. There will also be video and youtubes of various portions of the event. And there will be materials and models in the videos, and other artifacts for others to embrace and to carry forward in local Teach-Ins and Counter-Conferences. All this will be open to the netroots community, so that any blogger may join in a real dialogue on fiscal sustainability embracing both the Internet and face-to-face meetings – a dialogue that will reverberate across the internet; and, if we do things right, overwhelm with the strength of numbers, the Administration’s effort to manage public debate so that the American people come to believe that the only alternative to collapse is austerity and suffering for working people.

I think the effort to spread our alternative narrative will never end. And it is a message that I, personally, will never cease to deliver. Ironically, this Administration’s message is: no we can’t have full employment; no we can’t have Medicare for All; no we can’t have a good public education for everybody; no we can’t remake our energy foundation; no we can’t do anything about global warming; and no we can’t have bright futures, because solving our problems costs too much and we are running out of money.

Before our eyes, Mr. yes, we can, has morphed into Mr. no we can’t. But we say in answer to Mr. no we can’t: yes we can do all of these things. And an important first step in doing them is to cast off the blinders from our eyes, and to see the economy as it really is; a web of interacting self-organizing people whose fiat currency is issued by their Government. The value of this currency is based on the wealth, industriousness, and underlying productive capacity of the nation. So, any fiscal policy that destroys that wealth, industriousness, and productive capacity is not a fiscally responsible or fiscally sustainable policy, but instead is one of true waste and irresponsibility, another sham to transfer wealth upwards. What the Administration and Peterson are proposing is that kind of economic policy. It is about wasting lives, and about placing artificial constraints on economic activity. It is about dimming our collective and individual futures and making us a nation of sick, weak people without hope.

The yes we can President has deliberately disillusioned us with his increasingly depressive policies in the expectation that those who elected him on the wings of hope would turn their anger at him inward, follow him obediently into the posture of no we can’t, and accept the few crumbs he and the elite he has joined so easily are willing to hand out. Accepting the ideology of deficit hawkism and the false economics that underlies it is another step along the road to disillusionment and passivity. But recognizing the facts of monetary operations that the MMT practitioners offer us is a way back to hope. It is the message we need to get to work again, to create again, to live in hope again, and to have the futures we all envision. It is the message of yes, we can, which itself is a message that was true, as MMT shows us. It is a message that we must not let Mr. no we can’t, in our disappointment with him, take away from us. “Yes we can,” was never his. It was always ours. It is still ours. Embrace it, and with it embrace MMT and the real meaning of fiscal sustainability.

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

A Quick Bulletin

10:39 pm in Uncategorized by letsgetitdone

The Fiscal Sustainability Teach-In Counter-Conference happened at The George Washington University’s Marvin Center on Wednesday. It was held in the amphitheater at The Marvin Center and was sponsored and given strong support by the University’s Department of Management and the wonderful Marvin Center Staff. Blogs on the Teach-In Counter-Conference have already appeared here, here, here, here, here, here, here, here, here, and here, and others will be coming very soon covering different aspects of the event. Also, audio, video, presentation, and other web artifacts will be forthcoming over the coming days.

We want to begin to get these to you as quickly as we can, so that the answer to the Administration/Peterson Foundation message will be widely available. So, selise, a blogger on the fs.org team who contributed mightily to the success of the Conference, has kindly posted the first of these on her netrootsmass.net blog. Later, they will also be available at fiscalsustainability.org, when our web master and blogger, Lambert returns from live blogging the Teach-In.

(Cross-posted at All Life Is Problem Solving and correntewire.com).

What Is Fiscal Sustainability?

12:36 pm in Uncategorized by letsgetitdone

When people introduce a new meme into politics, their standard operating procedure is often to just start talking about some label, say that it’s a problem, make various dire predictions, and then keep writing more and more screeds to try to get everyone else to think that it’s a problem. The meme or label used in campaigns like this is value loaded in some way, and the label often has little to do with what the writer is talking about, because the label is rarely explicitly defined and journalists, pundits, or commentators think it’s very pedantic and academic to start talking about definitions. Pretty soon after a process like this gets going, there’s very little connection between a label and what is being talked about under that label. So it is with fiscal sustainability.

In the past few months there’s been a lot of talk about “fiscal sustainability,” and also an assumption that we all know what this means. It refers, of course, to: the annual Federal Deficit (the gap between Federal Spending and Federal Tax Revenues), the public National Debt (the accumulated inflation adjusted sum of deficits and surpluses since the inception of the Republic), and the debt held by the public to GDP ratio. People who write about this then, see things this way: continuing and growing deficits are a sign that fiscal sustainability is going down; continuing and growing increases in the national debt are a sign that fiscal sustainability is going down; and an increasing debt-to -GDP ratio is a sign that fiscal sustainability is going down.

But what is Fiscal Sustainability? Is it really about deficits, national debts, and debt-to-GDP ratios? Well, that depends on what we mean, or at least ought to mean by that phrase. In another post, I pointed out that:

Fiscal situation” ought to be taken to refer to Government spending and its impact on the economy as a whole, including the private sector and the international environment. Why? Because isn’t our interest in the value, both positive and negative, produced by Government spending, and isn’t the public purpose of Government to do the best it can to produce positive value and to both minimize certain negative consequences and completely avoid those consequences that are entirely unacceptable?”

And then I defined “fiscal sustainability” this way:

”Fiscal sustainability” is the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes.”

This definition can be consistent with worries about deficits, debts, and debt-to-GDP ratios; but only if the Government’s ability to spend is operationally limited by its ability to tax or to borrow. If it could not tax or could not borrow any additional money to use to increase spending to accomplish its public purposes, then it would be true that any short-term increase in spending that outran its ability to gather revenues over time would be "fiscally unsustainable."

On the other hand, however, if a Government’s ability to spend isn’t dependent on its ability to borrow or tax, then these debt-related indicators of fiscal sustainability aren’t valid any more, because they no longer measure it. We then need new measures. So, in the United States today, is the Government’s ability to spend dependent on its ability to tax or to borrow? If not, what is it dependent upon? If not, is the Peterson Foundation and the Administration making much ado about nothing? Are they focused on a non-problem, a distraction? Are they preparing legislation to cut Social Security and Medicare, entitlements, as they call them, out of a mere confusion, an error in their understanding about how the Government actually spends money? More generally, is their whole orientation to any new legislation that involves considerable Government spending based on a misunderstanding about the ability of the Government to spend?

These are some of the questions that will be addressed at the Fiscal Sustainability Teach-In Counter-Conference to be held on April 28th in Washington, DC at the George Washington University. Don’t miss the Teach-In Counter-Conference. Help us make it a success. Follow-up afterwards by watching the youtubes and the documentary therealnews.com will be making about the event, and by organizing fiscal sustainability teach-ins in your community.

Carry the anti-deficit hawk message of the event. We. Are. Not. Running. Out. Of. Money. The. Money. Was. There. All. Along. The. Money. Is. There. Now. The. Money. Will. Be. There. Tomorrow.

Let’s make this the start of a movement that sweeps Peterson and the deficit hawks aside, and that forces this Administration to end the recession and rebuild our nation. Here’s the event web site with all kinds of information about it, our speakers, the issues being addressed, press releases, schedules, location, associated blogs and so on.

(Cross-posted at All Life Is Problem Solving, Fiscal Sustainability and Correntewire.com

Fiscal Sustainability and the American Future

10:52 pm in Uncategorized by letsgetitdone

The purpose of the President’s recently constituted National Commission on Fiscal Responsibility and Reform as stated in Section 4 of the President’s Executive Order establishing the Commission is:

Sec. 4. Mission. The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission shall propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. This result is projected to stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers. The magnitude and timing of the policy measures necessary to achieve this goal are subject to considerable uncertainty and will depend on the evolution of the economy. In addition, the Commission shall propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.

Key words/phrases in this statement are: “fiscal situation,” “fiscal sustainability,” “balance the budget, excluding interest payments on the debt, by 2015,” “stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers,” policy measures subject to uncertainty depending on the evolution of the economy,” and changes “that meaningfully improve the long-run fiscal outlook,” and “the gap between the projected revenues and expenditures of the Federal Government.” How are these related to each other?

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