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What Happens Now?

7:12 pm in Uncategorized by letsgetitdone

In the aftermath of the great 2013 government shutdown/debt ceiling crisis, and the kicking of the can down the road while maintaining austerity once more, the subject on many minds is where do negotiations over fiscal policy go from here? Will the new “budget committee” produce more austerity and do a grand bargain including the “chained CPI”? Will Congress finally turn towards economic growth and job creation, or will we continue to have more shutdowns and debt ceiling crises in 2014?

Chained CPI and the “Grand Bargain”

Let’s begin with “chained CPI” and possible “Grand Bargains.” The President seems to still want one, but the question is, does anyone else? And, if they don’t, can he still get it through?

It’s dangerous for anyone running in 2014 to vote for chained CPI. Surveys show that overwhelming majorities of all Americans want no cuts to Social Security and Medicare, and also that 40% of tea party respondents are 55 or over, and are not likely to support such cuts, either. Nor do they appear to be anti- “their” Medicare. It’s the corporate Republicans who oppose these things. So, I don’t think the corporate Republicans would get much love from the tea baggers for supporting entitlement cuts, apart from Medicaid, which I think the tea party views as welfare. Certainly any credit the Congressional Republicans would get from their tea party base for voting for “chained CPI” would not outweigh their having given in on the CR and the rise in the debt ceiling just passed.

So what can the corporate Republicans in Congress gain from voting for chained CPI? Very little, I think, unless the Democrats get behind it, and then they can run against the Democrats as having sold out Social Security, as long as not many Republicans vote for it. In that case, however, the Democrats won’t have enough cover to vote for it, so they are unlikely to do so.

So, then we have to ask, what can induce the Democrats to vote for entitlement cuts knowing it will hurt them in the elections? Will the President be a big factor in the Congressional elections? He wasn’t in the elections of 2012, and, he was a negative in the 2010 wave election. Can he deliver votes by campaigning for other Democrats? Does he even want to? Does it matter to Congressional Democrats if he gets annoyed at most of them? I doubt all of these things.

Why will Patty Murray and Harry Reid (both of whom may want to run again in 2016) vote for chained CPI? To end the sequester? As Joan McCarter says, the coming second round of the sequester hurts the Republicans more than the Democrats. So, where’s the incentive for Democrats to go along with the President on chained CPI? I don’t think there is any.

If the President wants chained CPI this Spring, then he needs to assemble a corporate, Wall Street-supporting coalition from both parties, and that has to be large enough for a majority in the House. Since many Republicans would see passing the chained CPI as a victory for the President if he continues to support it, and the Democrats in Congress don’t, then we’re talking about a situation where the Tea Partiers and their allies would be called upon to pull the President’s chestnut out of the fire. How many votes do you suppose he’d get from the Tea Partiers and other Republicans for this? Keeping in mind that they just got 144 votes in the House to continue the ruinous shutdown/debt ceiling crisis, maybe 40, or 50? Or even that many, given that they’ll want to run against the Democrats on Social Security in 2014, if possible, and won’t see any political gain in holding hands with him as everyone jumps off the “I voted against SS” cliff?

And how many House Democrats would he get to play along? 150? 100? More? I think if he can’t get 200, an almost impossible outcome with at least 90 “progressives” very uncomfortable with the proposal, then this dog won’t hunt. The more he’s likely to fall short, the more likely it is that Democrats will see themselves as walking the plank for nothing, and will just run away from the proposal, and vote against it if need be.

Now you may see this scenario as far-fetched, because you may be thinking there would be some big omnibus deal with the Republicans that chained CPI would just get tucked into, and that would be irresistible for “progressive” Democrats. But what do the Republicans have to give? They certainly won’t offer any additional taxes on the wealthy. That’s poison to them. And they certainly won’t offer any increased deficit spending, say on infrastructure, because that would weaken the deficit/debt play they plan to run for all they’re worth in the election, and also because they know that infrastructure spending will reduce unemployment, and perhaps improve prospects for Congressional Democrats in the elections.

So what can they offer? Only concessions on the sequester. But here, if Pelosi, Murray and Reid play tough, as they certainly ought to do, then as Joan McCarter explains, the Republicans either have to shoot themselves in the foot again by keeping in place the sequester, or they would have to come to agreement. Then, if the Democrats know what’s good for them in 2014 (not a sure thing by any means, but still likely, in light of how well refusal to budge has served them over the past two weeks), then they won’t accept anything less than full lifting of the sequester. It’s harmed the economy for long enough, we need them to get rid of it, and they need that too.

The Republicans will then play games proposing lifting the parts of the sequester they don’t like, while giving the Dems nothing or only very little. At this point the Democrats need to take an all or nothing position on the sequester, rejecting the Republican’s salami tactics, and calling on the public for an end to the sequester nonsense, which has hurt the economy so grievously already.

The Rs will respond either by agreeing to lift it, or they will refuse. If they refuse, then the Democrats get to blame them for the down economy, we will surely see in the run up to the election, and the Democrats can run against that down economy which they would then claim was caused by the Republican shutdown, multiple debt ceiling crises, sequester, and blocking of any efforts to lower unemployment with jobs programs. (“They promised us “jobs,” “jobs,” “jobs,” and what did we get? Debt ceiling crises, sequesters, a government shutdown, more unemployment, and an economy in the ditch.)

Given that CBO projections will probably show the deficit going down to $400 Billion or less in FY 2014, which is about 2.5% of GDP, the Republican emphasis on “teh debt” and the deficit will not trump a Democratic campaign blaming Republicans for the lack of recovery and calling for jobs programs. Add to the above themes the Republican War on women, and suppression of voting rights of seniors, blacks, hispanics, and urbanites, and we have a Democratic victory in 2014 large enough to get back the House and keep the Senate.

Given all this, I don’t think there will be any Grand Bargain or chained CPI “compromise” in the near future and in the run-up to the election. It just makes no political sense for most Democrats and many Republicans. It may come up again in the lame duck and possibly in the next Congress, Republican or Democrat, if the President continues to push it. But I don’t think we’ll see it again this fiscal year.

Continued Austerity?

What we will see however, is continuing austerity from CRs or budget agreements, whether or not the sequester is lifted. Where a trade deficit exists, Government austerity is either running a surplus, or a deficit so low that it doesn’t make up for the leakage in demand due to the trade deficit. Let’s say one’s trade deficit is 3.5% of GDP, then the Sectoral Financial Balances (SFB) Model (whose terms refer to flows of financial assets among the three sectors of the economy in any defined period of time):

Domestic Private Balance + Domestic Government Balance + Foreign Balance = 0

tells us that the domestic private sector, taken as a whole, can’t increase its net financial assets, unless the Government has a deficit greater than 3.5%. And, if we wanted to provide for the domestic private sector to save 6% while it was running that 3.5% trade deficit, anything less than a Government deficit of 9.5% of GDP would not meet that objective.

Of course, no budget proposed by anyone in Congress or the White House envisions a deficit this large. Patty Murray’s Senate Budget proposed in the Spring of 2013 envisioned a 4.2% of GDP deficit for FY 2014, just a bit more than the austerity boundary of 3.5%. Paul Ryan’s House Budget proposed a 3.2% deficit, which is an austerity budget, in the precise sense that given a 3.5% trade deficit, it would entail the private sector running a deficit and losing 0.3% in net financial assets.

Will either a compromise bill coming out of the budget committee, or a CR, after a failure to agree on a budget, be closer to Ryan’s or Murray’s deficit figure? I think it will be closer to Ryan’s; partly because the Congress just passed a CR for the first approximately three months of the fiscal year that is closer to Ryan’s view than to Murray’s and which maintains the sequester, and partly because I doubt that the Democrats will even propose a more expansive budget involving a deficit, but will just focus on getting the sequester removed in early 2014, and will then turn to other problems and to positioning themselves for the fall elections.

Growth and Jobs or Shutdowns and Debt Ceiling Crises?

I think the answer is neither. We may have shutdown and debt ceiling threats before the 2014 elections; but we will not have either of these types of crises, because the cost in public opinion, if it keeps trending the way it has been, will be too heavy for many Republican candidates, except for those in the reddest gerrymandered districts, to bear in 2014. I believe they know this, and that many of them are increasingly willing to chance getting primaried by tea party candidates in order to avoid probable defeat from Democrats, if they toe the tea party line and then try to run.

So, I think the shutdowns and debt ceiling scares are over until after the elections. That means there will have to be an agreement on a CR for the first part of FY 2015 by next October 1. That will happen because there’s no way the Republicans will chance another hostage-taking taking a month before the next elections.

That’s the good news. The bad news is that there will be very little growth and very few new jobs. If the sequester remains in place for the rest of FY 2014, unemployment is likely to increase, not decrease, because Government will continue to be a fiscal drag on the economy, and the private sector is likely to avoid expansion without increased demand. That demand could be manufactured by a credit bubble; but it doesn’t look like that is in the offing for 2014. So, the shortfall in demand produced by the Government will not be made up from private sector spending.

On the other hand, if the sequester is lifted, then this will make some difference. We will probably see declining unemployment if that happens, but since the deficit was much too small to sustain a vigorous expansion, even before the sequester, the decline in unemployment, increased job creation, and economic growth, will all happen only slowly, and by election time we will still see an unhappy public, but maybe one that is a little more hopeful about the future than we are now seeing.

I don’t know yet whether the falloff in economic activity due to Government austerity or near austerity, will be enough to produce another recession in the middle of this long stagnation period, Richard Eskow has aptly named “the long depression.” But there is some chance that this will happen before the fall elections. If it does, then we will see a messaging war on who bears the blame for the downturn, and the outcome of the elections will hang on the outcome of that war.

(Cross-posted from New Economic Perspectives.)

Richard Eskow Asks: Which Side Are You On?

9:32 pm in Uncategorized by letsgetitdone

Education Social Security

Education Social Security

Richard Eskow of the Center for the American Future, posted a very good one a couple of days ago. He used the old union meme “which side are you on” to beat up the President and Congress about Social Security being placed on the negotiating table. I thought his writing on it was striking. Here’s some of it:

“This is a moment of moral clarity. Right now there are only two sides in the Social Security debate: the side that says it’s acceptable to cut benefits – in a way that raises taxes for all income except the highest – and the side that says it isn’t.

“It’s time to ask our leaders – and ourselves – a simple question: Which side are you on?”

“Nancy Pelosi says she can convince most Congressional Democrats to “stick with the President” as he pursues his gratuitous and callous plan to cut Social Security benefits as part of a deficit deal – even though Social Security does not contribute to the deficit.”

I certainly hope that Nancy Pelosi cannot convince most Democrats to risk their seats and prepare the way for a Republican sweep in 2014 by voting to cut SS. The Republicans will respond to this by casting themselves as the protectors of SS, and while this is ridiculous, the Democrats will not be credible in claiming that they are its protectors, and they will lose their identity as the protectors of the safety net, a very high price to pay for the sake of raising taxes on the rich by an amount that is insignificant in the greater scheme of things. Eskow goes on:

“Excuse me: Stick with the President? What about sticking with our seniors and our veterans? What about sticking with our disabled fellow Americans? What What about sticking with the more than 4,000 children on Social Security who lost a parent in the Iraq War?

“If you want to “stick with” Americans on Social Security, it’s time to call everybody who represents you in Washington – your Representative, your Senator, your President – and tell them that they’ll lose your support if they do this deal.

“It’s time for an end to the Orwellian doublespeak. Cutting benefits won’t “strengthen” Social Security, as Nancy Pelosi claims. Cuts of 6.5 percent for a 75 year old and 9.2 percent for a 95 year old aren’t so small that “folks won’t even notice ‘em,” as President Obama claimed. They’re not a “technical” adjustment, as his press secretary argued, nor do “most economists believe … this about getting a proper measure of inflation.

“The smart economists know that even today’s cost of living formula isn’t enough. It undercounts the things older and disabled people use the most, like health care and public transportation. Some other people know the formula’s inadequate, too: Seniors. They live with the costs every day.

“So let’s stop all the double-talk and get down to the real question at hand: Which side are you on?”

The framing is “which side are you on”? Will you stick with the President and the people, who will do a deal at any costs, or will you stick with seniors and the American people. This reminds me of the frame Randy Wray recently used in one of his posts on re-framing MMT. That framing came from Bruce Springsteen: Read the rest of this entry →

The Happy Dance of Richard Kirsch

6:55 pm in Uncategorized by letsgetitdone

Every once in a while, Richard Kirsch, does a "happy dance" article celebrating his own Health Care for America Now campaign for health care reform, whose outcome of course was the wonderful bill legislated by the Congress last Spring. Kirsch, who is now a Senior Fellow at The Roosevelt Institute, posted his latest happy dance at The Nation, whose "liberal media bias" was nowhere in evidence near his article.

I have only a few comments to make on his description of the process of bringing this "progressive victory" to us all, since, no doubt, Kirsch is the leading expert on this process. However, I will say something about an aspect of the process which he’s neglected to describe and then go on to talk about the results of his noble efforts.

On process, Richard fails to talk about the successful efforts of HCAN to work with the Obama political team and other "progressive" organizations in Washington, to take Medicare for All "off the table" as an option that would receive serious consideration in Congress. HCAN persuaded most other progressive organizations based in Washington with significant funding to shut up about single-payer and get behind the public option proposal.

At first a comprehensive version of a public option bill outlined by Jacob Hacker was used to seduce the left organizations. It was claimed that it would be much more acceptable to the health insurance industry than single-payer, and had a much better chance to pass. Then as the public option alternative was de-fanged, a little more at each stage of the political process, HCAN held the coalition of progressive organizations together, in the "veal pen," and prevented the resurrection of single-payer as a viable alternative.

In order to carry out its effort, HCAN and its predecessor organization, The Herndon Alliance conducted biased polling, manipulated the media, used its very substantial funding to flood the media with PO-based stories, did its best to label single-payer advocates as "unrealistic," and, generally, to tell people that "the perfect is the enemy of the good," while preparing to support legislation that was very far from being either perfect or good.

The story of the efforts and manipulations of HCAN, the "bait-and-switch tactics;" the lack of honesty with the public about the continued diminution of the public option as the legislative process moved forward; it’s unwillingness to say a loud "no" as the bill moved farther and farther away from either single payer, or the original public option compromise, and closer and closer to its final state as a pure bail-out for the insurance industry, delivering very little value to people, can be traced at the Physicians for a National Health Program (pnhp) web site. Please read Kip Sullivan’s many blogs to see a picture of real perfidy on the left, and to understand that the worst thing that could have happened to the left’s campaign for national health insurance was to have it led by HCAN and its objective of getting the Public Option "sparkle pony" passed into law.

A more general account, from the viewpoint of George Soros’s favorite notion of reflexivity, of the multi-stage de-generative political process engaged in by the left, under the leadership of HCAN is here. In short, the process engaged in by HCAN, under Richard’s leadership was, in my view, nothing short of a progressive disaster. It is one we must never duplicate, if we value the continued existence of the progressive movement and progressive values.

Moving on to the outcome of HCAN’s process, the Administration’s final health care reform bill, which Richard is pleased to call a "victory;" I doubt that there are very many progressives who would characterize it that way outside the land of Washington organization spin. Most people blogging or commenting at FireDogLake certainly thought it was a defeat and that it was worse than no bill at all. Of course, everyone in the Medicare for All movement thought it was a great betrayal, and there were many in the blogosphere generally, who thought the bill was a great failure, and that progressives should have been hanging their heads in shame over it, rather than doing happy dances.

I posted my own opinion of the bill in a piece called "J’Accuse" here and here, before the final compromise occurred, but none of my central criticisms were blunted in the final bill. The bill that Richard Kirsch calls a victory, is one that fails to stop hundreds of thousands of fatalities, and millions of bankruptcies, and home foreclosures, before it goes into effect in 2014, and even then dooms people to an additional 127,000 fatalities between 2014 and 2019, if there is no further reform.

The outcome of Richard’s process, which he celebrates, is not the victory he also celebrates, but a travesty of progressivism, a true failure and a catalog of sell-outs to corporate interests at every step of the way. Further, Richard’s "happy dance," constituting a self-evaluation of the significance of his own efforts, holding it forth as a model for others to follow is itself a travesty, reminiscent of the efforts of Dick and Lynne Cheney to recast Dick’s own legacy of failure.

One of the most disturbing trends in Washington in past years has been the increasingly frequent efforts of politicians and those associated with them to give themselves credit for outcomes that only they and very few others recognize as worthy of praise. It would be in much better taste, and also much more conducive to learning the real lessons of the past, if they waited for others to praise them, and until then, kept a respectful silence, before they began "the happy dance."

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

J’accuse

6:45 pm in Uncategorized by letsgetitdone

In an earlier post evaluating the House Health Care Reform Bill, I raised the question of the morality of voting for the bill, and argued that voting for it was an immoral act. Now that the Senate bill has been passed and includes many of the same features of the House bill including a “band-aid” period before the bill takes full effect in 2014, and the likelihood that a final Conference compromise will incorporate features of both bills, it’s time to raise the question of morality again. In connection with the House bill I said:

”So, what should we think of this bill, evaluating it from the perspective of what it provides in the band-aid period. Does it improve things in that period or not? Is it better than nothing at all? Is it an immoral and an intolerable bill, in some ways like Alan Grayson’s Republican plan saying to thousands of people each year, “If you get sick then die quickly.” Read the rest of this entry →

Kill It, It’s the Enemy of the Good

11:57 pm in Uncategorized by letsgetitdone

Absent a substantial change in direction by Congressional Leadership and the President, I think it’s time to do whatever progressives can to kill the health care reform legislation currently moving through Congress, and then to immediately reset to Medicare for All, single payer.

As HR 3962 bill sits now, it’s worse than no bill at all, and the Senate and Conference versions are likely to make a final bill still worse. If so, that bill will destroy progressive and Democrat credibility by associating us once again with reforms that don’t solve problems, and corporate interests, in opposition to the American people. Read the rest of this entry →

My Wife, Bonnie, Says: “Nancy’s Bill Needs An Amendment”

8:07 pm in Uncategorized by letsgetitdone

On reading my evaluation of the “band-aid” period between 2010 and 2013, specified in Nancy Pelosi’s compromise bill, Bonnie commented:

”I think the House ought to include a special subsidy for the 31,000 families of uninsured people who will die annually from lack of insurance during the band-aid period, so that they can afford to bury their loved ones.”

When I asked why, Bonnie replied by saying that: Read the rest of this entry →

An Evaluation of Nancy’s Masterpiece: The Band-aid Period

2:42 pm in Uncategorized by letsgetitdone

We’ll see many policy analyses and evaluations of Nancy Pelosi’s compromise health care reform bill as it gets closer to a final vote. This one won’t be thorough, since the bill is one of daunting length (1990 pages) and complexity, and I haven’t had the time to do a really detailed analysis. But I’ll do the best I can now, because enough detail is available to get a general impression of the bill, and evaluations that are timely are sorely needed, if only to feed the very essential debate that must go on before such a consequential bill becomes final.

The thing that sets this bill apart from most, is that it specifies two distinct periods in which the legal structures created by the bill will be different. The first period is from January 1, 2010 to the date in 2013 when the exchange, the public option, the mandates, the subsidies, and the outlawing of denials due to preexisting conditions become relevant, and the period thereafter, when most of these conditions take effect, and when eligibility for the exchange and the public option will be gradually expanded.

I’ll begin this analysis and evaluation with the first “band-aid” period. Speaker Pelosi’s office has conveniently produced a list of 14 provisions that take effect immediately. There are three categories of provisions: those mainly focused on addressing the problems of coverage and cost we see in the present system, provisions which provide “goodies” to Medicare recipients, and provisions providing miscellaneous “goodies” to sub-groups in the population, or address long-term but not the current central issues of health insurance reform. Read the rest of this entry →

The Tip of the Democratic Spear?

5:05 pm in Uncategorized by letsgetitdone


Alan Grayson been making waves lately. His characterizing the Republican health care plan as: “if you get sick, die quickly, and then calling out members of the Republican Party as “foot-dragging, knuckle-dragging neanderthals,” were both good for a laugh. And then, when they howled and demanded an apology, he refused to apologize to them, but instead said that he would only apologize to the 44,000 annual dead and their families for Congress’s inaction failing to fix the health insurance mess.

On Friday’s installment of Countdown, Lawrence O’Donnell, substituting for Keith, played a clip of Grayson’s recent speech on the floor of the House (above), and then also had him on the program for a softball interview (below). In both performances Grayson exuded confidence, comfort, and humor. In the interview he was just “basking,” a really “happy warrior” in the tradition of Al Smith, Franklin Roosevelt, and Harry Truman. Read the rest of this entry →