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Chained CPI Helps Fund Corporate Tax Breaks and Trickle Down

10:49 am in Failed government by masaccio

Obama Finds Trickle-Down Inspirational

Jack Lew, the Treasury Secretary and former head of the Office of Management and Budget, testified before the Senate Budget Committee recently. His written testimony explains the priorities set by President Bipartisan, Barack Obama, who seems to think he was elected on the long-term Republican promise to balance the budget.

Lew tells us that Obama’s budget is based on his Grand Bargain offers to Speaker Boehner that couldn’t garner any Republican backing. Lew doesn’t explain why that should be a starting point for further capitulations. Lew mentions such balanced ideas as the Chained CPI. That’s the part where we slash at Social Security and raise taxes on the middle class by raising income tax brackets less than inflation. Lew explains the reason for this assault on the 99%: “The chained CPI is a more accurate measure of inflation in that it does a better job of reflecting the substitution of goods in response to relative price changes.” That is a lie.

The CPI is supposed to measure how much it costs to maintain your lifestyle. The Chained CPI measures the decline in your standard of living as you change your protein intake from an occasional piece of beef to Alpo. Lew thinks that’s not a problem because it’s all protein. And it’s not a problem for the administration’s rich clients, whose life-style is utterly unaffected by inflation. For the 99%, the Chained CPI assumes that you are just as happy with canned catfood as you were with fresh salmon.

Lew’s headline number is $580 billion in tax hikes. It dwarfs the impact of cutting Social Security, which is $130 billion. At the same time, we are increasing taxes by $100 billion by raising the brackets more slowly than actual inflation. So, we have an actual $680 billion in increased revenues. Let’s see what we do with those. You probably think it has something to do with helping the middle class, as Lew claims in the section labeled “Strengthening the Middle Class by Investing in the U.S. Economy”. That translates to More Trickle Down From President Bipartisan. He wants to increase funding for US agencies to promote trade, including the Trans-Pacific Partnership, and the Transatlantic Trade and Investment Partnership, the new NAFTAs, and will hurt even worse as we watch corporations erode our sovereignty. Then we recycle the money back to corporations that shift foreign production back to the US. We paid them to leave, through deductions available for moving out (which supposedly will be repealed), and now we pay them to return. But that’s not all the corporations won. Take a look at the budget, pp. 7-35, where you can see all the money going to corporations on its way to trickling into the pockets of the rich.

For the middle class there are some opportunities for training, and schools for four-year olds, an increase in the minimum wage (because the middle class now lives at the minimum wage), and help with recovery of child support. The end.

Here’s a quote from the budget:

The Administration believes in a balanced approach that cuts spending and reforms entitlements responsibly, but also raises revenue from tax reform that closes special interest loopholes and addresses deductions and exclusions ….

Let’s just skip the tax increases on the middle class and the destruction of their retirement benefits. Why do Lew and Obama think balance is a good thing? Did the people on Social Security and Medicare and Medicaid cause the Great Crash? Did they reap billions of dollars in benefits from the Reagan/Bush/Obama tax rate cuts? Did they steal from pension plans or from stock and commodities brokerage accounts? Did they manipulate LIBOR for their personal benefit? Did they launder money for drug cartels and terrorists? Did they need Get Out Of Jail Free cards from the fake prosecutors at the Department of Justice? Did anyone in the entire country vote for this guy thinking “Oh good, at last someone will make the tough decision to cut my Social Security and give the money to the rich and their corporations?”

I’m all for balancing the budget. Just do it on the backs of the oligarchs and corporations and their foundations and their offshore holdings of trillions and their professional minions who make it all possible. That’s fair and balanced.

Photo by wayne’s eye view under Creative Commons license

Chained CPI Means You Can’t Have Nice Things

11:38 am in Economy by masaccio

circus clowns

Legislators clustered to meet with ALEC, @FixTheDebt, and President Obama

The Obama Budget Document includes 11 mentions of Chained CPI. Here are the first four:

In the interest of achieving a bipartisan deficit reduction agreement, beginning in 2015 the Budget would change the measure of inflation used by the Federal Government for most programs and for the Internal Revenue Code from the standard Consumer Price Index (CPI) to the alternative, more accurate chained CPI, which grows slightly more slowly. Unlike the standard CPI, the chained CPI fully accounts for a consumer’s ability to substitute between goods in response to changes in relative prices and also adjusts for small sample bias. Most economists agree that the chained CPI provides a more accurate measure of the average change in the cost of living than the standard CPI. P. 46

The first bold section tells us that Obama believes there is a bipartisan consensus that we have to cut Social Security and raise taxes on the middle class. I’m not seeing that in any segment of the political world except vicious jerks like the Club for Growth. I can’t wait to see the Hastert Rule operate in the House, forcing Speaker Boehner to admit that a majority of House Republicans thinks hiking taxes on the middle class and slashing Social Security is a terrible idea.

The second explains that this is good because when prices go up, or incomes drop, consumers can just buy some cheaper thing than the thing they really like. You can read a paper from the Bureau of Labor Statistics explaining this in detail here. The plain fact is that this is an outright admission of the utter failure of the consumption society.

The example you get is that if beef gets more expensive, you can substitute pork, without in any way affecting your life. In other words, the selections among beef, pork, chicken and catfood you currently make are assumed to give you a certain level of pleasure, but now you can’t have that level of pleasure. Either you eat less of something you like, or you just don’t get to eat it, and have to eat something you don’t like as much.

Suppose you lose your nice watch. If the price of your ideal watch has gone up for whatever reason, you get a cheaper watch, or no watch and use your phone. That nice watch you used to be able to have is now out of the picture, but that doesn’t matter because you can still tell time. That’s the magic of substitution.

There is an unspoken connection here: that your income is constant across all these time periods. That isn’t true either. People are losing their jobs and taking lower paid jobs. If you are still getting raises, they come in tiny increments every year. If you are retired, you get nothing on your savings, and little on any equities you might hold. To maintain your standard of living, you have to eat your savings or go into debt. Most likely, you can’t have nice things, so you get to substitute less nice things. No natural fibers for you, too expensive. So what? Just substitute something you don’t like as well, or do without.

There is one other key point: this analysis ignores the effect of substitution in oligopolistic markets. What is the free market for cell phone services or cable services? They are oligopolies. Your choices have nothing to do with the amount produced.Prices are not set based on the underlying cost of service, but upon whatever these people can get away with. They raise prices to maintain their profits. Your only substitution is to buy less service, in a downward spiral. Your life gets worse.

Of course, all this is irrelevant to the feral rich. Their income goes up as they suck out the money from you for your cell phone and your cable service and every other thing you buy. They don’t substitute for anything.

The real point of the Chained CPI is that you don’t get to live nicely. You can expect a declining standard of living. That is the message of your President and the oligarchy he serves.

The fifth mention of Chained CPI in the Budget explains that the switch to chained CPI will decrease the deficit by at least $230 billion over the next 10 years. This is the number in tables S-2 and S-3. P. 184, 186. Table S-5, p. 189, gives the number for Social Security: we are cutting payments to the elderly by $130 billion. Table S-6, p. 191, tells us that over 10 years the average savings is .1% of annual projected GDP. Table S-7, p. 193, gives the annual savings adjusted for population growth and some kind of inflation accounting. In those terms the total savings drop to $107 billion.

The last mention is in Table S-9. There is a line item labeled “Chained CPI: Adjust indexing and protect vulnerable populations”, which according to the footnote includes revenue effects. The ten year total is $230 billion, which includes Social Security cuts and $100 billion in new taxes that slug the middle class resulting from adoption of Chained CPI. That’s another chunk of not having nice things: you have to pay higher taxes, so forget that chicken, and buy a fifty-fifty mix of pink slime and hamburger.

Unless, of course you are in whatever the “vulnerable population” turns out to be. But don’t worry, even if you aren’t now, as inflation eats your savings and the Chained CPI cuts your Social Security, soon enough you’ll enter the vulnerable population. That’s already happening. This study says that 46% of Americans die with less than $10,000 in assets.

The President and the oligarchy are introducing the masses to their Brave New World of not-so-nice things. Or nothing at all. Read the rest of this entry →

Timothy Geithner Says Justice Is Nice but Banks Are Just the Best

10:34 am in Financial Crisis by masaccio

The Secretary of the Treasury discusses the rule of law

The soon-to-depart Treasury Secretary Timothy Geithner confirmed to Liaquat Ahamed of The National Review that his goal was to protect bankers:

… My own view was that it was going to be very hard, if not impossible to design a financial rescue that was going to be effective in protecting all the innocent victims hit by the crisis and still satisfy the completely understandable public desire for justice and accountability. Those things were in direct and tragic tension, never resolvable at that time.

I always felt that the only preoccupation for people in policy at the time should be to fix the problem as quickly as we could, as effectively as we could, and only after that would other things be possible, including how to figure out not just how to clean up the mess, but reform the financial system.

That’s just silly. There is no tension between protecting the innocent victims and locking up the criminals who caused the Great Crash. None. And his claim that he wanted to do anything for the “innocent victims” is laughable. The truth is what he told Elizabeth Warren and Neil Barofsky: he wanted to foam the runway with the financial corpses of the victims of mortgage and foreclosure fraud so that the banksters and the feral rich would have a soft landing. Geithner thinks us professional leftists who are outraged by the failure to prosecute banks and their criminal employees are short-sighted, if not stupid:

…I think that what really distinguishes countries in crisis are those that are lucky enough to have political leaders who are willing to take the brutal political cost of doing what’s necessary and those countries that waited and let the populist fires burn, or decided they were going to try to teach people a lesson and put populism ahead of other things.

So, it’s fine with him that there were no criminal prosecutions. The only relevant issue was the entire economy, and Geithner thinks he did great there:

I’m biased but I felt that in the basic strategy that the President embraced and that we put into effect, we did something that was incredibly effective for the broad interest of the economy and the financial system.

The results of that effectiveness are obvious, even if Geithner can’t grasp them. Unemployment is outrageously high. The middle class has been crushed by stagnant wages and huge losses in personal wealth, especially home equity. The poor are on the chopping block, with state after state trying to cut the meager assistance they provide and the President bent on cutting Social Security, Medicaid and Medicare. Retirees see their savings dwindle under years of zero to negative real interest rates. The megabanks are bigger and more dangerous than ever.

That “broad interest of the economy” Geithner talks about is to insure that the feral rich pay no price, and are rewarded with ever-increasing personal wealth and income. Geithener and Lanny Breuer are joined at the hip in carrying out the Obama program of wealth protection at any cost, including the rule of law. Read the rest of this entry →

That’s No Grand Bargain, That’s a Surrender

10:34 am in Wankers by masaccio

Faustian Bargain

Last time we heard talk of a Grand Bargain, it was President Obama’s idea of a solution to an actual problem. The crazy party, rebelling against Speaker John Boehner, held the entire nation hostage over raising the debt limit.

Let’s give Obama the benefit of the doubt and assume that he thought a Grand Bargain would solve that problem for that time and the future, and that cutting spending in the face of massive unemployment and a shaky economy was a good idea. After all, he was advised by the great geniuses of the day, Tim Geithner, Larry Summers, Jack Lew and other disciples of the leprous Robert Rubin.

It turned out that Speaker Boehner couldn’t deliver the votes from the crazy party, and Obama had to settle for Grand Bargain I, The Sequestration. It means cutting defense spending and domestic spending, but not Social Security, Medicare or Medicaid. And it means raising taxes. Good. Obama gets the tax hikes he wants. And he seems to think these spending cuts are a good idea. And if they aren’t, just change the law. So what’s the basis for bargaining?

Well, the Sequestration has morphed into the Ewok of Terror, the Fiscal Cliff, thanks to the fools in the Village, whose last contact with reality dissolved during the Clinton Administration. I’m not that fond of the Sequestration, but after the election, it looks pretty good. And with this crowd of generals in rut, it really looks even better.

So why is there a need to bargain? Why should Obama agree to cut Social Security, Medicare and Medicaid? Why do we need Grand Bargain II, Revenge on the Old? What’s in it for the people who just elected Obama and the Democrats? Nothing.

Let’s be clear here. Obama claims that his goal is to increase taxes on the richest Americans. He swears up and down that he will not waver in this crucial cause. So why is he trying to make a deal? Everyone, including Speaker John Boehner and his crazy party, knows that taxes will go up if nothing happens. Then the crazy party has to explain why it’s better for taxes to go up on everybody than just the hyper-rich. That won’t happen, and if it does, the crazy party will seal its doom, which should suit Democrats just fine.

So why does Obama think he has to offer anything to get the outcome that he says he wants? There is no need for what Obama calls “Shared Sacrifice”. Does Obama think it’s a sacrifice by the hyper-rich to pay more taxes? It isn’t. And if this were a morality play I’d point out that increasing taxes on the villains who caused the Lesser Depression would settle out a lot of bad Karma. But it isn’t that either. As an economic matter, those who can afford to pay are the best source of funds to pay down the deficit. Taxing the rich does the least damage.

But it’s worse than that. If he agrees to any reduction in Social Insurance programs, he will force younger people to save more than they already are. That’s bad for the overall economy right now. If he follows the Simpson-Bowles model, the average person will have to save $122.65 per month, according to my calculations. My calculation assumes that your savings earn 3% interest per year. That won’t happen for the next several years, so the number is low.

But wait, that isn’t all. The latest brilliant idea is to raise Medicare eligibility to 67. That means you have to pay for two additional years of private insurance at exorbitant prices (and massive increases in income for the private health insurance companies Obama loves so much). So you need either to keep working for an additional two years, or save enough to cover five digit premiums, not to mention the FICA and Medicare taxes you pay on any income you earn. Or you could just die in the street.

That’s what Obama means by shared sacrifice. You sacrifice. The rich continue share in the proceeds.

This isn’t a bargain. A bargain is when both sides benefit. Here, one group of Americans, the group that just handed Obama and the Democrats a huge victory, is screwed into the ground. The other, consisting of worthless politicians and plutocrats, gets a huge victory.

I don’t even understand why it counts as a victory for rich people. Are they really such jerks they think we should cut retirement benefits for old people because the hyper-rich have to pay more taxes? Well, they probably are. But it doesn’t have to be that way. It wouldn’t be that way if Obama and the Democrats didn’t agree that it should happen.

The reality is this. Obama can’t just make himself beat these bastards into the ground. He can’t force himself to be a real Democrat like Lyndon Johnson or FDR, and stomp on their faces when they are down. He wants to give them something in exchange for higher taxes. But he doesn’t have anything to give the rich or to the crazy party. So he’s going to give them your Social Security and Medicare and Medicaid.

How Long Must We Trust Generals on Afghanistan?

5:34 pm in Wars by masaccio

Pioneering Vet clinic in Taliban country

How long? (photo: Helmandblog/flickr)

In the wake of the miseries we have inflicted on the people of Afghanistan over the last 10 years, including the recent massacre, President Obama said Tuesday that he met with, and has extraordinary confidence in, General John Allen, the commanding general. We kill Afghanis so routinely that they no longer take to the streets when after a massacre, and we make stupid mistakes, like bombing weddings and insulting their religion and their sense of honor. But, the President trusts the generals in charge.

We don’t know exactly what brought on the most recent tragedy. There has been talk that part of the problem is the refusal of the Army to diagnose Post Traumatic Stress Syndrome in its soldiers because treatment and care are very expensive. I think a more likely explanation comes from retired Major General Robert H. Scales in the Washington Post.

Perhaps the issue might be that no institutional effort can make up for trying over the past 10 years to fight too many wars with too few soldiers?

But I think if someone wants to place blame, it should be on a succession of national leaders who fail to recognize that combat units, particularly infantry, just wear out. Lord Moran concluded in his classic about combat stress in World War I, “Anatomy of Courage,” that the reservoir of courage begins to empty after the first shot is fired. The horrors of intimate killing, along with other factors such as fatigue, thirst, hunger, isolation, fear of the unknown and the sight of dead and maimed comrades, all start a process of moral atrophy that cannot be reversed. Lord Moran rightfully concludes that nothing short of permanent withdrawal from the line will bring soldiers back to normalcy.

This sounds right to me, and I hope some of our readers with service backgrounds will chime in. I knew many soldiers during the Viet Nam war, and every one of them said that it was horrible, but that it was bearable because they were only in combat for a few months to a year. One friend, an artillery officer, served as a forward observer, a dangerous job. He did that for four months or so, and then went into a field office where there was little danger. Equally important, none of the people I knew served more than one tour in Viet Nam, with the exception of several guys I knew who were career army and volunteered to go back after receiving promotions, thinking it would enhance their careers.

The New York Times reported yesterday that the administration is considering speeding up our withdrawal. The big problem is that the Generals don’t want to leave. Read the rest of this entry →

Obama Fails to Meet Emotional Needs Of Bankers

7:08 pm in Financial Crisis by masaccio

Bankster Scrooge McDuck wonders where his White House invitation may be, while insisting on anonymity. (photo: dreamagicjp via Flickr)

Once again President Obama has failed to meet the needs of his constituents. This time, it’s the bankers he has failed.

On the mental list of slights and outrages that just about every major figure on Wall Street is believed to keep on President Barack Obama, add this one: When he met recently with a group of CEO’s at Blair House there was no representative from any of the six biggest banks in America.

Not one!

“If they don’t hate us anymore, why weren’t any of us there?” a senior executive at one of the Big Six banks said recently in trying to explain his hostility toward the president.

Maybe because he knew the only thing you want to talk about is you and your needs? Maybe because you have produced nothing for the rest of the country except loss and misery? Maybe because the President is embarrassed that he can’t afford that special shower that throws money directly onto your bare skin?

It’s all personal with these weepy people:

“You have to understand, it is very personal. He raised money from us,” one executive at a top six bank said. “Then he started calling us bad people. So forgive us for not wanting to buy him a drink after getting punched in the eye.”

We outsiders think it doesn’t count as a punch in the eye when Obama signs off on that tax gift in direct violation of his pledge to the rest of us, refuses to consider prosecutions for your crimes, rejects controls on your outrageous bonuses paid out of direct taxpayer transfers, agrees to wimpy regulation of your thieving industry, and appoints your drinking buddies to be his personal economic advisers. We like action. Your feelings are hurt by some words.

You Wall Streeters think Obama and the lackeys you sent to run the economy are ignorant putzes:

“You go down to the White House now and sit down to talk with members of the inner circle and the issue is no longer so much hostility as it is sheer incomprehension,” said one senior private equity executive. “You wind up talking about things they are not at all interested in and are generally outside their area of competence.”

So you admit that Geithner and Summers and the rest of that crowd are incompetent. That’s exactly what we all think, maybe for different reasons. I hope it means Obama has figured out that you are a bunch of crooks. That hope gets a tiny boost from this:

A senior Wall Street lobbyist explained his feelings this way: “This president came into office in the midst of an economic crisis and started off by demonizing insurance companies and then going after Wall Street banks. Never did he try to bring together CEOs and say, ‘We are in this together, we are Team America and we are going to go out and get things done.’ That’s the power you have as president. Instead this White House pushed people away and they did it consciously and they are still doing it.”

This is a perfect example of narcissism. I bet it never dawned on this arrogant jerk that from the far right of the political spectrum to the far left, and from the least to the most politically alert citizen, there is one area of absolute agreement: Team America was held hostage by Team Banker, Team Banker paid a corrupt congress and a compliant administration to salvage it from its gambling losses and theft, and Team America’s underwater homeowners, savers, retirees and workers were sold into serfdom to protect the wealth of Team Banker.

This time the President got it right: nobody can stomach you or your pestilential business. You got the money. You won’t get the love.

Who Can Obama Nominate To Head Up the Consumer Financial Protection Bureau?

9:00 am in Uncategorized by masaccio

Treasury Secretary Geithner doesn’t want Elizabeth Warren to head up the Consumer Financial Protection Bureau, created by the new financial reforms. As Shahien Nasiripour points out in the Huffington Post, Warren has called out Geithner on a number of issues, not least of which is the failure of Treasury to lead on the foreclosure problem.

President Obama can’t handle internal controversy, and what a battle it would be. On one side, the money boyz, Larry Summers (women are genetically unsuited for math), Geithner (Sheila Bair and Mary Schapiro are too serious about their jobs and not sufficiently impressed with the political skillz of the money boyz). On the other side, yet another woman more qualified by temperament, brains, determination, knowledge and skill than the money boyz. Geithner couldn’t bear having Warren describe his fetish for giant banks, the only people who might hire him after he exits the revolving door.

We know how that "battle" comes out: just look at Dawn Johnson. That means that Warren, who created the idea and has been its strongest proponent, is out as possible leader.

So, who can the President appoint who would be acceptable to the money boyz, and the administration’s buddies and potential massive contributors at the Business Roundtable? Herewith a list of possibles.

Read the rest of this entry →

Obama’s Common Sense Approach To Financial Reform Mirrors Health Care Reform: Hold On To Your Wallet

7:13 pm in Uncategorized by masaccio

In his Cooper Union Speech, President Obama called for common sense financial reforms. He was talking to a bunch of the thugs on Wall Street, voracious zombies who don’t deal in common sense any more than the leeches at Wellpoint. They deal in profits, and there is absolutely nothing they won’t do to protect their ability to profit at the expense of every single human on the planet, including their cubicle mates.

The common sense reforms the President supports are meaningless in the face of the depredations of Wall Street which have destroyed the lives and fortunes of millions of their fellow citizens.

1. A liquidation authority for institutions of a certain size, which will shut them down with the “… least amount of collateral damage to innocent people and businesses”. I’m sure you and your grandkids can afford that.

2. “Some limits” on the size of banks and the kinds of risks they can take, set by regulators who are appointed by the same people who did nothing last time.

3. Transparency in derivatives. These apply only to “standard” derivatives, an undefined term, to be defined by regulators appointed by the same people who watched Wall Street set fire to your money.

4. Consumer protection. The President thinks banks want to compete offering better products rather than selling confusing and expensive products. OK, that’s funny.

5. Shareholder “say on pay”, and more power to act in corporate elections if the SEC allows it. Mutual funds own most of the stock of these giants, and they have their hands in your pockets just like Wall Street does.

I’m having trouble believing my eyes. This pathetic set of reforms is the change we get to deal with the worst financial disaster in decades? The economy was crushed by an industry which functions on fraud, cheating consumers, wasting money on obviously fraudulent loans, paying itself gigantic bonuses, setting up transactions to screw their customers, raising interest and fees to the sky at the expense of a damaged group of workers, and this is what we get?

This is pathetic. No wonder the Republicans are willing to negotiate from this ludicrous starting point. By the time the negotiations are over, we can expect a mandate that each of us open three credit card accounts and use them for all purchases, paying 30% interest compounded daily, with no grace period. And if you don’t, the IRS will collect a fee equal to 1% of your income to pay for the salaries of the banksters and their lobbyists.

What I Saw in Athens

9:03 am in Uncategorized by masaccio

I volunteered for voter protection in Athens, Ohio, home to the fighting Bobcats of Ohio University. I flew to Columbus, OH to see the Obama rally, and drove on down to Athens, a beautiful little town about 80 miles southeast of Columbus. The water main had broken where I was staying, which I decided was not an evil omen. The next morning, I went to headquarters, and did phones for an hour. The phone list was the first sign that something was Changed. The list was people who had said they would vote early, but hadn’t at that time. I was stunned. I had a script, and clear instructions from a volunteer. I think I hit on three, there were no wrong numbers, and while I was there, among the entire group of callers, there weren’t more than 5 republicans. Last time I did phones, for Kerry in 2004, in two hours, I found only 5 or so Democrats out of 100, the rest were wrong numbers and republicans.

Then I went to Voter Protection Training. This was my second clue that something had Changed. There must have been 75 people there, lawyers and legal people from across the country. I Read the rest of this entry →