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New York Times’ Panic Reporting Gets S&P, Markets 180 Degrees Wrong

9:14 am in Uncategorized by Scarecrow

As we watch the various markets react to recent events, it’s essential we keep our heads straight on some basics, because the media, and particularly the “news” reporters and editors of the New York Times, have got almost everything backwards.

You can ignore almost everything you’re hearing from Washington politicians, including the White House, and Beltway media. Here’s what knowledgeable economists are telling us.

1. The US government is not about to default on its debts. A nation with it’s own currency and whose debts are all in its own currency cannot be forced to default unless crazy people force it to default. The US can always print or mint more dollars to pay off debts denominated in dollars. S&P ignored this fact. The only way the US can be forced to default is if the government is taken over by crazy people. Unfortunately, there are a lot of them, but S&P mumbled when it should have clearly called out the crazies. But S&P and the non-crazies have also bought (or are trying to sell) other economic snake oil.

2. The markets do not believe in the S&P fairy tale that the US is in danger of defaulting on its debts. The markets are saying just the opposite. Forget the stock market; it’s the bond markets that matter here. In those markets, bond prices are rising and interest rates are falling to very low levels. That tells us investors all over the world think US Treasury bonds are safe, so they are buying more bonds, not selling them. S&P’s analysis is gibberish.

3. The stock market is signaling the economy is in trouble; it’s not saying we have a debt crisis. [See Krugman links here] The Commerce Department revisions to GDP signaled that the US economy was falling into a depression in 2008 and only barely escaped in 2009, after the stimulus and Federal Reserve actions started to kick in. The recent jobs numbers tell us unemployment is not likely improve much for several years, which leaves parts of the economy in a near depression. The debt debates are telling markets there’s no rational discussion in Washington about how to boost the economy. Given that and more, it makes sense for stocks to be tanking.

4. The debt reduction hysteria is making the economy worse and is self-defeating. The debt hysteria is the economic snake oil everyone from the President and his advisers to Pete Peterson and Simpson-Bowles to the Tea Party are selling. With the economy still on the edge of recession, and parts in near depression, the only thing keeping the economy afloat is federal spending. It may need that support for years, because the recession was much deeper than everyone thought. But if federal spending declines, as the debt hysterics are demanding, and state/local government spending continues to tank, then GDP must fall. It’s just math. As the economy declines, there will be less collected in taxes, and more paid out in safety net spending — unless a cruel nation slashes that too — so the net result could be higher deficits, or at least less debt reduction than they expected.

5. Today’s consumers can’t revive the economy by spending more, because they’re still recovering from losing $6-7 trillion in housing wealth. Housing prices pumped up during the bubble are still falling (why hasn’t Greenspan been banished?). And lately, the private sector has lost trillions more in 401k etc, savings as stocks crash due to expectations of a continuing weak economy. Only the federal government can raise spending to boost the economy.

6. Enhanced trade can’t revive the economy either, because other nations are also struggling. We’re running huge trade deficits, buying more from others than we sell to others. But our trading partners are also struggling to keep their economies from declining, and they’re making it worse with their own austerity. Many of Europe’s banks are essentially insolvent from the 2008 burst, and covering for them has pushed weaker governments towards insolvency. We’d like to keep the value of our dollar cheaper, to allow us to export more. But other countries are also trying to keep the value of their currencies lower so that they sell more and buy less; if everyone does that, they cancel each other out.

7. All this means federal deficits are unavoidable, as long as the private sector is also not spending more. If the Feds spends less, the accounting identity from Econ 101 tells us the private sector would tank. Slashing government spending could cause a another severe recession or depression.

8. The S&P credit rating rationale is based on a bogus economic view. There is no accepted theory that says the debt to GDP ratio must be below some percentage, such as 75 percent, to be “sustainable” or conducive to growth. Yet S&P and Moody’s are both saying that Congress must achieve a $4 trillion down payment to debt reduction over 10 years in order to keep the ratio from rising about this arbitrary 75 percent. Even if the average ratio for some economists’ preferred outcomes in other countries was 75 percent, that does not mean that number is the correct benchmark for any single country, let alone the US now. Every country is different, and there is no reason to believe the US cannot handle debt to GDP ratios much higher than some historic international average and still be “sustainable” or conducive to growth.

9. The financial industry has a strong incentive to create debt hysteria. Severe government budget cutting creates ample opportunities to force state and local governments to privatize public assets and to create conditions requiring the social safety net to become privatized. But the financial sector can gather wealth even in a downturn, because, they’ve learned, government will back stop them. S&P is paid by the financial sector. And then there’s S&P’s role in helping the financial sector pull off massive fraud. Any Democrat, such as my millionaire Senator, John Kerry, who engages in debt hysteria, should be shamed and pushed out of office.

10. President Obama and his advisers own this mess. It was the President who insisted that we needed to slash the debt by $4 trillion over ten years, who said that was a precondition for “sustainability” and getting our fiscal house in order. He told the nation we can’t even have a useful conversation about growing the economy or creating jobs until we did that. All his advisers echoed him. [Even DeLong would replace the entire team, but Summers for Fed Chief? You were also for Bernanke, Prof.]

It was all gibberish. But when S&P and Moody’s use the $4 trillion trigger and no one says, “huh?”, it’s because the White House validated that completely arbitrary number. Thus S&P’s $2 trillion “error” may reveal they’re incompetent and pursuing their own ideological agenda, but its still true that the debt limit bill got just over $2 trillion and left us $2 trillion short of the arbitrary $4 trillion. It’s all gibberish, but it’s the White House’s gibberish. Worse, it’s forced every timid Democrat, including the entire leadership and millionaires like John Kerry,” to echo the same gibberish. Shame on them all.

In Cowboys and Aliens, Humans Win; In Washington’s Zombies Vs. Pods, They Lose

6:14 am in Uncategorized by Scarecrow

"Here You Leave Today and Enter the World of Yesterday, Tomorrow, and Fantasy"

"Here You Leave Today and Enter the World of Yesterday, Tomorrow, and Fantasy" by IceNineJon on flickr

To escape the fantasy world of confidence fairies, invisible bond vigilantes and the economic zombies and pod people who dominate Washington, I went to see Cowboys and Aliens. It was a healthy, life-affirming return to reality.  If you prefer horror films, watch CSPAN 2.

In this fun Hollywood escape, violent, prejudiced men trapped in their own machismo join with repressed victims of genocide to confront rapacious creatures  intent on capturing the gold market. People captured by the gold freaks are turned into zombies to feed the looters.  The heroes are Indiana Jones, 007, and the last of the Mohicans played phoenix-like by the pretty House Lady. There’s a liberal bartender and a kid who becomes a man by dissecting a bug.   In the end, the humans of all types realize they have to join together to defeat the rapacious creatures who are looting the planet and turning humans into zombies and pod people.   There’s hope for our species!

Back in Washington, D.C. there are no heroes and no upbeat ending.  Instead, the looting, muggings and beatings will continue until morale improves.

In our “real” world, there is a radical extremist group driven by zombies and zombie beliefs who successfully blackmail the nation into strangling its own economy.   The supposedly “sane” group that is supposed to stop this madness has become cowardly and turned into mindless pod people, who assure the nation that the  gutting of American government and essential services and safety nets won’t occur in one step but in several, whose outcome is locked in by an undemocratic Super Congress and the next debt limit blackmail in 2013. Read the rest of this entry →

CNN Interviews on Debt Deal: Knaves, Thieves and Liars

6:36 am in Uncategorized by Scarecrow

CNN’s State of the Union featured Mitch McConnell, Chuck Schumer and Gene Sperling, ending with Mark Zandi. Their collective task, and they all agree on this, was to sound reasonable while not explaining what really matters in the emerging deal President Obama is hoping to impose on a helpless, and increasingly hopeless nation.

There were no guests to represent the victims of this deal, and there will be tens of millions of them.  CNN invited no one who could explain or argue what a terrible deal this would be for the nation.   The nation’s economy, the elderly, the poor and the unrepresented are about to take a serious drubbing, but thank the gods both Democrats and Republicans, Congress and the President will willingly administer the beatings and continue them until morale improves.

The basic components are reported to include:

1.  Raising the debt limit by enough to get us into 2013, about $2.6 trillion or so.  (No one thinks to ask, what then? Do we destroy even more government then?)

2.  Cutting spending by at least the same amount, possibly even up to $3 trillion?

3.  Agreeing to about half of those cuts now.

4.   Creating a 12-member, Cat Food II Commission to achieve the other half by the end of the year, by greasing the Congressional skids for more cuts.

5.  Adding “triggers,” so that if the Cat Food II Commission fails to agree, automatic measures are imposed to achieve the debt reduction goals.

6.  Allowing a vote on some form of balance budget amendment to the Constitution.

7.  Not mentioned: Remaining silent on anything that the country actually needs, like jobs, rescuing states, alleviating poverty and income equality, reining in the financial sector, stopping the looting, holding these criminals accountable, making the investments needed now and in the future, or planning to rescue the economy if it tanks again from the stupidest economic policies one could possibly imagine.

According to Mitch McConnell, who refused to reveal any details other than those designed to assure his craziest supporters, the deal may ultimately include as much as $3 trillion in spending cuts but include no new revenues. Host Gloria Borger asked, why would he expect Democrats to accept a deal with no revenues?  Mitch trotted out the half chestnut that even the President agrees that raising taxes when the economy is weak would be a terrible idea.

Okay, but predictably, Ms. Borger did not then ask why the same implicitly Keynesian argument McConnell is using to protest tax increases does not apply with at least equal or greater force to spending cuts and government layoffs when the economy is weak.  So Mitch McConnell never had to confront his favorite talking point’s hypocrisy.

Borger asked whether there might be any new revenues coming out of the Cat Food II Commission.  “There are no tax increases in this deal,” he said.

Then it was Chuck Schumer’s turn to lie to the American people.  He didn’t explain why, two days after the Commerce Department report showed that the economy is close to sliding back into official recession and the prospects for reducing unemployment are dismal, he and fellow Democrats were not screaming for a jobs and stimulus plan instead of spending cuts.

He wasn’t ask how he can assure the country that $3 trillion in spending cuts over the next decade will not hurt the economy and millions of Americans and seriously degrade vital public services.  Nor was he asked how the Democratic leadership can justify a total capitulation to Republican blackmail and adopting their talking points.

No, Chuck’s main concern was making sure that when the Cat Food II Commission fails to agree, the triggers that kick in to impose further carnage on the economy and hurt millions of real people will hurt some Republican sacred cow too.   Yeah, Chuck, that will make us all feel better.  Gosh, we lost Medicare and Social Security benefits, but man, we sure stuck those hedge fund guys!

Next we heard from Gene Sperling, the White House spinner.  He repeated, as David Plouffe did on Meet the Press, all of the Administration’s talking points we’ve heard from Obama and Bill Daley, most of which are illogical, economically backwards and/or morally offensive.  “You can’t ask for sacrifice from seniors,” Sperling started off.  But he didn’t know when to shut up.  Instead he added “without asking for some sacrifice from the well off.”  So, you can hurt seniors.

In the Orwellian universe in which this White House spins, “shared sacrifice” means that it’s okay to hurt seniors and extract even more from the poor and those without political power as long as we also change the tax treatment for hedge funds or corporate jets.  “Compromise” means giving away the store, caving in to Republican blackmail, enraging Democrats and betraying everyone who voted for Obama or the Democrats.  And then Sperling repeated the gibberish about how all this will restore confidence to the business community.

Next, Mark Zandi said the reported deal is a “great deal,” and that the $3 trillion reduction comes close to the “down payment” that will get us to “sustainability.”  The market will react very positively, he assured us, knowing the reason is because lots of market folks believe this gibberish.

Would this improve the economy or create jobs, Borger ask?  “Yes,” he said, forgetting that it contradicts everything he’s ever said about the effects of stimulus, the need for more, and the negative consequences of reducing government support while the economy is weak.  There must be a dozen of his quotes out there,does Gloria Borger know?  This deal will provide “certainty,”  Zandi assured us, thus laying the foundation for improved growth in coming months.  Confidence fairies flew out of my screen.

The only hope the American people ever had during this mugging, though no one but Krugman is ever allowed on tv to explain it, was that this abysmal Congress would deadlock.  That would force the President of the United States to ask his lawyers again whether there was anything in the Constitution that gave him sufficient executive authority to tell Congress and the Republican crazies to kiss off and tell his Treasury Secretary to avoid default and pay the nation’s bills, all of them.

“Uh, well, gosh, now that you asked in that light, Mr. President, there are actually several ways you could do this . . . “  And then David Plouffe would send an apology to David Gregory for declaring the opposite today.

But that was never what President Barack Obama wanted.  He used the phony debt crisis and debt limits extortion to get what he’s always wanted: shared responsibility in cutting programs for the elderly and the poor, while protecting the interests of the financial backers whose millions he’ll need to get re-elected.  And never mind that he’s destroyed what’s left of the Democratic Party, not to mention a nation’s hopes for humane government.

NYT Economist: Economy Gasping for Air, So Cut off Air Supply Slowly

8:47 am in Uncategorized by Scarecrow

Catherine Rampell, the New York Times’ usually sensible economist, provides a good commentary on today’s depressing Commerce Department report on our stagnant economy. If you read the first two thirds of her article, you’d logically conclude that unless we can find a replacement for the rapidly fading federal stimulus, there isn’t anything on the horizon to raise GDP growth and boost employment. Logically she ends with this:

“There’s not going to be additional monetary stimulus, and it’s hard to imagine any fiscal stimulus given the current discussion in Washington,” Mr. Ryding said. “So what’s going to get us out of this? The inevitable conclusion is time, and that’s not very satisfactory.”

But somewhere in the middle, without warning or logic, Rampell gets captured by Pod People.

The Commerce Department report tells us the economic recession was much deeper than previously believed — we are still not back to the GDP levels of 2007. And the second dip this year, while not yet technically a “recession” because GDP growth hasn’t gone negative yet, was worse than originally reported.

As Dean Baker reminds us, demand was crushed, the 2009 stimulus helped reverse that, but the stimulus is quickly winding down and is now offset by severe reductions in state government spending.

The result is entirely predictable: Depressed demand from people losing $6 or $7 trillion in wealth, plus declining or negative stimulus, equals a declining economy, with little or no growth and worsening unemployment. You couldn’t ask for a clearer confirmation of Keynes and the need for immediate, substantial new stimulus.

So what happens when a sensible economist becomes a Pod Person? They say things like this:

Washington, therefore, has a delicate balancing act in its current debt ceiling debates. Given the unsustainable debt trajectory that the economy is on — primarily because of the country’s growing health care obligations — Congress needs to impose greater fiscal discipline. But imposing too much too soon, or being too focused on the wrong types of spending cuts, could be self-defeating by weakening growth so greatly that tax revenue falls and requires the country to borrow even more.  

Given inflation concerns, it also seemed unlikely that the Federal Reserve will swoop in with another round of monetary easing to goose growth.

Shorter Rampell: The economy is gasping for air, so we need to cut off the oxygen supply more slowly. Since core inflation is very low, the Fed should worry about hyper inflation. And because our private health providers charge too much to provide less than universal coverage, we have a debt crisis and should cut Medicare.

You can’t argue with Pod People.

(For a human interpretation of today’s dismal economic report, see Dean Baker.

Elizabeth Drew Wants a Better President, Also a Pony

11:24 am in Uncategorized by Scarecrow

A pony for Elizabeth (photo: Tambako the Jaguar)

A pony for Elizabeth (photo: Tambako the Jaguar)

You can hardly blame the growing number of decent folks, long respected, admired writers like Elizabeth Drew, who are now, or still, calling on Barack Obama to stop being a wimp, a disappointment, a terrible negotiator, or a betrayer to his people, principles and Party and become a better President. But he won’t, people, so what’s plan B?

I’m a great fan of Ms. Drew; have been for, um, decades. In her now widely seen article, she joins many others urging Mr. Obama to just say no to the economic terrorists holding the government, its credit, its finances and its functions hostage. Just demand a clean, no strings bill to raise the debt limit and tell the nation, and the Tea-GOP, that he’s had enough. The nation would cheer.

The problem with all such urgings is they assume the President is being forced to accept terrible public policy, and that only a stiffer spine, backed by his supporters, or perhaps a more clever bargaining strategy, would release the inner President he keeps hidden. Read the rest of this entry →

Move Over Doug Feith: Lawrence O’Donnell Has a Friend

7:10 am in Economy, Politics, Uncategorized by Scarecrow

There’s a fascinating, or should I say, depressing, debate occurring in Washington over how much federal spending should be cut as a condition for raising the debt ceiling, which everyone except the Tea-GOP crazies understands must be raised. There is a somewhat less important debate about the President’s strategy in getting to an answer.

Over several nights, MSNBC’s Lawrence O’Donnell (Last Word) has argued that Mr. Obama has pursued a brilliant strategy that has not only split the Republicans over their unwillingness to accept any tax increases but also put him in an advantageous position for getting a “clean” debt limit bill without egregious cuts, as well as gaining political traction as the only responsible adult in the room.

I’ve noted that this theory, while implying Mr. Obama is lying, conveniently ignores important facts and consequences about Mr Obama’s assumed strategy.

Never mind that with Mr. Obama’s consent/direction, Harry Reid is trying to make the “clean” bill as dirty as he can so that a least a few Tea-GOPs can vote for it and not force cowardly Democratic Blue Dogs to vote as though the country was more important than their reelection. I’ll only add that in yesterday’s press conference, the President reinforced points that increase my concerns about the economic message he keeps sending.

The President has again told voters that dramatically reducing our debt has to be the nation’s priority; we can’t fix the economy nor adequately relieve the real unemployment crisis unless we first solve the faux debt problem. So if we only raise the debt limit (McConnell’s original “clean” bill that Mr. O’Donnell thinks is Obama’s clever goal) without a major “down payment” on debt reduction, Washington and voters will continue to be preoccupied by the debt.

Well, as long as the President and the Tea-GOP both insist that we can’t fix the economy or create enough jobs unless we dramatically reduce the debt, then there’s no reason to expect this President or this Congress to fix the economy or create enough jobs.

That’s a very clever argument for not fixing the economy or creating jobs, or being blamed for it, but apparently, the perversity of relentlessly promoting that false belief has escaped Mr. Obama’s supporters, who seem to pay no heed to the dozens of economists telling us our leaders have their priorities backwards.

Pointing out this perversity is causing severe angst among Obama fans, who have now latched onto Lawrence O’Donnell’s lecturing progressives for their thoughtless criticism of Mr. Obama’s brilliant strategy.

In this wondrous article, progressives are accused of being naive, ignorant of American history, hypocrites in complaining about raising retirement ages now but ignoring that already happened, and best of all, simply too young and immature to know much, compared to O’Donnell who knows how to use a computer to edit the number in the debt limit statute. Read it all; it’s a treasure.

So what evidence is there of these crimes, and particularly the crime that hypocritical progressives are indifferent to the current eligibility ages in Medicare and Social Security?

I guess that when most progressives were proposing, in the health care debate, that Medicare be extended to everyone, or failing that, at least extending it down to 55, and failing that, at least let people buy into Medicare as an option on the Exchanges, and failing that, at least offer a public option linked to Medicare rates on the exchange that might one day become the equivalent of Medicare, that must have meant that none of us ever had a problem with raising the eligibility age of Medicare.

And when progressives argued for temporarily lowering the age for Social Security to help relieve the jobless crisis, and when Jane Hamsher this week front paged an article by James K. Galbraith in which, among other things, Professor Galbraith recommends, as he did in 2009, that we lower the eligibility age for Social Security at least temporarily as a jobs recovery measure, and when Jon Walker and I (and probably many others) endorsed that idea during the stimulus debates and again when they first started talking about “reforming” Social Security, and when we noted during the Cat Food deliberations that it was looney to consider raising the eligibility age further when millions of newly jobless were already being pushed prematurely onto lower benefit levels of Social Security and Medicare, that that obviously meant progressives were just fine with the fact the eligibility age for full benefits had been raised already.

It’s only slightly annoying that, without having any facts, Mr. O’Donnell’s friend assumes that those of us criticizing Mr. Obama’s economic views and who oppose putting Medicare and Social Security benefit cuts on the table must be too young and immature to remember much history. Ignoring the gratuitous insult to younger people, many of us are retirement age or older, and some of us recall being drafted to help kill little brown people in Vietnam. I guess none of us was wise enough to learn anything about politicians claiming to be against things like needless war and torture and indefinite detention but then engaging in or covering for them.

It is no revelation that Mr. Obama may think he can benefit with independents by insulting progressives. And it’s possible that when progressives push back, that helps him in some perverse way disconnected from the public interest. He and his brilliant political team now have the economy languishing, unemployment at 9.2 to 17 percent and the Tea-GOP holding US credit and the economy hostage. They’ve got him running several points behind the generic representative of one of the stupidest, most destructive political parties in American history. But O’Donnell’s friend concludes that every time progressives push back against Mr. Obama’s flawed policies, they’re helping Mr. Obama.

By that logic, the way for progressives to pressure the Administration to adopt policies in line with progressive values is to stand on a chair and clap as hard as they can every time the President reenforces Tea-GOP talking points, publicly criticizes liberals or undermines the progressive elements of the New Deal that produced a 50 year run of rising incomes, expanding middle class, and success for the country, never mind the Democratic Party. Of course, that would only confuse the independents, wouldn’t it?

Step down, Doug Feith; you’ve lost the title.

Related Updates from Americablog: Larry Summers on Obama’s 2009 plan to “reform” Social Security and Medicare.

From DeLong, citing David Dayen: No, no, no; first loot, then burn

Why Is Larry O’Donnell Implying Obama Lied to the Country and the Tea-GOP?

6:04 pm in Economy, Politics by Scarecrow

MSNBC’s Lawrence O’Donnell can barely contain his self-adulatory glee in coming up with the theory that President Obama has outfoxed the Tea-GOP in the debt limit negotiations. But the question is, why should the country be happy about what his argument implies for the President’s principles and veracity?

It’s clear that the Tea-GOP are now seriously split — between the crazies and the predators — over what to do about Mr. Obama’s insistence on more tax revenues as a condition for significant spending cuts. Since the holy Tea-GOP mantra is that any (net) tax increase is comparable to original sin and will get you expelled from Grover Norquist’s grace, the faithful don’t know whether to follow Mitch McConnell’s exit strategy, which at least keeps them in grace for now, or Eric Cantor’s no-exit strategy which . . . well, it’s not clear what would happen, but it’s got the Business Roundtable, the Chamber of Commerce, the Federal Reserve, IMF and Wall Street freaking out.

O’Donnell’s theory, however, holds that President Obama essentially lied to John Boehner and Mitch McConnell. He lied by falsely telling them — and telling the public in his press conferences — that he’d accept dramatically reduced domestic spending, including significant reductions in Social Security and Medicare benefits, if only the Tea-GOP would accept net tax/revenue increases on a 3:1 ratio. And that’s okay, because he never really agreed to such cuts but knew the Tea-GOP would reject the offer, so he wouldn’t have to agree.

O’Donnell insists this was a clever lie, and those stupid Republicans and (O’Donnell loves this part) those mean progressive bloggers (I guess that includes me!) naively took Obama at his word. What fools! Since all the fools were duped, time has now run out on the debt limit, the financial elites will rein in the crazies, Obama will get a “clean” bill, and the Republican leaders will be seen by their base as unprincipled fools. So was Jay Carney lying today when he downplayed Mitch McConnell’s exit plan?

“This is not a preferred option,” White House Press Secretary Jay Carney said of McConnell’s proposal in his daily briefing. . . .

“The president is firmly committed to significant cuts in spending and to dealing with our deficit and debt problems in a balanced way,” he said. “Bigger is better. … It’s an opportunity for a game-changer, to put the United States on much firmer ground as we really get into the 21st century and the economic competition that confronts us.”

A plausible theory needs to accommodate and explain virtually all of the facts and observations relevant to it; otherwise it’s not credible. And Mr. O’Donnell has conveniently left out some important facts.

The President and his advisers have repeatedly told the American people that the nation needs to “tighten its belt” and get its “fiscal house in order.” He’s said repeatedly that the deficits and debt are contributing to business uncertainty, and this uncertainty is preventing the economy from recovering broadly enough to solve the very serious unemployment problem. He’s said we can’t even have a useful conversation about jobs until this debt problem is solved. He’s promoted the priority of debt reduction through White House appointments and Alan Simpson’s Catfood Commission, choosing individuals who claim deficits and the debt constitute a “crisis.”

Mr. Obama has also argued in public that the debt limit talks are an opportune moment to resolve these issues, and because they are so important, the talks should include massive spending reductions, a Grand Bargain. We need to think big, he’s said, and “if not now, then when?”

Now I agree with economists who think Obama’s economic assessments are not merely a misunderstanding of our economic situation, but unsupported, dangerous gibberish. But put that aside. O’Donnell’s theory implies that the President was either lying when he said those things, or he’s just lied to the Tea-GOP in a way that may tank the opportunity Mr. Obama claims we need to accomplish what he told us was a prerequisite to economic recovery.

So where’s the truth? Does the President actually believe the things he said in public? If so, hasn’t he just made it less likely he’ll achieve his goals, because he’s misled the Republicans (and the country) and humiliated their leaders whose agreement he needs? Or was he lying when he made all those arguments about the connection between deficit/debt reductions and fixing the economy? If so, then where’s his jobs program and why has he been embracing talking points that make such a program harder to achieve?

What should voters, particularly those who care about Social Security and Medicare, think? Should they assume that Mr. Obama really would accept significantly lower benefits for those on Social Security and Medicare in exchange for higher taxes on carried interest and changing deductions for corporate jets? Where does that leave the Democratic Party? Or should voters assume Mr. Obama was lying about all that and would never accept the deal he said he’d make?

It would be tragic if Mr. Obama achieved what he claimed to be pursuing, whether or not it embarrassed Tea-GOP leaders. But even if all that has happened is that Obama has split and humiliated those leaders, we’re still stuck with a President who claims to believe economic notions that would harm millions of people. Unless he was lying. Next theory?

Earth to Obama: Tea-GOPs Are Okay If Govt Stops and Economy Fails on Your Watch

11:49 am in Media by Scarecrow

As the nation careens towards the cliffs of insanity, I’ve yet to see a convincing explanation for why President Obama is helping the destructive elements of the Tea-GOP blackmail the government and force reductions in dozens of programs that represent the fundamental purposes of government.

I don’t have the slightest doubt Mr. Obama wants to preserve government functions, even if he’s willing to accept reduced levels of efficacy and benefits to Americans and unwilling to demand the most well off pay for them. And I’m certain he wants the debt level raised enough to avoid confronting that issue again before the 2012 elections. I assume he wants the solution to impose minimum damage to the economy, even if I fundamentally disagree with his economic analysis. Surely he believes his reelection strongly depends on whether voters believe the economy and jobs are on a credible path to recovery.

So we’re left to speculate how the White House thinks it can overcome the fact that the dominant party in Congress has chosen to hold the US economy hostage and risk a worse recession and/or a costly rise in interest rates and potentially catastrophic hit to US credit. What’s their logic? How does this end?

We got a hint of Mr. Obama’s thinking today when he again clearly endorsed two prevalent myths: the confidence fairy belief that up to $2 trillion in business investment and hiring are just waiting for a deficit deal even though there are not enough customers with enough money to buy their products, and the preposterous notion of Tea-GOP rationality and good faith.

What we can do is to solve this underlying debt and deficit problem for a long period of time, so that then we can get back to having a conversation about [jobs]. Read the rest of this entry →

Boehner’s Tea-GOP Crazies Reject Obama’s Crazier Grand Bargain; Dangerous Stalemate Continues

7:04 pm in Uncategorized by Scarecrow

Reports from Saturday night indicate Speaker John Boehner has told the White House that his Tea-GOP party will not accept President Obama’s framework for a “grand bargain.” Apparently his people aren’t willing to vote for up to $1 trillion in additional tax revenues, and there may be other objections.

[David Dayen has more at FDL News.] From Huffington Post’s Ryan Grim:

“Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes,” Boehner said in a statement. “I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.”

The Obama White House’s rhetoric remains tied to Tea-GOP talking points, which if used as a basis for policy, would only harm the economy and increase unemployment. His senior advisers continue to claim, illogically, that it would be okay to make massive cuts in spending if only the rich paid more taxes. Here’s Dan Pfeiffer (via Ryan Grim):

“The President believes that solving our fiscal problems is an economic imperative. But in order to do that, we cannot ask the middle-class and seniors to bear all the burden of higher costs and budget cuts. We need a balanced approach that asks the very wealthiest and special interests to pay their fair share as well, and we believe the American people agree.

Two points. Spending cuts now, with or without tax increases, would harm the economy, yet the White House can’t seem to say this clearly. And even if the cuts were scheduled for a post-recovery period when they would be less harmful, cutting valuable programs like Social Security would not be acceptable and would not become justified by having hedge fund managers pay more taxes.

When used here, the “balanced approach” argument is gibberish. Spending should be cut when it doesn’t serve a worthwhile public purpose; taxes should be raised and allocated fairly from those able to pay to accomplish those public purposes. Only someone indifferent to public policy consequences is taken in by this “balance” argument.

Where Boehner’s rejection leaves the discussions planned for Sunday is hard to sort out, because none of the parties has a coherent, logically consistent position or one consistent with the public interest. The American people do not have a reliable representative to protect their interests in these discussions. The realities appear to be this:

– The nation’s economy desperately needs more federal spending, because the economy has not sufficiently recovered to sustain sufficient growth to reduce employment in any reasonable timeframe. Friday’s terrible jobs report confirmed this. The human suffering and vast economic waste from this situation are the real crises facing the economy, not deficits, and Washington is not addressing these real crises.

– Despite the consenus on the need for more spending to rescue the states, reduce and relieve unemployment and rebuild the country, none of the parties is recommending these measures as necessary conditions for agreement on raising the debt ceiling, even though they would affect the debt.

– There are no leaders in either party recommending economically sound policies. So it’s very unlikely anything useful will come out of the debt limit discussions that will help the economy, and very likely the economy will be harmed.

– The debt limit has to be raised. Only the most extreme, least reality-based members of the Tea-GOP deny this. However, the Tea-GOP base may prevent sufficient Republican votes to raise the debt limit without spending reductions that could cripple the economy.

– The country is in the middle of a fiscal/financial crisis, but not the one Boehner describes. We face the Hobson’s choice of either hurting the economy and increasing unemployment by slashing spending at a time when more spending is needed, or creating a further financial crisis by failing to raise the debt limit. The Tea-GOP has deliberatly created this terrible choice.

– With Tea-GOP votes now questionable, Democrats are now realizing their votes could become the deciding factor in choosing between crippling the economy further and betraying their base on the most important social programs of the Democratic era, or refusing to do so and being blamed for the consequence of not raising the debt limit. Obama has recklessly put Democrats in this untenable position.

With a few exceptions, much of the Beltway reporting can’t seem to rise above “he said/she said” narratives or deficit hysteria framing (e.g., see NYT versus this NYT editorial), and so it is not reporting how destructive Washington’s leaders have become or how much Obama’s reckless judgment has crippled his own party. We are staring into an abyss, none of the leaders are grownups, and those who lead us are not listening to anyone with an ounce of sense.

CNN Criticizes Obama for Chastizing GOP, Then Lectures Him for Not Lecturing GOP

4:54 pm in Uncategorized by Scarecrow

I don’t usually watch CNN, because the odds of hearing something completely absurd are quite high, and that’s just from their anchors, never mind their frequent panelists. But tonight I did and immediately started looking for things to throw at my tv.

In the opening segment of his show, Elliot Spitzer featured Gloria Borger (why does this woman have a job?) and David Gergen (why are we still listening to him?) to prove the point.

Spitzer invited Borger to repeat her column criticizing Obama for chastizing the GOP (in his presser today) on their adamant position against raising revenues. According to Ms. Manners, it’s not okay for our President to ridicule the GOP or John Boehner and Mitch McConnell; he should instead be the adult in the room — with “adult” defined as someone who’s as afflicted with deficit hysteria as she is. And since getting rid of tax deductions for corporate jets and other stuff is only worth $3 billion or so — she said, reading from Eric Cantor’s talking points — it was unpresidential for Obama to even bring that up. Apparently rhetorical examples that make a political point are not sufficiently grown up when made by a Democrat against the Republicans.

Borger continued that the only people who would appreciate Mr. Obama’s takedown of the illogical and extremist GOP positions would be Harry Reid and Nancy Pelosi, whom the fair and balanced Borger reminded us are “two of the most unpopular politicians in America.” So her larger meaning is, it’s not okay for Obama to support Democrats who believe the President should be more forceful in defending their priorities and undermining the GOP negotiating positions, even though they’re threatening to defund worthwhile and popular programs and crash the economy again. He needs to be more polite to Mitch McConnell.

Well, I guess that view is right if you see the world through the goggles of a Tea-bot.
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