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Even if the Debt Ceiling Goes Up, There is Damage Done

5:46 am in Uncategorized by Bill Egnor

One of the things about this whole ginned up debt ceiling fight (and we can call it nothing else when the debt ceiling has been raised, albeit with objections from the minority party at the time, without preconditions 89 times) is that it is not just defaulting that can damage the US economy and credit.

It is true that if we reach the end of our borrowing power, there are going to be severe consequences. Even if we used the incoming revenue from taxes to try to keep paying the interest on our debt, or pay our military or pay retirees their Social Security, there will still be little matter of needing to cut all other spending by 44%, and do it right then, to keep under the need to borrow any more money to pay commitments we have already made.

That is what happens if we default, but other things will happen just because we are having this hostage drama play out. The credit worthiness of nations is based on more than just the fact that they are paying their bills, it is also based on the amount of surety a bond buyer can have that they will pay in the future.

What the Republicans have done, and the White House with its desire of a “Grand Bargain of the Republic” deal has abetted, is show that there is some doubt that the U.S will pay its bills going forward. Right now we are not seeing a risk premium on our bonds, because we’ve built up 230 plus years of confidence. We’ve never even come close to default and bond buyers are still using that past performance to judge the safety of our Treasury bonds.

However, once this crisis is over, assuming the ideological madness of the Republicans does not drive our and the world economy over a cliff, there will still be the knowledge that one party in the United States not only was willing to play chicken with the debt ceiling but that they had large groups within that party who do not believe that there will be dire consequences if it is not raised as needed.
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The President’s Libya Speech – First Thoughts Open Thread

4:17 pm in Uncategorized by Bill Egnor

Okay so I just finished watching the Presidents speech on Libya and I thought it might be good to have kind of an open thread where folks can post their first impressions. Since this is my post, I guess it is incumbent on me to kick things off.

Let’s start with an over view, it was a good speech as these things go. Not to long, the president was confident in his delivery and firm in his tone.

He spent the first ten minutes laying out all that happened leading up to the imposition of a no fly zone, including the coalition building required for a successful intervention. He made a point of listing the Libyan Rebels and the Arab League as those who asked for this action, under a United Nations sanction.

He made the humanitarian case against Khadafy noting that he had in the past hung civilians in the streets and the in this case had threatened a door to door search for rebels and compared them to rats that needed to be exterminated.

The president went on to lay out where the United States would go and would not go in the pursuit of protecting civilians. He explained that we would not put ground troops in and that it was always the intention of the United States to help set up the no fly zone and then fall back into a support role with NATO taking the lead.

He wound up his speech by taking shots at those who feel that we should not have gone in and those who feel we should be directly involved in regime change with troops on the ground.

For those who think we should have stood aside, he brings up the specter of the former Yugoslavia and the massacres that happened for nearly a year before the United States acted. President Obama appealed to American exceptionalism there leaning on our history of stepping in when there are human rights violation and insisting that we would not wait until there was a horrific acts to do the right thing.
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Speaker Boehner Stop Lying, Broke Nations Can’t Borrow

6:28 am in Economy, jerks, Republican Party by Bill Egnor

Bank Of Montreal

Bank Of Montreal by Galt Museum & Archives on The Commons, on Flickr

We’re flat broke. What do you think of when you read that? Having been busted more than a few times in my life it means no money and no prospect of getting any. Pretty simple and straight forward, unless, of course, you are the Speaker of the House; then “broke” can be parsed and spun and twisted.

We have all seen the great orange Speaker saying “We’re broke” over and over again as he tries to sell a justification for what his masters (the Freshmen Republican “Tea Partiers”) insist on him doing with the budget. It is really an effective statement, powerful, short and direct. It would be perfect if it were not for the fact that it is flatly a lie.

The United States has a deficit. That is true. The United States also has a lot of debt, but to say that we are “broke” is ridiculous. It is just another half truth scare tactic from the party that has made a performance art-form of the practice.

Even Speaker Boehner’s office has had to admit that he is parsing the word. When they were challenged on the claim the U.S. is broke they came out with a statement that said when the Speaker says “broke” he means spending more than you have for an extended period of time. Sheesh! It is hard enough to communicate in this life without making twisted and tortured parses of common words.

What gets up right up my nose about this meme is that is completely ignores the fact there are two things to do when one does not have enough money. Spend less or get more money. As State Rep. Joe Gibbons (D-FL) put it so succinctly on NPR this morning:

If my family checkbook at home is short, you know what I do? I get a second job. I don’t just eat three days instead of seven. … What they’re telling us we got to do is, you got to eat three days.”

There is a lot of opportunity and in fact lot of desire on the part of the citizenry in the nation to raise taxes on the wealthy both at the state level and the national level. Nationally 88% of folks surveyed said they would rather raise taxes on millionaires and billionaires than cut programs in an effort to balance the budget. In Wisconsin where this fight is playing out on the smaller scale 67% percent said they would like to see higher taxes on people making $150,000 a year.

Of course this shows the basic Republican ideological bankruptcy. They have been trumpeting (that’s what Elephants do, trumpet, right?) about the freaking deficit for two entire years. Yet in that time they have not been willing to raises taxes on the ultra-wealthy. Just so it does not go down the memory whole, they were the ones that held the extension of unemployment benefits for millions of out of work Americans hostage to get an extension of the Bush Tax Cuts for the Paris Hilton’s and Koch Brothers of the nation.

They are also the ones that are now trying to claim that the modest job growth that we are seeing as the final bits of the stimulus money from the American Reinvestment Act are spent is due to keeping taxes at the same rate as when their deregulatory policy crashed the national and planetary economy.

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Paying Down The Debt, You Have To Increase Taxes

6:03 am in banality of evil, Economy by Bill Egnor

Buy war bonds

Buy war bonds by Duo de Hale, on Flickr

I know, I know, I should just stay out of the Washington Post business section if I want to keep my blood pressure in normal human boundaries but like a dog returning to its vomit I just can’t help myself. Today it is there on the front page, an article by Steven Mufson (think he got a lot a teasing about that last name?) talking about how the National Debt (not a new movie franchise by Nickolas Cage) is now at or above the level that we experienced post WWII.

We do have a huge amount of debt that we have incurred. When you fight two wars without a tax increase that happens. When you fight two wars on top of a massive give away to the top 2% of earners (who are way, way, way less than 2% of the population) you get the kind of giant red ink we are hearing the Republicans and Tea Partiers squeal about and sadly the President listening too.

Mr. Mufson then goes on to talk about how things are really different between 1947 and now. He notes that by the time Eisenhower was elected the 122% debt to GDP ratio had dropped to 87%. He found a Harvard Economist to quote who says that the major factors were pent up demand, the fact that we had the only working industrialized economy and a young work force, coupled with a pretty steep inflation rate allowed the U.S to reduce its debt in fast order. All that is true but it ignores one really important fact, that there were 27 marginal tax rates at the time with the top one being 90%.

This glaring omission just makes me nuts. Mufson’s tame professor laments:

But today the U.S. economy is in a polar opposite condition. The labor force is aging, U.S. manufacturing often lags behind Asian and European rivals, households are in hock up to their eyeballs, and consumer appetite for goods is tepid. In addition, inflation is tame and government spending locked into entitlement programs and debt service that will be hard or impossible to alter.

We’re not growing like we were after World War II, so the amount of debt you can bear and the trajectory are much worse,” Rogoff said.

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Republican Jethros Shocked That Cutting Taxes Increases Deficit

6:23 am in Economy by Bill Egnor

More Jethro Bodineism from the Republican Party. It kind of comes down to basic math here. If you cut the revenue of the nation, and you don’t cut the spending at the same time, you get a higher deficit, capisce? There is nothing radical about that, you collect less money, you have less money to spend. Kind of basic, right?

Which is why it just puts a giant spot light on the fact that as a group Republicans have as much fiscal credibility as my late Springer Spaniel. Roll Call is quoting Sen. Mark Kirk as saying:

“I think everyone is in a collective state of shock right now over the CBO numbers.”

The diagnostic tools for Bodineism are not always very accurate, but it is safe to say that if you are shocked that you voted to extend the Bush era tax cuts for the wealthy and the deficit projection goes up, then you are a Bodineism sufferer.

Of course this is really part of the Republican planning. They get the tax cuts for millionaires and billionaires then scream “Deficit! Greece! Ireland!”, and try to take a hatchet to spending programs.

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New Stimulus Needs One Big Project

6:05 am in Economy, Executive Branch, Government by Bill Egnor

Complexity is really only attractive to nerds. I say this as someone who loves complex systems and way they interact. Given the choice most folks would rather have a description boiled down to the barest of truths and then they go from there in thinking about it. This is part of the problem with the public perception of American Recovery Act, more commonly known as the stimulus bill.

It is widely held by economists and those who don’t rely on Faux News and Rush Limbaugh for their information that the stimulus worked very well, for its size. Even as it was being passed 19 months ago many were saying it was too small in its scope to completely fix the hole in the economy that the policies of radical Republicans had caused. This was a win/win situation for the Republicans as they would be able to reap the benefits in their districts and states, but still be able to say that it was bad policy since it did not bring the nation back to full recovery.  . . .

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China Blues – The Next Republican Deficit Meme

3:11 pm in Financial Crisis by Bill Egnor

Looking around the country you would think the easiest thing in the world to get passed would be a jobs bill or another stimulus. The number of unemployed Americans is critically high and the business climate is pretty dismal. The growth we saw in the economy in the last quarter was due to businesses restocking inventory, the cash for clunkers program and the stimulus. Without more help, it will not be repeated.

Yet the Republicans are going to go nuts about the deficit and the debt. It does not matter to them that they were primarily responsible for running it up with two unpaid for wars, taxes cuts to the wealthiest Americans and the prescription drug bill. They are going to scream bloody murder that we are mortgaging our children’s future, even though they and their fat cat buddies are not going to do anything to pay down what they spent.

One of the big scare tactics, which you are going to hear about in the next few weeks, is the amount of money we owe to the Chinese. There was even a Super Bowl commercial from Rick Berman’s Astroturf group the Employment Policies Institute (you have to give it to Conservative Astroturfers they have the Orwellian names down) with cute little kiddies saying a new pledge to China and the Debt. You can see it here.

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