Shared Sacrifice

The middle class and the working class have sacrificed and sacrificed and sacrificed... up the wazoo. We paid when the greed-driven banksters drove the economy off the cliff and demanded mammoth bailouts-- or else. So shared sacrifice means, or should mean, it's time for the rich and privileged to pay their fair share. But their politicians protect them. Our politicians don't protect us. The GOP would rather let the good faith and credit of the United States government disintegrate than rescind the unsustainable Bush tax cuts-- or should we now face reality and call them the Bush/Obama tax cuts?

There were two important developments Tuesday, both bad. Washington's always problematic Gang problem reared its head as the Conservative Consensus rushed in to take control of the situation. And tthis transpartisan conservative stunt almost looked reasonable-- I suppose that was the idea-- as the House Republicans passed their ridiculous latest gimmick to pass Ryan's kill-Medicare budget, this time on steroids and this time called Cut, Cap & Balance.

Let's start with the Gang problem. Dean Baker, co-director of the Center for Economic and Policy Research got right to the heart of the matter:

The budget plan produced by the Senate’s “Gang of Six” offers the promise of huge tax breaks for some of the wealthiest people in the country, while lowering Social Security benefits for retirees and the disabled. Despite claiming that they will "reform" Social Security on a "separate track, isolated from deficit reduction," the plan includes cuts to Social Security that would be felt in less than six months, as the plan calls for a new inflation formula that will reduce benefits by 0.3 percentage points a year compared with currently scheduled benefits. The plan also calls for a process that is likely to reduce benefits further for future retirees.

The proposed cuts to Social Security are cumulative. This means that after ten years, a beneficiary in her 70s will see a cut of close to 3 percent. After 20 years, the cuts for beneficiaries in their 80s will be close to 6 percent, while the reduction in annual benefits will be close to 9 percent by the time beneficiaries are in their 90s. For a beneficiary in her 90s living on a Social Security income of $15,000, this means a loss of more $1,200 a year in benefits.

The plan also calls for large cuts in tax rates including a targeted top rate of between 23-29 percent, which will be at least partially offset by elimination of tax deductions. For the highest-income people, this is likely to mean a very large reduction in taxes. For example, Jamie Dimon and Lloyd Blankfein, the CEOs of J.P. Morgan and Goldman Sachs, respectively, are both paid close to $20 million a year at present. If this pay is taxed as ordinary income, then they would be paying close to $7.5 million a year in taxes on it after 2012. However, if the top rate is set at 29 percent, they may save as much as $1.9 million a year on their tax bill. If the top tax rate is set at 23 percent then the Gang of Six plan may increase their after-tax income by more than $3 million a year.

It is striking that the Gang of Six chose to respond to the crisis created by the collapse of the housing bubble by developing a plan that will give even more money to top Wall Street executives andtraders. By contrast, the European Union is considering imposing financial speculation taxes to reduce the power of the financial industry and raise more than $40 billion a year in revenue.

"The plan calls for substantial cuts elsewhere in the budget which are likely to cut into the incomes of large segments of the population, especially the sick and the elderly. The cuts it proposes to the
military are just over 1.0 percent of projected spending over the next decade.

In short, this is a plan that should be expected to please the wealthy since it will mean large reductions in their tax liability in the decades ahead. On the other hand, most of the rest of the country is likely to feel the effects of lower Social Security, Medicare and Medicaid benefits, in addition to other cuts that are not yet fully specified.

Baker's an economist-- a real one, not like the corporate shills Wall Street provides all our presidents for their economic teams. And Bernie Sanders (I-VT) isn't the kind of politician Wall Street gets behind either. Funny, his perspective Tuesday was very similar to Baker's.

While all of the details from the so-called Gang of Six proposals are not yet clear, what is apparent is that the plan would result in devastating cuts to Social Security, Medicare, Medicaid and many other programs that are of vital importance to working families in this country. Meanwhile, tax rates would be lowered for the wealthiest people and the largest, most profitable corporations.

This is an approach that should be rejected by the American people.  At a time when the rich are becoming richer and corporate profits are soaring, at least half of any deficit-reduction package must come from upper income people and profitable corporations.  We must also take a hard look at military spending, which has tripled since 1997.

So while Obama seems to be begging CEOs to donate-- in lieu of their refusal to pay their fair share of taxes-- to the public schools that their greed is destroying, the Party of Greed and Selfishness was passing their Cut, Cap & Balance stunt 234-190, almost every single Republican and five disgusting Blue Dogs-- Boren (OK), McIntyre (NC), Matheson (UT), Cooper (TN) and Shuler (NC)-- voting to screw ordinary working families on behalf of their rich campaign donors once again. Real Democrats voted against it... even the just sworn in conservative Janice Hahn. Congressional Progressive Caucus co-chair Raúl Grijalva (D-AZ) stripped GOP intentions bare:

“This terrible plan could cut Medicare and Medicaid to unsustainably low levels and put seniors’ well-being at risk. Anyone who wants to pass it through Congress should remember that more than 70 House Democrats have already pledged their opposition, and more are signing on every day. The letter we sent to Leader Pelosi July 8 vowing to oppose any cuts to Social Security, Medicare or Medicaid as part of these budget negotiations has become a growing wave of House resolve to protect these programs. We’re keeping it open for more signatures, and our Gang of 70-plus has the ‘Gang of Six’ completely outnumbered. Newly minted Rep. Janice Hahn signed on as one of her first official acts as a Congresswoman-- that’s how quickly it’s picking up momentum.
 
"Republicans have already said they won’t vote for any package, period, because of their opposition to a functional economy. House Democrats hold the key to whatever plan can pass Congress. That’s why the Senate ‘Gang of Six’ proposal is dead on arrival. Instead of toying with ways to slash vital programs in just such a way as to make different budget numbers align on paper, Congress and the White House should follow the path of our People’s Budget: creating jobs, protecting Social Security, Medicare and Medicaid, ending corporate subsidies and millionaire tax giveaways, and ensuring our economy works for everyone rather than a greedy few.”

What can we do? Elect political leaders like Norman Solomon. Why? Watch the video:

You can't have a bitchin' "austerity" movement without an International Conspiracy of Dunces -- meet Our Davy Brooks

Once upon a time, Doonesbury's Roland Hedley went spelunking in Reagan's brain. Would anyone have the courage to attempt the same quest in Our Davy Brooks's brain?

by Ken

I expect many of you have already seen this, but I don't think you'll mind looking at it again. (Sorry I can't provide a link. Somehow as of this writing it still doesn't seem to have been added to the Borowitz Report website. Well, there's a link!)

BOROWITZ REPORT
June 17, 2011

Greece Offers to Repay Loans with Giant Horse
Steed Wheeled Into Brussels at Night

BRUSSELS (The Borowitz Report) – In what many are hailing as a breakthrough solution to Greece’s crippling debt crisis, Greece today offered to repay loans from the European Union nations by giving them a gigantic horse.

Finance ministers from sixteen EU nations awoke in Brussels this morning to find that a huge wooden horse had been wheeled into the city center overnight.

The horse, measuring several stories in height, drew mixed responses from the finance ministers, many of whom said they would have preferred a cash repayment of the EU’s bailout.

But German Chancellor Andrea Merkel said she “welcomed the beautiful wooden horse,” adding, “What harm could it possibly do?”

I've intentionally led off with a light moment because, as promised, we're about to descend into the murky, incomprehensible depths of DavyBrooksWorld.

Just this morning on the radio I heard some pompous economic semiliterate, commenting on the Greek crisis, saying that we know how to deal with their debt problem but now we just lack the political will to do so. Of course what he means is that we know the forced-austerity technique, which transforms the ill-gotten gains of the financial players who've made out like bandits in the runup into a price to be paid by people who've gotten no benefit from it.

The "serious" people who tut-tut about the Social Security "crisis" tut-tut in exactly the same way. We know what has to be done; we just lack the political gumption to do it. Or the state budget crises raised to toxic proportion by the economic meltdown: Hoodlums like the new governors of Wisconsin, Florida, and Ohio know how to deal with it -- and they've got the political gumption to do what has to be done: "solve" the problems on the backs of people who didn't cause them, thereby protecting the movers and shakers who did, and in many cases got rich, or I should say richer, doing it.

I suppose if you just wanted to pick on Our Davy Brooks, you could equally well deconstruct every pile of manure Our Davy shovels onto the NYT op-ed page. The levels of stupidity and dishonesty are really that predictable.

I can think of several reasons why I've glommed onto the column he wrote last week, hailing an astonishing discovery, the most important discovery since the discovery of sunshine: that the economic meltdown was caused by . . . Freddie Mac! (Or maybe Fannie Mae, I forget which.)

First, I had a moment of instant revulsion when I noticed the blurb for that column (for which, on principle, I'm not going to provide a link; that seems to me just encouraging him) on the day's NYT e-newsletter. It didn't take a particularly keen olfactory detector to smell a turd. It looked to be, only three years late, yet another assault on the best scapegoat the Far Right has come up with to deflect blame from the class of movers and shakers whose private parts they live to lick.

Maybe too I was primed because I once made the mistake of allowing a wingnut commenter to drag me into his inexhaustibly "sourced" conviction that the true cause of the economic meltdown was the Community Reinvestment Act of 2008, by which the government held guns to the head of scrupulously honest bankers and forced them to lend money to vile scum of the criminally poor class (not very hidden subtext: overwhelmingly people of inappropriate skin pigment) for the purpose of sinking the economy. Of course those inexhaustible citations, if you look at them, turn out to be either just plain bogus or twisted-beyond-recognition distortions, all to buttress the ideological delusions they've made up in their head, all of which are totally impervious to facts, which the Far Right has come to consider its deadliest enemy.

Now my point here, and the reason I bring it up, is that this is exactly the way Our Davy Brooks works. His trick -- and I'm not equipped to say whether it's a stroke of genius or a stroke of luck -- is to wrap his ideological rigidities in a veneer of "centrism." But he practices "journalism" the way David Brock -- as he reported in Bllinded by the Right -- discovered was the standard practice of the Far Right pseudo-journalists he'd attached himself to, among whom he had made himself the shiningest star. It occurred to him rather belatedly that where actual journalists set out to find out what the story is, his people started out with the story fully written in their heads and then went out in search of anything they could find, or more likely twist, to seem to support it.

THE POINT IS NOT THAT FANNIE
AND FREDDIE ARE BLAMELESS

To start with, it appears that that book Our Davy read, well, he doesn't seem to have actually read it, just glommed onto the part that fits his ideological fixation. I'm told by people I trust a lot more than Our Davy that he ignored substantial parts of the book that dealt with the Fed, Wall Street, and nonbank financial parties.

More to the point, though, he's just got the Fannie-Freddie story wrong. Which is not to say that Fannie and Freddie don't deserve brickbats. Here's economist Dean Baker's take:

The trillions of dollars that the geniuses at the private investment banks funneled into the housing market were the force that inflated the bubble to its 2006 peaks. Fannie and Freddie were followers in this story, jumping into the subprime and Alt-A market in 2005 to try to maintain market share. They were not the leaders.

Just to be clear, Fannie and Freddie were serious bad actors. They are both huge companies that do nothing else but deal with housing. It is incredible that they did not recognize the housing bubble and take steps to try to deflate it, and protect themselves, before it grew to such dangerous levels.

Suppose that Fannie and Freddie started demanding appraisals of rental values and refused to buy any mortgage where the ratio of sale price to annual rent was higher than 20. This action by itself likely would have shaken some sense into the housing market. I said this back in 2002, when I first warned of the housing bubble and predicted the collapse of Fannie and Freddie. I also frequently criticized Fannie and Freddie in public forums, including debates with their chief economists. Unlike Brooks, I wasn't worried about non-issues as economic disaster loomed on the horizon.

However:

As much as Fannie and Freddie deserve blame for incompetence and corruption, no serious person can make them the main culprits in this story. The Wall Street crew made hundreds of billions on pushing fraudulent mortgages. Furthermore, if we had competent economists running the Fed, they would have been shooting at the housing bubble as early as 2002 also. This does not mean raising interest rates in an economy that was struggling to recover from the collapse of the stock bubble. (I'll say that again, since people have a hard time understanding "do not raise interest rates." The Fed should not have raised interest rates.)

If Greenspan had paid attention to the economy he would have had the Fed's staff devoted full-time to document the evidence for the housing bubble and he would have used every public appearance (e.g. congressional testimonies, public speeches, international forums) to warn of the risks posed by the housing bubble. He also would have used the Fed's full regulatory authority to police the mortgage issuing practices of the banks under its supervision. He also would have prodded other regulators to use increased scrutiny for the institutions under their control. (Greenspan was never shy about making suggestions to others.)

My guess is that these actions would have by themselves crashed the bubble and done so long before it grew to such dangerous levels. They would be essentially costless, so it is difficult to see why a vigilant Fed chair would not have followed this route.

It is difficult to believe that these actions would not have been sufficient to deflate the bubble. After all, the David Brooks of the world can ignore Dean Baker warning of the housing bubble, they cannot ignore the Fed chair issuing such warnings, backed up by endless Fed papers documenting the case.

But Our Davy has found his narrative, and restored the earth to its rightful axis. And people continue publishing and reading his gibberish.

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