Debt Ceiling Shenanigans

As you've probably noticed, the GOP is holding the US treasury bonds hostage. 

Oh, you haven't? Well, that's because it's cleverly called "raising the debt ceiling", a phrase which probably makes most voters roll their eyes on change the channel. For background, the debt ceiling is the amount of money the federal government is allowed to be in debt at any given time. We assure our ability to continue paying our debts by raising the debt ceiling periodically when it is deemed necessary. If we don't raise the debt ceiling we default on our debt.

You see, federal deficits are covered with the issuance of treasury bonds, which people buy thanks to their AAA rating and the fact that the USA has never, ever defaulted on its sovereign debt. The government always pays the interest and then always pays off the principal when the bond comes due. That's how it's been since 1812 and how it should be for as long as we exist.


But a curious thing has happened. The National Debt went from $5.9 trillion in President George W. Bush's first year in office (a Clinton budget) to $10.8 trillion in Barack Obama's first year in office (a GWB budget).  So in 8 year our National Debt increased by 83% ... under Republican leadership. Remember, the GOP held both houses of Congress and the Presidency from 2003-2007. You can see the trend in the graph below, which plots national debt (top, black line) by administration. There is a massive increase in national debt in both the 12 years of Reagan-Bush and the 8 years of GWB. Bill Clinton's era is nearly debt neutral thanks to his balanced budget years.
 

The causes of the massive increase in debt under the previous administration are simple - an unpaid for war, an unpaid for tax cut, an unpaid for Medicare prescription drug plan, and an economy that tanked in late 2007 thanks to a wide variety of reasons I've discussed elsewhere. 

So President Obama was handled an economic shambles and a massive debt. He's now being blamed for an economic shambles and massive debt. My, what short memories we have. 


So what's interesting in all of this is that Republicans claim to be the fiscally repsonsible members of our government, and yet under their last 2 presidential eras, we've accumulated nearly all of our National Debt. And now the Republicans in Congress are making hay over this debt in order to get their way. 

What way is that? They're demanding spending cuts equivalent to the amount the debt ceiling is raised. In principle, this is a reasonable request. That's where the reasonableness ends.We're in the middle of a jobless recovery. Unemployment is still 9% (5% is considered "full employment") and this ignores the additional millions of our workforce who have simply stopped looking for work. We're still fighting the war in Afghanistan. We're fighting shadow wars in Yemen and Pakistan. While President Obama's health care reform law eliminated the Medicare prescription drug debacle, we're also still funding the unpaid for tax cut. 


Ending the wars and raising the tax rates back to Clinton era levels would be all that needs to be done in order to vastly reduce our deficits and eliminate the need for future debt limit increases (we're already over our current debt limit so the horse is already out of the barn this time) - yes Republicans have already stated that they refuse to raise taxes and we all know how they feel about the military. 


So where else could we cut? Well, social programs, of course. Government oversight capabilities too. All the things that are popular with voters and unpopular with conservatives. I'll be curious to see how this plays out, because the public has shown very little concern over the national debt in the middle of our economic crisis. I suspect the GOP is overplaying their hand just as they did with the Ryan budget and that if the Democrats can control the message on this, the GOP will face big losses in November 2012. 

Of course, they don't control the message very often and when the message is "Republicans want to cap the debt limit!" it comes across as a good thing ... the real message is "Republicans are willing to let the government default on its national debt for the first time in history!" 

Because that's what they'll do if they actually do not raise the debt limit. Funny that they're willing to do that all for a tax break for their wealthy donors and continued funding of their military industrial monster. Not funny-ha-ha, of course, but funny-sad.

Memorial Day Reflections

Yesterday I spent a fair bit of time reading Frederick Douglass' Memorial Day speeches from both 1871 in Arlington National Cemetery and 1878 in Union Square, New York City. In both instances Mr. Douglass honored the fallen Union and Confederate soldiers while reminding the audience, in no uncertain terms, that there was a right and a wrong side to that conflict.

What also struck me, while reading up on the origins of the holiday, is that this is not a celebration of our troops (that's Veteran's Day), but a remembrance of those who have made the ultimate sacrifice for our country. It used to be called Decoration Day, because communities would decorate the graves of those killed in battle. The tradition began, improbably, just a year or so after the Civil War ended in Charleston, SC, of all places, when former slaves honored the Union dead from a prison camp in the city's racetrack. The holiday did a lot to heal wounds between the North and South, but was also used by some, like Frederick Douglass, to remind the country that while brave men fought and died for their country, they did not always die for a just cause.

This lead me to reflect on U.S. military action over the past decade. Trillions of dollars, thousands of dead Americans, tens of thousands of dead Iraqi and Afghan civilians, and to what end? We have a struggling democracy in Iraq. We have nothing resembling a coherent endgame in Afghanistan. We're running shadow wars in Pakistan and Yemen. We're now aiding in the bombing of Libya.

And yet without our help, revolution sprang up in a half dozen other Arab countries all on their own, toppling the leadership in Tunisia & Egypt with other regimes teetering on the brink. Unfortunately, we're poorly positioned to spread democracy in these countries, because we're probably the least trusted foreign power in the Arab world - well, after Israel I suppose.

I don't normally delve into foreign policy on this blog. There's good reason. It's far too complex for easy digestion. I don't always know the correct course of action. I assume our government is acting on intelligence beyond that available from the press. And yet I still hope that we make diplomatic and military decisions that stand up to the light of a just cause.

Unfortunately, I have a hard time seeing that in much of the action we've taken over the past decade. I had hoped President Obama would help us reverse course, and while he's ended the war in Iraq, he's doubled down on Afghanistan and has increased the number of drone strikes in other countries. Even before the moral issues come into play, the cost in blood and treasure is too high to warrant poorly justified aggression toward other countries.

We can do better. We must do better.

Jesus was a Socialist?

I don't actually believe that, because I don't think Jesus cared much about political philosophy. He was, after all, the Son of God and not of this world. Or he wasn't. That point is largely irrelevant to the point I'm trying to make. A large swath of the American public do believe Jesus was the Son of God and yet are diametrically opposed to his teachings. 

It's an extreme example of cognitive dissonance to believe that a man who taught that we should sell all we have and give it to the poor would not support a system of government that also provided for the poor. I've yet to hear a rational argument proving that this is the case apart from a whole lot of hand waving about personal responsibility, individual freedom, and government inefficiency. 

Jesus' teachings boil down to just two things: 

You shall love the Lord your god with all your heart and with all your soul and with all your strength and will all your mind, and your neighbor as yourself. - Luke 10:27

So love God with all your heart/soul/strength/mind. And love your neighbor as much as you love yourself. 

Why then would Christians advocate for government that does not provide for basic needs of their neighbors (fellow citizens)? There is little in the new testament that could remotely be construed as Christian support for capitalism and individual rights over socialism and collective rights, and yet much of the religious right has chosen the former. 

On this Easter, the holiest of Christian holidays, I'd encourage you to reflect on Christ's teachings and what that means for your beliefs about how to treat your fellow man. That treatment can be just as easily individual treatment as much as it can be societal treatment. Social programs which protect the vulnerable, the poor, the sick, the needy, the old, and the young are not something to revile, but something to embrace and work toward improving so that the inefficiencies can be minimized while the benefits are maximized. There is certainly room for improvement, but the alternative, no protections for those people, is not an option in a just and righteous modern society. 

Peace. 

Protect Mother Earth with ... Taxes?

It's Earth Day TM so what better day to talk about externalities?

Externalities in economic terms are costs or benefits that reside outside the direct costs or benefits of a transaction between two parties. In other words, an externality is not reflected in the transaction price.

There are positive externalities and negative externalities.

Positive externalities provide a spillover of benefit to a community.  For example, if you pay a landscaper to beautify your front yard, your neighbors may see an increase in property values despite not having been a party to the transaction between you and your landscaper.

Negative externalities provide a spillover of harm or cost to a community. For example, tobacco use can lead to 2nd hand smoke and uncovered medical expenses absorbed by a community.

One way economists have advocated for accounting for these externalities is through the tax code. Taxes on alcohol and tobacco are higher, because of the negative externalities associated with these purchases. These kinds of taxes for negative externalities are often criticized by opponents as being a sign of the pervasiveness of "The Nanny State" - an over-controlling government intent on dictating the behavior of its citizens. When, in fact, it is an appropriate method for trying to ensure that the transaction costs reflect the true costs.

Conversely, tax credits are offered on hybrid cars, because they reduce energy use and pollution. Funny how these kinds of incentives don't receive nearly as much criticism even though it alters the transaction costs and reduces tax revenue (increasing the deficit). It is still a "Nanny State" at work, but to the benefit of the consumer.

How is this related to Earth Day TM ?

Well, arguably the biggest negative externalities are associated with the environmental pollution that results from transactions - consumption of goods and services:

• Pollutants from burning fossil fuels. 
• Chemicals spilled into our waterways.
• Waste materials from manufacturing.
• Disposal of replaced items (e.g., old computers, cell phones)
• Air quality from traffic congestion.

All of these and many others represent negative externalities that can be mitigated through environmental regulation or changes to the tax code.

This is where the idea of Cap & Trade legislation comes into play.  A government sets a cap on how much of a pollutant may be released into the atmosphere and companies would bid for credits under this cap. Revenue from this auction would go toward government revenue. A company who wants to pollute more than they have credits for can buy (or trade) for credits from a company that is not using all of its credits. This is a market based solution to pollution control, and yet there is resistance to this kind of approach. There are a fair number of arguments both from the extreme right and extreme left when it comes to this proposed solution.The left doesn't think it will have a serious effect on pollution (i.e., governments will set the caps too high to make a difference) while the right thinks it's an unnecessary imposition on business transaction costs.

Yep, you got that right. "Free market" advocates argue against a Cap & Trade solution, because it requires purchasers to pay for the full costs of the product they buy.  So much for an efficient market - one where prices reflect true value.

So enjoy your Earth Day TM and please do something for the environment that you normally wouldn't. Me? I'm working in the dark.

A Note to Birthers

Get over it.  

President Obama is American and eligible to be President of the United States.

• His mother was an American citizen. 
• She gave birth to him in a hospital in Honolulu, Hawaii in 1961. 
• A legal birth certificate was issued. 
• He lived in the U.S. continuously for more than 14 years prior to seeking election.
• He was over 35 years of age when he first sought office.

Ergo, he meets the constitutional criteria required to be President of the United States.

So all you birthers can go to hell for your stupidity, your ignorance, and your hatred of our democratically elected leader. Bunch of freedom-hating assholes. Go fuck yourselves.

Thanks. 

Faith Restored

So Paul Ryan's budget plan is designed to reduce expenditure largely by:

A) privatizing Medicare - turning it into a voucher system where the elderly can take their vouchers and go buy private insurance.

B) turning Medicaid into block grants to states (they're supposed to spend that block grant on healthcare for the poor, but conceivably they could spend it on anything they wanted).

It's also designed to reduce revenues by:

C) cutting taxes on the wealthy.

Yes, you read that right. Supposedly the solution to our national debt crisis is to completely gut the healthcare protections for the poor and elderly while giving additional tax cuts to the wealthy (down to 25% from the current top marginal rate of 35%).

Ryan claims that cutting taxes on the wealthy will increase revenue, which is a canard I've addressed previously. If you want to create jobs, you should focus on reducing the costs to businesses to hire new workers, not reduce the tax burden of people who make most of their money through investments. (I address jobs, because this is always the argument from the right - lower taxes spurs economic growth).

Ryan's tax plan isn't overly troubling to me, because he claims that the tax rates will be reduced across the board by closing common loopholes to make the tax plan changes revenue neutral. I think a complete tax code reform is long past due. As GOP presidential maybe-hopeful Mitch Daniels has been purported to have said, "It's time to have a tax code that looks like it was designed on purpose." This was originally attributed to Bill Simon, but anyway. It's a great idea. A simplified tax code could, indeed, have lower tax rates and increase revenue by having far fewer loopholes. The trouble is that to actually get to revenue neutral on Ryan's plan you'd have to do some things we don't have any hope of doing to the tax code - like eliminating the mortgage interest deduction and taxing capital gains as income. Doubt either of those things will happen anytime soon.

Ryan's healthcare plan is terrifying to me. First of all, how on earth can anyone expect senior citizens (those who use the health care system more than any other age group) to get reasonable rates for health insurance on the open market? That's unpossible!

And how many states do we really trust to use their block grants to provide health care to their poor when we can't currently trust states to provide health care for their poor when there are strings attached to the funding? It's just not going to happen. No way, no how.

So why is this blog post entitled, "Faith Restored"? Mainly because a recent McClatchy-Marist poll found that the American people know better and aren't going to fall for Ryan's abysmal budget plan as the solution to our problems.


64% of Americans approve of an increase on taxes for people making over $250,000/year.

80% of Americans oppose cutting Medicare and Medicaid  to reduce the deficit.

31% of Americans think the country is heading in the right direction (down from 41% since January).

Paul Ryan's debt reduction plan is a joke. But the bigger joke is how much positive press he got over it. Fortunately, the American people appear immune to the nonsense and still support realistic solutions to our problems.

The Unoccupied Middle

According to Gallup polling, conservatives outnumber liberals in the United States by more than 2:1. At least as of 2010 figures in which 42% of Americans self-identify as conservative ideologically and 20% self-identify as liberals. An additional 35% self-identify as moderate. It's really this middle ground that determines elections if they're motivated to vote. But this also represents the most conservative our country has been since Gallup began this polling in 1992. 

Rather than get into why this has happened, I'd rather think about what this means.

Republicans appear empowered after their 2010 midterm election win, which gave them control of the House of Representatives and a number of Governorships. In just a few short months since their swearing in in January 2011 they've accomplished a remarkable amount, at least on paper. Virtually none of their legislative actions have a hope of passing the Senate or being signed into law by the president, but they've had much more success at the state level where they've severely hampered worker's rights in Wisconsin and other places. 

I'm sure they'd argue this is what the voters sent them to Washington (and state capitols) to do. I'm sure some voters would agree with them. Where I think they'll run into trouble is that many other voters did not. 

But the GOP appears to be rushing headlong toward a more conservative position. The expected passage of Paul Ryan's budget plan for 2011, which would cut taxes for the wealthy and corporations while turning Medicare into a voucher system, is a conservative's wet dream.

Add to that recent polling that has Donald Trump handily leading the pack of potential 2012 GOP presidential nominees with 23% of likely Republican voters saying that they will not vote for anyone who is not a birther, it's pretty clear the that GOP has shifted hard right. 

Very hard right. 

This is an opportunity for President Obama and the Democrats. All they need to do to be successful in 2012 and beyond is to step into that middle ground that's been nearly completely abandoned by Republicans. 

President Obama has begun his move in this direction by both going along with the extension of the Bush tax cuts, which while it did not raise taxes for the wealthy, it also kept taxes lower for the rest of us. His own $4 Trillion deficit reduction plan, which he announced this week is also much more moderate than that proposed by Ryan. In the case of Obama's budget proposal, he's got both conservatives and liberals upset, which suggests it got it just right. 

The GOP has proven themselves adept at controlling the message (remember the death panels and other nonsense about health care reform), but they're going to have a hard time spinning their recent actions into something moderates will buy into. The longer the Tea Party and Birthers dominate the polling for the GOP nominee for president, the harder right the electable Republican hopefuls will need to shift. And the harder time they'll have beating a president who is stepping in behind them into the big empty middle ...

A middle devoid of Republicans, but not devoid of voters. 

Six months ago I thought Obama was extremely vulnerable for re-election. The longer things go on like this and the further right the GOP pushes things, the easier time he'll have winning 4 more years.