or view here: http://www.youtube.com/watch?v=jopY13psYOY
Thursday, June 30, 2011
Is 14th Amendment a way out of the debt crisis or constitutional train wreck?
George Washington University law professor Jonathan Turley appeared on Countdown with Keith Olbermann to discuss whether employing Section 4 of the 14th Amendment is a way out of the debt ceiling crisis. [See my previous post "Democrats may declare debt ceiling unconstitutional"] Turley didn't question whether the 14th Amendment could be used but cautioned that it might lead to the equivalent of a constitutional train wreck. Watch his take on the strategy here:
or view here: http://www.youtube.com/watch?v=jopY13psYOY
or view here: http://www.youtube.com/watch?v=jopY13psYOY
Proof: Republicans seek political advantage by keeping economy weak and unemployment high.
Suppose Republicans were really serious about deficit reduction, would they oppose their own ideas about how to bring that about?
Suppose Democrats in budget negotiations agreed to a ratio of spending cuts to tax increases almost identical to the ratio Republicans had previously proposed, would it make sense for Republicans to walk out of negotiations?
That is what happened and it proves that Republicans really don’t want a budget deal to raise the debt limit. Just as Democratic Senator Chuck Schumer and others have said and that we reported here: There is every reason to suspect that Republicans want a second recession and high unemployment because they believe a bad economy will benefit them in the 2012 elections.
See: http://www.thestatecolumn.com/articles/chuck-schumer-republicans-are-opposing-the-economic-recovery/
What’s the proof? Let me begin with something Ezra Klein wrote recently:
A bit more information has trickled out over the last few days detailing the exact state of the budget negotiations when they collapsed. Both sides, as they often said, were shooting for about $2.4 trillion in deficit reduction over 10 years. They'd already agreed on around $1 trillion in spending cuts and were making good progress on the rest of it. But Democrats insisted that $400 billion -- so, 17 percent -- of the package be tax increases. And that's when Republicans walked.
So, the Democrats were proposing a budget deal that consisted of 83% spending cuts and 17% tax increases. Republicans said NO on the spending cuts/tax increases ratio and walked.
Mike Konczal at Rortybomb asks a very interesting question. What is the ideal conservative ratio between spending cuts and tax increase as part of deficit reduction?
Konczal took a look at the March, 2011 Joint Economic Committee (JEC) Republican report, Spend Less, Owe Less, Grow the Economy. As he notes, the report is economic garbage spewed by the right-wing think tank American Enterprise Institute (AEI), but it spells out the Republican position on the proper balance between spending cuts and tax increases in deficit reduction. So, what did they propose? AEI said the best approach would be eighty-five percent spending cuts to fifteen percent tax increases.
So, let’s see:
Republicans propose: 85% Spending Cuts to 15% Tax Increases
Democrats agree to: 83% Spending Cuts to 17% Tax Increases
REPUBLICANS REJECT THE DEAL AND WALK
Does that make sense? In short, Democrats agreed to almost exactly what Republicans had proposed and it still was not enough to even keep them at the negotiating table. Now, why would Republicans categorically reject what is essentially their own idea unless they didn’t really want to reach agreement?
Think about it, if you are in negotiations with someone and you agree to give them just about everything they want and they still reject what you propose, then you can only come to the conclusion that they are not serious about reaching agreement. They don’t really want a deal. That’s the case with Republicans. We can only conclude that they believe they will be better off in the 2012 elections if no agreement is reached, the debt ceiling isn’t raised, the country goes into default and the economy sinks into another recession. In other words, the Republicans are willing to extend and expand economic suffering, simply for political advantage. What other reason could they possibly have for rejecting their own ideas?
Read more:
Republicans warned: Debt ceiling must be raised with tax increases.
World’s top economists send letter urging Congress to raise debt ceiling
235 world economists, including six Nobel Laureates, have sent a letter to Congress urging it to raise the federal debt limit immediately WITHOUT drastic spending cuts. They warn that not raising the debt limit and/or doing so only in exchange for drastic cuts in federal spending could push the United States back into a recession.
The full text of the letter follows:
Dear Speaker Boehner, Minority Leader Pelosi, Majority Leader Reid, and Minority Leader McConnell,
We, the undersigned economists, urge Congress to raise the federal debt limit immediately and without attaching drastic and potentially dangerous reductions in federal spending. Not doing so promptly could have a substantial negative impact on economic growth at a time when the economy looks a bit shaky. In a worst case, it could push the United States back into recession.
The U.S. economy looks fragile at present. Economic growth has been too weak to generate sufficient new job creation. Reaching the limit on total outstanding debt could force a dramatic and sudden cut in federal spending that would destroy jobs and threaten the recovery. To remove spending from the economy at such a pivotal moment would be irresponsible.
Failure to increase the debt limit sufficiently to accommodate existing U.S. laws and obligations also could undermine trust in the full faith and credit of the United States government, with potentially grave long-term consequences. This loss of trust could translate into higher interest rates not only for the federal government, but also for U.S. businesses and consumers, causing all to pay higher prices for credit. Economic growth and jobs would suffer as a result.
Click here to see the full text of the letter and list of signatories.
RELATED DEVELOPMENTS
Obama:
This afternoon Obama told the Republicans their position that they would not accept any tax increases as part of a deal to raise the debt limit was not “sustainable.” He noted that Democrats have been willing to compromise and “move off their maximalist position” and that Republicans needed to do the same.
Obama "If everybody else is willing to take on their sacred cows and do tough things in order to achieve the goal of real deficit reduction, then I think it would be hard for the Republicans to stand there and say that, 'The tax break for corporate jets is sufficiently important that we're not willing to come to the table and get a deal done,' or, 'We're so concerned about protecting oil and gas subsidies for oil companies that are making money hand over fist, that's the reason we're not going to come to a deal. I don't think that's a sustainable position."
International Monetary Fund
The International Monetary Fund warned that “the federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets.”
REPUBLICANS RESPOND—WE DON’T CARE
Republican House Speaker John Boehner responded to “The president's remarks today ignore legislative and economic reality and demonstrate remarkable irony,” Speaker John Boehner said in a prepared statement. “The president is sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the House. The votes simply aren’t there -- and they aren’t going to be there.
“A debt-limit increase can only pass the House if it includes spending cuts larger than the debt-limit increase; includes reforms to hold down spending in the future; and is free from tax hikes," Boehner stated. "The longer the president denies these realities, the more difficult he makes this process. If the president embraces a measure that meets these tests, he has my word that the House will act on it. Anything less cannot pass the House.”
“A debt-limit increase can only pass the House if it includes spending cuts larger than the debt-limit increase; includes reforms to hold down spending in the future; and is free from tax hikes," Boehner stated. "The longer the president denies these realities, the more difficult he makes this process. If the president embraces a measure that meets these tests, he has my word that the House will act on it. Anything less cannot pass the House.”
Wednesday, June 29, 2011
BREAKING NEWS: Greek Parliament agrees to further austerity measures--Avoids default for now
Today, the Greek Parliament by a vote of 155 to 138 accepted a package of austerity measures the European Union was demanding in return for lending Greece $17 billion it needs to pay its expenses through the summer.
Greece avoids a default on its debt for now.
NY Times reports:
Investors had feared that a collapse in Greece might have repercussions throughout the international financial system. Two other European Union countries — Ireland and Portugal — have also turned to international lenders for assistance.
Only one member of the ruling Socialist Party voted against the measure, and one opposition deputy voting crossed party lines to support the measure. (Five others voted present, and two members were absent.)
The measures approved include tax increases, wage cuts and the privatization of 50 billion euros, or about $72 billion, in state assets. A second vote will be held Thursday to enact the measures, with crucial sticking points expected to include the timing of the privatizations, especially of the state electric utility, the Public Power Corporation, whose powerful union has close ties to the Socialists.
BREAKING NEWS: Three judge panel upholds individual mandate in health law
A three judge panel upheld the individual mandate in the health reform law today by a vote of 2 to 1. In its ruling, the U.S. Court of Appeals for the 6th Circuit, based in Cincinnati, said the "minimum coverage provision is a valid exercise of legislative power by Congress under the Commerce Clause" of the U.S. Constitution. This was the first time the health law had been considered at the appellate court level.
Democrats may declare debt ceiling unconstitutional
Reports out of Washington suggest that Democrats are becoming so frustrated with Republicans refusal to negotiate in good faith on the debt ceiling issue that some are beginning to embrace the 14th Amendment, nuclear option I discussed in a previous post and essential ignore the debt ceiling law completely. Some Democratic Senators may hold a news conference on this as early as tomorrow.
As I noted, Section 4 of the 14th Amendment says that the U.S. must pay its bills. It reads:
As I noted, Section 4 of the 14th Amendment says that the U.S. must pay its bills. It reads:
Section 4. The validity of the public debt of the United States, authorized by law… shall not be questioned.
Some legal scholars and journalists have argued that Section 4 makes the whole idea of a debt ceiling unconstitutional. Additionally, some have argued that Congress Implicitly Extended the Debt Ceiling by Approving the Budget. Their argument goes like this:
There are two powers that the Constitution gives to Congress that are applicable here - the power to "borrow money on the credit of the United States" (Article I, Section 8, Clause 2) and the implicit power to appropriate money suggested both by Article I, Section 8, Clause 1 ("The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States") and Article I, Section 9, Clause 7 ("No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law")
The question here is this: would Congress appropriating more money to be spent than is brought in via revenue be an implicit approval that the Treasury should be able to borrow at least that much money?
In other words: wouldn't the very act of appropriating money in a way that would increase the national debt constitute an implicit approval to raise the debt ceiling on the part of Congress?
The question here is this: would Congress appropriating more money to be spent than is brought in via revenue be an implicit approval that the Treasury should be able to borrow at least that much money?
In other words: wouldn't the very act of appropriating money in a way that would increase the national debt constitute an implicit approval to raise the debt ceiling on the part of Congress?
Given the wording in the 14th amendment, not to mention the possible implicit approval by Congress, some now argue that Obama could just ignore the debt limit and pay the bills, regardless of what Congress says.
True, Republicans would scream and very likely launch impeachment proceedings. It is unlikely they could get the Senate to remove Obama from office. Groups or individuals might attempt to take the issue to the courts but there is some question concerning how they would establish standing to sue since it would be hard for anyone to show that they were harmed by the government PAYING its bills. Anyway, a court challenge would probably take months or years and the whole issue would probably be resolved by then.
See my previous post "Is there a Constitutional alternative to default?" for more.
Also, read more here:
71% of Republicans don’t like ANY of the Republican candidates.
71% of Republicans in a new CBS News/New York Times poll say they don’t like any of their current Republican candidates for President and want more choices. Asked which of the current candidates they felt enthusiastic about, 67% said “No One.”
Overall, at this early stage of the election, FEW Americans are enthusiastic about voting. Just 27% are more enthusiastic about voting in the 2012 presidential election compared to past elections. That is about the same as in the fall of 2007. Only 27% say they are paying a lot of attention to the race at this stage.
There does appear to be a voting enthusiasm gap between parties. Republicans are MORE enthusiastic about voting than Democrats just like in 2010. Those who identify with the Tea Party are MORE enthusiastic than Democrats or Republicans at this stage.
Obama’s approval rating remains low (47%) and 52% disapprove of his handling of the economy. However, only 8% blame him for the state of the nation’s economy. Most blame either the Bush administration (26%) or Wall Street (25%).
63% of Americans in the CBS poll say the country is on the wrong track.
Read more here:
Obama leads all GOP opponents in new poll….but
Obama leads all potential GOP opponents in a new McClatchy-Marist poll but 43% of registered voters say they definitely will not vote for him. Only 36% say they definitely will vote for him. Obama would beat Bachmann 49% to 36%. Romney comes closest with 42% to Obama’s 46%.
In the GOP field, Romney leads for the nomination with 19%, followed by Giuliani and Perry (both undeclared) at 13%. Bachmann has only 8%, behind Palin at 11%.
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Tuesday, June 28, 2011
The truth about the debt ceiling debate
Many Americans are confused about the debt ceiling debate that is going on in Washington. So, what’s the real story? What is the debate all about? Why is raising the debt ceiling important? What might happen if the debt ceiling is not raised by August 2nd.
MSNBC recently interviewed Robert Greenstein, President of the Center on Budget and Policy Priorities, on what the debt ceiling is all about and the risks of not raising the debt limit. Greenstein provides one of the best explanations I’ve seen. Here is the interview.
If video doesn't play, click here to see the interview:
http://www.youtube.com/watch?v=YbFs4XUAhP8
If video doesn't play, click here to see the interview:
http://www.youtube.com/watch?v=YbFs4XUAhP8
Republicans support large government, expensive, job-killing E-Verify
Republicans are busy passing anti-Hispanic, immigration laws in state after state. Typically, these laws include a provision requiring businesses operating in the state to use E-Verify, the government’s Internet-based work authorization system; even though it is well known that the system is severely flawed. Republicans say they are the friends of small business. Republicans say they are for smaller government. Republicans say they are opposed to taxes. Republicans say they want to create jobs. So, how well do these goals fit with E-Verify? The Center for American Progress examined the impact of E-Verify on jobs and small businesses. Their conclusion: E-Verify expands the size of government while decreasing revenue, places a crushing burden on small businesses, and imposes a “jobs tax” on ordinary Americans.
Check out their Infrograph below:
CBS Poll: Americans alienated from their government
A new CBS poll shows Americans alienated from their government which most say no longer works for them. Eighty percent say members of Congress are more interested in serving special interests than serving the interest of people who elect them to office. Eighty-five percent say they have too little influence on American life large corporations (75%) and special interests (71%) have too much. Finally, say Americans, the rich benefit most from Federal Government policies.
Read the full results of the poll here: http://www.cbsnews.com/stories/2011/06/27/politics/main20074879.shtml?tag=contentMain;contentBody
Monday, June 27, 2011
BREAKING NEWS: Blagojevich found guilty
Former Illinois governor Rod Blagojevich has been found guilty on 17 of 20 counts of corruption with maximum penalty of 300 years. He becomes the second straight Illinois governor to be convicted of corruption. His predecessor, George Ryan, is serving 6 1/2 years in federal prison.
Social Media—The mind-boggling facts and an equally mind-boggling must-see video.
Here are some mind-boggling facts about social media usage today followed by a link to a video you must see about our changing world.
Did you know?
- Lady Gaga, Justin Bieber and Britney Spears together have more Twitter followers than the entire populations of Sweden, Israel, Greece, Chile, North Korea and Australia
- If Wikipedia.com were made into a book, it would be 2.25 million pages long and would take about 123 years to read
- Social media has overtaken pornography as the top activity on the Internet
- An education study revealed that online students out performed those receiving face-to-face instruction
- Kids in kindergarten now are starting to learn on iPads, not chalkboards
- Facebook tops Google in weekly U.S. traffic, and if the social networking site were a country, it would be the third-largest behind China and India
- 69 percent of parents are "friends" with their children on social networks
- A new member joins LinkedIn every second
- Gen Y and Gen X consider e-mail so passé that some universities have even stopped distributing e-mail accounts
- In April 2011, E-book sales surpassed print book sales in all categories. February 2011 ebook sales were 202.3% higher than in February 2010.
- A baby in Egypt has been named Facebook to honor the social networking site's role in the country's revolution
- Groupon will reach $1 billion in sales faster than any company in history
- 24 hours of video is uploaded to YouTube every minute
- The average kids receives their first cell phone by age 8
- 42% use their phone primarily for texting
- 31% of teens send and receive more than 100 messages per day or more than 3,000 messages a month.
- 15% of teens who are texters send more than 200 texts a day, or more than 6,000 texts a month.
- Boys typically send and receive 30 texts a day; girls typically send and receive 80 messages per day.
- Older girls who text are the most active, with 14-17 year-old girls typically sending 100 or more messages a day or more than 3,000 texts a month.
Click on these links to read more:
Is Deficit Hysteria just a right-wing ploy to defund social programs? You betcha.
Is the Republican deficit hysteria just another right-wing ploy to defund social programs? Joseph Schwartz, Professor of Political Science at Temple University, takes a look at the facts and answers—YES!. In a recent post on Daily Kos, Schwartz makes the following points:
The United States is not broke. The long-term deficit problem has not been caused by wasteful social spending, as the right contends, but by conservatives’ thirty-year project of starving federal, state and local governments of revenue via tax cuts for the affluent and for corporations.
[W]ell over half of the deficit spending from 2008-11 has nothing to do with the Obama administration’s policies. Rather, it is due to the lost revenue from the Bush tax cuts and excessive military spending, including $170 billion per year in “off-budget” expenditures on the unnecessary wars in Iraq and Afghanistan.
The Bush and Reagan tax cuts--which distributed 80 percent of their benefits to the top ten percent of income earners--each cost the federal coffers 2.1% of GDP in taxes per year, for a combined total of $600 billion a year in lost revenue. If we returned effective tax rates to the level of 1960, the federal government would take in $400-500 billion more dollars.
In 1960, corporate taxes constituted thirty per cent of federal tax revenues; today, corporate taxes only make up seven per cent of federal revenues. Thus, returning marginal income and corporate tax rates to those of the Eisenhower era would immediately eliminate most of today’s $1.2 billion federal deficit! Even if we can only reverse the Bush tax cuts on the most affluent 2 per cent (which would yield $70 billion a year in extra revenue) and abolish federal tax expenditures on corporations (such as the oil depletion allowance and the corporate exemption from having to pay taxes on foreign earnings) this would bring in $120 billion per year in revenues. Instituting a modest financial transactions tax of 0.25% on stock, bond, and derivatives trading – the level proposed by the European Union- could bring in another $200-300 billion per year.
The conservative propaganda machine claims that federal and state governments waste huge amounts subsidizing poor people. Yet income support and anti-poverty programs such as Head Start, Food Stamps, and Supplemental Security Income constitute only fourteen percent of the federal budget.
Cash transfers in the U.S. for unemployment insurance, Social Security, day care subsidies and the like amount to only 9 per cent of household disposable income, by far the lowest among the industrialized nations except South Korea. And we also rank next to last among the rich industrial countries in terms of social transfers that benefit the poor. In contrast, we rank first in tax subsidies for the affluent and for corporations.
If we instituted a single-payer Medicare-for-all policy that eliminated the role of private health insurers, we could lower the 25% of private health care dollars spent on health insurance company administration and advertising to Medicare’s seven percent administrative costs.
The next time a Republican/Tea Party nut case starts preaching to you how out of control spending is bankrupting the country, show him this post. Or, better yet send him to Schwatz’s original post here:
Once again: We have a REVENUE problem, not a SPENDING problem. If we fix the REVENUE side of the ledger, we can solve the so-called deficit crisis.
Also, if you want some good ideas for getting the country back on track, take a look at the People’s Budget, here: http://grijalva.house.gov/uploads/The%20CPC%20FY2012%20Budget.pdf
It achieves a budget surplus AND brings debit to below 65% of GDP by 2021 WITHOUT abandoning social safety net programs and destroying Medicare and Social Security.
Sunday, June 26, 2011
Are Republicans sabotaging the economy for political gain? You betcha.
Other bloggers are now beginning to say openly what I’ve been saying all along. The Republicans are willing to sabotage the economy in order to win the White House. Republicans are opposing every initiative that might lead to job growth and are doing all they can to reduce demand further and create more unemployment by insisting on immediate and drastic spending cuts.
Here is a sampling of what bloggers are now saying openly about the Republican conspiracy to undermine the economic recovery.
This from Steve Benen at Washington Monthly:
Republicans said a payroll tax cut would help create jobs, and now they’re opposed to their own idea. Republicans said the Economic Development Administration is great for the economy, and now they’re opposed to that, too. Republicans have traditionally supported infrastructure investment, but the “infrastructure bank” idea appears likely to be killed by the GOP. Many Republicans endorsed the TANF Emergency Fund last year as an incredibly effective method of lowering unemployment, and the congressional GOP killed that, too.
Republicans are blocking qualified Treasury Department nominees who could also be working on economic policy. Republicans are blocking qualified Federal Reserve nominees who could also help improve the economy, while demanding that the Fed do nothing to promote economic activity. The GOP is demanding that Congress and the White House agree to immediately take money out of the economy and eliminate public-sector jobs, even when conservative economists say that’s crazy. What’s more, these same Republican officials have made it abundantly clear that failure to give them the cuts they want would force them to crash the economy on purpose.
And it’s against this backdrop that one of the most powerful Republican officials on Capitol Hill has argued, more than once, that his “top priority” isn’t job creation, but rather, “denying President Obama a second term in office.”
Source: http://www.washingtonmonthly.com/political-animal/2011_06/is_the_answer_to_the_sabotage030503.php
E.J. Dionne, Jr. at The Washington Post says:
Republicans have no interest in moving the nation’s debate toward investments in job creation because they gain twice over from keeping Washington mired in discussions on the deficit. It’s a brute fact that Republicans benefit if the economy stays sluggish. And despite their role in ballooning the deficit during the Bush years, they will always outbid Democrats on spending cuts.
Michael Tomasky of the Daily Beast writes:
It’s about time the Democrats started saying openly what has been clear for months or even years now—that as long as economic recovery would work to the political benefit of Barack Obama, the Republicans have been, are, and will be in favor of sabotaging the economy. Senators Chuck Schumer and Dick Durbin made the point in a press conference in the Capitol Thursday. Noting that his GOP colleagues are coming out against business tax cuts (read that again: Republicans against tax cuts for businesses) that Democrats happen to support, Schumer said, “It almost makes you wonder if they aren't trying to slow down the economic recovery for political gain.” Well, not almost. Certainly. And I don’t “wonder.” I think it’s obvious.
Pessimism Abounds
If you have been feeling a little depressed lately, join the crowd. The Pew Research Center has just released results of a nationwide survey on the views of Americans about the nation’s economy and the status of their own personal fiancés. Americans think the nation’s economy and their own personal finances are only fair to poor. Although, most think their personal finances will improve over the next year, nearly half say they think the national economy is unlikely to get much better. See the chart below for a summary of the key findings from the Pew survey. You can read the complete results here: http://people-press.org/files/legacy-pdf/06-23-11%20June%20Econ%20Release.pdf
As you examine the numbers, note that not much has changed since a similar survey back in October of last year. The lack of improvement can’t help but be a problem for Obama and the Democrats. Pew found that Obama’s approval rating has declined from a high of 56% approval after getting Osama bin Laden to just 46% approval now largely due to this public pessimism about the economy and personal finances. Republicans plan to hammer away at blaming Democrats and the administration for everything wrong with the economy. Expect to hear that Reagan line “Are you better off than four years ago?” over and over throughout the campaign. In fact, Karl Rove’s Crossroads plans to run a $20-million campaign over the next two months "to frame the national debate on jobs, the economy and the national debt in anticipation of congressional action on these issues." In other words, to blame Obama for the nation’s economic woes. There is no word yet how or if Democrats run ads to counter the Rove attack.
Saturday, June 25, 2011
Is there a Constitutional alternative to default?
Obama might have the ability to exercise a Constitutional nuclear option and instruct the Treasury to sell bonds and meet government obligations even if Congress fails to raise the debt ceiling. How? Some Constitutional scholars and journalists say he could invoke the provisions of little known Section 4 of the 14th Amendment. It reads in part:
Section 4. The validity of the public debt of the United States, authorized by law… shall not be questioned.
Garrett Epps is a former reporter for The Washington Post and legal scholar. He teaches courses in constitutional law at the University of Baltimore. In an article that appeared in The Atlantic in April, Epps says Obama could go before the American people and explain that the Constitution explicitly requires him, under his duty to "take care that the laws be faithfully executed," to meet and pay all debts of the United States. He could argue that Section 4 of the 14th Amendment made it clear “that both the monies our nation owes to bondholders, and the sums promised in legislation to those receiving pensions set by law from the federal government, must be paid regardless of the political whims of the current congressional majority. All obligations that the nation has undertaken by drawing on its credit must at all times be rendered current.” He could then announce that he was ordering Secretary of the Treasury Timothy Geithner to immediately begin issuing binding debt instruments on the world market sufficient to cover all the current obligations of the United States government, even in default of Congressional action to meet those obligations.
Default avoided.
See Epps article here:
Bruce Bartlett, Bruce Bartlett, a columnist for The Fiscal Times writing on the blog Capital Gains and Games has proposed that Obama do the same thing in case Congress does not agree to raise the debt ceiling.
See here:
So would this be legal? And, would it be politically smart for Obama? Jonathan Zasloff at SameFacts.com offers these thoughts:
The only Supreme Court case law on it concerned whether government could renege on debts it made (no), and thus whether it applies to non-Civil War debts (yes).
So what’s the argument here? Recall that if there a conflict between statutes, the standard method of resolution is the “last-in-time” rule, i.e. whichever statute was passed more recently wins. The argument is that if Congress approves appropriations after the enactment of a debt ceiling, then it is unconstitutional to refuse to spend money for those appropriations. And the Treasury can’t issue T-bills and then refuse to make good on them. Those are decent arguments, although hardly sure-fire winners. The weakest link in the chain is entitlements, in other words, Medicare and Social Security. Congress enacted those before it enacted the debt ceiling (2006 IIRC), so those might not fall under this interpretation. As I have argued previously, whatever the merits of the claim, it may be that the only body with the authority to challenge a President making the claim would be a Congressional joint resolution, which would be blocked by Senate Democrats.
But here’s the kicker: whatever the legal merits of the 14th Amendment claim, its political virtues are overwhelming. Think about it from John Boehner’s perspective: if he agrees to increase the debt ceiling without significant Medicare cuts from Obama, he’s toast. But if he doesn’t agree to do that, Wall Street and GOP contributors go nuts. What’s he going to do?
And consider it from Obama’s perspective: if he agrees to significant Medicare cuts, he’s toast. But if he doesn’t, and the nation defaults, then the economy goes nuts and his re-election is imperiled.
Now, what if Obama does as Epps suggests and just issues more debt? It’s perfect from his perspective: he doesn’t cave, pleasing his base (and anyone who cares about good policy), while ensuring that there is no default.
But it is also perfect from the Republican leadership’s perspective. They don’t cave; they don’t increase the debt ceiling; and they can rail against Presidential imperialism, Obama’s socialist-Muslim dictatorship, etc. And if I am right about standing, no one ever has to bring this to a head because no one has standing to sue!
What about on policy grounds? That’s also a winner: the United States is the only developed country that requires a legislative vote for this. No problem there.
Read Zasloff’s article here: http://www.samefacts.com/2011/06/politics-and-leadership/the-debt-ceiling-and-the-14th-amendment-everybody-wins/
Of course, if Obama were to take the action these authors suggest, the Republicans might move for impeachment. However, it is doubtful that the Senate would actually remove Obama from office even if the House did impeach. Also, there is the possibility that the matter could be taken to the Supreme Court that could rule against Obama’s interpretation. However by the time the case got to the court the whole matter of raising the debt ceiling would probably have been worked out.
Is Obama likely to exercise this Constitutional nuclear option? Who knows, but it might be a way to avoid default if Republicans remain stubborn and no agreement can be reached.
The best way to fix the deficit may be to do nothing
The non-partisan Congressional Budget Office (CBO) has released its latest long term projections of Publicly Held Debt as a Percent of GDP. Here is the graphic from the GDP report showing the scary prospect that debt as a percent of GDP could reach a totally unsustainable nearly 200% of GDP by 2035. That is the Alternative Fiscal Scenario that assumes the Bush tax cuts and other temporary tax cuts will be made permanent. But, look at the solid blue line. That’s the Extended-Baseline Scenario. It assumes that Congress just leaves everything alone. The Bush tax cuts expire and we don’t tinker with anything. By 2035, our debt is about 85% of GDP, not great but a hell of a lot better than 200%. So, the best way to fix the deficit, or at least not make it much worse, could be to DO NOTHING.
Source: CBO long term budget outlook: http://cboblog.cbo.gov/?p=2317
Dean Baker, co-director of the Center for Economic and Policy Research (CEPR), released the following statement on the latest CBO projections:
"The new long-term budget projections from the Congressional Budget Office (CBO) show once again that the major problem facing the both the budget and the larger economy is out-of-control health care costs, not any inherent fiscal crisis. As was the case last year, the CBO baseline shows that the long-term debt to GDP ratio levels off in the baseline scenario. In the 2011 projections, the ratio of debt to GDP actually begins to decline after the early 2040s. The graph shows the sharp drop in future deficit projections following the passage of the Patient Protection and Affordable Care Act (PPACA) in March of 2010. [Notice the change in CBO projections from 2007 and 2009 compared to 2010 and 2011 in the graph below.]
The Economic Policy Institute had this to say about the latest CBO projections:
[T]he CBO report shows that if Congress simply did nothing new on revenue—in particular, if they did not extend the Bush-era tax changes nor other temporary tax reductions—then the deficit would be on a sustainable path over the 25-year horizon (with debt at a reasonable 84% of GDP in 2035). On the other hand, if we were to continue with current tax policy for the next 25 years, debt would spiral up to nearly 200% of GDP. (Over the long-term, rapidly rising health care costs are another prime driver of deficits, in addition to inadequate revenue.) The contention that revenue should not even be under discussion is at odds with economic reality.
One final thought. Let's assume that not only did we NOT extend the Bush tax cuts but that we did away with many of the tax expenditures/tax breaks that I talked about in a previous post [See Two Deficit Reduction and Job Creation Ideas Well Worth Considering]. Doing these two things along with making some gradual long-term cuts in discretionary spending could put us on track to getting the debt down to 60% of GDP which would be perfectly sustainable. The only reason anyone would consider the kinds of drastic cuts to spending on social safety net programs that the Republicans are insisting on would be if you wanted to destroy those programs. In short, the Republicans are not concerned with the deficit. If they were, they would be doing what I am suggesting. Republicans are concerned with radical social re-engineering. Just like Newt said.
Understanding the individual health insurance mandate
In 2014 when the health reform law goes into affect, you will be required to have health insurance or face a penalty. How will this individual health insurance mandate affect you if it survives court challenges? Will it affect you? What is the penalty for NOT having health insurance? The Kaiser Family Foundation has posted a graphic explaining the individual mandate to purchase health insurance and how will work. Click the link below to see how the individual mandate might affect you and your family.
Friday, June 24, 2011
Manager of largest mutual fund says Republicans wrong about job creation
William H. Gross manages the PIMCO Total Return Fund, the world’s largest mutual fund. In a recent article, he argues that immediate deficit reduction through spending cuts as the Republicans propose will harm the economy, that we need more stimulus and that the government must take a leading role in job creation to the point of the government becoming the employer of last resort if necessary. This is exactly what progressives have been saying and runs counter to everything the Republicans have been saying about the economy and job growth. Gross writes:
Both parties… are moving to anti-Keynesian policy orientations, which deny additional stimulus and make rather awkward and unsubstantiated claims that if you balance the budget, “they will come.” It is envisioned that corporations or investors will somehow overnight be attracted to the revived competitiveness of the U.S. labor market: Politicians feel that fiscal conservatism equates to job growth. It’s difficult to believe, however, that an American-based corporation, with profits as its primary focus, can somehow be wooed back to American soil with a feeble and historically unjustified assurance that Social Security will be now secure or that medical care inflation will disinflate. Admittedly, those are long-term requirements for a stable and healthy economy, but fiscal balance alone will not likely produce 20 million jobs over the next decade. The move towards it, in fact, if implemented too quickly, could stultify economic growth.
What then, shall we do? …[G]overnment must take a leading role in job creation. Conservative or even liberal agendas that cede responsibility for job creation to the private sector over the next few years are simply dazed or perhaps crazed. The private sector is the source of long-term job creation but in the short term, no rational observer can believe that global or even small businesses will invest here when the labor over there is so much cheaper. That is why trillions of dollars of corporate cash rest impotently on balance sheets awaiting global – non-U.S. – investment opportunities. Our labor force is too expensive and poorly educated for today’s marketplace.
In the end, I hearken back to revered economist Hyman Minsky – a modern-day economic godfather who predicted the subprime crisis. “Big Government,” he wrote, should become the “employer of last resort” in a crisis, offering a job to anyone who wants one – for health care, street cleaning, or slum renovation. FDR had a program for it – the CCC, Civilian Conservation Corps, and Barack Obama can do the same. Economist David Rosenberg of Gluskin Sheff sums up my feelings rather well. “I’d have a shovel in the hands of the long-term unemployed from 8am to noon, and from 1pm to 5pm I’d have them studying algebra, physics, and geometry.” Deficits are important, but their immediate reduction can wait for a stronger economy and lower unemployment. Jobs are today’s and tomorrow’s immediate problem.
Are you listening House Speaker John Boehner? Are listening House Majority Leader Eric Cantor? Are you listening House Budget Committee Chairman Paul Ryan? Are you listening Republicans? No, you never listen. You never learn. What you are demanding that we do will harm the country severely and add to the suffering of working Americans. Stop now!
Read Gross’ article here:
The truth about tax increases and job growth—Republicans still wrong
Republicans walked out of the budget talks yesterday saying they would not agree to any deficit reduction plan that included tax increases because tax increases would be job killers and hurt the economy. Cantor said “There is not support in the House for a tax increase, and I don’t believe now is the time to raise taxes in light of our current economic situation.” Speaker of the House John Boehner (R-OH), added “raising taxes is going to destroy jobs. If you raise taxes on the people that we need to grow our economy and to hire new workers, guess what: they’re not going to do it if they have to pay higher taxes to the federal government.”
Pat Garofalo at Think Progress points out that the Republicans need to check the facts and their own party’s history. As Garofalo notes, Reagan raised taxes during seven of his eight years in office in order to reduce the deficit. Republicans at the time opposed the tax increases claiming, like they are this time, that tax increases would result in all kinds of bad things for the economy and jobs. Guess what? The economy grew, inflation stayed low, and the unemployment rate fell. Bruce Bartlett, an economic advisor to both Reagan and George H.W. Bush, said:
“It would be hard to find an economic forecast that was more wrong in every respect“:
Looking at real gross domestic product, it grew 4.5 percent in 1983 and 7.2 percent in 1984 – an exceptionally strong performance. The stock market had one of its best years ever in 1983 – both the Dow Jones Industrial Average and the S&P 500 Index rose 35 percent. There was no increase in the rate of inflation, which was exactly the same in 1983 and 1984 as it was in 1982. The unemployment rate fell from 10.6 percent in December 1982 to 8.1 percent by December 1983 and 7.1 percent in December 1984.
The 1982 tax increase is the largest peacetime tax increase in U.S. history. And the same thing happened around President Bill Clinton’s 1993 tax increase: dire warnings from Republicans about economic Armageddon, followed by a booming economy.
Additionally, when the Center for American Progress compared top marginal rates with economic growth over the last 50 years, they found that lower top tax rates have coincided with weaker growth, while the strongest growth was during periods when the top tax rate was high.
So Republicans were wrong about the impact of tax increases on the economy during the Reagan years and they are wrong now. But, you can’t tell Republicans anything. They are convinced tax increases are always bad in spite of all of the evidence to the contrary. The sad thing is that Republicans are so locked into this Tea Party tax dogma that they are willing to allow the U.S. to go into default and suffer the terrible consequences of doing so that I outlined in previous posts.
See the Think Progress article here: http://thinkprogress.org/economy/2011/06/24/253569/reagan-1982-flashback-economy-boomed/
The dispute between Obama and Congress over Libya and the War Powers Resolution-Who is right?
You have probably heard about the uproar in Congress from both Republicans and Democrats over the issue of U.S. involvement in the Libya and whether Obama has violated the War Powers Resolution. The War Powers Resolution (WPR) is a Vietnam-era statute that requires the U.S. president to:
- Consult with Congress when deploying U.S. armed forces in certain circumstances;
- Give Congress a formal report within 48 hours of certain deployments; and
- Withdraw those forces within 60 days of that report if Congress has not authorized the deployment in the interim or at least extended that deadline (though the President can have an additional 30 days to effectuate the withdrawal if necessary).
The sixty day limit passed more than a month ago and Obama has not withdrawn the troops or sought Congressional approval to continue American involvement in the Libya conflict.
The White House asserts that the WPR clock stopped running on April 7, when NATO took charge of operations and the United States reverted to a primarily (though not exclusively) supporting role. More specifically, the White House contends that in light of these circumstances U.S. armed forces no longer can be said to be engaged in “hostilities” within the meaning of the WPR (“hostilities” being the key term in this context for keeping the clock running). Congress disagrees.
As of now, there doesn’t seem to be any real consensus on who is right about on the issue of whether WPR applies and there appears to be little likelihood that the matter will end up in court.
Today, the House in a rebuke to President Obama, rejected a resolution that would have authorized continued U.S. military operations in Libya for one year. However, a bill to defund military operations in Libya with only a few exceptions failed by a vote of 180 for to 238 against. Most Republicans voted in favor and most Democrats voted against. The issue will most likely never be brought to the floor in the Senate so the House votes are primarily symbolic.
For more on this debate of Libya and the War Powers resolution, read this “Primer” from the Brookings Institution here: http://www.brookings.edu/opinions/2011/0617_war_powers_chesney.aspx?rssid=LatestFromBrookings&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BrookingsRSS%2Ftopfeeds%2FLatestFromBrookings+%28Brookings%3A+Latest+From+Brookings%29
UPDATE: Georgia experiment in having probationers work in the fields was a bust
AP reports Georgia Governor Nathan Deal’s idea of putting probationers in the fields to replace migrate workers, who are avoiding the state because of Georgia’s new immigration law, didn’t turn out so well. Seems the probationers couldn’t take the 90+ degree heat and backbreaking work. "Those guys out here weren't out there 30 minutes and they got the bucket and just threw them in the air and say, `Bonk this, I ain't with this, I can't do this,'" said Jermond Powell, a 33-year-old probationer. "They just left, took off across the field walking."
Benito Mendez , a crew leader on a farm owned by Dick Minor, president of the Georgia Fruit and Vegetable Growers Association, “put the probationers to the test…assigning them to fill one truck and a Latino crew to a second truck. The Latinos picked six truckloads of cucumbers compared to one truckload and four bins for the probationers.”
Looks like Deal is going to have to go back to the drawing board on this one.
Obama within 21 electoral votes of winning re-election says Cook Political Report
The Cook Political Report has posted projections for the 2012 elections. Their Dashboard graphic shows the projected electoral vote count. Right now they have Obama with a lock on 21 votes shy of winning if you count states solid, likely and leaning Democrat. Also, Cook provides projections of the likely outcome of races for the House, Senate, and Governor’s races. Interesting. Check it out.
See the Dashboard here: http://cookpolitical.com/
Americans think they are WORSE off under Obama than Bush
A new Bloomberg poll contains bad news for Obama and the Democrats.
By a 44 percent to 34 percent margin, Americans say they believe they are worse off than when President Barack Obama took office in early 2009, when the U.S. was in the depths of a recession compounded by the September 2008 financial crisis and the economy was losing as many as 820,000 jobs a month.
The gloom covers the immediate future, with fewer than 1 in 10 people expecting unemployment to return to pre-recession levels within the next two years, and it extends to the next generation. More than half of respondents say their children are destined to have a lower standard of living than they do, upending a traditional touchstone of the American Dream.
More bad news. The poll found that the Republican message about tax and spending cuts, which almost all economists say is the wrong thing to do to create jobs, is gaining traction with American voters.
As the public grasps for solutions, the Republican Party is breaking through in the message war on the budget and economy. A majority of Americans say job growth would best be revived with prescriptions favored by the party: cuts in government spending and taxes, the Bloomberg Poll shows. Even 40 percent of Democrats share that view.
Little wonder. It is the ONLY message most Americans are hearing. Republicans continue to preach their poison while Democrats largely sit silent. Could these poll numbers put additional pressure on Obama to cave on the issue of tax increases/cuts in tax expenditures in the budget talks? We'll see.
Read the bad news poll results here: http://www.bloomberg.com/news/print/2011-06-22/americans-worse-now-than-when-obama-inaugurated-by-44-34-margin-in-poll.html
Thursday, June 23, 2011
What could happen if the debt ceiling isn’t increased and the U.S. defaults?
What could happen if Republicans and Democrats can’t reach agreement on the budget, the debt ceiling is not increased and the U.S. government defaults?
Here is what some economists are saying/predicting:
Maury Harris, chief U.S. economist for UBS Investment Bank, and Drew T. Matus, senior U.S. economist,UBS Investment Bank
The U.S. occupies a special place in global finance. The symbiotic relationship between the U.S. dollar as a reserve currency and the U.S. Treasury market’s monopolistic position as the safest, most liquid bond market in the world has served this country well. This unique position has allowed the U.S. to exercise significant authority in the global economy and enhanced its standing as a world power. Even a temporary default would eliminate the safe and liquid nature of the U.S. Treasury market, harming this country’s ability to exercise its power, to the detriment of the U.S. and the global economy.
The main impact on markets would come from sharply reduced liquidity in the U.S. Treasury market, as financial firms’ procedures and systems would be tested by the world’s largest debt market being in default. Given the existing legal contracts, trading agreements, and trading systems with which firms operate, could U.S. Treasurys be held or purchased or used as collateral? The aftermath of the failure of Lehman Brothers should be a reminder that the financial system’s “plumbing” matters. All the legal commitments and limitations in a complex financial system mean a shock from an event that is viewed as inconceivable – such as a U.S. Treasury default – can cause the system to stall. The impact of a U.S. Treasury default could make us nostalgic for the market conditions that existed immediately after the failure of Lehman Brothers.
Moody’s
The U.S. would risk not winning back its top Aaa credit rating soon if a failure by Congress to raise the nation’s debt limit causes even a short-term default, according to Moody’s Investors Service’s senior credit officer.
“Up until now, our assumption was that the risk is virtually zero of them ever missing an interest payment,” Moody’s Steven Hess said during an interview. “If they actually miss a debt payment, then it’s a fundamental change.”
A default stemming from “the debt limit and the political configuration would indicate that, well, this might happen again,” Hess said at Bloomberg headquarters in New York on June 21. “That risk is perhaps not compatible with Aaa.”
Donald Marron is director of the Urban-Brookings Tax Policy Center. He previously served as acting director of the Congressional Budget Office and member of the president's Council of Economic Advisers.
Large swaths of America's financial infrastructure have been built on the assumption that US Treasuries pay on time. And financial markets would likely punish the US with higher interest rates if we defaulted. That's what happened in 1979, for example, when back office snafus caused Treasury to unintentionally miss payments to some investors.
This time, Fitch, Moody's, and Standard & Poors are threatening to cut the US credit rating if we choose to default. Given the risks, most observers recognize that default is not, and should not be, an option. The US is not a deadbeat nation.
America is currently spending about $100 billion more each month than it collects in revenues. If we hit the debt limit, we won't be able to pay everyone who is rightly expecting to be paid.
Geithner can and should ensure that our debtholders get paid.
But someone – perhaps millions of someones – won't be paid on time. Contractors, federal workers, program beneficiaries, or state and local governments will suddenly find themselves short on their cash flow.
BREAKING NEWS: Republicans walk, Budget talks collapse
Other Republicans involved in the budget negotiations to find a way to avoid the U.S. government from defaulting have joined Cantor in walking away from the negotiating table. It is all about protecting the rich from tax hikes and protecting large corporations from losing tax deductions they don't need.
Cantor and Boehner said this:
Cantor and Boehner said this:
"Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue," Cantor said in a statement.
House Speaker John Boehner, the top Republican in Washington, said Democrats must take tax hikes off the table.
"These conversations could continue if they take the tax hikes out of the conversation," Boehner said.
Republicans are demanding that any steps to reduce the deficit must involve ONLY drastic spending cuts and the systematic destruction of entitlement programs and NOT TAX INCREASES or there will be NO deal. Like spoiled children, they are refusing to increase debt ceiling unless they get everything they want.
Read more about the Republican walk out here: http://www.reuters.com/article/2011/06/23/us-usa-debt-cantor-idUSTRE75M3SA20110623
So, what might happen if Republicans don't go back to the negotiating table and we reach August 2nd, the deadline, without an agreement to raise the debt ceiling?
Read this from a previous post:
Robert Reich, former U.S. secretary of labor and professor of public policy at UC Berkeley, spells out the probable scenario in an article today appearing on SFGate, the website of the San Francisco Chronicle.
Reich notes that Treasury Secretary Tim Geithner will have to do everything he can to continue paying interest on U.S. debt and avoid a default that would be truly disastrous for the country and the economy. Reich writes:
The government will have to cut spending by about 35 percent, about $3.8 billion a day. Seniors expecting Social Security and Medicare checks will be in for a rude surprise, as will military personnel and other government workers expecting to be fully paid.
Meanwhile, America’s creditors are likely to become spooked about the risk of not being repaid in the future. As a result, credit markets could go into free fall. Interest rates would skyrocket. The dollar would plummet.
Republicans are prepared to let this disaster happen unless they get everything they want.
Contact John Boehner and tell him its time for Republicans to stop behaving like spoiled brats and get back to the negotiating table. You can contact him here: https://boehner.house.gov/Contact/default.aspx
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