More Entitlements, Less Deficits?

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Today Ezra Klein posted an interesting piece about the Euro crisis that confirms what I have thought for some time.

You may have heard the standard right-wing talking point that the current economic woes in Europe are directly tied to entitlements. Conservatives made a similar claim about the US deficit, which is why we’ve been talking about that side of the equation instead of higher taxes until recently (thank you OWS).

Both claims, of course stretch the truth — a lot.

The economic downturn (due to the subprime mortgage disaster) and tax cuts for the wealthy are the prime factors in the US deficit.

Entitlements are also not the boogeyman in the European crisis.

Klein’s piece, “A larger welfare state can mean a lower deficit” highlights the case of Germany, which has a hefty welfare state — but didn’t suffer from any of the problems faced by Greece and other Euro-zone countries:

Take Germany. They have a pretty big welfare state: pensions, health care, paid vacations, unemployment benefits equal to two-thirds of one’s income. Indeed, the Organization for Economic Cooperation and Development keeps track of social spending — unemployment, old-age pensions, health care, etc — as a percentage of GDP. In 2007, Germany spent 25.2 percent of their GDP on such things. Greece spent 21.3 percent on social policies. Yet Greece is in crisis, and Germany is fine.

In fact, the reality is that a single-payer healthcare system — like the one in Canada — controls costs and actually reduces the deficit.

As recently as 1965, the cost of those two systems competed neck-and-neck. That year, Canada spent 5.9 percent of its GDP on health care. The United States spent 5.7 percent. But around that time, Canada was transitioning to its current single-payer system. Over the next four decades, the growth of health-care costs slowed in Canada while it accelerated in the United States. By 2009, Canada was spending 11 percent of its GDP on health care — and covering everyone. The United States was spending 17.4 percent of its GDP and leaving 45 million uninsured. In dollar terms, we’re spending $3,600 more per person, per year, than Canada.

I’m not an economist, but there seems to be some consensus in the articles that I have read that what Klein states is true.

I have seen no convincing evidence that European woes are principally caused by entitlement spending.

In fact, Klein makes a good argument that a strong healthcare system could act as a bulwark against deficit:

If the United States had Canada’s health-care system, and Canada’s per capita health-care costs, we would have a much “larger” welfare state, but we wouldn’t have a deficit problem. Assuming we weren’t spending that money elsewhere, we wouldn’t even have a deficit. Likewise, if any country in the euro zone maintained the United States’s health-care system and our health-care spending, it would have a smaller welfare state, but it would be sagging beneath a debt burden far more onerous than anything anyone in Europe is facing today.

-Chris

Related articles

• Contrary To Republican Rhetoric, Europe Is Not In Trouble Because Of Spending And Debt (thinkprogress.org)
• The European Debt Crisis in Three Graphs (bostongazette.wordpress.com)
• A Bankrupt Uncle Sam Hypocritically Lectures Europe On Debt (forbes.com)

Basic Math

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“It is mathematically impossible to invest enough in our economy and our country to sustain the middle class (our customers) without taxing the top 1 percent at reasonable levels again” – Venture Capitalist Nick Hanaeur

Hanauer has put his name on a growing list of 1 percenters who are boldly stating what most economists already recognize.

Writing on Bloomberg’s website, Hanauer observed:

We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

A new post on ThinkProgress.org reports that even someone in the belly of the beast, Morgan Stanley Chief Financial Officer Ruth Porat, has awakened to this reality:

“The wealthiest can afford to pay more in taxes. That’s a part of the deal. That makes sense. I don’t know anyone that doesn’t agree with that,” Porat said. “The wealth disparity between the lowest and the highest continues to expand, and that’s inappropriate.” “We cannot cut our way to greatness,” she added.

I hope this is the dawning of a new capitalist idea.

We have lived too long in the shadow of timid CEOs and their sycophants who look no further than the next quarter.

In order for capitalism to be sustainable, a robust middle class must exist.

The article goes on to note that one of the major factors driving income inequality is the outrageous compensation and bonuses given to the top tier of huge corporations.

Instituting practices that reward performance and sustainability would go a long way toward creating a healthy economy.

-Chris

Related articles

• Morgan Stanley Executive Calls For Higher Taxes On The Rich: ‘We Cannot Cut Our Way To Greatness’ (thinkprogress.org)
• Silicon Alley Insider: Venture Capitalist Shreds The Idea That Taxing The Rich Is A Job Killer (businessinsider.com)
• Millionaire Nick Hanauer Shoots Down Neil Cavuto’s Straw Men as He Explains Why His Taxes Should be Raised (crooksandliars.com)
• Who creates jobs? The middle class (dailykos.com)
• Study backs up “Buffett Rule” claims (cbsnews.com)

Robert Reich has a Sensible Plan

Economist Robert Reich has a sensible plan to fix our deficit and debt woes.

In a November 19 post, Reich gives the following advice to the Deficit Supercommittee (which has since disbanded, after failing to reach an agreement):

1. Make no cuts before unemployment is back under control (down to 5%).

2. Make the boost big enough. We need a huge jobs program with components like the New Deal’s Civilian Conservation Corps and Work Progress Administration to restore our infrastructure.

3. Raise taxes on the super rich and tax all income (capital gains included) at the same rate. Restore the tax structure to pre-1980 levels and put a 2% surcharge on income over $5 million.

4. Cut the real welfare — military spending and corporate subsidies. Savings = $400 billion annually.

Reich’s closing plea, of course,  fell on deaf ears:

Do you hear me, Washington? Do these four things and restore jobs and prosperity. Fail to do these, and you’ll make things much, much worse.

Unfortunately, there’s not a chance any of this will get through in this political climate.

It seems like we are constantly in a battle to mitigate damage from bad policy and those actively on a misguided crusade to make things much worse, and not making any headway in actually fixing the problem.

-Chris

David Brin’s Take on Income Inequality

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I recently discovered David Brin‘s Blog, Contrary Brin.

Some good stuff there, covering a gamut from lists of good science fiction books for teens to a post eviscerating Frank Miller’s “The 300” in response to Miller’s nasty swipe at the Occupy Wall Street protesters.

Part of his post over the weekend concisely addressed the income inequality that has grown over the past 30 years in this country:

* Ask your “ostrich” friends: “Tell us how to avoid “class war” now that 400 families own a greater share of our wealth than 50% of Americans. Is there some disparity that would finally make you worry? When they own more than 75%…Perhaps more than 90%? WHEN will you admit that we’ve returned to the normal condition that reigned in 99% of human cultures? Then will you admit that FDR wasn’t Satan, or that our parents in the “greatest generation” weren’t complete idiots, after all?”

He’s promised to take on the film version of Atlas Shrugged and Avatar, which should be interesting.

I highly recommend taking a look!

-Chris

Contrary Brin.

Low Expectations for State of the Union

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I don’t have any great expectations for the State of the Union address tomorrow night.
Paul Krugman has been critical of the signalling coming out of the White House:
The Competition Myth

Robert Reich has a blog summarizing how our country got to it’s current state and what the president should do about it:
The State of the Union: What the Presideny Should Say

There’s much truth in what both of these economists say.

But Obama has spent much of his time trying to appease business interests and surrounding himself with the movers and shakers from the very corporate enclave that helped create our current economy.

It’s not clear exactly what helpful policies will be allowed to see sunlight in a setting in which the president is bending over backwards to satisfy big business.

-Chris

Related Articles

• Report: Obama to Call for New Investments in State of the Union (news.firedoglake.com)

Deficit Reduction and Social Security

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In reviewing the proposal by the president’s bipartisan deficit reduction committee, there is one portion that I cannot disagree with more.

To be sure, this is a serious proposal, with pain all around, but the delay in benefits for Social Security recipients until the age of 68 is wrong, wrong, wrong.

I have always been a huge advocate of the much-derided lock box for Social Security.  The current system is solvent until 2037, but will rack up huge losses going out to 75 years from now.

Treating Social Security as just another part of the overall budget is one of the accounting tricks that have gotten us into this mess to begin with.

This is the first year since the 1980s that the Social Security will start paying out more than it has taken in.

This is due to the large number of Americans expected to retire. The 75 year shortfall is calculated at $5.3 trillion. Insurmountable, right?

Wrong.

Senate report says tweaks can sustain Social Security

Social Security faces a $5.3 trillion shortfall over the next 75 years, but a new congressional report says the massive gap could be erased with only modest changes to payroll taxes and benefits.

There are a few options to fix Social Security:

1. Increase the age where retirees qualify (as proposed by the committee)
2. Curb cost of living adjustments
3. Raise payroll taxes on EVERYONE

Social Security isn’t an “entitlement”. Everyone pays into it. It is an insurance policy that provides a modest safety net for retirees.

I agree with this letter writer to the Baltimore Sun on this point:

Cutting Social Security benefits is as bad as raising taxes

Social Security is said to be an “entitlement,” but the difference between an “obligation” and an “entitlement” is just a matter of point of view. Those of us who have been paying into the Social Security system for years are entitled to our promised benefits. The U.S. government is obligated to keep its promises.

Social Security and it’s problems should be addressed separately from the concerns of the burgeoning Federal deficit.

For too long, legislators have counted on being able to dip into the Social Security revenues to work their accounting magic and prop up a wasteful budget.

It’s long past time to end that practice.

-Chris

Related Articles

• Cenk Uygur: Cutting Social Security is the New TARP (huffingtonpost.com)
• Deficit Targets: Social Security, Mortgage Breaks (abcnews.go.com)

Deficit Rhetoric vs. Action

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Two articles came to my notice today concerning the deficit.

The big news was that Obama’s bipartisan commission on the deficit released their report on cutting the budget deficit:
Panel Weighs Deep Cuts in Tax Breaks and Spending

The lead:

A draft proposal released Wednesday by the chairmen of President Obama’s bipartisan commission on reducing the federal debt calls for deep cuts in domestic and military spending starting in 2012, and an overhaul of the tax code to raise revenue. Those changes and others would erase nearly $4 trillion from projected deficits through 2020, the proposal says.

The recommendations are dead, dead, dead.

Why?

The plan would reduce Social Security benefits to most future retirees — low-income people would get a higher benefit — and it would subject higher levels of income to payroll taxes to ensure Social Security’s solvency for at least the next 75 years.

Italics are mine.

These are the tough choices that country faces, and this is a serious proposal to fix what’s broken. Politically, however, it’ll never fly.

The plan calls for a simplification –and tax cuts across the board– by cutting many popular tax loopholes. The overhaul of the tax code would net a projected $80 billion in 2015.

On the other hand, the Tea Party poster boy, Rand Paul, can’t specify exactly what he would do to slash the deficit:

In Tense Interview With Spitzer, Rand Paul Can’t Name Specific Cut To Balance Budget

Spitzer asked Paul to name specific programs he would cut from health care, Social Security, or defense. But Paul demurred, explaining that he would offer a balanced budget in the next Congress — over 1, 2, 3, 4 and 5 year increments, but was still unsure of what to cut to get there. At one point, Paul even suggested that rather than pressing him for specifics, Spitzer should invite liberals and ask “how do you continue to have these programs?”

In other words, complete and utter bullshit.

Serious debate about the deficit is important, but for the Tea Party crowd, allegedly fueled by their deep concern about the deficit, have absolutely no plan to make things better.

It reminds me of the Monty Python skit, “How To Do It”:

Simplistic solutions to complex problems with no understanding and no hard work — that’s the stock and trade of the Tea Party and the Republicans who are trying to channel their activism to continue their campaign to reward the wealthy.

Bolstered by their midterm wins, there’s little hope that the Tea Party Republicans will negotiate in good faith to address the deficit.

Many of them have expressed publicly and privately that they do not want Obama to have a legislative win that he can run on in 2012, so they are quite content to do absolutely nothing and block everything.

We’ll see how it plays out, but it doesn’t look promising.

-Chris

Related Articles

• Is Anyone Serious about Cutting the Deficit? (cbsnews.com)
• Deficit Panel Calls For Social Security Cuts (oliverwillis.com)
• Ira Glasser: Calling the Republican Bluff (huffingtonpost.com)

Elections, Money and Citizens United

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I watched for two years the coming of the slow-motion train wreck that was Tuesday’s mid-term election.

Of course, the right is crowing that this is a repudiation of liberals and liberal ideology, which of course is wrong.

If this were true, the Blue Dogs would have sailed to reelection, and progressives would have all gone down hard. Instead, it seems progressives did better than the conservative/corporate toadies who call themselves Dems:

Progressives Fare Better Than Blue Dogs In Contested Races

Of the 54 seats occupied by members of the Blue Dog coalition, 27 of them were lost to Republicans. (That includes five held by incumbents who either retired or ran for the Senate.) On the other hand, all but three of the much larger group of Progressive Caucus members up for re-election won their seats, including six out of nine caucus members whose races were rated as competitive.

If anything the elections were the result of these things:

1) The timidity of the Democrats — and their inability to put their message out (and highlight their accomplishments)
2) The shit-ton of money poured into campaigns by secretive, unaccountable front groups in the light of the Citizen’s United Supreme Court ruling. Release the Kraken, indeed.

The New York Times has the critical article on this.
“Outside Groups on the Right Flexed Muscles”

While it is hard to sort out the exact difference they made, their success rate, particularly in races in which Republican challengers would have otherwise been badly outgunned, raises the prospect that a relatively small number of deep-pocketed donors exerted an outsize influence on Tuesday’s results.

Yeah. Classic understatement.

The principle right-wing shadow organ has been the hilariously misnamed US Chamber of Commerce. I’ve written about them before, and they look to be one of the most powerful money-laundering outlets for the Bankster set.

As a side note, I find it hilarious the way right-wing nutbags snarl the name “George Soros” (who funds liberal organizations) but can’t find their voice to say anything about Richard Mellon Scaife, the Koch Brothers, front groups like the US Chamber and media vampire Rupert Murdoch.

Until a way is found to get the oversized influence of huge multinational (and in many cases, foreign) money out of the election process, this country is on the fast march to Fascism.

The unbridled celebration of corporatism is about to begin, and the faith of the true believers is unlikely to be broken by any disaster visited upon us as a result.

If these deluded hordes could be swayed by reality, the BP disaster, Mortgage catastrophe and Enron certainly would have done the trick.

The inestimable Bill Moyers recently gave a speech honoring the late progressive historian Howard Zinn. Entitled “Welcome to the Plutocracy”, it should be read by anyone who gives a shit about this country.

The elder statesman of a dead art (journalism) crafts a lesson filled with all the history needed to highlight the consequences of the regressive direction American voters just chose.

Moyers captures the moment perfectly:

Now let’s connect some dots. While knocking down nearly all limits on corporate spending in campaigns, the Supreme Court did allow for disclosure, which would at least tell us who’s buying off the government. Senate Republican Leader Mitch McConnell even claimed that “sunshine” laws would make everything okay. But after the House of Representatives passed a bill that would require that the names of all such donors be publicly disclosed, McConnell lined up every Republican in the Senate to oppose it. Hardly had the public begun to sing “Let the Sunshine In” than McConnell & Company went tone deaf. And when the chief lobbyist for the Chamber of Commerce was asked by an interviewer, “Are you guys eventually going to disclose?” the answer was a brisk: “No.” Why? Because those corporations are afraid of a public backlash. Like bank robbers pulling a heist, they prefer to hide their “personhood” behind sock masks. Surely that tells us something about the nature of what they’re doing. In the words of one of the characters in Tom Stoppard’s play Night and Day: “People do terrible things to each other, but it’s worse in places where everything is kept in the dark.”

In the short term, I am extremely interested in how the alleged principles of the Tea Party zealots breaks against the wall of corporate adulation that is the Republican party.

I’ll be crying into my popcorn as I watch.

-Chris

Related Articles

• Texas millionaire gives $7 million to GOP group (salon.com)
• Senate Elections: Democrats Take Losses But Hold Upper Chamber (huffingtonpost.com)
• More than half the Blue Dogs are out (dailykos.com)

Plutocracy ascendent

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In the wake of the Citizen’s United ruling by the Supreme Court, unlimited amounts of cash are polluting our election campaigns and buying politicians wholesale.

Robert Reich had a nice piece on his blog Monday about the “Perfect Storm” that threatens our democracy:

“The Perfect Storm”

He hits all the bases:

• The top one-tenth of one percent of Americans now earn as much as the bottom 120 million of us
• Hundreds of millions of dollars are pouring into campaigns with no accountability whatsoever
• a handful of front groups is laundering the money, and some have taken donations from foreign companies
• Most Americans are in a bad position (unemployment, debt, mortgages) and taxes are rising and services are being cut
• Infrastructure is crumbling
• Politicians refuse to take the most modest step of restoring taxes for top earners (who are now “burdened” with the lowest taxation in 80 years)

Reich comments:

We’re back to the late 19th century when the lackeys of robber barons literally deposited sacks of cash on the desks of friendly legislators. The public never knew who was bribing whom.

Reich is right. And there doesn’t seem to be any hope in sight.

I have no choice but to agree with his gloomy conclusion:

The perfect storm: An unprecedented concentration of income and wealth at the top; a record amount of secret money flooding our democracy; and a public becoming increasingly angry and cynical about a government that’s raising its taxes, reducing its services, and unable to get it back to work.

We’re losing our democracy to a different system. It’s called plutocracy.

-Chris

Related Articles

• Defining Oligarchy (brighthub.com)
• A Lesson From The Grapes of Wrath (lewrockwell.com)
• Plutocracy, the Wealth Gap, and Income Inequality (coconuter.blogspot.com)

“US” Chamber’s Foreign Masters

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Think Progress has continued hammering on this important story.

The organization that purports to represent “small businesses” has already been caught taking money from foreign companies to use in ads in US elections.

Now The Chamber has been revealed holding seminars overseas to help enable US companies to more easily outsource jobs to say — China:

‘US’ Chamber of Commerce Hosts Seminars with Chinese Government Officials To Teach American Firms How To Outsource

If you need further evidence of whose interests the heavily-funded Chamber reflexively protects, look no further:

Below is an invite to an event sponsored by the right-wing billionaire Sheldon Adelson, inviting local businesses in Florida to come to Jacksonville and learn about outsourcing from Chinese government officials like Li Haiyan, the Counselor for Economic Affairs for the People’s Republic of China, U.S. Chamber lobbyist Joseph Fawkner, and BChinaB, a firm that specializes in helping American firms outsource their manufacturing jobs to China.

How does this help the small businesses the Chamber repeatedly invokes whenever they are criticized?

It doesn’t.

And as the DailyKos reported today, politicians (especially Republicans) have been caught carrying the water of the Chamber and their foreign benefactors

This cannot be overstated enough: the very next day after his self-labeled “Beijing fundraiser,” [Il-R Congressman] Mark Kirk voted against closing the tax loopholes that encourage corporations to ship American jobs overseas to countries like China.

 

-Chris

Related Articles

• Chamber’s true agenda: Corporate profits through outsourcing (dailykos.com)
• IL-Sen: Kirk fundraised in China, then voted to ship jobs overseas (dailykos.com)
• 84 additional foreign companies caught donating over $800k to Chamber of Commerce acct. used for US elections (americablog.com)

This cannot be overstated enough: the very next day after his self-labeled “Beijing fundraiser,” Mark Kirk voted against closing the tax loopholes that encourage corporations to ship American jobs overseas to countries like China.

This is –what do you call it? An issue. Democrats could run on this. If they can break the thrall of corporate cash.

-Chris