December 15th, 2010 · Comments Off on Moody’s: Bring It On!
Yesterday, as reported in Money News, Moody’s made me laugh, with the following pronouncements:
” . . . it could move a step closer to cutting the U.S. Aaa rating if President Barack Obama’s tax and unemployment benefit package becomes law. . . .
“The plan agreed to by Obama and Republican leaders last week could push up debt levels, increasing the likelihood of a negative outlook on the United States rating in the coming two years . . .
“A negative outlook, if adopted, would make a rating cut more likely over the following 12-to-18 months.
“For the United States, a loss of the top Aaa rating, reduce the appeal of U.S. Treasurys, which currently rank as among the world’s safest investments.
“From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth,” Moody’s analyst Steven Hess said in a report sent late on Sunday.”
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December 15th, 2010 · Comments Off on The National Debt Is Congress’s Fault! Redux
The national debt exists today because when the nation went off the Gold Standard in 1971 and adopted its present non-convertible fiat currency system, Congress did not repeal its mandate requiring that the Government back all its deficit spending with already existing borrowed dollars whose convertibility was covered by our holdings of Gold. This Congressional mandate to borrow funds by issuing debt instruments, has caused the national debt to persist. Had Congress repealed it when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our 1971 debts as they came due, and our national debt today, as well as our debt-to-GDP would both now be at Zero. So, the existence of the National Debt today is Congress’s fault! [Read more →]
December 15th, 2010 · Comments Off on The National Debt Is Congress’s Fault!
I’m sick and tired of hearing progressive icons like Bernie Sanders, Keith Olbermann, Ed Schultz, and many, many others, talking about the evil of leaving an enormous national debt, now at $13 Trillion plus to our Grandchildren. And I’m especially tired of hearing Congresspeople and Senators complaining about this. The reason why I’m tried of hearing it is that it is Congress’s fault that we have a national debt at this point in our history. And also Congress can largely get rid of this debt over a 10 year period any time it wants to. [Read more →]
December 15th, 2010 · Comments Off on Congressional Progressives: Make ‘Em End Debt Issuance!
There’s a flood of reaction out there among Progressives and other Democrats criticizing the recent “tax deal” on grounds that President Obama was rolled again and got far too little for his agreement to extend the Bush Tax Cuts for the wealthy, and agree to Estate tax rates of 35%. I share that opinion. But since a) the Democrats have steadfastly refused to use the constitutional option to get rid of the filibuster, b) the Republicans in the Senate will certainly prevent any legislation from being passed this month without a tax cut deal, and c) the unlikelihood that a Republican House will pass an extension of the middle class tax cuts without also passing the tax cuts for the wealthy, the Democrats still need a deal this month if they want to get unemployment insurance extended and other legislation passed.
So what should they to do? Well, for starters, the House and Senate Democrats could send the Republicans and the President back to the negotiating table with some instructions about what else they want in order to make a deal. The most important price they can make them pay in return for the tax cuts for the wealthy they want so much is an end to debt issuance. Why is an end to debt issuance so important? Here’s why: [Read more →]
December 15th, 2010 · Comments Off on I Shared My Thoughts with Organizing For America
Today I was favored with a message from Organizing for America (OFA). They asked me to listen to a video clip from the President explaining the deal he made with the Republicans. The President spent a lot of time explaining the process he’s gone through and the constraints he’s under, and what it was possible for him to do under the circumstances. He presented himself as being in a politically weak position in which he could only make an unpalatable compromise in order to “get something done” for the American people and those among us who are really hurting economically.
The OFA message asked me to share my thoughts after I listened to the President. So, I did this and also thought I would share them with you. Here they are. [Read more →]
December 15th, 2010 · Comments Off on Throwing Savers Under the Bus?
In a reply to my post on a progressive deficit reduction plan, a commenter suggested that holding Federal interest costs at the rate of .0226 in the coming years would “crush” retirees and savers, and throw them under the bus. Presumably, the commenter feels the same about the possibility I brought up of eliminating interest costs entirely by ceasing to issue debt instruments.
I think good answers to concerns like these about the Government limiting or ceasing to issue debt involve highlighting what other uses there are for the $11.8 Trillion we would save off CBO-based projections. Here’s one argument based on what else we would do with that money. [Read more →]
December 14th, 2010 · Comments Off on A New “Progressive” Deficit Reduction Plan
Even though I deny that there is a deficit/debt/debt-to-GDP ratio problem, I thought I’d get in on the fun everyone is having this month and offer my own deficit reduction plan. It prescribes 1) Keeping average interest rates at 0.0226; 2) finding a way to increase the growth in nominal GDP from an average annual change ratio of 1.044 (CBO’s assumption about growth) to a more historically (since 1940) typical average annual change ratio of 1.072.; and 3) putting a stop to increasing health care costs by passing Medicare for All immediately. The first two changes would result in deficit reductions in CBO-based projections of $8.3 Trillion from 2011 to 2020. The absolute value of the national debt increases from $9.2 Trillion in 2010 to $10.7 Trillion in 2020, and the debt-to-GDP ratio declines from 69% in 2010 to 37% in 2020. [Read more →]
December 14th, 2010 · Comments Off on The “Progressive” Give-Up Formula Is Alive and Well In the Latest Deficit Reduction Plans
Self-styled “progressive organizations” and commentators have been releasing their own deficit reduction plans in reply to the plans released by Erskine Bowles and Alan Simpson, Alice Rivlin and Pete Domenici, and The Peterson-Pew Commission. These new plans, were released by the Institute for America’s Future, Citizens Commission on Jobs, Deficits, and America’s Economic Future and Our Fiscal Security, a collaboration of Demos, the Economic Policy Institute, and The Century Foundation (TCF). The first, “Report and Recommendations of Citizens Commission on Jobs, Deficits, and America’s Economic Future” was written by Jeff Madrick with contributions from Roger Hickey, R. J. Eskow, Robert Borosage, Dean Baker, Robert Kuttner, Robert Pollin, and other unnamed Commission members. The second, “Investing in America’s Economy: A Budget Blueprint for Economic Recovery and Fiscal Responsibility” was written by Becky Thiess and Andrew Fieldhouse, both of EPI, with contributions from Heather McGhee (Demos, Defense Spending), Maggie Mahar (TCF, Health Care), and Josh Bivens (EPI and relating public investments to economic growth). The report was also written under the guidance of Greg Anrig (TCF), Tamara Draut (Demos), and John Irons (EPI). [Read more →]
November 24th, 2010 · Comments Off on The Real Solution to the REAL Fiscal Sustainability/Fiscal Responsibility Problem
In a recent post I wrote about “The Real Solution to the Fiscal Sustainability Problem.” But I was just kidding, folks. That was a solution only for people who think that Fiscal Sustainability means controlling the growth of the national debt, and stabilizing and reducing the debt-to-GDP ratio. That view of Fiscal Sustainability, however, doesn’t trace the connection from a coherent idea of fiscal sustainability to the national debt and the debt-to-GDP ratio. So, let’s start from such a view and see where it leads us. Fiscal Sustainability is:
the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purposes.
If you don’t agree with that definition, then propose another; but it seems clear to me that when people say that Federal spending is unsustainable, they’re saying that there’s something about that spending or its impact that undermines the future capability of the Federal Government to keep spending. If they’re saying something else, I’d be happy to learn what that is if someone will enlighten me. As for including “public purposes” in that definition, I did that just to emphasize that Government spending is always supposed to be aimed at purposes that the public endorses and/or thinks is valuable, and at nothing else.
So, if you can accept this or a similar definition of fiscal sustainability, then please note that it can be consistent with worries about debts, and debt-to-GDP ratios; but only if the Government’s ability to spend is operationally limited by its ability to tax or to borrow. If it could not tax or could not borrow any additional money to use to increase spending to accomplish its public purposes, it would be true that any short-term increase in spending that outran its ability to gather revenues over time would be “fiscally unsustainable.” [Read more →]
November 24th, 2010 · Comments Off on The Threat to Open Society and the Interactive Voter Choice System
The biggest problem for Americans in our time is the increasingly dangerous threat to open society posed by the trend toward plutocracy and its effects on the political system. George Soros described the antecedents of these threats in The Age of Fallibility (pp. 100-101):
“Gradually, the methods developed for commercial purposes found a market in politics. This changed the character of politics. The original idea of elections was that candidates would come forward and announce what they stood for; and the electorate would decide whom they liked best. The supply of candidates and the preferences of the electorate were supposed to be independently given, just as in the theory of perfect competition. But the process was corrupted by the methods adopted from commercial life: focus groups and framing the messages. Politicians learned to cater to the desires of the electorate instead of propounding policies they believed in. The electorate did not remain unaffected. They chose the candidate who told them what they wanted to hear, but at the same time they could not avoid noticing that they were being manipulated; they were not surprised when their elected leaders deceived them. But there was no escape. The increasing sophistication of communication methods was built into the system. That is how America became a feel-good society. It was fostered by politicians seeking to be elected.”
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