It’s Not a Fiscal Cliff, It’s an Austerity Crisis

It’s Not a Fiscal Cliff, It’s an Austerity Crisis

Washington is not known for the stunning clarity with which it frames and addresses tough issues. But has there ever been a debate so mired in confusion as the one around the so-called fiscal cliff?

The trouble starts with the term “fiscal cliff,” which misstates the nature of the problem and provides no hint of how to solve it. I prefer the term “austerity crisis,” which at least describes the real issue -- too much austerity, imposed too quickly. (This has the added advantage of sidestepping an increasingly inane discussion over whether the problem is really a “cliff,” “curb,” “slope” or perhaps a “bomb.”)

Here is the crux of it: Depending on what you throw into the pot, the sum of the expiring Bush tax cuts along with currently mandated spending cuts would equal somewhere between $500 billion and $700 billion in deficit reduction in 2013. That’s more than enough fiscal contraction to throw the U.S. into recession. The tax increases alone would reduce the average family’s take-home pay by more than 6 percent. Because everyone agrees that’s a bad thing, Congress could pass a law, tomorrow, preventing it. Done.

But Congress won’t pass that law. Although the problem may be too much austerity too quickly, most everyone in Washington is insisting that the solution should encompass much, much more. In theory, this crisis should be easily resolved: If you have too much austerity, lighten the load. The reason the austerity crisis has become so messy is that the connection between the problem and its solution has been severed.

Wrong Solutions

In fact, proposed solutions inevitably include four or even five distinct categories of policy. There are proposals to address the crisis itself -- to reduce the dangerous size and speed of the scheduled deficit reduction in 2013. There are proposals to replace the scheduled deficit reduction with a different set of deficit-reducing tax increases and spending cuts, to be phased in over a longer term. There are policies to redesign the tax code or reform certain entitlements. There’s the need to raise the debt limit, as the Treasury is expected to run out of borrowing authority in February. Finally, there are policies to increase the amount of short-term stimulus and boost infrastructure investment.

So while the proximate problem is too much austerity, too quickly, the solutions being offered address an array of other concerns. Meanwhile, amid these wide-ranging proposals, the conversation in Washington tends to focus exclusively on achieving deficit reduction -- even though the economic threat we face in January is too much deficit reduction.

A more sensible approach would deal directly with the problem at hand: the austerity crisis. And that could be defused fairly simply, without doing overly much to harm the deficit. The path would involve identifying policies that pack a big stimulus punch without significantly increasing the deficit. Such “mismatched” policies abound.

The liberal Economic Policy Institute estimates that continuing the payroll-tax cut would create 1 million jobs in 2013 at a cost of about $115 billion. By contrast, maintaining the Bush tax cuts -- yes, all of them, including those on income less than $250,000 -- would create only 600,000 jobs while costing $202 billion. Adding to the appeal of the payroll- tax cut is that it’s designed to expire once the economy has strengthened. The Bush tax cuts, once renewed, will probably continue costing the Treasury year after year.

This is what the public sees - we have to make balancing the budget a top priority and we have to make massive spending cuts. You know why the public sees the fiscal "cliff" in that frame, because the media have become hand maidens for the radical Right conservatives. Conservatives do not want to admit that we have a revenue crisis, another way of saying austerity crisis - because that would point to one somewhat simple solution -raising revenue from taxes on people who have so much money they ponder how many McMansions they feel like owning or whether they should have the chauffeur wash the Mercedes seven days a week or just every week day.

Paying Workers at Big Retailers Like Walmart Something Closer to a Living Wage is Good For Everyone

Paying Workers at Big Retailers Like Walmart Something Closer to a Living Wage is Good For Everyone

Chances are you missed this particular bargain on Black Friday: Agree to spend 15 cents more on every shopping trip, and Walmart, Target, and other large retailers will agree to pay their workers at least $25,000 a year.

Big box retailers aren't actually offering that deal, but a new study by the liberal think tank Demos argues that it would be a great bargain for us all if they did. Increasing the average wage at large retailers from $21,000 to $25,000 would probably cost you less than $20 a year at the register yet lift some 1.5 million people out of poverty (including your cashier), create 100,000 new jobs, and boost GDP by some $13.5 billion.

Demos argues that retailers would benefit, despite higher labor costs, because their low-wage employees could suddenly afford to buy more of the basic necessities that they scan and load into plastic bags every day.

If you are still wondering what's in it for you, however, then consider this tidbit from Sasha Abramsky:

    In 2004, a year in which Walmart reported $9.1 billion in profits, the retailer's California employees collected $86 million in public assistance, according to researchers at the University of California-Berkeley. Other studies have revealed widespread use of publicly funded health care by Walmart employees in numerous states. In 2004, Democratic staffers of the House education and workforce committee calculated that each 200-employee Walmart store costs taxpayers an average of more than $400,000 a year, based on entitlements ranging from energy-assistance grants to Medicaid to food stamps to WIC—the federal program that provides food to low-income women with children.

Seen through this lens, the worker protests that erupted after Thanksgiving at Walmart locations around the country might end up being the best Black Friday specials of them all. Think of them as 2-for-1 coupons: Spend more on wages now, improve the economy AND save us all lots of tax money down the road—money that we can spend instead on more important things, like, well, parachutes for our cats.

 Big box retailers like Walmart, Target, Best Buy and even upscale retailers like Macy's have a  not so rare disease called near-sighted tunnel vision. They see quarterly profit statements and bonuses dancing like Christmas faeries, they do not see the USA as a community writ large and what is best for the community in the long run.

The Laughable Myth That Taxes and Regulations Are Hurting Economic Recovery: Bank Profits Rebound To 2006 Levels, But Bankers Still Complain About Regulations

The Laughable Myth That Taxes and Regulations Are Hurting Economic Recovery: Bank Profits Rebound To 2006 Levels, But Bankers Still Complain About Regulations

In the last four quarters, the six largest Wall Street banks have made $63 billion, the most they’ve made since 2006. Despite having pushed the nation to the brink of economic collapse, and after receiving billions of taxpayer dollars, the banks are back to where they were when the housing bubble inflating.

However, according to Bloomberg News, a return to sky-high profits isn’t enough for the banking industry, which reacted to the numbers by whining about regulation and “a backlash against bankers“:

    Those billions of dollars in profits aren’t enough, according to interviews with more than a dozen bank executives and analysts. The lowest leverage in a decade, return on equity at a third of 2006 levels, higher capital requirements, shares trading below book value, declining bonuses, job cuts, the European sovereign-debt crisis and a backlash against bankers have damped the joys of profit, they said.

These six banks — Citigroup, Bank of America, JP Morgan Chase, Wells Fargo, Goldman Sachs, and Morgan Stanley — “will have combined profits of $9.9 billion in the third quarter, $17.4 billion in the last three months of the year and $75.8 billion in 2013? according to estimates. “When the banks say, ‘We’re doing very well but not getting a return on our capital,’ it’s completely incomprehensible, and it’s angering to the average American,” said Michael Greenberger, a former regulator who now teaches at the University of Maryland’s law school.

The banks’ return to massive profitability also refutes the argument that the Dodd-Frank financial reform law will cripple the ability of financial services companies to make money. According to a recent study, the nation’s banks went right back to making risky loans after receiving their taxpayer-funded bailout.

Higher taxes have actually helped with past economic recoveries.

Excellent satire on the Romney mentality: A manifesto for the entitled

Paul Ryan Fears the 30 Percent

RERUN: Fox, Carlson, Drudge Attacked Obama's Hampton Speech Five Years Ago. Carlson, Fox, Drudge and Hannity have hyped so much pure bullsh*t that has hurt America, one wonders how they can possibly think of themselves as patriots. Yet they never apologize or correct themselves. It is always onward to the next faux scandal, the next set of immoral lies, the next wave of racist tinged talking points.

Why Does millionaire hedge-fund manager, the Anti-American Robert Mercer and his pal Republican House candidate radical Randy Altschuler Hate America

Why Does millionaire hedge-fund manager, the Anti-American Robert Mercer and his pal Republican House candidate radical Randy Altschuler Hate America

Robert Mercer, the millionaire hedge-fund manager has been a consistent funder of right wing causes. In recent years, the co-CEO of Renaissance Technologies has bankrolled an Islamaphobic effort to stop a Muslim Community Center in New York City, given $1 million each to the pro-Mitt Romney Restore Our Future super PAC and Karl Rove’s American Crossroads, and spent $200,000 on ads against Rep. Peter DeFazio (D-OR), an advocate for more regulation of hedge funds. Now, public disclosure forms reveal he is the main benefactor for a new super PAC helping to elect New York Republican House candidate Randy Altschuler.

Prosperity First Inc. registered in April as a super PAC and reported on its July quarterly report that it had raised $635,500 in its first three months in operation. Of that, a whopping $500,000 came from Mercer. Until this weekend, it was unclear what Prosperity First would do with the money. Friday, the group reported its first $273,472 independent expenditure — an ad supporting Altschuler. This expenditure — the vast majority of which was funded by Mercer — is in addition to a pair of $2,500 contributions directly from the hedge-fund millionaire to Altschuler’s official campaign. In the post-Citizens United world, wealthy donors like Mercer can legally circumvent the legal limits and attempt to buy elections for their favorite candidates.

Why would Mercer spend so much to elect this candidate? After narrowly losing in 2010, Altschuler is again challenging Rep. Tim Bishop (D-NY). One key difference between the two candidates is their view on Wall Street regulation: Bishop voted for the Wall Street Reform and Consumer Protection Act of 2009 (commonly known as Dodd-Frank), while Altschuler blasted the law as a “flawed piece of legislation” that would “kill jobs and shrink tax revenues for New York State.” Renaissance Technologies did not much like the bill’s regulations for hedge funds — the company has spent over $1 million since the start of 2010 on federal lobbying including a significant focus on Dodd-Frank’s hedge-fund provisions.

Altschuler promises that if elected, he would “roll out the red carpet” for businesses like Renaissance Technologies, instead of “red tape.” He says he will make the elimination of what he calls “job-killing government regulations” a priority. Altschuler’s let-business-do-whatever-it-wants approach would probably be good for the bottom line for hedge-fund millionaires like Mercer — though they would likely not be so good for consumers anxious to avoid a repeat of the 2008 financial sector meltdown. For a person who earns $125 million in one year, the Supreme Court’s effective elimination of campaign finance limits may have made buying a House seat — or several — a legal and doable proposition.

The USA lost about $17 trillion dollars in wealth from 2007 to 2008 thanks to anti-American sleazebags like Mercer and Altschuler. If they hate America so much, if things are so terrible here for millionaires, they can afford to move to anywhere they like.

His Royal Highness Mitt Romney Wants To Be President So He Can Give Himself an $80 Million Dollar Tax Cut

His Royal Highness Mitt Romney Wants To Be President So He Can Give Himself an $80 Million Dollar Tax Cut

The U.S. tax code may be difficult to grasp, but understanding the presidential candidates' plans for it doesn't have to be. President Obama wants to raise his own taxes, while Mitt Romney wants to dramatically reduce the already small slice he pays to Uncle Sam.

Of course, that simplification doesn't shed light on just how dramatic President Romney's windfall for his family would actually be. Mitt's plan, which the nonpartisan Tax Policy Center forecast would cut taxes for the richest five percent of earners while increasing the tax bill for the other 95 percent of Americans, could slash his own annual IRS payment by almost half. And by eliminating the estate tax, the $250 million man would potentially divert $80 million (and possibly more) from the United States Treasury to his own heirs

On Friday, Governor Romney defended his mystery finances, declaring, "I have paid taxes every year. A lot of taxes. A lot of taxes." But when he announced Sunday that he wants "something dramatic" to boost the economy, he must have been speaking about his own.

Here's why.

At the end of 2012, the Bush tax cuts of 2001 and 2003 will expire. Among other changes to the tax code, President Obama wants to let the top 35 percent tax rate for income over $250,000 to return to its Clinton-era level of 39.6 percent and implement the Buffett Rule guaranteeing millionaires pay a minimum 30 percent effective tax rate. Obama would also end the "carried interest exemption" that allows Mitt Romney and other similar financiers to pay under 15 percent to Uncle Sam each year. In contrast, Romney would not only make the Bush tax cuts permanent, but deliver a 20 percent across-the-board tax cut. Upper income taxpayers would not only see their rate slashed to 28 percent, but would benefit by the elimination of the Alternative Minimum Tax (AMT).

While conservatives and their friends in the media have decided we have a deficit problem, we in fact still have a revenue problem. They are at their lowest level since the Reagan years - the last time we had a major recession. The major reason conservatives want to frame the issue this way is to make everyone believe we can cut spending to balance the budget. The only way to do that is to gut the safety net programs like Medicare.

Why Does Mitt Romney Want To Restrict Voting Rights For More Than 900,000 Ohio Veterans?

Scott Brown (R-MS) has a well deserved reputation for being lazy. So lazy that he is letting his buddies at the Anti-American Fox News do his attacking for him, REPORT: Fox Spends Over 43 Minutes Smearing Elizabeth Warren. Why is Scott Brown afraid of doing his own dirty work. Would making these kinds of false smears ruin little Scotty's fabricated image as a nice guy.

For Capitalism and Democracy to Survive America Must Let Go of Economic Policy that Entrenches Poverty, Coddles the Wealthy

For Capitalism and Democracy to Survive America  Must Let Go of Economic Policy that Entrenches Poverty, Coddles the Wealthy

As much as they claim to loathe government, right-wing policy makers adore government assistance to the nation’s superrich.

The economic policies, including weakened regulation of the financial industry, pushed by a party that has become behold to the superrich ushered in the Great Recession and the gaping economic inequality that the nation seems to be slowly awakening. Yet likely not fast enough. The number in poverty is on track, The Associated Press reported in July, to reach “levels unseen in nearly half a century,” and wiping out gains to lessen poverty that were seen in the 1960s. These economic policies center on tax cuts for the wealthiest, dwindling social services, along with weak regulation of the financial industry.

“The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year,” Columbia Business School Professor Joseph Stiglitz wrote last year. “In terms of wealth rather than income, the top 1 percent control 40 percent.”

Stiglitz noted in the same article how woefully out touch the wealthiest are – they can take care of themselves just fine and are numb to the plight of a family of three that must somehow survive on an annual income of less than $38,000.

So what can be done to reverse the situation? It appears rather hopeless, since the superrich are also the most powerful and have been able to keep alive the economic policies that have benefited them at a great cost to everyone else. During this year’s ACS National Convention Peter Edelman, a Georgetown University law school professor and longtime advocate for the nation’s most vulnerable said the shrinking middle class must become far more vocal in calling for an end to disastrous economic policies.

In a recent op-ed for The New York Times, Edelman , also chair of the ACS Board, said we know “what we need to do – make the rich pay their fair share of running the country, raise the minimum wage, provide health care and a decent safety net, and the like”

But to do all those things, Edelman said the people in the middle must vote in way that represents “their own economic self-interest.” In other words the middle class needs cease identify with the super wealthy. As long as people in the middle identify more with people on the top than with those on the bottom, we are doomed,” he wrote.

In his Times’ op-ed Edelman sounds a positive note, citing the Progressive era and actions following the Great Depression, in the effort to push economic policies that advance the fortunes of many people.

But the work is daunting. The nation’s social safety net, as Edelman and others have long noted has taken a beating due to right-wing economic policy. In his new book So Rich, So Poor, he details the devastating impact to minorities and single parents that a tattered social safety net has wrought.  

Stiglitz noted a year ago in his Vanity Fair article that the powerful few often stand in the way of policy that would improve the lives many more people. But they do so at their peril. “The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live,” he wrote. “Throughout history, this is something that the top 1 percent eventually do learn. Too late.”

Why does how many of the middle-class identify with the interests of the 1%. Some studies have shown that many of the middle-class think that some day if they work hard they will be part of that 1%. Yet the data suggest the chances of moving up the economic ladder - something Americans took for granted from the FDR administration through at least the 1990s - is no longer the norm. Because politicians cater to the 1% that is how economic policy is slanted.

Poor guy who dared punk Chik-fil-A over its hateful policies was fired and is getting death threats.

Rupert Mudoch's Anti-American Fox Evening News Show Lies About Military Voting In Ohio. A new conspiracy myth that Obama is trying to keep the military from voting early. A complete lie. Ohio has tired to make it harder for seniors, students and minorities to vote and that is a violation of federal law.

I can describe Mitt Romney’s tax policy promises in two words: mathematically impossible.

Mitt Romney, Like The Republican Party is Out to Destroy Capitalism

Mitt Romney, Like The Republican Party is Out to Destroy Capitalism

Mitt Romney touts his business acumen and job-creation record as a key qualification for being the next U.S. president.

What’s clear from a review of the public record during his management of the private-equity firm Bain Capital from 1985 to 1999 is that Romney was fabulously successful in generating high returns for its investors. He did so, in large part, through heavy use of tax-deductible debt, usually to finance outsized dividends for the firm’s partners and investors. When some of the investments went bad, workers and creditors felt most of the pain. Romney privatized the gains and socialized the losses.

What’s less clear is how his skills are relevant to the job of overseeing the U.S. economy, strengthening competitiveness and looking out for the welfare of the general public, especially the middle class.

Thanks to leverage, 10 of roughly 67 major deals by Bain Capital during Romney’s watch produced about 70 percent of the firm’s profits. Four of those 10 deals, as well as others, later wound up in bankruptcy. It’s worth examining some of them to understand Romney’s investment style at Bain Capital.

In 1986, in one of its earliest deals, Bain Capital acquired Accuride Corp., a manufacturer of aluminum truck wheels. The purchase was 97.5 percent financed by debt, a high level of leverage under any circumstances. It was especially burdensome for a company that was exposed to aluminum-price volatility and cyclical automotive production.

Casino Capitalism

Forty-to-one leverage is casino capitalism that hugely magnifies gains and losses. Bain Capital wisely chose to flip the company fast: After 18 months, it sold Accuride, converting its $2.6 million sliver of equity into a $61 million capital gain. That deal, which yielded a 1,123 percent annualized return, was critical to Bain Capital’s early success and led the firm to keep maximizing the use of leverage.

In 1992, Bain Capital bought American Pad & Paper by financing 87 percent of the purchase price. In the next three years, Ampad borrowed to make acquisitions, repay existing debt and pay Bain Capital and its investors $60 million in dividends.

As a result, the company’s debt swelled from $11 million in 1993 to $444 million by 1995. The $14 million in annual interest expense on this debt dwarfed the company’s $4.7 million operating cash flow. The proceeds of an initial public offering in July 1996 were used to pay Bain Capital $48 million for part of its stake and to reduce the company’s debt to $270 million.

From 1993 to 1999, Bain Capital charged Ampad about $18 million in various fees. By 1999, the company’s debt was back up to $400 million. Unable to pay the interest costs and drained of cash paid to Bain Capital in fees and dividends, Ampad filed for bankruptcy the following year. Senior secured lenders got less than 50 cents on the dollar, unsecured lenders received two- tenths of a cent on the dollar, and several hundred jobs were lost. Bain Capital had reaped capital gains of $107 million on its $5.1 million investment.

It always seems that some essential ingredients are missing from how conservative Republican views capitalism versus moral patriotic Americans. Romney and conservatives are out to exploit the system, to plunder, to sneak around ethical concerns, to undermine competitive markets - to create loads of money for themselves by any means necessary. Normal patriotic capitalists see the free market as a place to compete - to offer goods and services at competitive prices. To engage in meaningful dignified employment. To enjoy our families and lives.To buy the basics like food, shelter and clothing to provide the basic comforts. Republican believe in making America into a kind of corporate collective - a weird mirror image of Marxism - with the corporate lite at the top, and the powerless workers below.


Romney's 'Free Stuff' Speech Is a New Low