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About this blog: The Raucous Caucus shares the southpaw perspectives of this Boomer on the state of the nation, the world, and, sometimes, other stuff. I enjoy crafting it to keep current, and occasionally to rant on some issue I care about deeply...  (More)

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Mudbath, Redux?

Uploaded: Jan 16, 2013
Well, I was all set to write something about Executive Orders, and how there have been almost 14,000 of them -- hoping to comfort the nervous and/or trigger-happy. Those Orders have covered a huge range of topics, and have been used for both good -- desegregation of defense plants during WWII comes to mind -- it was a factor giving impetus to the post-war civil rights movement, and ill cleared the way for relocation of Japanese Americans into internment camps at Manzanar, CA and elsewhere in the west. Some have been found unconstitutional by the Supremes in the ordinary course of separation-of-powers processes (e.g., Truman's seizure of the steel mills). They are not all that unusual -- Presidents Bush2 and Obama have issued them at about the same rate (290 vs. 145).

But there's this semi-solid we've stepped-in, again, and once it's on your shoe, it demands attention.

The now-familiar pungency of the debt-ceiling mess has returned in earnest. To review, Congress votes to authorize payment of Past government spending, when those invoices take the total national debt above a set threshold. That threshold has been raised 74 times since 1962, including 18 times under President Reagan.

The first 73 of those times were completely uncontroversial -- for better or worse, We-the-People had incurred those debts; all that this vote meant was that we, via the federal government -- would continue to be good for them. To personalize the situation, remember that stupid boat you bought, or the time-share you never used? You still had to pay for them, even as you resolved to spend smarter in the future. Well, it's a lot like that here: invading that country might not have been the best idea, in retrospect, but when the trillion-dollar bills for it come due, they must be paid. Past bills you pay; future bills you may choose to avoid. To renounce those past bills would not make us Greece, but far worse: the Greeks, at least, are not dead-beat debtors.

The 74th ceiling increase authorization was in 2011, you may recall, and it was astonishing in its absurdist theatre. The House, led by Tea Party insurgents, demanded Future spending cuts in return for their acquiescence in paying our Past obligations, many of which, of course, they themselves had voted-for. Intrinsically meaningless, the "crisis" set the stage for the "fiscal cliff" calamity just witnessed, it cost $2 Billion in higher near-term borrowing costs (a non-partisan GAO number) and is projected to cost $20B by the time its effects work their way entirely through the system. All that unnecessary expense -- in the name of lowering the cost burden of the federal government? Congrats, gents and ladies.

So, since even flatworms learn from pain, surely we won't repeat such tomfoolery. Except that we are back, precisely where we were, with the GOP curiously demanding Future spending cuts in return for their agreement to allow us to pay our Past bills. They are again holding the full faith and credit of the United States hostage to their demands -- which is tantamount to holding a gun to their own heads. (Trigger, please?)

The President has said, sensibly, that the decision of whether to pay our Past bills is distinct from what we will choose to spend Next Year, and the outcome ought to be clear -- of course we should pay our bills. Everybody in Congress voted for something in the Past spending now due. Further, he has chosen the tack of attempting to shame The Shameless, saying this week that he will not ransom the nation's credit rating; rather that he expects the Congress to do the right thing, or face the wrath of We-the-People in 2014.

I think there's risk in that tack, as the Congressional districts have been gerrymandered to the point of being remarkably safe for incumbents, regardless of their sanity (Cf. Bachmann, Michele). Much of the heartland is as red as the coasts are blue, and it's not clear to me that there will be a tide in 2014 that sweeps out the recalcitrants. Expecting statesperson-like behavior from a group that has never so much as won a seat at the adult table is to court severe disappointment, and another gridlock. I fear this tack leads to the falls.

Put a kinder, gentler way, I think the Tea'd-up Republicans believe they were sent to Congress to upset the status quo; to borrow a phrase from strange bedfellow Malcolm X: "by any means necessary." If those means include taking every advantage, and making every element of the nation's economic life more austere, while holding center stage on its dog-with-a-bone issue, then those are good things that will eventually wean us away from the deficit-spending habit. If their heels are dug-in, we may be headed for another credit downgrade, and even a government shut-down before somebody blinks.

That means that social security checks, veterans' benefits, unemployment comp and food relief for the 20 million Americans who remain without work, and everything else the feds spend money on will be delayed. Millions of our fellow citizens will suffer in colder, hungrier circumstances. Will any of them think that's worth it, to make a point? If it comes to a government shutdown, I know precisely whose paychecks I want held-up first.

Of course, on a macro scale, a protracted stand-off also portends problems for the fragile recovery that so far continues a-shaky-pace. It is funded, in part, by government spending that makes-up for tepid private sector demand. If, indeed, the feds have to hold back or cancel spending for want of authority to undertake it, lay-offs will resume, and the ship of state will slide back toward recession. Will that be worth it, to make a point?

If the President is to succeed with his "let's be adults and do the nation's business" strategy, he will have to stay Way out in-front on this issue, maintaining its framing as above, and not allowing Messrs. McConnell and Boehner to conflate Past spending we owe and Future spending we don't owe in the public perception as they are busily trying to do. If it again descends into a mud bath, well, as my Mama used to say, "Son, never get in a fight with a pig. You'll both get equally dirty, and the pig is having fun."

I hate to write this, but I think we're in for a stupidly bumpy ride...again. If the flatworms ever organize a political party, I'm in.
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Posted by Tom Cushing, a resident of Alamo,
on Jan 17, 2013 at 7:11 am

Carp -- the DX syntax doesn't like "number signs," apparently, as it deleted them from paragraph one, along with the number of each EO referred-to.

In case anyone is keeping score at home, No. 8802 desegregated the defense plants, No. 9066 authorized internment and No. 10340 nationalized the steel industry, very temporarily, as it turned-out (the case of Youngstown Sheet & Tube v. Sawyer overturned it in short-order).

Posted by C. R. Mudgeon, a resident of Danville,
on Jan 17, 2013 at 11:36 am

It's worth repeating (or recalling) that in the vast majority of cases, proposed spending cuts by Republicans (even the most "draconian" ones) aren't even true spending cuts. Instead they are reductions in budgeted spending increases. If we merely froze discretionary spending (ignoring for the moment social security and medicare), we could grow ourselves into lower annual deficits over time. But this is apparently too radical of an idea.

Obviously it is impossible to ignore social security and medicare, but the solutions to those programs are more complex than a simple spending freeze. (And also more subject to reasoned debate.)

Many libs are fond of pointing out that previous Republican presidents have had large annual deficits during their terms (especially the dreaded Ronald Reagan and even-more dreaded George W. Bush). But even in the fantasy world of politics, annual deficits that exceed $1 trillion ($1,000 billion), such as has happened in each of the past four years, are demonstrably worse than $500 million annual deficits, which was about as bad as it got under Bush (roughly speaking, twice as bad....).

The CA situation in the wake of the Prop 30 tax increase is illuminating. If the optimistic projections for increased tax revenue prove true, yes, we will come close to having a balanced budget over the next two years. (Jerry Brown says we actually WILL have a balanced budget next year, but has pulled some accounting tricks and deferred some things to make this "happen".) But what doesn't get much mention is that state spending is projected to increase by 22% over the next two years!

Basically, when tax revenues are down, we incur large debts. When tax revenues are up, we decide that this will continue forever, and spend every penny. Then we wonder "what happened?" when the next drop of revenue occurs (not just due to the next economic downturn, but due to the fact that the Prop 30 tax increases go away after 4 years). Under what dream-world rationale are we deciding to spend 22% more in 2014, than we spent in 2012? And this is before a super-majority of Dems in the state legislature, with no restraints, decides to go after a bunch of new pet projects and programs....

Reducing spending (which is really just limiting the increases) IS essential (at both the federal and state level). And to the extent that the debt ceiling provides a bit of leverage to achieve federal spending cuts, I applaud the effort. For ALL of our sakes, especially for the sake of our children and their children, who don't deserve to be saddled with the massive debt that the current generation of politicians is peddling.

Posted by C. R. Mudgeon, a resident of Danville,
on Jan 17, 2013 at 11:49 am

Added comment on my post above. Yes, I know I was mixing CA state-level issues with the federal debt ceiling. It was just as an example of a lack of fiscal responsibility, that seems relevant.

At the federal level, one of the points I was trying to make is that merely freezing discretionary spending would accomplish a significant amount of deficit reduction, independent of doing anything with respect to Social Security and Medicare.

If I were president (or "king"), I'd go deeper than that, and my "starting point" for negotiations would be across-the-board cuts of 1% annually in discretionary spending. Spending more than this slowly-declining discretionary budget level in any particular area would require an offsetting additional cut in another area. This would include the military. THEN we can have the debate about what's more important.

Does anyone really think that a 1% cut (2013 versus 2012) in real spending would be "the end of the world as we know it"? You could find this much waste in ANY federal government function just by throwing darts. BTW - this was the gist of the Connie Mack "penny plan".

But even the most aggressive spending "cuts" that are currently being proposed don't even come close to cutting as much. That's how bogus the "we can't cut that!" claims are.

Posted by Enough!, a resident of Danville,
on Jan 17, 2013 at 11:03 pm

Stop entitlements! Now we have large numbers of people coming in on "refugee" status. They can even bring in relatives with special needs who are given a gov check! Then the parent of the special needs kid gets another gov check to "take care" of the relative!!! I know of such a family from Eastern Europe who are now buying a house! money...ain't it wonderful? Wake up people!!!

Posted by Tom Cushing, a resident of Alamo,
on Jan 19, 2013 at 8:08 am

Hi CRM: thanks for commenting.

On your deficits comment, I would separate the Reagan and Bush deficits completely. The former, driven by dramatically increased defense spending, helped pull the country out of a nagging, if mild recession (by today's standards). It also contributed to the USSR's throwing-in the towel on the Cold War -- pretty good return on that investment!

Bush2's deficits, however, were of the kind you deplore in your second-to-last paragraph -- they were incurred in good economic times and made no sense, especially when you are fighting, but not paying-for, one or two $1T/year foreign wars. Those deficits were both over-spending and tax-cut-based, and doubled the national debt from its previous level.

Obama's deficits Have been twice as big, but, like Reagan's, they are designed, intended, and widely credited with supplying both relief and demand that is pulling the economy out of the catastrophic recession he inherited. A "Hoover Solution" applied in 2008 would, in my view, have tipped the world economy into a severe Depression, and you and I might've been in those soup-lines.

I agree with you that the problem with Keynesian solutions is Not that they don't work on the downside -- they do -- but that we forget to pull money back out on the upside to pay-off those deficits -- every time. We can't let that happen this time -- and still I'd argue that it's too soon to dial back. I'd like to see another year of recovery to be certain that it has truly taken root -- AND most importantly, put some of our 20-million fellow citizens who are still out-of-work back into gainful, prideful, contributing employment.

I'll be accused of only lip-service concern for The Debt, but I think it's a problem -- a big problem that should color everything we do, but only a problem. Jobs remains the number one concern and it remains a crisis, in my view. I think we're insulated from it here in our valley and region, and that's one more blessing we ought to count on a daily basis.

The "1% solution" idea has a certain charm, but it's a frustrated substitute for judgment, because it's based on the proposition that all departments are managed equally well -- or badly. I'm guessing you've run enough commerce to know that that's just never the case -- some managers add value and others squander it. House-clean, by all means -- but isn't it better to KAATN where they ought to be kicked?

Posted by Dave, a resident of Danville,
on Jan 22, 2013 at 1:32 pm

Tom -

You mention Bush's spending on two wars as driving the deficit budgets during his time in office (and, I would argue, still contributing to current deficits through increase carrying costs of debt incurred then, and through care for our veterans, which will continue for years). True.

But, we can't overlook the huge contribution to the budget deficits in those years from the Bush tax cuts, which largely benefited the wealthy and which represented a massive transfer of wealth from the poor and middle class to the wealthy.

Posted by spcwt, a resident of Danville,
on Jan 22, 2013 at 4:40 pm

A tax cut for the rich is not a ?transfer of wealth? from the poor to the rich.

Money belongs to the people who earn it.

Perhaps you?re confusing America with another country where everyone owns wealth collectively.

Posted by Dave, a resident of Danville,
on Jan 23, 2013 at 12:54 pm

Shifting the burden of who pays the taxes required to operate our government (including the costs of ill-advised wars) is the same as a transfer of wealth from one group of people to another. Some people get to keep more of their earnings; others keep less. Basic economics, spcwt. I'm sure you studied a little economics before pursuing your law studies and tax law practice.

Posted by spcwt, a resident of Danville,
on Jan 23, 2013 at 2:42 pm

Your argument might make sense if there had been a dramatic rise in taxes paid by the poor and middle class. But taxes on the poor and middle class are the lowest they?ve been in decades. Web Link

Meanwhile, the poor and middle class continue to receive way more financial benefits than they pay into the system. For example, the average retiree today collects more than $100,000 in Medicare benefits than they pay into the system. Web Link

It?s the poor and middle class who enjoy the great transfer of wealth. They?re getting a free lunch, complements of taxes paid by the rich and federal borrowing. They?re not paying near enough taxes to account for all the financial benefits they receive.

And the rich are paying a lot of taxes. As an example, you saw Phil Mickelson, the golfer, say this week that he?s paying a 63% combined federal & state tax rate on his golf earnings. Web Link

And why do you keep bringing up those stupid wars? You know I was against those.

Posted by Tom Cushing, a resident of Alamo,
on Jan 24, 2013 at 4:41 pm

It should always be remembered that ol' S-P makes his living making impossible arguments seem plausible, and he uses this forum to keep his mental skills sharp.

There is simply no doubt that since the 1980s, American worker productivity has continued to rise steadily, and yet median family income has fallen-off that steady slope and stagnated. Check-out this graph: Web Link

So, where did all the pay-off for all that increased productivity go?

According to the Center for Budget and Policy Priorities, in 2007, the share of after-tax income going to the top 1 percent hit its highest level (17.1 percent) since 1979, while the share going to the middle one-fifth of Americans shrank to its lowest level during this period (14.1 percent).

Between 1979 and 2007, average after-tax incomes for the top 1 percent rose by 281 percent after adjusting for inflation ? an increase in income of $973,100 per household ? compared to increases of 25 percent ($11,200 per household) for the middle fifth of households and 16 percent ($2,400 per household) for the bottom fifth.

Two-hundred and eighty-one percent. Inflation adjusted. Versus 25% over that same 27 years.

As Mark Twain said: "Figures don't lie ..."

The real problem with this is, of course, that it's not sustainable -- unless the MC regains some of its former buying power, it just won't be able to buy all that Chevron gasoline, and everything else. Of course, the 1% will still have that accumulated wealth back on which to fall, and taxed at an average of 17% of into the indefinite future.

Posted by spcwt, a resident of Danville,
on Jan 25, 2013 at 8:48 am

Aren?t you conflating increased productivity with the creation of wealth?

Shouldn?t you instead look at how U.S. GDP is divided up?

Isn?t the dramatic increase in wealth of the 1% largely due to their participation in GDP growth of foreign countries rather than the 1% claiming a larger slice U.S. GDP?

Why should American workers deserve a slice of the wealth generated from products made overseas, sold in foreign markets to foreign customers, protected by foreign laws, delivered to market by foreign infrastructure?

Since 1980, haven't U.S. wages largely kept pace with U.S. GDP?

Posted by Tom Cushing, a resident of Alamo,
on Jan 25, 2013 at 10:26 am

Looks to me like it fell from a high of 54% in 1970 to 43% now -- that's a pretty big drop and far from staying even ... Web Link

Anyway, I want credit for making the GOP back-off, at least a little, and decide to use the debt limit much less suicidally. Your capital gains income should thank me. ;-)

Posted by spcwt, a resident of Danville,
on Jan 25, 2013 at 3:46 pm

Yes, good thing the GOP listened to you. See how important your blog is to the fate of humanity?!!

Your chart shows that from the end of the recession of 1980 until the recession of 2007, wages as a percentage of GDP remained around 46% - 47%. So, basically, for the past 30 years, the amount of U.S. GDP allocated to labor has remained constant. Rich people aren't taking money from the poor Americans! They're creating wealth by expanding into foreign markets, helping create wealth there, new customers, selling to hundreds of millions of new middle class folks in China, India, and Brazil, etc.

Obviously, that?s not good enough. We need better paying jobs here and a better educated workforce. There is a lot of work to do. But we can?t wish globalization away or pretend it?s still 1950 when the U.S. labor force was young and was the only major economy unscathed by war. Those were blessed times, unique in world history.

Also, according to the OECD, one of the main reasons average household income isn?t higher is due to the dramatic rise in single family households. People are choosing to divorce or never to marry. Those choices result in increased poverty. That's something people can fix by altering their personal choices and lifestyles.

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