How The Austerity Class Rules Washington

by Ari Berman

In September the Committee for a Responsible Federal Budget (CRFB), a bipartisan deficit-hawk group based at the New America Foundation, held a high-profile symposium urging the Congressional “supercommittee” to “go big” and approve a $4 trillion deficit reduction plan over the next decade, which is well beyond its $1.2 trillion mandate. The hearing began with an alarming video of top policy-makers describing the national debt as “the most serious threat that this country has ever had” (Alan Simpson) and “a threat to the whole idea of self-government” (Mitch Daniels). If the debt continues to rise, predicted former New Mexico Senator Pete Domenici, there would be “strikes, riots, who knows what?” A looming fiscal crisis was portrayed as being just around the corner.

President Obama listens to reports during a meeting of the President's Council on Jobs and Competitiveness in Pittsburgh, October 11, 2011. The various strands of the austerity class form a reinforcing web that is difficult to break. Its think tanks and wonks produce a relentless stream of disturbing statistics warning of skyrocketing debt and looming bankruptcy, which in turn is trumpeted by politicians and the press and internalized by the public. Even President Obama’s new jobs plan—a long overdue break with austerity-class orthodoxy—has been pitched in the context of deficit reduction. (REUTERS/Jonathan Ernst) The event spotlighted a central paradox in American politics over the past two years: how, in the midst of a massive unemployment crisis—when it’s painfully obvious that not enough jobs are being created and the public overwhelmingly wants policy-makers to focus on creating them—did the deficit emerge as the most pressing issue in the country? And why, when the global evidence clearly indicates that austerity measures will raise unemployment and hinder, not accelerate, growth, do advocates of austerity retain such distinction today?

An explanation can be found in the prominence of an influential and aggressive austerity class—an allegedly centrist coalition of politicians, wonks and pundits who are considered indisputably wise custodians of US economic policy. These “very serious people,” as New York Times columnist Paul Krugman wryly dubs them, have achieved what University of California, Berkeley, economist Brad DeLong calls “intellectual hegemony over the course of the debate in Washington, from 2009 until today.”

Its members include Wall Street titans like Pete Peterson and Robert Rubin; deficit-hawk groups like the CRFB, the Concord Coalition, the Hamilton Project, the Committee for Economic Development, Third Way and the Bipartisan Policy Center; budget wonks like Peter Orszag, Alice Rivlin, David Walker and Douglas Holtz-Eakin; red state Democrats in Congress like Mark Warner and Kent Conrad, the bipartisan “Gang of Six” and what’s left of the Blue Dog Coalition; influential pundits like Tom Friedman and David Brooks of the New York Times, Niall Ferguson and the Washington Post editorial page; and a parade of blue ribbon commissions, most notably Bowles-Simpson, whose members formed the all-star team of the austerity class.

The austerity class testifies frequently before Congress, is quoted constantly in the media by sympathetic journalists and influences policy-makers and elites at the highest levels of power. They manufacture a center-right consensus by determining the parameters of acceptable debate and policy priorities, deciding who is and is not considered a respectable voice on fiscal matters. The “balanced” solutions they advocate are often wildly out of step with public opinion and reputable economic policy, yet their influence endures, thanks to an abundance of money, the ear of the media, the anti-Keynesian bias of supply-side economics and a political system consistently skewed to favor Wall Street over Main Street.

Taken together, the various strands of the austerity class form a reinforcing web that is difficult to break. Its think tanks and wonks produce a relentless stream of disturbing statistics warning of skyrocketing debt and looming bankruptcy, which in turn is trumpeted by politicians and the press and internalized by the public. Thus forms what Washington Post blogger Greg Sargent calls a Beltway Deficit Feedback Loop, wherein the hypothetical possibility of a US debt crisis somewhere in the future takes precedence over the very real jobs crisis now.

Even President Obama’s new jobs plan—a long overdue break with austerity-class orthodoxy—has been pitched in the context of deficit reduction. Every debate over measures to improve the economy begins with the question “How much will it cost, and can we afford it?” rather than “How many jobs will it create, and how will it help the country?” Far from possessing the solution to our economic crisis, the austerity class represents a major impediment to finding one.

* * *

Groups like the CRFB and the Concord Coalition, founded by former Congress members in the 1980s and ’90s, have long presented themselves as nonpartisan, penny-pinching critics of wasteful government spending, when really they are anti-government, pro-corporate ideologues whose boards are filled with K Street lobbyists and financial executives. The goal of much of the austerity class is to see government funds redirected to the private sector. (Their ideology, which accepts the accumulation of private debt but opposes government debt, explains why the austerity class ignored the massive housing and credit bubble, which more than any single factor contributed to an explosion of debt worldwide.)

The austerity class’s reach has expanded in the Obama era, boosted by leaders of both parties and an influx of new funding. After consistently approving massive deficit spending under the Bush administration, Republicans suddenly found true religion under Obama (ironically, at a time when precisely the opposite of austerity was most needed). And within the Democratic Party, what Nobel laureate economist Joe Stiglitz calls “deficit fetishism” is viewed as the gold standard for responsible economics. Democrats revered Bill Clinton’s balancing of the budget as good policy and good politics, not to mention a shrewd way to tap Wall Street’s endless fundraising stream.

Obama and his main economic advisers (Tim Geithner, Orszag, Larry Summers) were devotees of former Clinton Treasury Secretary and Goldman Sachs/Citigroup alum Rubin, who co-founded the pro–Wall Street Hamilton Project think tank at the Brookings Institution in 2006. The Hamiltonians had warned of “the adverse consequences of sustained large budget deficits” during the Bush administration and advocated “painful adjustments,” namely cuts to social insurance programs like Social Security and Medicare in exchange for more liberal policies like tax increases and healthcare reform. Obama entered office with the Hamilton plan in his back pocket.

At the beginning of Obama’s presidency, Richard Nixon’s famous line “We are all Keynesians now” seemed more relevant than ever. But though Obama initially advanced a Keynesian-lite stimulus plan, which economists on the left and right agreed was imperative, the deficit was never far from the president’s mind.

In February 2009, just weeks after the stimulus passed, Obama pivoted to the deficit, holding a Fiscal Responsibility Summit at the White House and assuring Blue Dog Democrats he supported a special deficit-reduction commission. “We feel like we’ve found a partner in the White House,” said Blue Dog co-chair Charlie Melancon. The austerity class swiftly co-opted the new administration. The CRFB, the Peter G. Peterson Foundation and Pew Charitable Trusts launched a special commission in 2009 calling for mandatory spending caps and debt limits to put the United States in an “automatic, fiscal straitjacket.” Its recommendations formed the basis for last year’s Bowles-Simpson commission.

The austerity class’s deep pockets can be traced back to Peterson, a GOP billionaire who served as Nixon’s commerce secretary and founded the private equity Blackstone Group. Since 2008 his foundation has doled out $383 million of his promised $1 billion pledge to a seemingly endless number of think tanks, media organizations, advocacy groups and educational institutions to advance his debt obsession [see William Greider, “The Man Who Wants to Loot Social Security,” March 2, 2009]. This includes six- and seven-figure donations to groups like the CRFB, the Concord Coalition, the Committee for Economic Development and the Peterson Institute for International Economics. It’s largely because of Peterson that programs like Social Security and Medicare, favored by nearly 90 percent of the public, are savaged as bloated “entitlements” and are consistently on the chopping block.

Among the Petersonites, there was stiff opposition to a larger stimulus or additional recovery measures. “If we think about massive deficit spending as medicine for a sick economy, we also need to recognize that too much medicine can ultimately kill the patient,” said Maya MacGuineas, president of the CRFB (which received $656,000 from Peterson’s foundation last year), in January 2009. MacGuineas, a former stock analyst at Paine Webber and self-described “bond vigilante,” did stints at the Brookings Institution, the Concord Coalition and the 2000 McCain campaign before moving to the CRFB in 2003. She’s now one of the central organizers behind the austerity class.

Her minimalist take on the recession, though completely at odds with the views of top economists, quickly became conventional wisdom in elite Washington policy circles. “Concerns about the deficit limited the size of the stimulus act in 2009 and are a main reason that Congress has refused to take additional measures to cut our painfully high rate of unemployment,” wrote Christina Romer, former chair of Obama’s Council of Economic Advisers.

In his State of the Union address in 2010, the president announced a three-year freeze on nondefense discretionary spending (a position he’d criticized in all three presidential debates with John McCain as an “example of unfair burden sharing” and “using a hatchet when you need a scalpel”), along with the creation of Bowles-Simpson. “Families across the country are tightening their belts and making tough decisions,” Obama said. “The federal government should do the same.”

This line proved to be one of the most repeated talking points of the austerity class. “That’s a very intuitive argument, but it’s totally backward,” says Jared Bernstein, former chief economist to Vice President Biden. “When families are tightening their belt in a recession, the government has to loosen its belt.” The constant drumbeat against “excessive” government spending from the austerity class and opportunistic Republicans caused the administration to “pivot too soon,” says Bernstein.

“Having gotten a stimulus that he knew was too small, Obama should have said, This is a good first step, but we’re likely going to need more,” says Dean Baker, co-director of the Center for Economic and Policy Research. “And gone on the offensive. Instead he turned to balancing the budget. That set the stage for the Tea Party and the Peterson crowd, because ‘deficits’ were all anyone heard.” Indeed, conservatives were emboldened by Obama’s speech. “If the arguments in the coming years are between spending freezes and spending cuts, then we’ve already won,” wrote Jim Geraghty of National Review in January 2010.

By June 2010, austerity had gripped the globe, as the G-20 nations agreed to cut their deficits in half by 2013 and pursue “growth friendly” fiscal consolidation. In the midst of the recession, the notion of “expansionary austerity” became a kind of magical elixir for the deficit hawks, much as the Laffer Curve did for Reaganomics. Harvard economist Alberto Alesina pioneered the theory, arguing in 2009 that “spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions.” The CRFB, David Brooks, the American Enterprise Institute and the House Republican leadership quickly amplified his view. “Alesina has provided the theoretical ammunition fiscal conservatives want,” wrote Bloomberg Businessweek. It seemingly made no difference that his findings had been thoroughly debunked by the likes of The Economist, the IMF and the Center for Budget and Policy Priorities (CBPP), which found that in only nine of the 107 cases surveyed by Alesina had austerity measures led to increased growth. Yet to this day, leaders like Texas Representative Jeb Hensarling (co-chair of the supercommittee) insist that “deficit reduction will be a jobs plan.”

The austerity-class chorus grew louder following the release of the Bowles-Simpson report shortly after the 2010 midterm elections and framed the debate for 2011. (It was led by a conservative Democrat and a conservative Republican, evidently the definition of “balance” in Washington. Few in the media noted that Peterson-backed groups had staffed the commission and organized town hall events on its behalf, ostensibly underwriting what was purported to be an independent government entity.)

“Bowles-Simpson was not a deficit-reduction package,” says Stiglitz, “but a downsizing-government package.” Instead of rolling back the Bush administration policies that had turned Clinton’s surplus into a deficit—such as the Bush tax cuts, Medicare Part D plan and costly wars in Afghanistan and Iraq—the commission took aim at the social safety net and promoted pet conservative causes, like cutting the federal workforce by 10 percent, cutting funds for the Corporation for Public Broadcasting and capping medical malpractice lawsuits. It called for “serious belt tightening” beginning in 2012, when few economists believed the economy would have recovered from the recession.

In his budget for 2012, Obama proposed cutting discretionary spending to its lowest share of GDP since the Eisenhower administration. The debate in Washington was thus the administration’s “cut and invest” strategy versus the GOP’s “cut and grow” plan, noted Post blogger Sargent. Both proved illusory, as the country saw neither investments nor growth, only more cuts. The deal to avert a government shutdown included billions in cuts. By the time of the summer debt ceiling showdown, the parties were trying to out-cut each other, with the president increasingly espousing conservative talking points (such as the discredited ideas that government budgets are like family budgets, that spending cuts will create jobs and that slashing the deficit will return “confidence” to the market). Even Nancy Pelosi, the country’s highest-ranking progressive Democrat, declared in July, “It is clear we must enter an era of austerity.”

The triumph of the austerity class set the stage for Obama’s “grand bargain” offer to House Speaker John Boehner, which included $3 trillion in spending cuts in exchange for $800 billion in new revenue (roughly the equivalent of letting the Bush tax cuts for the rich expire). Times columnist Brooks called it “an astonishing concession” by the White House and “the deal of the century” for the GOP. Yet Boehner balked when Obama asked for $400 billion in additional revenue to help balance the lopsided plan. The parties agreed instead to $917 billion in cuts over the next decade, with the supercommittee tasked with finding $1.2 trillion in additional savings. The austerity debate is guaranteed to last until Christmas, at the very least.

* * *

The unholy alliance between the austerity class and supply-side conservatives, who talk a good game about deficits but in fact care principally about cutting taxes and government spending, has shifted the debate over the economy and the deficit far to the right since Obama took office. By promoting an age of austerity, the deficit hawks have enhanced the power of “starve the beast” conservatives like Grover Norquist, whose goal for years has been to shred the New Deal. The austerity class’s infatuation with Representative Paul Ryan is a prime example of this addled love affair.

In 2008, when Ryan introduced his radical budget road map—which called for turning Medicare into a voucher system, privatizing Social Security and redistributing income upward by drastically cutting taxes for the wealthiest Americans and largest corporations—MacGuineas praised his “tremendous courage and leadership.” When Ryan reintroduced his plan in 2010, the CRFB lauded his “thoughtfulness and courage.” The CRFB failed to mention that Ryan’s plan would increase the deficit, from a debt-to-GDP ratio of 60 percent in 2010 to 175 percent by 2050. “Paul Ryan added a huge amount to the deficit,” says John Irons, policy director at the Economic Policy Institute (EPI). “To call that even remotely fiscally responsible was not a correct analysis. It’s almost as if they said, We don’t care what your plan does—as long as you talk tough on deficits we’re going to support you.”

Indeed, in January the CRFB, the Concord Coalition and the Comeback America Initiative (all funded by the Peterson Foundation) gave Ryan a cherished fiscal responsibility award, despite his deficit-exploding budget, hostility to tax increases and votes in favor of the Bush administration’s deficit spending. Bob Bixby, executive director of the Concord Coalition, introduced Ryan by quoting Time magazine: “The irony of Ryan’s rise is that he has vaulted to popularity by embracing historically unpopular ideas.” Said Bixby, “And I thought to myself, now there is a deficit hawk…. If we limit ourselves to popular ideas, we’re never going to solve the problem.”

MacGuineas said the award honored Ryan for being the first politician to put forth a budget plan in 2011, which she called “the most fiscally responsible of any of the plans.” Technically, that’s true. Ryan’s budget, a modified version of his road map, achieves a modest $155 billion in savings over ten years by proposing what the CBPP calls “the most severe and wrenching budget cuts in US history—two-thirds of which would come from programs for people of low or moderate incomes” (i.e., Medicaid, Pell grants, food stamps and low-income housing).

The award to Ryan illustrates just how dangerously obtuse the austerity class’s definition of fiscal responsibility is. The deficit hawks succeed by making the debate over the deficit a pure accounting game, with no acknowledgment of the adverse impact a plan like Ryan’s would have on the broader economy and on so many Americans if it became law. “If [you’re] willing to slash spending so that long-run deficits are brought under control, then it’s fiscally responsible,” Jim Horney, vice president for federal fiscal policy at CBPP, says of the Ryan plan. “But if by fiscally responsible you mean putting the budget on a sustainable path but making sure that government is able to meet the needs of the people of the United States, then I think it’s a terribly irresponsible plan.”

The deficit hawks once again sided with Ryan and his GOP colleagues during the debt ceiling standoff. “Failing to use this debt ceiling ‘hammer’ to force serious fiscal reforms would be a dangerous lost opportunity,” the CRFB wrote in July. That demand became the official position of Congressional Republicans, turning what should have been a routine debt ceiling increase into a months-long hostage situation, which spooked financial markets, damaged a weak economy and further polarized the political system. “One of the biggest strategic mistakes these deficit groups made is to allow themselves to be captured by the right wing of the Republican Party and to allow themselves to validate those claims,” says Stan Collender, a longtime budget expert at Qorvis Communications. “They just fed into the frenzy.”

When Standard & Poor’s downgraded the US credit rating in August, MacGuineas called it a “heck of a wake-up call” and once again urged Congress to enact “at least a $4 trillion deficit reduction plan—probably more” without acknowledging her group’s role in perpetuating the manufactured crisis or the utter unfeasibility of achieving the sort of grand bargain that Republicans had just rejected. As economists increasingly called for more, not less, stimulus to boost the sluggish economy, the CRFB refused to budge from its hard line. Just a month later, the group backed the House Republican leadership by demanding that emergency disaster relief spending in the wake of Hurricane Irene be offset by spending cuts, which almost forced yet another government shutdown.

“I am about as frustrated with the CRFB as you can get,” says Collender, who has consulted for the group in the past. “They’ve become zealots and fanatics, as opposed to realists and pragmatists. It’s one thing to be a counterbalance to those who always want to spend more and tax less. It’s another thing to be pushing deficit reduction no matter what the economic situation is and whether it makes sense or not.”

* * *

It was only after Boehner rejected Obama’s grand bargain and the economy slowed to a halt that the president finally bowed to reality and introduced a new jobs plan. It may well be too little, too late, but Obama’s energetic campaign in support of the legislation has begun to redirect the debate over the economy away from austerity and back toward jobs.

Much of the mainstream media, however, remain enthusiastic cheerleaders for austerity. A recent story in the Washington Post, Experts Dubious of Obama Deficit Plan, featured criticism from MacGuineas, Bixby, an unnamed GOP aide and a corporate tax lobbyist as its lone sources. “That’s fair and balanced budget reporting at the Washington Post,” joked Dean Baker.

Austerity-class pundits have also advanced the myth that both parties are equally responsible for, and equally unwilling to fix, the deficit problem. Columnists like Brooks and Friedman at the Times and Fred Hiatt at the Post have gone to extraordinary lengths to make this argument, seemingly forgetting that not so long ago Obama offered Boehner exactly the kind of grand bargain they’re now advocating. “I keep thinking he’s a few weeks away from proposing serious tax reform and entitlement reform,” Brooks wrote of Obama. “But each time he gets close, he rips the football away.”

One wonders why it’s so difficult for the Brookses of the world to acknowledge reality. “There is no equivalency,” says the CBPP’s Horney. “It is absolutely the Republicans’ refusal to consider meaningful changes in revenues that is blocking real deficit reduction at this point.” A clear illustration: Obama proposed a plan that was weighted three-to-one on a ratio of spending cuts to tax increases, but at a recent GOP presidential debate, all the candidates said they would oppose a plan that was even ten-to-one.

Indeed, the austerity class has done such a good job of sidelining dissident voices—with the exception of the Times’s Krugman and a few other high-profile Keynesian economists—that the Washington debate seems permanently skewed to the right. “On one side you have deficit obsession to the point where Republicans use this as an excuse to threaten to shut the government down over a couple billion dollars,” says Bernstein. “On the other side you pretty much have people talking balance. You have no one on the other extreme saying, Our main worry about the deficit, with unemployment at 9 percent, should be: Is it large enough to provide the boost that the private sector is not capable of providing right now?”

It’s doubtful that Obama’s belated pivot back to jobs will break the power of the austerity class. The administration’s schizophrenic approach to the economic crisis has left voters perplexed about where it stands on the biggest issue of the day. “When you ask people, ‘What is Obama’s economic policy?’ they have no idea,” says Democratic pollster Stan Greenberg. “They think maybe it’s healthcare reform.” Obama’s latest position—more spending to boost the economy, followed by deficit reduction once the economy recovers—may be too nuanced for the public to grasp (some in the austerity class, in an attempt to retain credibility at a time of economic peril, now echo Obama’s view). “The Republicans’ message, ‘Government spending is a problem,’ is much easier to penetrate,” says the EPI’s Irons. “The administration is missing a simple point, which is that you need jobs to reduce the deficit.” That’s why the EPI advocates a moratorium on austerity measures until the unemployment rate is back down to 6 percent.

“Right now, front-loaded deficit reduction would be a disaster,” says Stiglitz. “But a commitment to future deficit reduction, if it’s out of tune with the economic recovery, as Bowles-Simpson was, would also be a disaster. Even if it happens in the future, it could have an adverse effect today. People will say, If I’m going to be poorer in the future, I’m going to have to put more money away today.” Trading unemployment insurance now for Social Security cuts later, for example, is not exactly going to reassure an anxious public. “I’ll feel progress when this notion that short-term spending has to be offset by cuts to Social Security and Medicare gets the boot,” says University of Texas economist James Galbraith.

The austerity class has done such a good job of demonizing deficits that it’s difficult to make the case for their necessity, even in the short term. “The damn thing has such a bad rap, it’s almost unimaginable for a policy-maker to argue that we need a bigger deficit,” says Bernstein. “But there are times when that argument is absolutely correct.” Now is one of those times.

© 2011 The Nation

Paul Ryan's Sham Budget Reflects GOP Deficit-Cutting Mania

Tax cuts for corporations and the super-rich; budget cuts for Medicare and Medicaid – how cynical can the congressman be?

by Dean Baker

If you want to see House budget committee chairman Paul Ryan sanctimoniously excuse himself and his friends for missing the most predictable economic crisis in the history of the world, you now have the opportunity. In a YouTube video produced by his staff, Ryan tells viewers that the crisis called by the collapse of the housing bubble caught "us" by surprise.

Well, it didn't actually catch us by surprise. Some of us had been warning about the potential damage caused by the collapse of the bubble since 2002. We repeatedly tried to warn of the dangers of the housing bubble in whatever forum we had.

It was easy to see that the housing market was hugely over-valued and that, at some point, it would collapse – just as the stock bubble had collapsed in 2000-2002. It was also easy to see that its collapse would have a devastating impact on the economy.

The bubble was driving the economy both directly, by propelling a construction boom, and indirectly, through the impact of housing bubble wealth on consumption. When the bubble burst, there would be nothing to replace this bubble-driven demand. It would be necessary to run the sort of large government budget deficits that we have seen the last four years in order to sustain the economy and keep the unemployment rate out of double digits.

All of this was 100% predictable and predicted. However, Representative Ryan wants to give himself the blanket "who could have known?" amnesty because he and his Wall Street friends chose to ignore the people who were giving the warnings. Ryan should apply a variation on the sanctimonious lines in his video to himself:

"Imagine being warned about an economic crisis that would throw more than 10 million people out of work and cause millions to lose their home and doing nothing. Imagine that our politicians in Congress and the White House chose to do nothing while there was still time, because it would have been bad politics to upset the Wall Street banks who were making so much money. They, instead, chose to ignore the warnings. That is immoral."

While some of us were putting in overtime and missing sleep trying to warn about the dangers of the housing bubble, Representative Ryan and his cronies were whining about a budget deficit that was almost non-existent. The budget deficits that the government was running in the years just before the collapse of the housing bubble were less than 2% of GDP (pdf). The debt-to-GDP ratio was actually falling. We could have run deficits of this magnitude forever.

After contributing, through his negligence, to the worst economic crisis since the Great Depression, Representative Ryan has the gall to imply that the people who don't like his plan now are immoral. While the specifics of his new plan this year have only just been announced, we know what he put on the table last year.

According to projections from the Congressional Budget Office, that plan would have raised the cost to the country of buying Medicare-equivalent insurance policies by $34tn over Medicare's 75-year planning period. It would also have led to huge cuts in Medicaid, denying healthcare to children, as well as other budget cuts that would have worsened the situation of low- and moderate-income children. And to offset these spending cuts, Representative Ryan promised big tax breaks to corporations and the richest people in the country. His budget proposed lowering the tax rate on both to just 25%.

If we can skip the sanctimony, let's just say what every budget wonk knows to be true. We don't have a budget problem; we have a healthcare cost problem. If per person healthcare costs in the United States were in line with those in any other wealthy country, we would be looking at huge budget surpluses, not deficits.

The answer lies not in cutting back, and/or eliminating Medicaid and Medicare, but in fixing the healthcare system. That's the simple truth – and to try to contend otherwise is immoral, Representative Ryan.

© 2012 Guardian News and Media Limited

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR -- He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer and the more recently published Plunder and Blunder: The Rise and Fall of The Bubble Economy. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.

GOP Rides Paul Ryan’s Road to Ruin (But Will Dems Blow Opportun?

His snake oil-castor oil budget is a gift to Dems, but only if they give up on "grand bargains" with extremists

by Joan Walsh

Most Democrats rejoiced when the newly elected House Tea Party extremists got behind Paul Ryan’s tax-slashing and program-cutting budget plan almost a year ago. The budget had no chance of passing the Senate, but it committed Republicans to unpopular spending cuts, including to Social Security and Medicare, and continued the party’s slavish devotion to tax protection for the top 1 percent. That’s why many liberals were horrified by reports that the White House was entertaining comparable budget-cutting proposals to resolve the debt-ceiling crisis last summer. Not only was it bad policy, it was terrible politics, sacrificing the huge advantage Republicans had conceded when they backed Ryan’s plan, especially his assault on Medicare.

The debt ceiling “grand bargain” failed. President Obama learned from the debacle and switched his focus to job growth from deficit-cutting. But the Ryan plan, with its political benefits for Democrats, also receded from the front pages. Until now, that is. Ryan brazenly released the 2013 version of his budget Tuesday morning. It’s a cocktail of snake oil and castor oil. It proposes $1.028 trillion in discretionary spending, less than the $1.047 trillion spending cap established by the debt-ceiling deal, repeals Obamacare, and cuts the top individual tax rate and the corporate rate as well. It aims to replace Medicare with a voucher plan again. Ryan says all of the GOP presidential candidates are down with his budget proposal. “I have spoken to all of these guys and they believe we are going in the right direction,” he told reporters. That’s great news for Democrats.

Unfortunately, the new Ryan plan comes on the heels of bad news from the Washington Post: a closely reported story about last summer’s debt-ceiling negotiations, which brought back the bad old days when the president was indulging the ideas of Ryan and friends to avoid defaulting on our credit obligations while also becoming the champion of fiscal prudence.

If you believe the Post’s reporting – its slant places most blame for the deal’s troubles on Democrats, but the key facts come from participants’ notes, emails and on the record recollections – the “deal” Obama entertained was worse than anything reported at the time: $1.2 trillion in spending cuts, reduced cost-of-living adjustments for Social Security and an unspecified hike in the Medicare eligibility age, in exchange for around $800 billion in “revenue” that relied on closing “loopholes” and (possibly) increased tax receipts thanks to an improved economy, while actually lowering top rates. What finally scuttled the deal was the work of the so-called Gang of Six – three senators from each party, whose proposal contained much bigger tax hikes and revenue increases, plus smaller spending cuts, than the Obama team had negotiated.

“I don’t think it was a mischaracterization on our part to say we’d be beat up miserably by Democrats who thought we got out-negotiated,” former White House chief of staff Bill Daley told the Post. The Gang of Six deal forced the embarrassed White House to ratchet up its tax-hike demands, and the bargain fell apart – but not before Obama reportedly called Boehner and offered to take the horrible pre-Gang of Six, no-tax-hike deal. The most ominous line in the entire piece: “White House officials said this week that the offer is still on the table.”

Let’s hope that’s not true. The Obama White House made a convincing pivot back to economic growth after its summer humiliation. I’m a big believer in forgiving, if not forgetting. We’ve all made mistakes. New York’s Jonathan Chait wrote about the Post piece Monday with surprising outrage, given his many essays chastising liberals and progressives for being too hard on the president. “Obama’s disastrous weakness in the summer of 2011 went further toward undermining liberalism than anybody previously knew,” he railed. I think a lot of us knew it, even if we didn’t have the ugliest details, and we tried to tell Chait at the time. But I’m ready to let bygones be bygones.

Democrats are being given another gift with the new Ryan budget, especially given its new assault on Medicare. I don’t care what Politifact or Rep. Ron Wyden (who co-sponsored Medicare cuts with Ryan) try to say: By giving seniors vouchers to purchase insurance on the private market, the plan would abolish Medicare. Because let’s be clear: Vouchers aren’t Medicare. In fact, Republicans and private insurers tried for years to create a program for elderly Americans that would run as a voucher plan, or otherwise funnel seniors into private insurance; in 1965 Democrats under Lyndon B. Johnson rejected that route in favor of a federal government-run program they called “Medicare.” The GOP is against it, plain and simple. (Ryan and Wyden’s plan would supposedly allow seniors who chose to to stay in a government-run plan, but how long would that hybrid exist? And how much would it cost; Medicare’s main efficiencies come from the fact that all seniors participate.)

Democrats need to stop sabotaging themselves and undermining their party’s signature accomplishments, including Medicare. The program needs reforms, but they will not be accomplished as long as the extremist wing of the GOP is in control. I think the president learned that the hard way, and I trust he’ll remember the lesson.

© 2012

Joan Walsh joined Salon in 1998 to become the first full-time news editor, and succeeded the irreplaceable David Talbot as editor in chief in February 2005.

The Ryan Budget vs. A 'Budget for All'

Who pays the bill for Wall Street's mess?
by Robert Borosage

On Tuesday, House Republicans rolled out their budget plan in the Washington version of a Hollywood movie opening. There was a star turn for Budget Chair Paul Ryan at a conservative think tank. Gaseous rhetoric -- "liberties endangered, time to choose" -- fouled the air. There were dueling videos, and furious salvos of partisan messaging. And a backup document -- the "Path to Prosperity" -- festooned with tables for wonks to wallow in.

And yesterday, with fewer trumpets and less fanfare, the Congressional Progressive Caucus releases its budget plan -- A Budget for All (,61&it...).

Each of the two documents is designed to define a message. Their contrasts help clarify the real choices the country faces. Federal deficits exploded after Wall Street's excesses blew up the economy. The questions now are who gets the bill and when does the payment start? Ryan's Republican budget and the CPC's offer starkly different answers that would take the country in starkly different directions.

The Bathtub Fantasy

"My goal is to cut government... to get it down to the size where we can drown it in the bathtub." Grover Norquist.

Ryan's Republican budget, like a speedo bathing suit on a corpulent geezer, is revealing, but not flattering. Even by Washington standards, this is a remarkably dishonest document. It claims to be serious, but offers targets that are simply preposterous. It calls for leveling with the American people, but cravenly ducks laying out who will pay for top end tax cuts. It calls itself a "blueprint for American renewal" while systematically trampling the American dream.

Republicans have lined up like lemmings to sign Grover Norquist's infamous pledge never to raise taxes on anyone at any time. But turns out they even treat the quips of the conservative gadfly as gospel. As the Center for Budget and Policy Priorities pointed out, the Ryan budget, by its own numbers, assiduously pursues Grover's bathtub fantasy.

The Congressional Budget Office reports that under the Ryan budget, by 2050 most of the federal government would simply cease to exist. Ryan's budget would shrink all federal expenditures outside of interest payments, Social Security, Medicare, Medicaid and children's health to 3.75 percent of gross domestic product (GDP).

To translate that arcane measure, CBO notes that "spending for defense alone has not been lower than 3 percent of GDP in any year [since World War II]. " Ryan and Republicans call for increasing defense spending -- so the rest of the government would have to be cut to bathtub size. Ryan argues that the "challenges this nation faces are among the largest in its history," but the budget target he offers is, well, goofy.

Tribunes of the 1%

With this budget, Republicans choose to be the tribunes of the 1%. They send the bill not to the banks that blew up the economy or the wealthy that enjoyed the party, but to the elderly, the middle class and the poor. Consider:

• Cut Taxes on The Rich. At a time of extreme inequality -- with the top 1 percent capturing a staggering 93 percent of all income gains in 2010 -- Republicans would dramatically lower taxes on the wealthiest Americans and, by definition, raise them on working families.

[Ryan isn't candid enough to admit to that, of course. He extends the top end Bush tax cuts, cuts top income tax rates to 25 percent, sustains lower rates on wealth (capital gains, dividends, millionaires' estates) while claiming the reforms will raise as much money by eliminating loopholes and tax breaks that he refuses to specify. But the only way to raise enough money to do that is to go after the biggest deductions -- limit the mortgage deduction for middle class homeowners and/or cut the tax benefits for employers provided health care. The first would add to housing woes; the second would lead more employers to stop providing health care. Both reforms that would directly hit working families.]

• Cut Health Care for Millions. With health care costs soaring and employers cutting back on health insurance benefits, the Republican budget would add millions to the rolls of the uninsured by eliminating the Obama health care reforms, with no program in its place.

• End Medicare as We Know It. With boomers headed into retirement and soaring Medicare and Medicaid costs driving projected deficits, we have to get health care costs under control. But instead of taking on the drug and insurance companies and the hospital complexes that drive up costs, the Republican budget would end Medicare as we know it, requiring seniors to pay more. When today's 55-year-olds retire, they would discover that Medicare has been turned into a voucher or "premium support" program that will not keep up with health care costs, forcing them to pay thousands more out of their own pockets. The Republican budget would also cut Medicaid support drastically for the most vulnerable -- the impoverished, the disabled, and the terminally ill.

• Cut Access to College. With college tuition soaring and more and more people being priced out of the education they have earned and need, the Republican budget would solve the problem by cutting back on student loan and grant programs. They would ration college admission by income rather than by merit.

• The Poor Pay for Deficit Reduction. And with poverty rising, the Republican budget would require that the poorest and most vulnerable Americans bear much of the burden of reducing the deficits that exploded when Wall Street blew up the economy. (Although, again, Republicans don't admit which domestic programs would take the hit. But, by reducing spending on domestic discretionary programs by one third in 10 years, they insure devastating cuts in everything from Head Start to education to disease control.)

• Let America Decline. With our basic infrastructure -- from roads to schools to sewage systems -- in dangerous decline, the construction industry flat on its back, and interest rates near record lows, Republicans call for spending less, not more, on rebuilding America, costing jobs, and rendering our economy less competitive and putting more lives at risk.

• Make the World a Tax Haven. With global corporations growing ever more adept at using transfer pricing and overseas tax havens to avoid taxes here at home, Republicans would make the entire world outside the U.S. a corporate tax haven, ending any taxation on profits reported abroad, encouraging companies to move jobs and book profits abroad.

• Pad the Pentagon. With the U.S. spending almost as much on its military as the rest of the world combined, Republicans demand that we raise, not pare, Pentagon spending.

The Austerity Trap

Ryan's Republican Budget has one other fundamental message -- that America must turn its attention immediately to the "crushing burden of debt." Ryan would cut spending by over $500 billion in the first two years compared to the president's budget, while claiming to lower taxes by about $131 billion. That takes nearly a 2 percent of GDP boost out of an economy growing at about the same rate. Ryan brags that the Republican budget reduces deficits faster and lower than the president's budget. (Although given that he won't reveal how he pays for over $4 trillion in tax cuts and what programs would take the spending cuts, that is far from proven.)

Lost in the race for austerity is the reality that we desperately need jobs and growth. Although the economy has started to generate jobs, 25 million Americans are still in need of full time work. We have fewer jobs than we had a decade ago, and millions more people. This debate should be focused on jobs, not cuts.

Ryan and Republicans duck this by arguing that austerity will increase confidence, and "job creators" will get to work. But we have seen how austerity works in Europe, now teetering on the edge of recession. It not only costs jobs; it makes deficit reduction harder. Ryan's budget assumes a rate of growth that his spending cuts and layoffs are likely to undermine.

The Budget for All

In stark contrast, the Congressional Progressive Caucus releases its FY2013 "Budget for All" on Wednesday. The CPC budget is offered as an alternative to the Ryan budget on the floor of the Congress and in the halls of public opinion. It, too, is a message document -- designed to show that common sense priorities do add up.

The CPC budget reduces deficits faster than Ryan does over the first 10 years. But the CPC begins sensibly, by boosting the economy with jobs measures in the early years. It calls for direct hiring programs -- a Student Jobs Corps and a School Improvement Corps among others. It would rebuild America with an infrastructure bank and bigger investment in roads, bridges and trains. It sustains investment in research and development, clean energy and manufacturing. And it repeals the austerity inflicted by the debt ceiling agreement.

The CPC assumption is that putting people back to work is the priority. And its budget shows this is not incompatible with deficit reduction.

As the economy recovers, the CPC would send the bill for deficit reduction to those who contributed to or benefited from the mess. It focuses on the "true drivers of our deficit -- unsustainable tax policies, the wars overseas, and the causes and effects of the recent recession" -- rather than going after programs for the poor and the elderly.

Hold Wall Street Responsible. The CPC would hold the banks accountable, imposing a "financial crisis responsibility fee" on the banks, raising $90 billion over 10 years and putting a brake on computer driven, nano-second financial speculation by imposing a financial transactions tax raising nearly $850 billion over 10 years.

Tax the Rich. Instead of lowering taxes on the rich, the CPC would raise them -- repealing the top end Bush tax cuts, taxing income from wealth at the same rate as income from work, raising tax rates on millionaires. The CPC would even impose a small temporary surcharge on individual fortunes over $10 million.

The CPC embraces Obama's minimum tax on overseas profits, curbs deductions for CEO stock options, and ends fossil fuel preferences. Perhaps its most controversial clause is its most sensible -- putting a price on carbon emissions, while aggressively refunding costs to working and poor families.

Reform Health Care. On soaring health care costs, the CPC would seek to limit costs, not send them to the most vulnerable. It would embrace the reforms built into the health care bill, add a public option to compete with private insurers, and require bulk purchase negotiations with drug companies for lower prices on drugs.

Pare the Pentagon. The Pentagon budget would be modestly pared over 10 years. Where Ryan ducks on Social Security, the CPC would act, lifting the income cap on Social Security taxes to secure the program.

The Choice

In his budget, Ryan suggests, "Americans, not Washington, deserve to choose the path their nation takes." These two budgets make that choice clear. The CPC would invest in jobs, preserve Social Security and Medicare, and call on the banks and the wealthy to pay a hefty share for getting us out of the hole we are in. Ryan's Republican budget would impose austerity, lavish benefits on the rich, end Medicare as we know it and send the bill for the mess to working families, the poor and the elderly. The CPC would invest in rebuilding the country and reviving the American Dream. Ryan would invest in policing the world and protecting the tax havens of multinationals, and turn the Dream into a fantasy. The Ryan budget stands with the 1%. The CPC with the rest of us. You get to choose.

© 2012 Campaign for America's Future

Robert L. Borosage is the founder and president of the Institute for America’s Future and co-director of its sister organization, the Campaign for America’s Future.

Media Blackout: Progressive Budget vs. Paul Ryan (Again)

by Peter Hart

Last year Republican Rep. Paul Ryan presented a budget plan that was, according to one analysis, full of "dubious assertions, questionable assumptions and fishy figures." But Ryan's brand of budget austerity makes the media swoon–hence we saw coverage (FAIR Media Advisory, 4/12/11) of Ryan's "piercing blue eyes" that dubbed him "a PowerPoint fanatic with an almost unsettling fluency in the fine print of massive budget documents."

Ryan's budget was never going to be adopted, but its release was widely covered across the corporate media. He was given credit for presenting a plan to reduce government deficits, even though his plan didn't really do much of that.

At the same time, the Congressional Progressive Caucus released its People's Budget, which raised taxes on the wealthy, slashed military spending, enacted a public option in healthcare and a Wall Street speculation tax–and unlike Ryan's plan, actually balanced the budget. It got almost no media attention. The most prominent story may have been the attack by Washington Post columnist Dana Milbank (4/13/11), who mocked the "starry-eyed" progressives for, among other things, being poorly dressed and coming up with a name for their plan that "conveyed an unhelpful association with 'the people's republic' and other socialist undertakings."

A year later, we're seeing the very same thing. Paul Ryan has a new budget proposal that looks similar to his last budget. As economist Dean Baker put it:

House Budget Committee Chairman Paul Ryan did a great public service when he released his budget last week. By throwing a piece of total garbage on the table and pretending it is a real budget plan, he allowed us to see who in Washington is serious about the budget and who just says things that will push their agenda.

The corporate media have rushed to cover the garbage. And yesterday the Progressive Caucus released its "Budget for All" plan. And the media reaction so far? According to my search of the Nexis news database, it's exactly one article, by Bay Area News Group reporter Josh Richman (3/26/12).

It's a good one, though–in that it presents the debate in a way that is almost unheard of in the rest of the press: "Two vastly different visions of how the government should spend its money were introduced in Congress this past week."

Richman writes that "most of the national buzz" went to the Ryan plan–then goes on to describe the Progressive Caucus budget clearly:

It not only would end the Bush-era tax cuts, but also create new tax brackets for millionaires and billionaires in keeping with the "Buffett rule." Named after multibillionaire Warren Buffett–who's pushing the agenda–the rule posits that the nation's richest shouldn't pay a lower percentage of income in taxes than less-affluent Americans. It ends what critics call "corporate welfare" for fossil-fuel industries, includes public funding of election campaigns and provides more aid to homeowners facing foreclosure.

Richman adds:

Representatives of Ryan's budget committee didn't return emails or a phone call seeking comment on Honda's budget plan.

The piece closes with this quote from Rep. Mike Honda, who is on the Progressive Caucus' budget task-force: "If people knew what the choices were, I think they'd say, 'Jesus, the progressive caucus budget looks pretty good.' "

Sadly, most people never will–because the media won't report the choice in the first place.

© 2012 Fairness & Accuracy In Reporting (FAIR)

Peter Hart is the activism director at FAIR (Fairness & Accuracy In Reporting). He writes for FAIR's magazine Extra, and is also a co-host and producer of FAIR's syndicated radio show CounterSpin. He is the author of The Oh Really? Factor: Unspinning Fox News Channel's Bill O'Reilly" (Seven Stories Press, 2003).

Five Preposterous, Persistent Conservative Myths

by Paul Buchheit

With the mainstream media in the hands of the mostly conservative wealthy, it's difficult for average Americans to learn the truth about critical issues. The following five conservative claims are examples of mythical beliefs that fall apart in the presence of inconvenient facts:

1. Entitlements are the Problem

Beyond the fact that we're 'entitled' to Social Security and Medicare because we pay for them, these two government-run programs have been largely self-sustaining while supporting the needs of millions of Americans.

Medicare is much less costly than private health care. Social Security, which functions with a surplus, would not be in danger of a long-term shortfall if the richest 10% (those making over the $106,800 cutoff) paid their full share.

The Center on Budget and Policy Priorities recently reported that 91% of entitlements go to the elderly or disabled, or to members of working households needing supplemental assistance. Only 9% of entitlement dollars go to non-working but employable individuals, and most of that is for medical care, unemployment, and survivor benefits.

2. Charter Schools are the Answer

Free-market adherents have a lot of people believing that the public school system needs to be 'saved' by charter schools. That belief is not supported by the facts. A Stanford University study "reveals in unmistakable terms that, in the aggregate, charter students are not faring as well as their traditional public school counterparts."

A Department of Education study found that "On average, charter middle schools that hold lotteries are neither more nor less successful than traditional public schools in improving student achievement, behavior, and school progress."

Charter schools also take money away from the public system. For example, the Los Angeles Unified School District loses nearly $7,000 in state money for each student who transfers to a charter. In Florida, the entire $55 million budgeted in 2011 for school maintenance went to charters. Governors in several states plan to direct money to schools that serve upper-middle-income families.

Furthermore, charter school teachers have fewer years of experience and a higher turnover rate, and according to one study were less likely to be certified.

Perhaps most damning are studies by the University of Colorado and UCLA which found that some charter schools segregate students by race and income. Said researcher Gary Miron of Western Michigan University, "Parents are selecting schools where their child will experience less diversity."

3. Corporate Taxes Are Too High

This one is easy. The facts can be found in U.S. Office of Management (OMB) figures, which show a gradual drop over the years in Corporate Income Tax as a Share of GDP, from 4% in the 1960s to 2% in the 1990s to 1.3% in 2010. That's one-third of what it used to be.

Also coming from the OMB is the percent of Total Tax Revenue derived from corporate taxes. The corporate share has dropped from about 20% in the 1960s to under 9% in 2010.

Finally, in a U.S. Treasury report of global competitiveness, it is revealed that U.S. corporations paid only 13.4% of their profits in taxes between 2000 and 2005, compared to the OECD average of 16.1%. A similar analysis of 100 of the largest U.S. companies found that less than 10% of pre-tax profits in 2010 were paid in non-deferred U.S. federal income taxes.

Corporate tax avoidance is rampant at the state level, too. A new study by Citizens for Tax Justice, which evaluated 265 large companies, determined that an average of 3% was paid in state taxes, less than half the average state tax rate of 6.2%.

4. Jim Crow is Dead

Even though white Americans are the nation's most frequent drug users and dealers, the people in jail for these offenses are overwhelmingly black. In some states, African Americans make up 80-90% of all drug offenders sent to prison.

As a nation, we lead the world in rates of imprisonment, and drug offenses have accounted for two-thirds of the increase in federal inmates.

Once drug users are in prison, they're stigmatized for life. As stated by Michelle Alexander, author of "The New Jim Crow": "Rather than rely on race, we use our criminal justice system to label people of color "criminals" and then engage in all the practices we supposedly left behind...Once you're labeled a felon, the old forms of discrimination - employment discrimination, housing discrimination, denial of the right to vote, and exclusion from jury service - are suddenly legal. As a criminal, you have scarcely more rights, and arguably less respect, than a black man living in Alabama at the height of Jim Crow."

5. Poverty Is Declining Everywhere

There's something disturbing about World Bank researchers using mathematical functions to determine who's living in poverty. But free-market fanatic The Economist liked the results, proclaiming that "poverty is declining everywhere."

That's easy to say when the World Bank gets to set its own poverty threshold, at $1.25 per day. The organization admits there was little change in the number of people living below $2 per day between 1981 and 2008. And almost half the world lives on less than $3 a day.

Another fact is that the rapid growth of China accounts for most of the global poverty changes. China is where hundreds of millions of starry-eyed young people went from zero income on the farms to a few dollars a day under oppressive factory working conditions. The GDP may show a decline in poverty, but a "quality of life" index wouldn't make that mistake.

6 and 7. Evolution and global warming don't exist.

These are just too preposterous for words.

Progressive activists continue to work toward the day when poverty is down everywhere, and minorities receive equal treatment, and education is properly funded, and tax subsidies rather than entitlements are minimized. But that day is being delayed by make-believe messages from the American conservative.

Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (,,, and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at

The Gullible Center

by Paul Krugman

So, can we talk about the Paul Ryan phenomenon?

And yes, I mean the phenomenon, not the man. Mr. Ryan, the chairman of the House Budget Committee and the principal author of the last two Congressional Republican budget proposals, isn’t especially interesting. He’s a garden-variety modern G.O.P. extremist, an Ayn Rand devotee who believes that the answer to all problems is to cut taxes on the rich and slash benefits for the poor and middle class.

No, what’s interesting is the cult that has grown up around Mr. Ryan — and in particular the way self-proclaimed centrists elevated him into an icon of fiscal responsibility, and even now can’t seem to let go of their fantasy.

The Ryan cult was very much on display last week, after President Obama said the obvious: the latest Republican budget proposal, a proposal that Mitt Romney has avidly embraced, is a “Trojan horse” — that is, it is essentially a fraud. “Disguised as deficit reduction plans, it is really an attempt to impose a radical vision on our country.”

The reaction from many commentators was a howl of outrage. The president was being rude; he was being partisan; he was being a big meanie. Yet what he said about the Ryan proposal was completely accurate.

Actually, there are many problems with that proposal. But you can get the gist if you understand two numbers: $4.6 trillion and 14 million.

Of these, $4.6 trillion is the revenue cost over the next decade of the tax cuts embodied in the plan, as estimated by the nonpartisan Tax Policy Center. These cuts — which are, by the way, cuts over and above those involved in making the Bush tax cuts permanent — would disproportionately benefit the wealthy, with the average member of the top 1 percent receiving a tax break of $238,000 a year.

Mr. Ryan insists that despite these tax cuts his proposal is “revenue neutral,” that he would make up for the lost revenue by closing loopholes. But he has refused to specify a single loophole he would close. And if we assess the proposal without his secret (and probably nonexistent) plan to raise revenue, it turns out to involve running bigger deficits than we would run under the Obama administration’s proposals.

Meanwhile, 14 million is a minimum estimate of the number of Americans who would lose health insurance under Mr. Ryan’s proposed cuts in Medicaid; estimates by the Urban Institute actually put the number at between 14 million and 27 million.

So the proposal is exactly as President Obama described it: a proposal to deny health care (and many other essentials) to millions of Americans, while lavishing tax cuts on corporations and the wealthy — all while failing to reduce the budget deficit, unless you believe in Mr. Ryan’s secret revenue sauce. So why are centrists rising to Mr. Ryan’s defense?

Well, ask yourself the following: What does it mean to be a centrist, anyway?

It could mean supporting politicians who actually are relatively nonideological, who are willing, for example, to seek Democratic support for health reforms originally devised by Republicans, to support deficit-reduction plans that rely on both spending cuts and revenue increases. And by that standard, centrists should be lavishing praise on the leading politician who best fits that description — a fellow named Barack Obama.

But the “centrists” who weigh in on policy debates are playing a different game. Their self-image, and to a large extent their professional selling point, depends on posing as high-minded types standing between the partisan extremes, bringing together reasonable people from both parties — even if these reasonable people don’t actually exist. And this leaves them unable either to admit how moderate Mr. Obama is or to acknowledge the more or less universal extremism of his opponents on the right.

Enter Mr. Ryan, an ordinary G.O.P. extremist, but a mild-mannered one. The “centrists” needed to pretend that there are reasonable Republicans, so they nominated him for the role, crediting him with virtues he has never shown any sign of possessing. Indeed, back in 2010 Mr. Ryan, who has never once produced a credible deficit-reduction plan, received an award for fiscal responsibility from a committee representing several prominent centrist organizations.

So you can see the problem these commentators face. To admit that the president’s critique is right would be to admit that they were snookered by Mr. Ryan, who is the same as he ever was. More than that, it would call into question their whole centrist shtick — for the moral of my story is that Mr. Ryan isn’t the only emperor who turns out, on closer examination, to be naked.

Hence the howls of outrage, and the attacks on the president for being “partisan.” For that is what people in Washington say when they want to shout down someone who is telling the truth.

© 2012 The New York Times

Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. Krugman was the 2008 recipient of the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, and his most recent, The Return of Depression Economics.

Deficit Reduction: The Great Distraction

by Dean Baker

This is the week of the third annual Deficit Fest, the event sponsored by Wall Street billionaire Peter G. Peterson. At this event, many of the people most responsible for the current downturn come together to tell us why we should be worried about the deficit at a time when 25 million people are unemployed, underemployed or have given up looking for work altogether and millions face the prospect of losing their homes.

Past deficit fests included exchanges where Peter Peterson and former Treasury Secretary and Citigroup honcho Robert Rubin mused about their comparative net worth. We also got to witness President Clinton bemoan the fact that the Democratic and Republican leadership in Congress teamed up to prevent him from cutting Social Security. Had Clinton gotten his way, millions of seniors would be getting by on Social Security checks that are more than 10 percent smaller than what they now receive.

Peterson is also known for his sponsorship of the "Economic Sleepwalk" tour, which was officially billed as the "Fiscal Wakeup" tour. This involved sending a group of policy wonks around the country to complain about the budget deficit at a time when the housing bubble was growing to ever more dangerous levels. While some of us were doing our best to warn of the imminent disaster, Peterson was using his money and political connections to dominate media space at a time when the country's debt-to-GDP ratio was actually falling.

But why harp on the past? We should be focused on the future.

And one of the items that this group would like to see in our future is a deficit deal like the one proposed by Erskine Bowles and former Senator Alan Simpson, the co-chairs of President Obama's deficit commission. (The Bowles-Simpson plan is inaccurately referred to on the commission's website as a report of the commission, ironically on a page titled "Moment of Truth." In fact, it is only the report of the co-chairs since it did not receive the 14 votes needed to be approved as an official report of the commission.)

This plan includes a wide range of budget cuts, including cuts to Social Security and Medicare. It would reduce the annual Social Security cost-of-living adjustment by 0.3 percent, which would lower lifetime benefits by an average of more than 3 percent. It would also raise the retirement age for Social Security. To balance these cuts to programs that benefit tens of millions of ordinary workers, Bowles and Simpson would cut the corporate tax rate from 35 to 28 percent and would lower the tax rate paid by the very wealthy from 40 percent to 28 percent. While these reductions in tax rates are supposed to be offset by the elimination of loopholes that benefit the wealthy, people have good cause for skepticism.

If these policies seem out of step with the interests of ordinary workers, it should not be surprising given their parentage. Erskine Bowles in particular could be the poster boy for everything that is wrong in national politics today. Bowles rose to become chief of staff in the Clinton White House in the 90s. He then twice competed unsuccessfully for Senate seats in North Carolina. As a consolation prize he became the President of the University of North Carolina.

Since it is hard to make ends meet on a university president's salary these days, Mr. Bowles also did a little bowling for dollars. He moonlighted as a director on corporate boards, serving stints at Morgan Stanley, the huge Wall Street investment bank, General Motors (until it went bankrupt), and most recently Facebook.

Being a director on a corporate board typically involves attending 4-8 meetings a year. For this, directors receive several hundred thousands of dollars in compensation. For example, in 2008 Erskine Bowles received $335,000 in compensation for his work on Morgan Stanley's board.

This year is noteworthy because Morgan Stanley's dealings in mortgage-backed securities brought it to the edge of bankruptcy in the fall of 2008. It was only saved from disaster by the generous intervention of Ben Bernanke. He allowed the bank to change its status in the middle of the post-Lehman crisis, and become a bank holding company. This gave it the protection of the Fed and the FDIC.

Given this near brush with death, shareholders might ask what Mr. Bowles did for the $335,000 that we paid him. "We" is appropriate in this sentence, since much of the public has a stake in Morgan Stanley either through an index fund in a 401(k) that likely holds some of the company's stock or the defined benefit pensions that most state and local governments still have for their workers.

In fact, we should be asking this question of directors more generally. When shareholders voted "no" last month on the pay package of Citigroup's CEO, Vikram Pandit, they were saying that the company's well-paid board was not doing its job. These directors were getting paid $250,000 each year for just a few days' work. Their job is precisely to prevent such outlandish pay packaged for top management.

The failure of these highly paid directors is a major national problem. Their compensation looks more like payoffs than paychecks. After their palms get greased, they look the other way when the CEOs walk away with tens or even hundreds of millions of dollars of the shareholders' money. And the outsized pay of the CEOs corrupts pay scales throughout the economy. Even heads of charities can now command pay packages in excess of $1 million a year.

Anyhow, when we hear Erskine Bowles and his friends rant about the deficit this week, we should remember that once again they are distracting the public from the country's real problems. And this crew is at the center of those problems; it is not the solution.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer and the more recently published Plunder and Blunder: The Rise and Fall of The Bubble Economy. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.

When the 1% Attack: The Austerity Agenda

by Paul Krugman

“The boom, not the slump, is the right time for austerity.” So declared John Maynard Keynes 75 years ago, and he was right. Even if you have a long-run deficit problem — and who doesn’t? — slashing spending while the economy is deeply depressed is a self-defeating strategy, because it just deepens the depression.

So why is Britain doing exactly what it shouldn’t? Unlike the governments of, say, Spain or California, the British government can borrow freely, at historically low interest rates. So why is that government sharply reducing investment and eliminating hundreds of thousands of public-sector jobs, rather than waiting until the economy is stronger?

Over the past few days, I’ve posed that question to a number of supporters of the government of Prime Minister David Cameron, sometimes in private, sometimes on TV. And all these conversations followed the same arc: They began with a bad metaphor and ended with the revelation of ulterior motives.

The bad metaphor — which you’ve surely heard many times — equates the debt problems of a national economy with the debt problems of an individual family. A family that has run up too much debt, the story goes, must tighten its belt. So if Britain, as a whole, has run up too much debt — which it has, although it’s mostly private rather than public debt — shouldn’t it do the same? What’s wrong with this comparison?

The answer is that an economy is not like an indebted family. Our debt is mostly money we owe to each other; even more important, our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income.

So what happens if everyone simultaneously slashes spending in an attempt to pay down debt? The answer is that everyone’s income falls — my income falls because you’re spending less, and your income falls because I’m spending less. And, as our incomes plunge, our debt problem gets worse, not better.

This isn’t a new insight. The great American economist Irving Fisher explained it all the way back in 1933, summarizing what he called “debt deflation” with the pithy slogan “the more the debtors pay, the more they owe.” Recent events, above all the austerity death spiral in Europe, have dramatically illustrated the truth of Fisher’s insight.

And there’s a clear moral to this story: When the private sector is frantically trying to pay down debt, the public sector should do the opposite, spending when the private sector can’t or won’t. By all means, let’s balance our budget once the economy has recovered — but not now. The boom, not the slump, is the right time for austerity.

As I said, this isn’t a new insight. So why have so many politicians insisted on pursuing austerity in slump? And why won’t they change course even as experience confirms the lessons of theory and history?

Well, that’s where it gets interesting. For when you push “austerians” on the badness of their metaphor, they almost always retreat to assertions along the lines of: “But it’s essential that we shrink the size of the state.”

Now, these assertions often go along with claims that the economic crisis itself demonstrates the need to shrink government. But that’s manifestly not true. Look at the countries in Europe that have weathered the storm best, and near the top of the list you’ll find big-government nations like Sweden and Austria.

And if you look, on the other hand, at the nations conservatives admired before the crisis, you’ll find George Osborne, Britain’s chancellor of the Exchequer and the architect of the country’s current economic policy, describing Ireland as “a shining example of the art of the possible.” Meanwhile, the Cato Institute was praising Iceland’s low taxes and hoping that other industrial nations “will learn from Iceland’s success.”

So the austerity drive in Britain isn’t really about debt and deficits at all; it’s about using deficit panic as an excuse to dismantle social programs. And this is, of course, exactly the same thing that has been happening in America.

In fairness to Britain’s conservatives, they aren’t quite as crude as their American counterparts. They don’t rail against the evils of deficits in one breath, then demand huge tax cuts for the wealthy in the next (although the Cameron government has, in fact, significantly cut the top tax rate). And, in general, they seem less determined than America’s right to aid the rich and punish the poor. Still, the direction of policy is the same — and so is the fundamental insincerity of the calls for austerity.

The big question here is whether the evident failure of austerity to produce an economic recovery will lead to a “Plan B.” Maybe. But my guess is that even if such a plan is announced, it won’t amount to much. For economic recovery was never the point; the drive for austerity was about using the crisis, not solving it. And it still is.

© 2012 The New York Times

Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. Krugman was the 2008 recipient of the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, The Return of Depression Economics, and his most recent, End This Depression Now!.

The Facts Are Clear: This Cruel Austerity Experiment Has Failed

While the human cost of economic stupidity is all too visible, the world's leaders are paralysed by their dogma
by Will Hutton

Last week was an awesome warning of where go-it-alone austerity can lead. It produced some brutal evidence of where we end up when we place finance above economy and society. The markets are now betting not just on the break-up of the euro but on the arrival of a new economic dark age. The world economy is edging nearer to the abyss, and policymakers, none more than in Britain, are paralysed by the stupidities of their home-spun economics. Yanis Varoufakis, ex-speechwriter for former Greek prime minister George Papandreou and now an economics professor in the US, said last week: "There is precisely zero chance of austerity working. It is the same as thinking you can escape from gravity by waving your arms up and down."

It could hardly be more sobering. Money has flooded out of Spain, Greece and the peripheral European economies. Signs of the crisis range from Athen's soup kitchens to Spain's crowds of indignados protesting in the streets against austerity and a broken capitalism. Youth unemployment is sky-high. Less visible is the avalanche of money flowing into hoped-for safe havens in the US, Germany and even Britain. The last time the British government could sell government bonds at interest rates as low as today's was in the early 1700s.

George Osborne and his acolytes proclaim this as a triumph of the government's economic policies. They are gravely mistaken. Rather it portends fears that the international economic order may collapse because if so many countries are simultaneously pursuing austerity, where's growth to come from?

Virtually everywhere you look there are signs of a weakening world economy. At home, manufacturing suffered its biggest plunge for three years, and this in an economy already suffering its longest depression since the 19th century. American jobs growth is petering out. Unemployment in Europe averages 11%. Even China witnessed a sharp fall away in factory activity in May.

Yet none of this should be a surprise. We live in the aftermath of one of the biggest financial and intellectual mistakes ever made. For a generation the world, with the London/New York financial axis at its heart, surrendered to the specious theory that lending and financial contracts could grow many times faster than the underlying economy. There was a blind belief that in a free market banks could not make mistakes. Free markets didn't make mistakes – only clumsy bureaucratic states made economic mistakes. Or so they said. Financial alchemists, guided by the maxims of free market fundamentalism, could make no such errors.

Except that they did. The result was the financial crisis of 2008. Had governments not underwritten their overstretched banks with trillions of dollars, euros and pounds, an even worse global slump would have ensued. But while the banks could continue trading, the hundreds of trillions of loans and financial contracts they had made did not go away.

And because governments had guaranteed their deposits, as in Ireland, or had to inject capital into them as Spain has been doing all last week, this private bank debt has steadily become public debt. Here is a classic case where all the gains were privatised, and all the losses were socialised. It was the much-maligned state that had to step in and clear up the mess left behind by the private sector. The free market wasn't so free after all – in fact it proved astonishingly expensive for the public purse. People across Europe still pay the price.

This is no solution. Overstretched banks have become more cautious about lending new cash; and even strong banks are caught up in the backwash because if they step into the breach they could fall into a vortex of falling property prices and declining economic activity, becoming weak in turn. So as banks stand aside from their crucial function of generating credit, governments and central banks must step in to generate the demand that has now disappeared.

But they have not done so to a sufficient degree. Part of the problem is that the more bank debt that governments guarantee, the less room for manoeuvre they feel they have – especially as their stagnating economies forces up welfare spending and depresses tax revenues.

But the larger problem is intellectual. The dominant ideology of the day – from the same roots that delivered the crisis – forbids it. A consensus stretching from US Republicans through to Angela Merkel's Christian Democrats via George Osborne's Treasury continues to claim that the state is the source of economic bad. The state threatens enterprise, invites damaging taxation, and is the root cause of spreading inflation. The state must balance the books just as the private sector must.

This is not just an economic but a moral necessity, they argue. Living within one's means rather than "maxing" out on debt appeals to American, British and German individualistic Protestantism. Inflation is even more a sign of moral degradation: it means reneging on promises, rewarding spendthrifts and penalising savers. We had the good years. Now we must take our medicine. The public and private sectors must retrench simultaneously worldwide. Enterprise and free markets will do the rest. The "march of the makers" will step in to fill the void left by public austerity measures.

This is a first-order moral and economic mistake. Human beings need each other for mutual support. In economic terms this means that no individual, either as a person or a company, can manage existential risk by themselves. That risk needs to be shared and mitigated otherwise the risk is not accepted. There would be no enterprise or innovation – the risks of failure too great. That is why there is a role for both private and public sectors. It is governments who provide the means through which we express our social obligations and pool our risks.

This is the heart of Keynesian economics – a different set of moral and economic propositions than those which prevail. Today we can see an almost laboratory experiment on a global scale of why Keynes was right and his detractors wrong. There is no doubt what Keynes would advocate now: a government-sponsored increase in demand co-ordinated across as many countries as possible and an acceptance of a temporary but closely managed increase in inflation to reduce the real value of debt.

The enormous legacy of private debt – whether in Britain, Germany, Spain, the US or Greece – and the fiendishly complicated way so many of the loans have been organised and distributed around the world financial system cannot be easily unwound. Sir Philip Hampton, chair of RBS, warned this week it might take a generation for RBS investors to recover their money.

The choice is thus stark. To commit to decades of economic stagnation, the break-up of the eurozone, the risk of trade protection and autarchic economic policies, the dismantling of the west's social contracts, the imposition of high unemployment and the political fallout that will follow.

Or to change course.

The technical means are relatively simple. Governments must replace targets for inflation with targets for the growth of prices and growth of output combined. Central banks should inject money into their financial systems by offering to buy new bank loans made to support new investment, new innovation or new infrastructure – helped by partial government guarantees.

Governments also need to increase demand. They can do this directly – with targeted and time-limited tax cuts or spending increases. They can also move indirectly, taxing the rich more aggressively and re-allocating the proceeds in tax cuts to those on middle incomes and lower who tend to spend more – along the lines that both presidents Obama and Hollande have proposed. There is also a case for a financial transactions tax – both to raise crucial revenue and to cap the growth and frenetic speed of financial transactions. Finance has become too powerful. It needs constraining.

Will any of this happen? The west is at a cross-roads, and although such proposals will be fiercely opposed by the British, German and American right they need to be beaten back. After all, it is their ideas that have brought us to this pass. It is not too fanciful to argue that the future of western capitalism depends upon how this argument plays out – and how quickly, if at all, there is a change of course.

© 2012 The Guardian/UK

William Nicolas Hutton is an English writer, weekly columnist and former editor-in-chief for The Observer. The analysis in his books is characterised by a support for the European Union and its potential, alongside a disdain for what he calls American conservatism – defined, among other factors, as a certain attitude to markets, property and the social contract. In 1992, he won the What The Papers Say award for Political Journalist of the Year.

US Austerity Is Here, We Just Don't Talk About It Enough

The Lost and Forgotten Americans of 2012
by Renee Parsons

As the austerity budget crisis continues to plague diverse Euro countries, American voters may breathe a sigh of relief that even with an economy that remains sluggish, the harsh level of austerity cuts being proposed in Greece and Spain and elsewhere have not happened here. At least that's what conventional wisdom espoused by those who have not suffered from the 2008 financial collapse or experienced the $1 trillion budget cuts in 2011 would have you believe.

As the early weeks of the presidential campaign have shown, the American electorate can expect a mind-numbing election season devoid of a real debate on real issues offering real solutions for millions of desperate citizens living on the edge, confronting the daily hopelessness of an utter catastrophe, abandoned by a government that once claimed to be 'Of, By and For the People". Lost in the shuffle of birth certificates or whether a private equity multi-millionaire is qualified to be president more than a community organizer is any discussion of the impacts on the upcoming second round of $1.2 trillion budget cuts.

In addition, with little substantive disagreement on most international affairs, any real discussion of U.S. foreign policy objectives will be virtually non-existent as the killing of Osama bin Laden is accepted as the crown jewel of foreign policy achievement.

Absent from political dialogue will be a convincing argument that the systemic causes of the economic failure of 2008 have been corrected and its accomplices held responsible while expunged from public discourse will be the on-going foreclosure crisis that has claimed more than two million homes, 30 million long-term unemployed Americans, 50 million Americans living in poverty (the majority of whom are children with 1.5 million homeless since 2009), a student loan debt crisis that exceeds the $1 trillion credit card debt or a profit-driven health care system that fails 45 million Americans. As a third-world poverty spreads throughout the country dooming already-chronically destitute citizens to a lifetime of extreme poverty and with no real glimmer of recovery on the horizon, the impersonal statistics fail to convey the private suffering that millions of citizens are experiencing as an enduring economic depression destroys any hope of a vibrant quality of life. Lost among the statistics is the socially unacceptable subject of economically-related suicides with the Center for Disease Control's latest report that U.S. suicides are at its highest rate in 15 years with 8.3 million Americans reporting thoughts of suicide.

The political establishment's failure to deal more forthrightly with the housing crisis which is essential to economic recovery has been painfully apparent as both Romney and the Obama administration have adopted a hands-off approach to foreclosures reminiscent of Herbert Hoover. Romney favors allowing the 'free market to work' as Housing and Urban Development Secretary Donovan opposes a foreclosure moratorium as 'counter productive' with neither in support of direct federal intervention like FDR's Home Owners Loan Corporation of 1933 which refinanced at-risk mortgages and created the 30 year mortgage timeline.

With the spectacle of the Republican primaries over, it might have been expected that Mitt Romney, once a moderate governor of Massachusetts and not heretofore seen as a typically mean-spirited Republican, would pivot to the center. Instead, as he co-opted 'traditional values' from his zealous primary opponents, Romney redefined himself as 'severely conservative' as he has chosen to follow the Republican party in pursuit of policies that will do little to help millions of American families most in need of assistance.

A graduate of Harvard Law and Harvard Business School, Romney, who could easily make a guest appearance on AMC's Mad Men, has hyped his 15 years at the helm of Bain Capital as evidence of his job-creating ability and insight into economic issues as qualifications for the Oval Office. Among issues earning his support is the malicious austerity Ryan Plan which would cut the federal budget $4.3 trillion. While Ryan's tax cuts for the 1 percent would deprive the Federal treasury of $4.5 trillion in revenue, near-final elimination of the social safety net would be accomplished with an $800 billion reduction in Medicaid, a $134 billion cut in food stamps and a $1.2 trillion cut in non-defense discretionary spending over the next ten years. Non-discretionary cuts would include veterans benefits, education, Head Start, environmental protection and meals on wheels among other programs.

Innocuous references to the economic collapse have largely overlooked the ramifications of the $14 trillion debt ceiling crisis that saw adoption of the Budget Control Act (BCA) of 2011. The Act, which mandated the first round of $1 trillion cuts and approved the debt ceiling but did not include an increase in tax revenues from the country's top 1 percent. The BCA capped reimbursements to Medicare providers, cut $487 billion from the Pentagon to begin in 2013 as it established a bi-partisan Congressional 'super committee' to recommend a second round of $1.2 trillion cuts. Those were the days when a frightened American public was persuaded that a "Grand Bargain" with 'everything on the table' required a 'shared sacrifice" from 99 percent of American citizens, none of whom were responsible for the 2008 collapse while the 2012 mantra is "we're all in this together."

The BCA was adopted by the House of Representatives on a 269 - 161 vote with 95 Democrats voting "aye" and 95 Democrats voting "nay" while the Senate approved the BCA on a 74 - 26 vote with 7 Democrats voting against adoption.

Once the Super Committee failed to reach their goal of $1.2 trillion deficit-reducing cuts, the Act called for $1.2 trillion of across-the-board (aka sequestration) decreases to be automatically triggered by January 1, 2013. Here. Those cuts would be a 50-50 split of approximately $600 billion from the military budget and $600 billion from domestic spending over ten years. In retrospect, it is puzzling that the political drama of the Super Committee's 'failure' to agree on $1.2 trillion cuts was all for naught since, by virtue of its failure, $1.2 trillion in sequestration cuts are mandated anyway. Either way, there was going to be $1.2 trillion in additional budget cuts regardless of whether the Super Committee acted or whether the sequestration 'trigger' was pulled at the end of 2012. "Trigger" generated cuts may appear anonymous without specific Congressional sponsors to blame as claims of an unwilling Congress being 'forced' to act will insulate some Members from public anger.

In the aftermath of the Super Committee, the president offered his support for the $1.2 trillion reductions due later this year promising to "veto any effort to get rid of the new automatic cuts" (i.e. sequestration) while citing a 'balanced approach' with everyone doing their 'fair share' and, at the same time, reaffirming his earlier request for $3 trillion worth of cuts -- on top of the already-approved $1 trillion cuts.

Here's where the already-complicated details become more convoluted:

Therefore, if Congress follows the president's lead, the federal budget would be reduced by a total of $4 trillion. In other words, adopting a level of budget cuts that will be comparable to the Ryan Plan. While the specific details between the two may vary, a $4 trillion budget cut is a $4 trillion budget cut and the necessary reductions have too few pots from which to withdraw the money.

Looking ahead six months, there is no doubt that this fall's lame duck congressional session immediately after the election will potentially be the most divisive and the most damaging to the interests of the American people -- all in the name of sharing the burden. With an as yet indeterminate number of lame duck members packing their desks on their way out the door, there is no guarantee that those lame duckers will vote their conscience in support of the country's forgotten citizens.

And now the convoluted scenario becomes even more complex:

With the prospect of $600 billion in cuts to Pentagon spending as required by sequestration, some of the world's largest defense contractors are warning in anticipation that they "cannot wait until a lame duck session to deal with the consequences of sequestration." Both Lockheed Martin and Northrop Grumman have raised the possibility of significant job losses or facility closures causing further unemployment turmoil. The Aerospace Industries Association representing defense manufacturers is actively campaigning against sequestration.

In response to concerns from defense contractors, Deputy Defense Secretary Ashton Carter appeared before the American Enterprise Institute on May 29 offering the assurance that the administration had reversed its earlier opinion and was determined to avoid the automatic cuts (sequestration) scheduled to take effect January 1. Citing that sequestration will 'disrupt thousands of contracts and programs', Carter was reported to have referred to Defense Secretary Leon Panetta's warning to Congress that another $500 billion in additional cuts would "inflict severe damage to our national defense for generations."

All of the above is a lot to digest for most Americans who have assumed that the country's elected leaders have been tending the national cash register -- we now know from experience that no MBA Wharton School expert can replace feet-on-the-ground common sense that says with austerity budget cuts, the public will have less money to spend and if there is less money circulating, the entire economy will stagnate thereby increasing an unconscionable level of public pain and suffering.

As might be expected, the 2012 campaign will avoid reference to the U.S. continuing to borrow its way out of debt (47 percent of which is owned by foreign entities and 53 percent owned by domestic entities) or mention of a $533 billion annual interest debt payment by 2015 or to provide clear, concise data on exactly how much interest the debt is costing taxpayers annually and what institutions are profiting from U.S. indebtedness.

Also lacking will be any examination of the very real benefits of a public banking alternative which would allow the government to finance its own infrastructure needs and public services as the Bank of North Dakota does without usury interest payments to a rapacious Wall Street financial services industry that cares nothing for the lost, forgotten Americans on Main Street.

Renee Parsons was a lobbyist for Friends of the Earth in Washington, D.C. focusing on nuclear energy issues. While at FOE, she was responsible for a TRO that stopped the Dept of Energy from conducting an experimental drilling program at 12 locations along the perimeter of Canyonlands National Park as a possible high-level nuclear waste repository. Her efforts included opposing the Nuclear Waste Policy Act and organizing the coalition that successfully defunded the Clinch River Breeder Reactor. She also served as staff in the U.S. House of Representatives. In 2005, she was elected to the Durango City Council (Colorado) and served four years as Councilor and Mayor.

Capitalism and the Mad Uncle in the Attic

by John Atcheson

Listen. Can you hear the Mad Uncle in the attic? His muffled shriekings are getting louder as the myths, deceptions and delusions we’ve been living on evaporate one by one in the face of reality.

Can you feel that sickening thrill as we poise atop this Sisyphean peak we call capitalism, right before the inevitable, nauseating plunge back down into reality?

Can you smell the stench from the soon-to-fail Rio plus 20 meeting as we con ourselves into believing we can snatch a bit more time at the peak if only we could steal yet more of our children’s children’s children’s birthright?

Ah, but we – plutocrats and people alike -- all beg, can’t we keep this damned Uncle locked up for just a little more time. Maybe until this election is over. Or until we’ve extracted a little more money from a fossil-fueled economy based on greed and exploitation. Or until … oh, I don’t know … until we’ve bled the last iota of money from the 99%? Or at least until … I get mine?

Can’t we pretend for just one more generation that capitalism – pure, unconstrained capitalism, the kind Reagan promised us would bring morning to America – isn’t instead bringing mourning to America, and to the world?

Can’t we just pretend, for one more generation, that the whole infinite growth on a finite world thing isn’t just a giant, tragic Ponzi Scheme designed to sell out the future?

Can’t we pass this problem onto them?

Can’t we use buzz words and sound bites to drown out the lunatic? Words like socialist or redistribution or – most dreaded of all – communism. Can’t we keep pretending that capitalism is the necessary handmaiden of Democracy, the only path to prosperity, our only source of happiness?

No. We can’t. Because deep down inside, in places we don’t like to visit, we know the Mad Uncle is right.

What we’re doing now isn’t making us all rich. It’s impoverishing us.

Ultimately, all wealth comes from natural capital. Things like fertile soils; viable forests; intact gene pools; abundant minerals; clean water and living oceans; sustainable fish stocks; flourishing ecosystems; a stable, life-sustaining climate. We are liquidating these essential sources of wealth as if they were so much junk offered for pennies on the dollar at a desperate garage sale.

Our current version of capitalism is good at generating more currency, not greater wealth. And we forget that currency is merely a surrogate for things of real value, with no tangible value in and of itself.

And even the currency isn’t being distributed equally. It’s being siphoned off by the richest and most powerful in a spiral of inequity.

It isn't making us happy, it's enslaving us to a life spent pursuing more and more stuff we don’t need for reasons we don’t understand. Bigger; more; faster becomes biggest; most; fastest. But easy, easier, easiest becomes fatter, sicker weaker.

It isn’t making us free, it’s creating a tyranny of the corporations and plutocrats. They weaken government in the name of freedom, only to turn us into indentured servants to a system that's designed to take from the poor and middle class and give to the uber rich, even as it liquidates Earth’s treasures.

But the real tragedy isn’t our own alienation or our economic and spiritual impoverishment. It is the diminished legacy we leave the rest of humanity and indeed, the rest of the biosphere.

It’s our willingness to consume the future in an orgy of gluttony, drowning out the Mad Uncle’s protests with the noise of our own slurping, chewing, smacking, munching, crunching as we inhale our children’s birthright.


Not really. Every living system is in decline, and the rate is accelerating.

In the case of climate change we are at the threshold of igniting feedbacks that will usher in an inevitable and catastrophic set of changes that will make life difficult in some areas and impossible in others.

It’s time to admit that the Mad Uncle is right. Pure, unconstrained capitalism is the problem, not the solution.

What, then, are we to do?

There are alternatives. We could tie currency to sustainable eco-systems. Instead of a gold standard we could have a green standard. Thus, destruction of a nation’s stock of natural capital would devalue its currency, and make it poorer.

We could adopt systems of production and ownership such as Co-ops that emphasized cooperation, equitable sharing of revenue and stewardship of our natural resources. It’s not pie-in-the sky, to consider this. Cooperatives already produce more than $1 trillion in assets, enough to make them equivalent to the 10th largest economy in the world.

We could insist that trade agreements contain real, enforceable requirements for equitable treatment of labor and serious environmental protections, so that globalization ceased being a race to the bottom for humans and the planet.

Yes, these ideas are unrealistic, naïve, politically impossible and all the other labels that will surely be affixed to them and other ideas like them.

But it is worth remembering, that the only thing more unrealistic than junking our current bastardized system of economics is supposing we can continue to liquidate the Earth without consequence.

That’s what the Mad Uncle is telling us. We continue to ignore him at our peril.

John Atcheson is author of the novel, A Being Darkly Wise, an eco-thriller and Book One of a Trilogy centered on global warming. His writing has appeared in The New York Times, the Washington Post, the Baltimore Sun, the San Jose Mercury News and other major newspapers. Atcheson’s book reviews are featured on

Romney-Ryan Bet on ‘Greedy Geezers’

Exclusive: Mitt Romney and Paul Ryan were quick to assure U.S. seniors that they will be grandfathered in to today’s Medicare – even if younger Americans get stuck with an inferior system – a bet that the selfishness of “greedy geezers” will grease the way to a Republican victory, writes Robert Parry.

By Robert Parry

The newly minted Republican ticket of Mitt Romney and Paul Ryan is placing a big – and some might say cynical – bet that the stereotype of the “greedy geezer” is real, that Americans now eligible for Medicare or close to it don’t care that the popular health program won’t be there for their children and grandchildren.

In picking Rep. Ryan as his vice presidential running mate, Romney has taken on Ryan’s plan for replacing Medicare for senior citizens with a voucher program that will end the current fee-for-service program and shift more of the financial burden for health care onto Americans after they turn 65.

However, as Romney and Ryan quickly explained in a TV interview, the Ryan plan wouldn’t affect people currently on Medicare. In its current form, Ryan’s plan for turning Medicare into a voucher system (or “premium support” as Ryan calls it) wouldn’t begin until 2022.

Since senior citizens vote in higher percentages than other demographic groups, Romney and Ryan are trying to split the current Medicare recipients away from those Americans in later generations. The reasoning goes: If today’s seniors think that they’ll still get theirs, they won’t care that their kids and grandkids might be stuck with an inferior program costing each one more than $6,000 extra.

Last year, when Ryan’s was pushing his Medicare overhaul, he and other advocates specifically stressed to seniors at town hall meetings that they would continue to get the system’s guaranteed benefits, an explanation that drew applause from some voters in that age group but prompted concerns from others.

For instance, in Elkhorn, Wisconsin, 64-year-old Clarence Cammers hesitantly asked Ryan a question that got to the heart of the matter. After describing himself as a disabled veteran living on Social Security, Cammers said he could stand some cutbacks for himself; that wasn’t his concern.

“I will be fine,” Cammers said. “I guess what I’m saying is, what are all these changes going to mean for my son?”

Cammers was noting the hard truth that it would be younger Americans who would face Ryan’s scheme of replacing Medicare with government vouchers that would fall short of covering the costs of private insurance.

Pleasant Language

Though Ryan inserted some pleasant language promising that the sick will get adequate care, the reality is sure to be different, essentially requiring the elderly – many who will have preexisting conditions – to navigate through a complex system of insurance companies offering varying levels of coverage. Plus, many insurance companies don’t want anything to do with old and sick people.

As the Brookings Institute’s Henry Aaron explained to the Washington Post’s Ezra Klein, “We’ve all heard about the great proportion of health services used by people in the last year of life. That means if you’re an insurer, you want desperately to not enroll those people. That means you need to try every marketing device you can not to get stuck with the sickies.”

Indeed, the projected budget savings from Ryan’s “premium support” system would be derived from the shortfalls between the vouchers and the cost of medical care for seniors. In other words, the money would be taken out of the pockets of the elderly or be saved by them skipping treatments that they otherwise would receive.

Even for current and near-term Medicare beneficiaries, the Republican plan would have that effect for people needing lots of prescription drugs. The Ryan plan would repeal the current subsidy for seniors facing the “doughnut hole” gap in drug benefits.

But the hardest impact of the Ryan plan would hit those turning 65 in 2022 and later. Though Ryan’s sketchy 2011 proposal lacked many of the specifics needed to fully evaluate its effects, a New York Times editorial noted, “there is little doubt that the Republican proposal would sharply reduce federal spending on Medicare by capping what the government would pay at very low levels. …

“The Congressional Budget Office estimates that by 2022 new enrollees would have to pay at least $6,400 more out of pocket to buy coverage comparable to traditional Medicare. Huge numbers of Medicare beneficiaries live on modest incomes and are already struggling to pay medical bills that Medicare does not fully cover. We should not force them into private health plans that would charge them a lot more or provide much skimpier benefits.”

In the years beyond 2022 — under Ryan’s original plan – the gap between Ryan’s voucher and the actual cost of medical care would widen even more because he would attach it to a slower measure of inflation than the rise in medical costs.

“We’re looking at linking to an index that grows less rapidly than health-care costs by three to four percentage points a year,” said Aaron of the Brookings Institute. “Piled up over 10 years, and that’s a huge erosion of coverage.”

Ryan’s plan also would repeal the Affordable Care Act, known as “Obamacare,” meaning that tens of millions of non-seniors would be on their own to grapple with large insurance companies that aggressively seek to weed out customers with preexisting conditions that might require expensive care.

In December 2011, Ryan did embrace a compromise Medicare plan with Sen. Ron Wyden, D-Oregon, that would index government support levels to the average rise in insurance costs and would let seniors sign up for what essentially amounts to a “public option,” i.e. a government-run program.

However, assuming Romney and Ryan win in November — and bring in a Republican House and Senate — it’s not clear which plan the Republicans would push, since they might no longer need significant Democratic help. They might go back to Ryan’s initial plan which was approved by the House Republican majority.

Premature Death

The obvious result of Ryan’s original Medicare plan would be that many Americans who are now under 55 would die prematurely because they would have to skip treatments or be forced deeper into poverty as they struggled to meet the premium demands of the insurance industry.

Which gets us back to Clarence Cammers’s question: “what are all these changes going to mean for my son?”

The Republican assumption about the “greedy geezers” is that they don’t share Cammers’s concern; all they care about is their own welfare; they want to live as long and as healthy a life as possible but don’t feel the same for their kids and grandkids.

But the GOP bet on the “greedy geezers” is even more startling in that Romney and Ryan are gambling that these seniors and near-seniors would prefer lowering the top tax rates even more for millionaires and billionaires than seeing their progeny enjoy a full and fulfilling life.

Because of Romney-Ryan new tax cuts (and President George W. Bush’s old tax breaks), Ryan’s budget plan doesn’t foresee a balanced budget for nearly three decades – and only then if his original Medicare overhaul plan is enacted and medical costs are shifted heavily onto the backs of the next generations.

Romney and Ryan are further betting that Americans are ready to embrace a brave new world of unbridled selfishness as envisioned by Ryan’s idol, novelist Ayn Rand, who dreamed of a place where “supermen” of industry would be unchained from a society demanding that they share the bounty of their success with others.

In her influential writings, Rand ranted against social programs that enabled the “parasites” among the middle-class and the poor to sap the strength from the admirable rich. But she secretly accepted the government benefits of Medicare after she was diagnosed with lung cancer.

A two-pack-a-day smoker, Rand had denied the medical science about the dangers of cigarettes, much as her acolytes today reject the science of global warming. However, when she developed lung cancer, she connived to have Evva Pryor, an employee of Rand’s law firm, arrange Social Security and Medicare benefits for Ann O’Connor, Ayn Rand with an altered spelling of her first name and her husband’s last name.

In 100 Voices: An Oral History of Ayn Rand, Scott McConnell, founder of the Ayn Rand Institute’s media department, quoted Pryor as saying: “Doctors cost a lot more money than books earn and she could be totally wiped out.”

So, when push came to shove, even Ayn Rand wasn’t above getting help from the despised government. But her followers, including Paul Ryan, now want to strip those guaranteed benefits from other Americans of more modest means than Ayn Rand.

Lecturing a Voter

These Republican priorities hit home at a town hall meeting held by Rep. Rob Woodall, R-Georgia, in May 2011 when one of his constituents worried that Ryan’s plan would leave Americans like her, whose employer doesn’t extend health benefits to retirees, out of luck.

“Hear yourself, ma’am. Hear yourself,” Woodall lectured the woman. “You want the government to take care of you, because your employer decided not to take care of you. My question is, ‘When do I decide I’m going to take care of me?’”

However, another constituent noted that Woodall accepted government-paid-for health insurance for himself. “You are not obligated to take that if you don’t want to,” the woman said. “Why aren’t you going out on the free market in the state where you’re a resident and buy your own health care? Be an example. …

“Go and get it in a single-subscriber plan, like you want everybody else to have, because you want to end employer-sponsored health plans and government-sponsored health plans. … Decline the government health plan and go to Blue Cross/Blue Shield or whoever, and get one for yourself and see how tough it is.”

Woodall answered that he was taking his government health insurance “because it’s free. It’s because it’s free.”

The Romney-Ryan ticket has shoved its chips into the middle of the table with a gamble that Americans so despise the federal government – and the country’s first African-American president – that they will ignore such hypocrisies as demonstrated by Ayn Rand and Rep. Woodall.

And for those already on – or soon to be on – Medicare, the Republican bet is that these seniors and near-seniors will be the greediest of geezers, enjoying the health program for themselves but willing to take the risk that their children and grandchildren will be left at the mercies of private insurance giants.

The Romney-Ryan calculation suggests the Republicans really do believe that today’s senior citizens represent the most selfish generation in American history.

Copyright © 2012 Consortiumnews.

Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & ‘Project Truth’ are also available there.

Washington, Are You Listening?

The Bush tax cuts siphon off money that could fund education and other crucial programs.
by Mattea Kramer

Patrick Pylvainen grew up in a small town outside Minneapolis. The Minnesotan college student has seven siblings, so he borrows money for his tuition — Stafford loans from the federal government, plus loans from private banks that require interest payments while he's still in school. Now, those more affordable federal loans are in jeopardy.

The cascade of federal budget cuts expected to begin in January would slash every single program the government classifies as "discretionary," including funding for education. That's heartbreaking, since public investment in education was a driving force behind historic U.S. prosperity. And an advanced degree is Patrick's ticket to his dream job as a problem-solver in health care policy.

Secretary of Education Arne Duncan recently announced that looming budget cuts will pull funding from student loan programs. That will make it more difficult for students to get timely information about financial aid and could even prevent young people like Patrick from enrolling in college. And that's not all. Duncan said 1.8 million kids will be affected by reduced aid to disadvantaged public schools, while as many as 100,000 very young at-risk kids could lose access to early-childhood education through the Head Start program. These changes will be the law of the land if January's scheduled budget cuts are allowed to take effect.

But this isn't how it has to be. Instead of slashing these programs, our lawmakers could simultaneously provide ample funding for education while reducing deficits. One of the most heated debates this election season is what to do about the Bush-era tax cuts, which are scheduled to expire at the end of the year. Those tax cuts aren't often mentioned in the same breath as education funding, but they should be.

That's because the Bush tax cuts siphon off money that could fund education and other crucial programs.

Consider this: In 2012, those in the top 1 percent will enjoy, on average, a $70,250 tax break. That's money that could go toward higher education, Head Start, and public schools across the nation. Lawmakers should let some or all of the Bush tax cuts expire to raise trillions of dollars over the next decade — and to prevent deep cuts to federally funded education.

Some lawmakers say we can't let the Bush tax cuts expire even for the super rich, arguing it would harm job creation. But level-headed research suggests that reverting to pre-Bush tax rates would have only very small effects on the behavior of those top earners. Meanwhile, the benefits of greater tax revenue — including higher graduation rates and a more skilled workforce — would far outweigh any losses.

Would most Americans get behind such a move? In a word, yes. There's strong support (62 percent) for increasing education funding, even in the context of budget deficits. And a recent Gallup poll found that six in 10 Americans believe wealthy taxpayers aren't paying their fair share. This is our chance to reduce deficits and invest in education for the long-term prosperity of the United States. Washington, are you listening?

Mattea Kramer is a research analyst at the National Priorities Project in Northampton, Massachusetts and co-author (with Chris Hellman) of the new book, A People's Guide to the Federal Budget.

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