Friday, December 28, 2012

Why we're (almost certainly) going over the "fiscal cliff" (Kevin Drum)

The basic answer is pretty simple. To borrow the cogent formulation of Mann & Ornstein, which captures the larger situation that the present "fiscal cliff" fiasco merely exemplifies: "Let’s just say it: The Republicans are the problem".

For a more specific analysis of why this month's negotiations (or pseudo-negotiations) have gone nowhere, a good place to start is with Kevin Drum's piece from a few days ago (below).

It's hypothetically possible, of course, that over the next few days we will all be astonished by seeing the Congressional Republicans agree to some stopgap solution that postpones the austerity bomb for a while.  But it's most likely that on January 1 this analysis by Kevin Drum will still offer the relevant starting-point.

Happy Holidays,
Jeff Weintraub

===================================
Kevin Drum
Wednesday, December 26, 2012
The Great Republican Recession of 2013 is Now Five Days Away

After the failure of his fiscal cliff negotiations with the White House, followed by his humiliating inability to get even his ridiculous "Plan B" proposal approved by House Republicans, John Boehner gave up and punted the whole thing over to the president and the Senate. Why? Matt Yglesias says Boehner likes the idea because the only way to get anything through the Senate is to compromise with Republicans, which will produce a deal to the right of Obama's current proposal. "Then once something like that difference-splitting bill passes the Senate, Boehner gets to take it up as the new baseline for negotiations and pull the ultimate resolution even further to the right."

True enough. But I doubt this was Boehner's intent from the beginning. Remember that during the debt limit talks last year, Boehner initially handed off negotiating duties to Eric Cantor, hoping that if Cantor signed off on a deal it would get the rest of the tea party caucus to throw in their votes as well. But Cantor double-crossed him after a few weeks, pulling out of the talks and pushing them back in Boehner's lap so that Boehner would have to take the heat for agreeing to any tax increases. But even at that, Boehner didn't give up: he tried to keep negotiating until it became clear that the Cantorites just flatly wouldn't approve any feasible deal. Eventually a deal got done after Mitch McConnell got involved.

We're seeing the same dynamic this time around: Boehner trying to negotiate, but eventually giving up after it became clear that the Cantorites wouldn't agree to any feasible kind of deal. So now he's going back to the debt limit playbook, and hoping that maybe a deal that comes with the imprimatur of Senate Republicans will also get enough Republican votes in the House to pass. Besides, if a deal passes the Senate, that gives him an excuse to bring it to the floor even if it doesn't have the votes of a majority of the Republican caucus.

Now, it's true that Mitch McConnell will almost certainly want to take Obama's most recent proposal and use that as a starting point to move even further rightward:
But that's exactly why Obama would be foolish to take any such thing seriously. Starting in the New Year, the Senate gets more liberal. The House also gets more liberal. And the policy baseline also gets more liberal. The White House isn't going to pull the plug on negotiations, but unless Boehner comes back to the table with something new to say they have no incentive to further weaken their hand.
Yep. However, for PR reasons, Obama has to remain the adult in the room at all times, continuing to negotiate honestly even in the face of seemingly relentless intransigence. No ultimatums, no walking out of talks. But on January 1, taxes on the middle class go up and the economy slowly begins to slide into the great Republican Recession of 2013. That's the leverage that will finally force GOP leaders to get serious. Obama will never say so publicly, but I imagine he knows this perfectly well.

Monday, December 24, 2012

Iranian & American anti-semites cooperate to explain how the Jews were to blame for the Newtown massacre

It was only a matter of time before some people found ways to blame the Jews (and/or "Zionists") for the elementary school massacre in Newtown, Connecticut.  One especially illuminating analysis along these lines was relayed to the world by the official Iranian TV network, PressTV, which summed up its report as follows:
A prominent Phoenix-based analyst tells Press TV that the Israelis and their media like Hollywood are behind most of the violent incidents happening within the United States namely the recent deadly New Town school shooting incident.
Note that the analysis offered here is not simple or superficial, but complex, multi-layered, and sociologically rich.  The role of the Jews in this incident and others like it is not merely direct (in a manner reminiscent of the mythical involvement by Israeli Mossad agents in bringing down the World Trade Center on 9/11) but also indirect—through the effects of the Jewish-controlled media on American culture, for example, or the Jewish gun control plot "to take guns away from normal law abiding middleclass Americans," leaving them helpless to defend themselves, not to mention Jewish control of US foreign policy, and so on (transcript here).  In case this version of the story was too subtle, PressTV also ran two other pieces titled, more straightforwardly, "Israeli death squads involved in Sandy Hook bloodbath" & "Mossad death squads slaughtered American children at Sandy Hook".

The "prominent Phoenix-based analyst" interviewed by PressTV, Mike Harris, is someone I've never heard of.  In a country the size of the US there are a lot of nuts, and the internet is full of crazy websites peddling lunatic conspiracy theories of all varieties, so why give this one even a moment's attention?  I think that in this case there are at least three reasons for paying a little attention.

First, this brief discourse by Mike Harris offers a usefully informative compendium of some major themes that run through a wide range of Jewish-world-conspiracy theories on both the far right and the far left (on certain topics, it's not always easy to tell the difference between the two).  If you've ever wondered how we Jews manage to do so much damage and keep it under the radar, Harris lays out a cogent and comprehensive explanation that ties a lot of apparently unrelated elements together (as paranoid delusions often do).

Second, Harris was given a platform, and his anti-semitic ravings were endorsed and broadcast to the world, by the official TV service of the Iranian regime.  There are some people who continue to deny, in the face of all the evidence, that the current Iranian regime is pervasively and systematically anti-semitic (not just 'critical of Israeli policies' or 'pro-Palestinian').  For such people, this very typical example of pseudo-journalistic propaganda from PressTV might serve as one more small reality check.

The third point is related to the second.  In the US, paranoid anti-semitic ravings like those of Mike Harris and his colleagues are culturally and politically marginal (though more genteel echoes of some of their themes can occasionally be found in more mainstream discourse).  In some other parts of the world, however, lunatic anti-semitic conspiracy theories of this sort are not just respectable, but mainstream.  It's worth being reminded of that.

=>  For a slightly fleshed-out account of this affair, which usefully outlines the main elements of Mike Harris's analysis, see the piece below from Britain's CST blog.  (Norman Geras also highlights a piece on this subject by Max Fisher at the Washington Post.)

Yours for reality-based discourse,
Jeff Weintraub

==============================
CST blog
December 19, 2012
Iranian & American antisemites unite: British anti-Zionists on stand-by
By Mark Gardner

Iranian state broadcaster, Press TV, has excitedly blamed the dreadful Connecticut school shooting upon Israel, Zionists and Jews. It is quoting Mike Harris, financial editor of the American website, Veterans Today:
And I want you to look at this in a greater context of things. We have had a Zionist-controlled Hollywood, a Zionist-controlled news media that is the conduit to all of these violence ... into every home in America and so you wonder why there is a culture of violence? It is because it comes from the Jews in Hollywood. That is where the conduit of violence comes from. That is the source of it.
Not content with indirectly blaming Zionist / Jewish control of American media , Harris directly blames Israel (and throws in the old Israel / Jews kill children routine for antisemitic measure):
But look behind that even deeper, I want to remind you of the Norway shooting of Mr. Breivik, which followed a week after Norway had agreed to support Palestine. Now you look at Israel just lost their bid to thwart Palestine from being recognized by the United Nations and now here we go, here is a revenge killing in the US, sponsored by Israel, that killed all these innocent children and that is something that Israelis do very, very well. They target the innocent, they target the children ...
Of course, no self-respecting ‘anti-Zionist’ or antisemite would neglect to trot out the ‘Jewish money controls Congress’ charge:
So let us connect the dots here about what is going on globally, geopolitically with Israel involved. Now they are also calling for a Congressional hearing. Now one thing you can count on with a Congressional hearing is there is going to be a cover up because all the Congressmen are bought and paid for by the Israeli Lobby in the US.

So any truth of this is going to be hidden because Israel wants it hidden,because they are once again the guilty party.
Israeli death squads are then joined, seamlessly, by Jewish-controlled filth:
You have to realize Israel has been operating death squads in the United States since Gabrielle Giffords and Judge Roll were shot in Tuscan. There has been other incidents as the Colorado shooting, that was again Israeli death squads operating in the US ...

... I watched the filth that Hollywood produces. The filth that comes out of Hollywood. Hollywood is Jewish-owned and Jewish-controlled and they spew filth and they spew violence out.
The Jewish end-game? Why, to further control America of course:
... taking guns away from law abiding Americans is pointless. The culture as we are talking about here is Jewish-inspired, comes out of Hollywood, comes out of the Jewish-controlled news media. It comes out ..., our congress is bought and paid for. Look at who the major donors are!

70 percent of the money comes out of corporations that are Zionist Jewish-controlled. Let us put credit where credit is due and this goes squarely on the Jewish lobby and let us look at our control who want to take the guns, [Dianne] Feinstein, [Charles] Schumer,[Barbara] Boxer; those are all the ones; those are all Jewish senators, all Jewish people who want to take guns away from normal law abiding middleclass Americans, who have a right under this constitution to do it.

They have been trying to destroy this country and trying to destroy this constitution for the last 70 years....

We are not going to sit back and take this Zionist-occupied government that we have in this country anymore.... We have had a Zionist-controlled Hollywood, a Zionist-controlled news media, that is the conduit to all of these violence.... It is because it comes from the Jews in Hollywood. That is where the conduit of violence comes from. That is the source of it.
This talk of Zionist-occupied government and Jewish gun control is highly reminiscent of The Turner Diaries – the infamous American neo-Nazi guide to Race War that helped inspire the truck bombing of the Alfred Murrah building in Oklahoma in 1995, which murdered over 160 people. The book takes the “mass Gun Raids” under the Cohen Act” as its starting point for a fantasy white revolutionary overthrow of the United States. This is its take on what must be done with the Jews:
If the White nations of the world had not allowed themselves to become subject to the Jew, to Jewish ideas, to the Jewish spirit, this war would not be necessary. We can hardly consider ourselves blameless. We can hardly say we had no choice, no chance to avoid the Jew’s snare. We can hardly say we were not warned....

The people had finally had their fill of the Jews and their tricks.... If the [revolutionary] Organization survives this contest, no Jew will — anywhere. We’ll go to the Uttermost ends of the earth to hunt down the last of Satan’s spawn.
Meanwhile, back at the Veterans Today website, you can see some regular contributors who are better known for their work within British anti-Israel and leftist circles, than they are for attracting  fleas from crazy American neo-Nazis, survivalists, conspiracy nuts etc. Step forward, Gilad Atzmon and Alan Hart. In Hart’s case, he actually has an article on the school shootings. This avoids antisemitism, but attracts some rabidly antisemitic comments, including the first one:
You need a strong German who no longer cow tows to the jews. One who will take charge and eliminate their control over the press, media, banks and every policy and law that affects the population. A leader with strong ties and allegiance to his brothers at arms. One who has the National interest of the Fatherland in mind not the interest of the International bankers. One who wants to build rather than destroy. One who is not afraid to put his life on the line to unite his people to all want to create a better America. I only say German because the last time a man like this appeared he was a German.
George Galloway still presents for Press TV. Will he, or Alan Hart, (or even Gilad Atzmon) raise any meaningful protest against this mad antisemitic garbage?

Sunday, December 23, 2012

Callousness on parade in Republican health care politics – How Mitch McConnell gave the game away

In my post on Bobby Jindal's Christmas Spirit earlier today, I quoted from a piece by Josh Barro in which he advised well-meaning conservative pundits and  policy intellectuals who would like to believe that there is a serious Republican alternative to Obamacare that they should avoid wishful thinking and face reality.
The alternative to PPACA is nothing. Mitch McConnell’s comments last weekend were instructive -- Republicans in Congress have no meaningful plan to replace Obamacare and think that 30 million uninsured Americans is “not the issue.”
The incident with Senate Minority Leader Mitch McConnell to which Barro referred was, indeed, an especially illuminating moment of revelation. So it's worth revisiting.

It occurred on July 1 of this year during a TV exchange between McConnell and Chris Wallace of Fox News (no less). McConnell was in the midst of bashing Obamacare and explaining how the Republicans could use various procedural maneuvers to repeal it after their expected victory in November. Wallace, who is less of a hack than most Fox staffers and even acts like a real journalist on occasion, put the following question to McConnell:
One of the keys to Obamacare is that it will extend insurance access to 30 million people who are now uninsured. In your replacement, how would you provide universal coverage?
McConnell, who obviously had not given this matter much thought, evaded the question and instead tried to run out the clock by repeating the standard Republican talking-points attacking Obamacare.  But Wallace, surprisingly enough, didn't let him get away with it.  He repeatedly broke into McConnell's filibuster to request that McConnell answer his question. Finally, as time was running out, Wallace put it to him straight, provoking the following exchange:

Wallace:  “But respectfully, sir .... I just want to ask what specifically are you going to do to provide universal coverage to the 30 million people who are uninsured?”

McConnell:  "That is not the issue."

Wallace:  “You don’t think 30 million people uninsured is an issue?”

What's interesting about this exchange is not just that McConnell made it abundantly clear, to anyone who was still wondering, that he doesn't give a damn about the 30 million Americans without health insurance.  What's even more striking, in a way, is that he hadn't even bothered to come up with a ready-made formulaic response that would allow him to pretend that he gives a damn.  For McConnell and the people he's used to dealing with, no, it's not an issue that deserves attention.

Republican politicians sometimes claim that they don't simply want to throw people without decent health coverage to the wolves, but instead have a better plan to take care of them.  As one of their slogans goes, they won't simply dismantle the health care reform passed in 2009, but will "repeal and replace" Obamacare.  Well, replace it with what?  In reality, not only do they not have a serious alternative in mind, but in most cases they barely pretend to have a serious alternative. Nevertheless, this propaganda does manage to fool some people who are determined to be gullible.  So we can be grateful to McConnell for cutting through that bullshit, however inadvertently.

You can watch a video clip of the exchange below.

—Jeff Weintraub


Callousness on parade in Republican health care politics – Bobby Jindal's Christmas spirit

Unfortunately, it's all too easy to multiply examples of that callousness.  But for one especially striking illustration, I commend to your attention this piece by Rod Dreher in The American Conservative ... as well as some relevant highlights from a piece by Josh Barro, which follow it below.

==================================================
The American Conservative
December 22, 2012
Dying Poor People & Jindal’s Priorities
By Rod Dreher

Not sure how this is going to sound to the rest of America when Louisiana Gov. Bobby Jindal runs for president:
Cuts to hospice care announced by state officials last week are deeper than originally portrayed, eliminating hospice treatment for all Medicaid recipients starting in February, the Louisiana Department of Health and Hospitals said Wednesday. In announcing the reductions to hospice care, which aims to make dying people more comfortable in the last six months of their lives, Jindal administration officials said the cutbacks would force people on Medicaid to seek the service in a nursing home. But the change actually means the state is eliminating all hospice care – both at home and in nursing facilities — to people covered by Medicaid.
Merry Christmas, Poors! More:
Legislators at a Friday hearing to discuss the $165.5 million in reductions and other budget fixes were especially alarmed by the hospice cuts. The cuts are needed because a revenue shortfall has thrown the the state’s budget out of whack. The budget must be balanced by the time the fiscal year ends on June 30.
If the state doesn’t have the money, it doesn’t have the money — and we in Louisiana are constitutionally required to balance our state budget. But not enough money to pay for hospice care for the poor? Really? What kind of state are we?

We are the kind of state that provides at least $1.79 billion annually in tax breaks and incentives to business.

We are the kind of state that won’t cut or scale back those, even a little bit, but will cut $1.1 million annually to provide minimal end-of-life care for 5,800 poor Louisianians.

Such are the priorities of our presidential hopeful Republican governor and our GOP-run state government, it appears. I believe that our governor is sincere when he openly and enthusiastically talks about his Christian faith, which makes it all the more frustrating to see that business and industry are the Chosen People in this state. more important to take even more away from the poorest of the poor than to compel the well-off to give up the least tax break. Gov. Jindal said in a 2011 Christianity Today interview:
I think that it’s absolutely critical to get the economy growing without raising taxes or increasing the deficit. I’m also proud to belong to a party that stands for the sanctity of human life and traditional marriage. Those values remain important during good and bad economic times.
“Sanctity of life”? With Medicaid-funded hospice, we’re talking about helping terminally ill poor people die with dignity. What kind of “sanctity of life” ethic values maintaining state tax breaks for wealthy corporations over hospice care for the poor?

Jindal supporters, what am I missing here? Help me out.

[Via The Mighty Favog.]
==================================================

=> These actions by Jindal's administration that Dreher finds so morally dumbfounding are part of a larger story that also happens to be a moral scandal—the equally callous political posturing by many Republican governors who are refusing to implement the Medicaid expansion included in the Affordable Care Act (aka Obamacare). Back in July another dissident conservative writer, Josh Barro, spelled out what's involved here:
[G]overnors can’t repeal the Patient Protection and Affordable Care Act. Their option is to take federal funds that will pay for 90-plus percent of a Medicaid expansion to cover the working poor, or not. Republican governors who decline these funds will be attacked for blocking coverage expansion to help the poor and the sick that is nearly free to state taxpayers because that is exactly what they will be doing.

Second, any governors who believe that undermining Obamacare is part of a long game to get a better health reform are mistaken. If there is Republican enthusiasm for "a health system reform that seeks to contain cost growth through progressive cost-sharing, deregulation designed to facilitate business-model innovation, and other market-oriented measures," [JW: Barro is quoting from a piece by  Reihan Salam that tried to concoct a speculative pseudo-sophisticated defense of what the Republican governors were doing] then where was that reform (or even serious legislative action toward such a reform) when Republicans ran the federal government between 2001 and 2007?

The alternative to PPACA is nothing. Mitch McConnell’s comments last weekend were instructive -- Republicans in Congress have no meaningful plan to replace Obamacare and think that 30 million uninsured Americans is “not the issue.”

Conservative health wonks will object to my characterization. They will say they have many plans to use markets to drive down costs so that affordability is less of an issue. They may even advance plans that spend money to subsidize some sort of coverage for some expanded group of Americans. But Republicans have not taken them up on those plans when they have had the chance. That’s partly because expanding coverage costs money, and Republicans aren’t willing to spend money on it. And it’s partly because achieving significant cost control, even though market mechanisms, goes against the interests of groups that support Republicans, such as doctors and seniors.

There’s a reason Representative Paul Ryan’s plan to cut Medicare costs doesn’t even start affecting anyone for 10 years. The Republicans’ best electoral strategy on health care is to talk a good game but not implement reform with meaningful effects. If Republican governors refuse expanded Medicaid, those federal incentives won’t change.

This is a shame, because Reihan is right about one thing: There's a lot that’s undesirable about the PPACA model. [....]

Those are all things Republicans could have gotten if they had been willing to play ball on reform. But instead, they hunkered down and decided to throw everything they could at the law. [....] Turning down the Medicaid expansion would be just another component of the obstruct-everywhere strategy.

Republicans might succeed in throwing enough wrenches in the law to prevent it from working, though that looks less and less likely following last week’s court decision. But nobody should fool himself into thinking the endgame is a sleeker, better reform that expands coverage and controls costs. If Republican lawmakers in the states decide to turn down Medicaid funds, the main effect will be many of their constituents going without health insurance.
Happy Holidays,
Jeff Weintraub

Saturday, December 22, 2012

J.R.R. Tolkien on ending the Bush tax cuts for the top 2%

As we all know, for four years now one key focus of political gridlock in US national politics has been the absolute, intransigent refusal of the Congressional Republicans, along with the wider Republican right, to accept any tax increases at all for the wealthiest Americans.  The Bush tax cuts have been scheduled to expire (as a by-product of the procedural tricks used to pass them in the first place).  Obama's proposal, reiterated steadily ever since his first run for president in 2007-2008, has been to accept a continuation of the Bush tax cuts for 98% of taxpayers, but to allow those cuts to expire for the top 2%—whose federal income tax rates would go up a few percentage points on their (adjusted, taxable) annual income over $250,000, back to the levels that prevailed during the Clinton administration. (As I'm sure you remember, the Clinton years were a time of economic decline, technological stagnation, skyrocketing unemployment, and exploding federal deficits—just as right-wingers confidently predicted when Clinton's first budget was passed in 1993.)  This extremely moderate, reasonable, and unambitious proposal has encountered a solid wall of immovable, often hysterical, Republican opposition, accompanied by a noisy chorus of plutocratic whining..

After Obama's re-election this November, even some unimpeachably hard-right Republican figures began to muse aloud that the Republican Party's (well-deserved) reputation as the Plutocrats' Party was beginning to turn into an electoral liability, and perhaps they should do something to change this image.  One notable statement along these lines came from Louisiana Governor Bobby Jindal on November 12, less than a week after the election:
“We’ve got to make sure that we are not the party of big business, big banks, big Wall Street bailouts, big corporate loopholes, big anything,” Jindal told POLITICO in a 45-minute telephone interview. “We cannot be, we must not be, the party that simply protects the rich so they get to keep their toys.”
It's not clear whether Jindal was recommending an actual shift in the Republicans' substantive policies or just some cosmetic public-relations adjustments (as Jonathan Zasloff and others noted skeptically at the time). But either way, it seems clear that Jindal had put his finger on a real problem.

Since then, as the showdown over the so-called "fiscal cliff" began to loom, some Congressional Republicans and right-wing pundits began to get a bit wobbly about mounting a last-ditch, all-or-or nothing fight to preserve lower tax rates for the wealthy.  But so far those voices have turned out to be marginal.  The political maneuvering of the past month and a half, capped by the fiasco of Republican House Speaker John Boehner's attempt at a Plan B, have made it clear that the great bulk of Congressional Republicans still refuse to consider raising tax rates for the top 2%.  Maybe some of them will feel differently after the Christmas recess, or after the Bush tax cuts have automatically expired on January 1.  But for the moment, at least, the Republicans remain overwhelmingly determined to make sure that the rich get to keep their toys, whatever that takes.

=>  Is it purely a coincidence that I just happened to run across the following passage from J.R.R. Tolkien?  A film based on The Hobbit is coming out, and at one point the review in the New Yorker quotes directly from Tolkien's book.  When the dragon Smaug discovers that one cup has been removed from his vast golden hoard, how does he respond?  He falls into
the sort of rage that is only seen when rich folk that have more than they can enjoy suddenly lose something that they have long had but never used or wanted.
Now, why should that remind me of the right-wing reaction to the possibility that tax rates for millionaires might go back to Clinton-era levels? Your guess is as good as mine ...

—Jeff Weintraub

P.S. Thanks to James Wimberley for providing us with Tolkien's drawing of Smaug:

Tuesday, December 11, 2012

Christmastime for the Jews – A seasonal collection

These will be new for some of you, re-runs for others, but timely for all (or so I hope). With good will for Jews and goyim alike.  —Jeff Weintraub

Jewish Christmas - The Chinese connection

Christmastime for the Jews (contd.)

All I want for Christmas is ... Jews (Pseudo-Mariah Carey)





 (If you get a pop-up ad while the video is running, just click the X in the upper-right-hand corner of the pop-up.)

=>  And here's a little tidbit (parody! parody!) by David Mamet:

Hamas (once again) clarifies its position on Israel

 hamas-gaza-openz

Actually, no clarification should be necessary—except that Hamas's position on this subject, which is clear and principled and straightforward, is constantly being obscured by distortion, disinformation, and wishful thinking.  Hamas is a militantly theocratic and anti-semitic organization that refuses to accept the existence of Israel (not Israel's policies or its occupation of Palestinian territories captured in 1967, but Israel's existence) and is committed to the destruction of Israel and its replacement by an Islamic state.  Those are simply facts, whether or not one finds them inconvenient, and a willingness to recognize these facts should be the starting-point for any serious discussion. Yet we're always being told that Hamas doesn't really mean it, that it has shifted or modified its position, that it is becoming more "moderate," and similar pseudo-sophisticated clichés.

On December 28 the head of Hamas, Khaled Meshaal, who was domiciled in Damascus until recently, paid his first visit to Gaza.  He was the featured speaker at a massive rally celebrating the 25th anniversary of Hamas's founding as well as the alleged "victory" of Hamas in its recent conflict with Israel. This event provided some useful reality checks.

I'll quote first from the report in the Guardian  (which I pick because the Guardian's bias against Israel is sufficiently well established that no one can plausibly accuse it of peddling Zionist propaganda):
Hamas leader Khaled Meshaal vowed Gaza's rulers would never give up "an inch of the land" to Israel in an uncompromising speech before tens of thousands of cheering supporters at a triumphalist "victory" rally in Gaza City.

"Palestine is ours, from the river to the sea and from the south to the north. There will be no concession on an inch of the land," he told the crowd on his first visit to Gaza. "We will never recognise the legitimacy of the Israeli occupation and therefore there is no legitimacy for Israel, no matter how long it will take."
If you put those last two sentences together it should be clear enough, even for someone determined to pretend otherwise, that ending "the Israeli occupation" of "Palestine" means eliminating Israel.

The New York Times report by Steven Erlanger spells out some further details:
Speaking before tens of thousands of supporters to celebrate the 25th anniversary of the founding of Hamas, Mr. Meshal said the Jewish state would be wiped away through “resistance,” or military action. “The state will come from resistance, not negotiation,” he said. “Liberation first, then statehood." [....]

Mr. Meshal’s harsh words reflected longstanding Hamas principles rather than new, specific threats toward Israel. But they will only reinforce Israel’s belief that Hamas is its enemy and intends to continue to use military force to reach its goals.
Now, why on earth would Israelis be tempted to draw those conclusions? At all events, it's worth noting that Erlanger's allusion to Hamas's use of "military force" is a misleadingly euphemistic formulation. Hamas has consistently declared, and amply confirmed in practice, that it regards the deliberate murder of Israeli civilians as a completely legitimate tool of armed conflict. According to the generally accepted laws of war, that's an unambiguous war crime. But why quibble?

And what about the long-term prospects for Israeli Jews?  The AP/Times of Israel
report added one more interesting tidbit from the rally:
A spokesmen for Hamas’s military wing, Izz ad-Din al-Qassam, warned Israelis to prepare their passports.

“We fought the Zionist entity with limited power,” he said. “What will happen when we fight with all our might?

“Zionists, you should prepare your passports and get ready to disappear,” the spokesman added.
I suppose that could be taken as a sign of "moderation," if one were so inclined.  Israeli Jews won't necessarily be wiped out.  Instead, to borrow a term used in a different context by an American politician, they can practice "self-deportation".

Yes, it's true that Hamas figures sometimes signal that under certain conditions they would be willing to accept a prolonged truce (or hudna) with Israel—which they could use to increase their missile stockpiles and otherwise build up their military capacities to resume armed conflict.  Even if we take these occasional hints at face value, they wouldn't change Hamas's fundamental goals and principles one iota.  A hudna is a military gambit, not a peace offer.

=>  In short, there is no mystery about Hamas's position, which has been quite clear, consistent, and principled.  Hamas is committed to the destruction of Israel, "no matter how long it will take," through armed struggle that includes the terrorist murder of Israeli civilians.  Some might want to argue that Hamas's position in this matter is justified, and although I would describe that assessment as wrong and immoral, at least it would be honest. Or one might want to argue that, in the long run, Hamas will change its position  That's not impossible.  But in the meantime, until that happens, Hamas's actual position is what it is.  Trying to pretend otherwise is either mistaken or dishonest, and any discussion that tries to evade or obscure or whitewash this unpleasant reality is not worth taking seriously.

And we can take that one step further.  Even if you do happen to believe that Israel's existence is unjust and illegitimate, and that Israeli Jews deserve to be driven into the sea, another hard reality is that support or apologetics for Hamas does the Palestinian people no favors.  As Hussein Ibish correctly summed it up in his response to Meshal's Gaza speech, "For the Palestinian national movement, Hamas is a disaster built on a calamity." In my opinion, only people whose hatred for Israel is greater than their sympathy for actual Palestinians could disagree with that.

Yours for reality-based discourse,
Jeff Weintraub

It's still necessary to debunk the right-wing fable that Fannie Mae, Freddie Mac, and the Community Reinvestment Act caused the financial crisis

A few days ago Brad DeLong sent us back to a very useful piece by New York Times columnist Joe Nocera in December 2011. Nocera's column was about the genesis, dissemination, and continued repetition of The Big Lie that Fannie Mae, Freddie Mac, and the Community Reinvestment Act caused the financial crisis of 2008 ... which, in turn, precipitated the economic crash from which we are still recovering.  A key point of this argument, as Nocera explained, is the claim "that the government’s effort to encourage homeownership among low- and moderate-income Americans is what led to the crisis."

This myth hasn't gone away. On the contrary, it has been peddled so assiduously by the right-wing propaganda machinery that to many people, especially those who don't follow the issues closely and obsessively, it sounds like a plausible account.  But that makes it especially important to keep pointing out that this oft-told fable is, in fact, misleading ideological bunk.

Nocera did that effectively in his column (see below), which remains all too relevant.  But I think his discussion needs a bit of explanatory background, and for that I'll go back to one of my own discussions of these matters in November 2011.

=> Despite important differences on many specific points, most serious analysts would agree that many of the roots of the great economic crash of 2008 and the world-wide economic recession through which we're still struggling lie in the long-term consequences of decades of unwise, reckless, and irresponsible deregulation driven by a toxic combination of market-utopian ideological delirium and straightforward political corruption. One area in which this especially true is the financial sector. Finance capitalism was unleashed, ran wild, swallowed up too much of the economy, and then brought down the house when it crashed--and had to be rescued.  (For some details and elaboration, see here & here. & here.)

On the other hand, people who get their information about the current Great Recession, and about the political economy of the United States more generally, from sources like the editorial page of the Wall Street Journal, Fox News, and Republican politicians are presented with an alternate universe in which Wall Street and financial deregulation—including the uncontrolled securitization of mortgages and the wild proliferation of other unregulated derivatives—had nothing to do with precipitating the crash. Instead, the fault lay entirely with quasi-governmental institutions like Fannie Mae and Freddie Mac and with the consequences of the 1977 Community Reinvestment Act (which supposedly forced banks to issue sub-prime mortgages to poor people and minorities). On one occasion last year this nonsense was summed up, in truly astounding statement that might seem to vindicate the crudest versions of a Marxist theory of class-bound ideology, by none other than New York City's Mayor Michael Bloomberg:
It was not the banks that created the mortgage crisis. It was, plain and simple, Congress, who forced everybody to go and give mortgages to people who were on the cusp [....] But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody.
I happen to know some intelligent, serious, and well-informed people who have been taken in by this propaganda, and like most propaganda it does contain some grains of truth, but overall it's just a fable. (For a patient explanation of some of the reasons why, see here.) However, this nonsense is far from being harmless, since as long as the real sources of the problem are ignored or obscured or distorted out of recognition, it will be hard to generate the political will to do anything constructive about them.

=>  So how did this fable originate, and how has it been disseminated?   As Nocera explained,
[...] Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis. His partner in crime is another A.E.I. scholar, Edward Pinto, who a very long time ago was Fannie’s chief credit officer. Pinto claims that as of June 2008, 27 million “risky” mortgages had been issued — “and a lion’s share was on Fannie and Freddie’s books,” as Wallison wrote recently. Never mind that his definition of “risky” is so all-encompassing that it includes mortgages with extremely low default rates as well as those with default rates nearing 30 percent. These latter mortgages were the ones created by the unholy alliance between subprime lenders and Wall Street. Pinto’s numbers are the Big Lie’s primary data point.

Allies? Start with Congressional Republicans, who have vowed to eliminate Fannie and Freddie — because, after all, they caused the crisis! Throw in The Wall Street Journal’s editorial page, which, on Wednesday, published one of Wallison’s many articles repeating the Big Lie. It was followed on Thursday by an editorial in The Journal making essentially the same point. Repetition is all-important to spreading a Big Lie.

In Wallison’s article, he claimed that the charges brought by the Securities and Exchange Commission against six former Fannie and Freddie executives last week prove him right.  [....]  Rarely, however, has his intellectual dishonesty been on such vivid display. In fact, what the S.E.C.’s allegations show is that the Big Lie is, well, a lie.

Central to Wallison’s argument is that the government’s effort to encourage homeownership among low- and moderate-income Americans is what led to the crisis. Fannie and Freddie, which were required by law to meet certain “affordable housing mandates,” were the primary instruments of that government policy; their need to meet those mandates, says Wallison, is what caused them to dive so heavily into those “risky” mortgages. And because they were powerful forces in the housing market, their entry into subprime dragged along the rest of the mortgage industry.

But the S.E.C. complaint makes almost no mention of affordable housing mandates. Instead, it charges that the executives were motivated to begin buying subprime mortgages — belatedly, contrary to the Big Lie — because they were trying to reclaim lost market share, and thus maximize their bonuses.

As Karen Petrou, a well-regarded bank analyst, puts it: “The S.E.C.’s facts paint a picture in which it wasn’t high-minded government mandates that did [Fannie and Freddie] wrong, but rather the monomaniacal focus of top management on market share.” As I wrote on Tuesday, Fannie and Freddie, rather than leading the housing industry astray, got into riskier mortgages only after the horse was out of the barn. They were becoming irrelevant in the most profitable segment of the market — subprime. And that they couldn’t abide. [....]

Three years after the financial crisis, the country would be well served by a real debate about the role of government in housing. Should the government be helping low- and moderate-income Americans own their own homes? If so, is there an acceptable level of risk? If not, how do we recast the American dream?

To have that debate, though, we need a clear understanding of what role the government’s affordable-housing goals did — and did not — play in the crisis. And that is impossible as long as the Big Lie holds sway.

Which, now that I think of it, may be the whole point of the exercise.
But read the whole thing (below).

—Jeff Weintraub

==============================
New York Times
December 23, 2011
The Big Lie
By Joe Nocera

So this is how the Big Lie works.

You begin with a hypothesis that has a certain surface plausibility. You find an ally whose background suggests that he’s an “expert”; out of thin air, he devises “data.” You write articles in sympathetic publications, repeating the data endlessly; in time, some of these publications make your cause their own. Like-minded congressmen pick up your mantra and invite you to testify at hearings.

You’re chosen for an investigative panel related to your topic. When other panel members, after inspecting your evidence, reject your thesis, you claim that they did so for ideological reasons. This, too, is repeated by your allies. Soon, the echo chamber you created drowns out dissenting views; even presidential candidates begin repeating the Big Lie.

Thus has Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis. His partner in crime is another A.E.I. scholar, Edward Pinto, who a very long time ago was Fannie’s chief credit officer. Pinto claims that as of June 2008, 27 million “risky” mortgages had been issued — “and a lion’s share was on Fannie and Freddie’s books,” as Wallison wrote recently. Never mind that his definition of “risky” is so all-encompassing that it includes mortgages with extremely low default rates as well as those with default rates nearing 30 percent. These latter mortgages were the ones created by the unholy alliance between subprime lenders and Wall Street. Pinto’s numbers are the Big Lie’s primary data point.

Allies? Start with Congressional Republicans, who have vowed to eliminate Fannie and Freddie — because, after all, they caused the crisis! Throw in The Wall Street Journal’s editorial page, which, on Wednesday, published one of Wallison’s many articles repeating the Big Lie. It was followed on Thursday by an editorial in The Journal making essentially the same point. Repetition is all-important to spreading a Big Lie.

In Wallison’s article, he claimed that the charges brought by the Securities and Exchange Commission against six former Fannie and Freddie executives last week prove him right. This is another favorite tactic: He takes a victory lap whenever events cast Fannie and Freddie in a bad light. Rarely, however, has his intellectual dishonesty been on such vivid display. In fact, what the S.E.C.’s allegations show is that the Big Lie is, well, a lie.

Central to Wallison’s argument is that the government’s effort to encourage homeownership among low- and moderate-income Americans is what led to the crisis. Fannie and Freddie, which were required by law to meet certain “affordable housing mandates,” were the primary instruments of that government policy; their need to meet those mandates, says Wallison, is what caused them to dive so heavily into those “risky” mortgages. And because they were powerful forces in the housing market, their entry into subprime dragged along the rest of the mortgage industry.

But the S.E.C. complaint makes almost no mention of affordable housing mandates. Instead, it charges that the executives were motivated to begin buying subprime mortgages — belatedly, contrary to the Big Lie — because they were trying to reclaim lost market share, and thus maximize their bonuses.

As Karen Petrou, a well-regarded bank analyst, puts it: “The S.E.C.’s facts paint a picture in which it wasn’t high-minded government mandates that did [Fannie and Freddie] wrong, but rather the monomaniacal focus of top management on market share.” As I wrote on Tuesday, Fannie and Freddie, rather than leading the housing industry astray, got into riskier mortgages only after the horse was out of the barn. They were becoming irrelevant in the most profitable segment of the market — subprime. And that they couldn’t abide.

(The S.E.C., I should note, had its own criticism of my column, saying that I conflated its allegations regarding the lack of disclosure of subprime mortgages, with an entirely different set of charges it has brought regarding disclosure of so-called Alt-A loans. I still maintain that the S.E.C.’s charges are weak, and that the agency brought the case in part for political reasons: how better to curry favor with House Republicans than to go after former Fannie and Freddie executives?)

Three years after the financial crisis, the country would be well served by a real debate about the role of government in housing. Should the government be helping low- and moderate-income Americans own their own homes? If so, is there an acceptable level of risk? If not, how do we recast the American dream?

To have that debate, though, we need a clear understanding of what role the government’s affordable-housing goals did — and did not — play in the crisis. And that is impossible as long as the Big Lie holds sway.

Which, now that I think of it, may be the whole point of the exercise.

Monday, December 10, 2012

Life without stimulus (contd.) – Comparing the US & Britain once again confirms that Keynes was right and the Republicans are wrong



(From Business Insider, April 2012. This graph updates an October 2011 US/UK comparison, here, which already showed the US economic recovery pulling ahead significantly, despite unremitting Republican sabotage and obstructionism. The contrasts would be even stronger now, in December 2012.)
--------------------

In some ways, admittedly, the idea that governments should respond to economic downturns with policies of fiscal "austerity"—that is, with spending cuts and other measures to reduce their growing deficits—may seem like common sense. To quote one popular but misleading slogan, when individuals and families have to tighten their belts, government should tighten its belt too. And before the 1930s, this piece of economic folklore would also have been regarded as sound and responsible mainstream economics.

Unfortunately, life is sometimes more complicated than that. Ever since the Great Depression of the 1930s and the work of John Maynard Keynes it has been recognized—or, at least, it should be generally recognized—that this is precisely the wrong way to respond to an economic crash. In that kind of situation, a fixation on government deficit-cutting is not just misplaced and harmful but systematically counterproductive and self-defeating. As the amount of demand in the overall economy slumps, withdrawing further demand from the economy through those "austerity" policies just accelerates a self-reinforcing contractionary spiral. Insufficient demand reduces sales and discourages investment, businesses cut back or go bust, unemployment increases and incomes shrink, consumers have less money to spend, and so on ... with the result that the economy declines even further or, at best, remains stuck at a depressed level where it is operating well below capacity. A shrinking economy also yields smaller government revenues from taxes, increasing government deficits, and for governments to try to improve that situation with spending cuts and/or tax increases will reinforce contractionary tendencies in the economy. In the meantime, there is a lot of unnecessary suffering and social disruption.

Some key implications are pretty clear. To put it bluntly, when the economy is threatened by or recovering from a major recession, the government should be running a deficit (except in exceptional situations that make this difficult or dangerous) to pump more demand into the system, offset contractionary dynamics, and help promote economic recovery. In the US case, for various reasons, the major responsibility for doing this rests with the federal government, not state and local governments. (And, by the way, if you've been hoodwinked by right-wing propaganda into believing that the Obama administration's 2009 economic "stimulus" didn't work, thus disproving Keynes on this point, think again.)  More generally, fiscal policy should be counter-cyclical. Everything else being equal, governments should bring down their deficits in good times, not bad times. The time for governments to balance the budget, run surpluses, or pay down the debt is when the economy is booming. During downswings in the business cycle, let alone major economic crises, trying to do those things is a bad idea.

All of that is a fairly straightforward recapitulation of what should be conventional economic wisdom, and before the 2008 crash I would have guessed that these basic (I mean really basic) Keynesian insights were generally accepted, at least by informed analysts and policymakers.  But the experience of the past four years has made it clear that many people find the points I've just outlined controversial, deeply counter-intuitive, or even surprising.  Whether those views stem from economic illiteracy, partisan demagoguery, or a quasi-theological commitment to pre-Keynesian economic dogmas, they have unfortunately been pervasive and influential—and very damaging, since they happen to be quite misguided. 

=>  As a number of analysts have pointed out over the past several years, we have a first-rate natural experiment available to help confirm that diagnosis.  In American economic debates and demagoguery, there has been a lot of talk about the dangers of the US turning into Greece.  But in many ways that's wildly misleading, since Greece is a very different sort of country from the US, with very different economic circumstances.  The more logical and informative comparisons would be with the larger & stronger western European economies ...

 ... and especially with Britain, where the Conservative-led government elected in May 2010 decided to pursue Republican-style austerity policies in a serious and consistent way.  (If you check out the graph above, May 2010 is the point when the red line, for the British economy, stops rising and goes flat.  That's not a coincidence.)  In the US, on the other hand, the Obama administration has responded to the Great Recession with broadly Keynesian policies of economic stimulus and counter-cyclical deficit spending—despite unrelenting Republican sabotage and obstructionism, combined with excessive timidity and unwise concessions to deficit hysteria on the Democratic side.  They could have done it better, and they should have done it more aggressively, but basically they've done it.

With what results?  As John Cassidy explains in a very nice recent piece, the lesson to be learned from this concrete comparison is very clear: "It’s Official: Austerity Economics Doesn’t Work".  Some highlights:
[....] In making his annual Autumn Statement to the House of Commons on Wednesday, George Osborne, the Chancellor of the Exchequer, was forced to admit that his government has failed to meet a series of targets it set for itself back in June of 2010, when it slashed the budgets of various government departments by up to thirty per cent. Back then, Osborne said that his austerity policies would cut his country’s budget deficit to zero within four years, enable Britain to begin relieving itself of its public debt, and generate healthy economic growth. None of these things have happened. Britain’s deficit remains stubbornly high, its people have been suffering through a double-dip recession, and many observers now expect the country to lose its “AAA” credit rating.

One of the frustrations of economics is that it is hard to carry out scientific experiments and prove things beyond reasonable doubt. But not in this case. Thanks to Osborne’s stubborn refusal to change course—“Turning back would be a disaster,” he told Parliament—what has been happening in Britain amounts to a “natural experiment” to test the efficacy of austerity economics. For the sixty-odd million inhabitants of the U.K., living through it hasn’t been a pleasant experience—no university institutional-review board would have allowed this kind of brutal human experimentation. But from a historical and scientific perspective, it is an invaluable case study.

At every stage of the experiment, critics (myself included) have warned that Osborne’s austerity policies would prove self-defeating.  [JW: And that's not just hindsight. For one roundup of some of those warnings in 2010, see here.]  [....]  Osborne, relying on arguments about restoring the confidence of investors and businessmen that his forebears at the U.K. Treasury used during the early nineteen-thirties against Keynes, insisted (and continues to insist) otherwise, but he has been proven wrong.

With Republicans in Congress still intent on pursuing a strategy similar to the failed one adopted by the Brits, this is a story that needs trumpeting. Austerity policies are self-defeating: they cripple growth and reduce tax revenues. The only way to bring down the U.S. government’s deficit in a sustainable manner, and put the nation’s finances on a firmer footing, is to keep the economy growing. Spending cuts and tax increases can also play a role, but they need to be introduced gradually.  [....]

That austerity has led to recession is undeniable. [....]  But Osborne was determined to go ahead with his grisly exercise in pre-Keynesian economics. [....]

If all the pain he has inflicted had transformed Britain’s fiscal position, his policies could perhaps be defended. But that hasn’t happened.  [....]  The debt-to-G.D.P. ratio, which Osborne originally said would peak at about seventy per cent, has now hit seventy-five per cent, and it is forecast to come close to eighty per cent in 2015-2016. It was supposed to start falling next year. Now, it is set to keep climbing until at least 2017-2018.

A comparison with what has happened on this side of the Atlantic is illuminating. For the purposes of the natural experiment, the U.S. can be thought of as the control. In adopting a fiscal stimulus of gradually declining magnitude over the past four years, the Obama Administration has administered what was, until recently, the standard medicine for a sick economy.

As one would have expected on the basis of the textbooks, the American economy, while hardly racing ahead, has fared considerably better than its British counterpart.  [....]  What may be more surprising—at least to those of you who have been listening to the deficit hawks—is that the United States, while sticking with Keynesian stimulus policies, has also managed to bring down the size of its deficit, relative to G.D.P., almost as rapidly as hairshirt Britain has. [....] 

Let’s go over that one more time. Having adopted the policies of Keynes in response to a calamitous recession, the United States has grown more than twice as fast during the past three years as Britain, which adopted the economics of Hoover (and Paul Ryan). Meanwhile, the gaping hole in the two countries’ budgets has declined at roughly the same rate, and next year the U.S. will be in better fiscal shape than its old ally.

Q.E.D.
—Jeff Weintraub

==============================
New Yorker
December 7, 2012
It’s Official: Austerity Economics Doesn’t Work
By John Cassidy

With all the theatrics going on in Washington, you might well have missed the most important political and economic news of the week: an official confirmation from the United Kingdom that austerity policies don’t work.

In making his annual Autumn Statement to the House of Commons on Wednesday, George Osborne, the Chancellor of the Exchequer, was forced to admit that his government has failed to meet a series of targets it set for itself back in June of 2010, when it slashed the budgets of various government departments by up to thirty per cent. Back then, Osborne said that his austerity policies would cut his country’s budget deficit to zero within four years, enable Britain to begin relieving itself of its public debt, and generate healthy economic growth. None of these things have happened. Britain’s deficit remains stubbornly high, its people have been suffering through a double-dip recession, and many observers now expect the country to lose its “AAA” credit rating.

One of the frustrations of economics is that it is hard to carry out scientific experiments and prove things beyond reasonable doubt. But not in this case. Thanks to Osborne’s stubborn refusal to change course—“Turning back would be a disaster,” he told Parliament—what has been happening in Britain amounts to a “natural experiment” to test the efficacy of austerity economics. For the sixty-odd million inhabitants of the U.K., living through it hasn’t been a pleasant experience—no university institutional-review board would have allowed this kind of brutal human experimentation. But from a historical and scientific perspective, it is an invaluable case study.

At every stage of the experiment, critics (myself included) have warned that Osborne’s austerity policies would prove self-defeating.  [....]  Osborne, relying on arguments about restoring the confidence of investors and businessmen that his forebears at the U.K. Treasury used during the early nineteen-thirties against Keynes, insisted (and continues to insist) otherwise, but he has been proven wrong.

With Republicans in Congress still intent on pursuing a strategy similar to the failed one adopted by the Brits, this is a story that needs trumpeting. Austerity policies are self-defeating: they cripple growth and reduce tax revenues. The only way to bring down the U.S. government’s deficit in a sustainable manner, and put the nation’s finances on a firmer footing, is to keep the economy growing. Spending cuts and tax increases can also play a role, but they need to be introduced gradually.

Before the last election there, which took place in May, 2010, the U.K.’s economy appeared to be slowly recovering from the deep slump of 2008-09 that followed the housing bust and global financial crisis. Just like the Bush Administration (2008) and the Obama Administration (2009), Gordon Brown’s Labour government had introduced a fiscal stimulus to help turn the economy around. G.D.P. was growing at an annual rate of about 2.5 per cent. Once Osborne’s cuts in spending started to be felt, however, things changed dramatically. In the fourth quarter of 2010, growth turned negative and a double-dip recession began. So far, it has lasted two years. While G.D.P. did expand in the third quarter of this year, the Office of Budget Responsibility, an independent economic agency that Osborne set up, has said that it expects another decline in the current quarter. For 2013, the O.B.R. is forecasting G.D.P. growth of just 1.3 per cent. With the economy so weak, the O.B.R. says that the unemployment rate will tick up from eight per cent to 8.2 per cent next year.

That austerity has led to recession is undeniable. Despite the Bank of England slashing interest rates and adopting a policy of quantitative easing, consumer and investment spending have remained depressed. Osborne places much of the blame on continental Europe, Britain’s biggest trading partner, but that’s a lame excuse. It was perfectly clear back in 2010 that Europe was headed for trouble. The proper reaction to a negative external shock is to loosen fiscal policy, not tighten it, much less tighten it violently. But Osborne was determined to go ahead with his grisly exercise in pre-Keynesian economics.

If all the pain he has inflicted had transformed Britain’s fiscal position, his policies could perhaps be defended. But that hasn’t happened. Back in 2009, the O.B.R. predicted that by the end of 2013-2014, the deficit would have fallen to 3.5 per cent of G.D.P. Now, the O.B.R. says that the actual figure will be 6.1 per cent. And since most of its forecasts have proved too optimistic, this might well be another underestimate. Even by Osborne’s preferred measure, which adjusts the headline figure for the state of the economy and doesn’t count capital spending, the deficit won’t be eliminated before 2016-17 at the earliest. The debt-to-G.D.P. ratio, which Osborne originally said would peak at about seventy per cent, has now hit seventy-five per cent, and it is forecast to come close to eighty per cent in 2015-2016. It was supposed to start falling next year. Now, it is set to keep climbing until at least 2017-2018.

A comparison with what has happened on this side of the Atlantic is illuminating. For the purposes of the natural experiment, the U.S. can be thought of as the control. In adopting a fiscal stimulus of gradually declining magnitude over the past four years, the Obama Administration has administered what was, until recently, the standard medicine for a sick economy.

As one would have expected on the basis of the textbooks, the American economy, while hardly racing ahead, has fared considerably better than its British counterpart. Between 2010 and 2012, G.D.P. growth here has averaged about 2.1 per cent. For the U.K., the figure is 0.9 per cent. What may be more surprising—at least to those of you who have been listening to the deficit hawks—is that the United States, while sticking with Keynesian stimulus policies, has also managed to bring down the size of its deficit, relative to G.D.P., almost as rapidly as hairshirt Britain has. Back in 2009, at the depths of the recession, both countries had double-digit deficits. Today, the U.S. deficit stands at about seven per cent of G.D.P., and the British deficit is about five per cent of G.D.P. But with the U.S. growing faster than the U.K,. the gap is set to close. Next year, according to the latest forecasts from the Congressional Budget Office and the O.B.R., the U.S. deficit will be considerably smaller than the U.K. deficit: four per cent of G.D.P. compared to six per cent.

Let’s go over that one more time. Having adopted the policies of Keynes in response to a calamitous recession, the United States has grown more than twice as fast during the past three years as Britain, which adopted the economics of Hoover (and Paul Ryan). Meanwhile, the gaping hole in the two countries’ budgets has declined at roughly the same rate, and next year the U.S. will be in better fiscal shape than its old ally.

Q.E.D.

Friday, December 07, 2012

Obama talks turkey about Republican debt-ceiling extortion – "I will not play that game. Because we’ve got to break that habit before it starts."

Following up two previous posts (Bruce Bartlett – The debt ceiling is the real fiscal cliff and John Boehner threatens to repeat the debt ceiling fiasco), here's a key passage from Obama's December 5 speech to the Business Roundtable. Let's hope he means it, and that the Republicans believe him.



And here's a transcript, which is worth reading closely:
Let me make one last point and then I’ll start taking questions. There had been reports — and these are not necessarily confirmed, and maybe some of you have more insight than I do on this — that perhaps the Republicans go ahead and let the middle-class tax cuts get extended, the upper-income tax cuts go up, otherwise we don’t get a deal, and next year we come back and the thinking is Republicans will have more leverage because there will be another vote on the debt ceiling and we will try to extract more concessions with a stronger hand on the debt ceiling.

I have to just tell you that is a bad strategy for America. It is a bad strategy for our businesses. And it is not a game that I will play.

Most of you were involved in discussions and watched the catastrophe that happened in August of 2011. Everybody here is concerned about uncertainty; there’s no uncertainty like the prospect that the United States of America, the largest economy that holds the world’s reserve currency, potentially defaults on its debts; that we give up the basic notion that the United States stands behind its obligations.

And we can’t afford to go there again. And this isn’t just my opinion; it’s the opinion of most of the folks in this room. So when I hear some on the other side suggesting that to resolve the possibility of a perpetual or a quarterly debt ceiling crisis that there is a price to pay — well, the price is paid by the American people and your businesses and the economic environment worldwide. And we should not accept going through that.

John Engler, who is, I think — he and I philosophically don’t agree on much — (laughter) — no, I’m just being honest about John, and he’s a great politician but he — he originally comes from the other party– but John is exactly right when he says the only thing that the debt ceiling is good for as a weapon is just to destroy your credit rating.

So I want to send a very clear message to people here: We are not going to play that game next year. If Congress in any way suggests that they’re going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation — which, by the way, we had never done in our history until we did it last year — I will not play that game. Because we’ve got to break that habit before it starts.
—Jeff Weintraub

Thursday, December 06, 2012

John Boehner threatens to repeat the debt ceiling fiasco, and to keep repeating it indefinitely

This is a follow-up to Tuesday's post about Bruce Bartlett's argument, which I find both convincing and important, that "The Debt Ceiling is the Real Fiscal Cliff". Again, it's important to emphasize that Congressional votes to raise the debt ceiling do not authorize new or increased expenditures by the federal government. They simply authorize the federal government to keep selling bonds to help pay for expenditures that have already been mandated by law. In the past, therefore, periodically raising the debt ceiling in order to allow the US government to keep paying its bills was a routine matter, sometimes accompanied by purely symbolic posturing.

As Bartlett correctly points out, "the debt limit is nuts. It serves no useful purpose to allow members of Congress to vote for vast cuts in taxation and increases in spending and then tell the Treasury it is not permitted to sell bonds to cover the deficits Congress created." But that's the procedure that happens to be in place (since the debt ceiling was introduced in 1917), and until last year it didn't do much damage.

In retrospect, though, we can now see that this somewhat odd procedure was a potential bomb that could blow up the US economy, if one of the major parties was sufficiently reckless and irresponsible to weaponize it.  In 2011 the Congressional Republicans decided to take that plunge in a historically unprecedented way, refusing to raise the debt ceiling when US government debt hit the upper limit unless they got sweeping concessions in return.  In effect, they used the threat of a US government default (which would also be historically unprecedented) as a way of taking the US economy hostage for purposes of crude political extortion.  That hostage-taking language, by the way, doesn't come only from critics of this maneuver.  It was used in a straightforward and unembarrassed way by Republicans themselves, including Senate Republican leader Mitch McConnell:
I think some of our members may have thought the default issue was a hostage you might take a chance at shooting. Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming.
And incidentally, the bit about "some" Republicans being willing to actually shoot the hostage was not an exaggeration.  A number of Congressional Republicans made it clear they really were willing to force the US government into default if they didn't get their way; and when Obama caved in to Republican extortion and offered the Republicans an extravagantly favorable deal, the House Republican caucus refused to accept it.  So the 2011 debt-ceiling crisis was not really resolved, but only postponed, on the basis of a bizarre package of measures that now have us facing the prospect of the so-called "fiscal cliff" (which should really be called an "austerity bomb").

=> We should also be clear about the fact that this Republican hostage-taking was an innovation that went well beyond normal hardball politics. Back in 2011, Bartlett usefully spelled out the truly astounding (and quite un-conservative) irresponsibility of what the Republicans were doing.
Over the last several weeks, a number of Republican congressmen have said that they will not vote to raise the debt limit unless massive cuts are guaranteed in advance. Some Republican senators have promised a filibuster against a debt limit increase should it pass the House. And Tea Party spokesmen have promised strenuous primary opposition for any Republican voting for a debt limit increase. [....]

Republicans are playing not just with fire, but the financial equivalent of nuclear weapons. Perhaps at one time when the federal debt was owned entirely by Americans we could afford to take a chance on debt default because the consequences would only be internal. But today, more than half of the privately held public debt is owed to foreigners; the Chinese alone own more than $1.1 trillion of Treasury securities.

Moreover, many countries use Treasury securities as backing for their own currencies. Thus the impact of default would be felt internationally, disrupting finances and economic policies throughout Asia, Europe and Latin America.

Therefore, a potential debt default is far more than a domestic consideration; it is a matter of foreign policy. This is why Secretary of State Clinton and Navy Adm. Mike Mullen have warned that the public debt represents an important threat to national security. As attorney Thomas Geoghegan recently put it, “Where the validity of the debt is concerned, our national security is at stake.”
In the end, financial apocalypse was avoided.  But this artificial crisis paralyzed national politics for months, damaged the economic recovery (which, from the Republican perspective, was a political bonus), and triggered a first-ever downgrade of the US government's credit rating.

=> And now, as I noted on Tuesday, there are good reasons to worry that the Congressional Republicans are ready and willing to do the same thing again within the next few months..

What I should have added is that this is not just a matter of anxious speculation.  House Speaker John Boehner has explicitly threatened to replay this extortion racket over and over, every time the federal government hits the debt ceiling.  He made this threat at a press conference on November 29 and then doubled down on on it on Fox News a few days later:
I’ve made it clear to the President that every time we get to the debt limit, we need cuts and reforms that are greater than the increase in the debt limit. It’s the only way to leverage the political process to produce more change than what it would if left alone.
Now, it may be that Boehner is just bluffing when he says this, to increase his negotiating leverage and/or to head off a revolt by the farthest-right Tea Party ultras in the House.  (Many of them already regard Boehner as a week-kneed compromiser and secret moderate, and also believe that the only reason the Republicans lost the 2012 presidential election is that their candidate wasn't extremist enough.)  But it would be foolishly complacent to take that for granted.

=> I want to acknowledge that I can imagine truly exceptional circumstances in which this kind of extreme, all-or-nothing strategy might be appropriate, even justified--for example, if some desperately urgent and genuinely transcendent issues were involved, like ending slavery or preventing a military coup.  But we're not in a situation that remotely resembles anything like that.

Yes, I know that some far-right ideologues among the Congressional Republicans genuinely believe that the policies being pursued by the radical Kenyan-Muslim-Communist in the White House pose such a drastic and urgent danger to the United States and the American Way that any means are justified in order to stop them.  (Earlier this year the recently-defeated Republican Congressman Allan West added, for good measure, that "there’s about 78 to 81 members of the Democratic Party that are members of the Communist Party.") But those people are simply delusional.  The bulk of the Congressional Republicans, including the leadership, are acting on the basis of more cynical hard-headed calculation.  They decided some time ago that a strategy of monolithic intransigence and rule-or-ruin obstructionism would yield them maximum political advantage--and the 2010 midterm elections confirmed those calculations for them, though right now they're still figuring out how to respond to the shock of Obama's re-election.  Over time, unfortunately, the result is that the national Republicans have become a party dominated by routine extremism and intransigence, along with an increasing willingness to tear up the normal rules and restraints of the political game.  And that makes them, frankly, a danger to the republic.

Even sober, centrist, temperamentally moderate, and judiciously balanced analysts of US politics like Thomas Mann and Norman Ornstein have gradually been forced to recognize this unpleasant reality.
We have been studying Washington politics and Congress for more than 40 years, and never have we seen them this dysfunctional. In our past writings, we have criticized both parties when we believed it was warranted. Today, however, we have no choice but to acknowledge that the core of the problem lies with the Republican Party.

The GOP has become an insurgent outlier in American politics. It is ideologically extreme; scornful of compromise; unmoved by conventional understanding of facts, evidence and science; and dismissive of the legitimacy of its political opposition.

When one party moves this far from the mainstream, it makes it nearly impossible for the political system to deal constructively with the country’s challenges.

“Both sides do it” or “There is plenty of blame to go around” are the traditional refuges for an American news media intent on proving its lack of bias, while political scientists prefer generality and neutrality when discussing partisan polarization. Many self-styled bipartisan groups, in their search for common ground, propose solutions that move both sides to the center, a strategy that is simply untenable when one side is so far out of reach. [....]
And one of the most striking pieces of evidence helping to confirm this assessment is the astonishing (but no longer surprising) fact that the Congressional Republicans are willing to use repeated threats of a US government default as a routine tool of political extortion, despite the fact that by doing so they systematically undermine the "full faith and credit" of the United States and run the risk of financial apocalypse.

=> Let's be optimistic and presume that the Republicans' fever will break at some point in the future—though only if they begin to pay a bigger and more unambiguous political price for it than they have so far. But in the meantime, it's crucial to somehow defuse this debt-ceiling bomb with which they may accidentally blow up the US economy.

A necessary first step is to recognize the danger. And in that respect, one encouraging sign is that the Obama administration has begun to issue public warnings that we can't let this kind of economic hostage-taking become a regular habit—and, in the process, has been trying to appeal to the enlightened self-interest of the business and financial lobbies:
President Obama warned Republicans against using a hike in the debt ceiling as leverage to win entitlement cuts, arguing it would play havoc with the economy.

In an address to corporate CEOs at the Business Roundtable, Obama said business leaders “should not accept going thorough” another debt-ceiling crisis like the one in 2011 that caused stocks to fall and led Standard and Poor’s to devalue the U.S. credit rating.

He warned a repeat of that showdown would be a “catastrophe” for the nation that would cause a “self-inflicted series of wounds that will potentially push us back into recession.” [....]

The president told the CEOs that a fight over the debt ceiling would cause more uncertainty for business. “We can't go there again,” Obama said. [....]

He also quoted Business Roundtable President John Engler, the former Republican governor of Michigan, who said the debt ceiling was "not a good weapon for anything except destroying our own credit rating." [....]

Obama said GOP use of the debt ceiling as leverage in the current round of tax and spending talks was a "bad strategy for America, it is a bad strategy for your businesses, and it is a game I will not play.”
(For the key passage from Obama's speech, see here.) He's right. Paying ransom to hostage-takers is not a viable long-term solution, since it only legitimates their hostage-taking and encourages them to keep doing the same thing in the future. And the Obama administration also has a practical proposal for defusing the debt-ceiling bomb—based, ironically, on a suggestion offered (and then withdrawn) by Mitch McConnell in 2011:
Earlier Wednesday, the Treasury Department posted a statement advocating that Congress adopt a so-called "McConnell Provision," named after an idea first floated by the GOP Senate leader. Under the proposal the debt ceiling would automatically increase, and Congress could only stop it with a two-thirds majority vote in both chambers.
Technically, as I recall, McConnell's proposal would have required the president to explicitly propose each increase in the debt ceiling, thus putting the political onus on the White House and allowing the Republicans to engage in demagogic anti-tax posturing. But it would take a two-thirds vote to block such an initiative, so the practical consequences would be similar to those of the current Treasury proposal.
"Extension of the McConnell Provision would lift the periodic threat of default from the U.S. economy and remove politics from future debt limit debates, while preserving Congress’ essential role in spending, revenue and borrowing decisions," argued Treasury spokeswoman Jenni LeCompte.
On the other hand, the immediate response by the Republicans has been intransigent.
But McConnell's office rejected the Treasury Department's characterization of his idea and indicated he would not support such a plan today. [....]

“The president wants to have the ability to raise the debt ceiling whenever he wants, for as much as he wants, with no responsibility or spending cuts attached,” said Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.). “This is an idea opposed by Democrats and Republicans alike; it's a power grab that has no support here.” [....]
Etc. Having acquired this weapon, they don't want to give it up. And as we've seen, they're threatening to use it repeatedly and without restraint.

So we may well be headed toward another debt-ceiling crisis early in 2013. Josh Marshall suggests, plausibly, that this could result in "the mother of all government shutdowns". Let's hope that forecast turns out to be too pessimistic. But stay tuned ...

—Jeff Weintraub