A plague on both your houses

Allan Sloan, an editor of Fortune, blames BOTH tea party conservatives AND the Obama administration for bungling our economic crisis:

What the hell is going on? We thought the worst was behind us, but it wasn’t, thanks largely to fallout from the Standard & Poor’s downgrade of U.S. credit brought on us by the incompetence of our alleged national leaders.

Only three short years ago, the world financial system was on the brink of disaster after Lehman Brothers went broke in September 2008. Those scary times seemed to have disappeared in the spring of 2009. But now, things are even scarier.

After the worst sell-off since the financial crisis, traders and passersby react to grim news about the stock markets and the global economy.

Our current mess is different from the Lehman-related horror because it stems primarily from politics, not economics. The previous fear-fest came about because Lehman’s bankruptcy disrupted financial markets in unanticipated ways. Today’s crisis was completely avoidable. You can blame it directly on the fools who brought our country to the brink of defaulting on its debts in the name of saving us from . . . I’m not sure what.

Yes, the tea party types bear primary responsibility — but they couldn’t have done it without the cowardice and incompetence of the Obama administration, which let things get way out of hand. This whole fiasco just enrages me. And it ought to enrage anyone who wants the United States to act like a real country rather than some third-rate failed state run by fanatical factions that hate one another. . . .[He goes on to detail why both sides are at fault.]

Now that I’ve finished venting, let me make one more attempt to be reasonable — and show how relatively easy it would be to solve our problems while allowing both the tea party and the left wing to claim victory and go home. This requires (1) that we survive the 2012 election cycle (boy, that’s going to be a blast) and (2) that the winners recognize that our current federal income tax rules and rates, Social Security benefit formula and Medicare provisions are historical and political accidents rather than holy writ handed down to Moses by the Lord on Mount Sinai.

We need more jobs, more growth and more tax revenue. Note that I said more revenue, not higher rates. There are lots of proposals kicking around that would cut rates, eliminate the alternative minimum tax and broaden the tax base by drastically reducing itemized deductions.

Only about a third of taxpayers, primarily higher-income types, itemize deductions, so only they would be affected. Do this right, and you end up with more tax revenue from high-income people (which allows the “tax the rich” types to be happy) but lower rates (which lets the tea party folks claim victory).

On the entitlement front, we modify Social Security and Medicare formulas, imposing higher costs on higher-end retirees (which would include me, should I ever retire). What’s in it for the right-wing fanatics? Those programs’ projected costs drop. For liberal wing nuts? They can claim victory because people are living longer than when these programs were introduced and will collect more benefits over their lifetime than originally intended.

Yes, rationality is out of style, and fanaticism is the new normal. But do we really want a national life like the one we’ve had the past few years? All shrieking and no thinking?

via This time, the economic crisis is no one’s fault but the government’s – The Washington Post.

What do you think about his solutions?  Tax reform that increases revenue, while lowering rates (pleasing liberals). Entitlement reform (pleasing conservatives).  Is there any way politically to adopt that kind of centrist something-for-both-sides program?

Obama’s new stimulus plan

President Obama will soon propose a new economic stimulus plan, one that will combine tax cuts, lots of new spending, AND deficit reduction:

President Obama has decided to press Congress for a new round of stimulus spending and tax cuts as he seeks to address the great domestic policy quandary of his tenure: how to spur job growth in an age of austerity.

Obama will lay out a series of ideas in a major address right after Labor Day, when he and  a largely antagonistic Congress will return from vacation, the White House said Wednesday.

The president is thinking about proposing tax cuts for companies that hire workers, new spending for roads and construction, and other measures that would target the long-term unemployed, according to administration officials and other people familiar with the matter. Some ideas, such as providing mortgage relief for struggling homeowners, could come through executive action.

Obama also plans to announce a major push for new deficit reduction, urging the special congressional committee formed in the debt-ceiling deal this month to identify even more savings than the $1.5 trillion it has been tasked with finding.

In packaging the two, he will make the case that short-term spending can lead to long-term savings.

“We can’t afford to just do one or the other. We’ve got to do both,” Obama said Wednesday in this farming town in northwestern Illinois, population 671, the last stop of his three-day bus tour through the rural Midwest.

via Obama to issue new proposals on job creation, debt reduction – The Washington Post.

Notice how even Democrats see that tax breaks are necessary to improve the economy.  But consider the main approach:  Both more spending AND more cutting.  That should work.

A different take on our economic woes

The wild fluctuations of the stock market last week seem to be a reaction to the national deficit and the downgrading of American bonds.  But, as financial analyst Liaquat Ahamed, points out, investors were dumping stocks and investing in government bonds, despite the downgrade and despite record low interest rates.

So, if financial markets aren’t worried about the full faith and credit of the United States, why is the stock market falling? An alternative view, most prominently expressed by New York Times columnist Paul Krugman, is that the markets have concluded, given the struggling economy, that budget cuts are precisely the wrong medicine for what ails us. The Obama administration was backed into a corner by the S&P downgrade and must now focus on cutting the budget deficit to the exclusion of all other policy objectives. Such austerity — whether achieved through spending cuts or tax increases — at this moment in the business cycle would only exacerbate a slowdown. In this reading, the stock market is preparing itself for the coming double-dip.

If this is the market’s message, what should we do? Instead of instituting deeper budget cuts and other austerity measures, the government should pursue the opposite: It should take advantage of the fact that it can essentially borrow for free to finance badly needed infrastructure investments. After all, our airports, roads and bridges are in need of urgent repair, and the extra investment would provide job opportunities and inject money into the economy.

via What is the stock market telling us? – The Washington Post.

Expect that to be the Democrats’ position, that we should stop worrying about the deficit and spend even more money to create jobs and get the economy going.  Mr. Ahamed says, however, that this isn’t politically possible.  Mainly because ordinary Americans saw the government bailing out big banks and corporations, but doing nothing to bail them out.  He proposes a different kind of government activism aimed specifically at consumers and homeowners, which, I suspect, may also become Democratic proposals:

A large-scale government program to restructure residential mortgages and help households refinance underwater mortgages would reduce the debt overhang and support consumer demand. Most important, by channeling public money to help individual families, rather than Wall Street, this initiative could alter the political dynamics that currently doom any government efforts to jump-start the economy.

Can you answer this take on the economic problems and what government might do about them?

The Super Committee

Congressional leaders have appointed the “Super Committee” tasked by the debt reduction deal to recommend spending cuts and bring the federal budget under control.  There have been other such committees, of course, whose recommendations have been ignored, but this one has some clout:  Its recommendations will be voted on with an up or down vote–rather than death by a thousand amendments–and if they get voted down, automatic cuts click in.

What do you know of these folks?  Do you think they can solve the debt problem?

Rep. Jeb Hensarling of Texas;

Rep. Dave Camp of Michigan;

Rep. Fred Upton, also from Michigan;

Sen. Jon Kyl of Arizona

Sen. Rob Portman of Ohio;

Sen. Patrick J. Toomey of Pennsylvania

Sen. Patty Murray of Washington

Sen. Max Baucus of Montana

Sen. John F. Kerry of Massachusetts

Rep. James Clyburn of South Carolina

Rep. Xavier Becerra of California

Rep. Chris Van Hollen of Maryland

via Deficit ‘super committee’ reflects party leadership – latimes.com.

Wisconsin recalls in favor of GOP

It looks like the unions lost and Republicans won in Wisconsin, as recall elections sparked by Gov. Scott Walker’s stand against collective bargaining for state employee unions retained the GOP majority in the state legislature:

Republicans held onto control of the Wisconsin Senate on Tuesday, beating back four Democratic challengers in a recall election despite an intense political backlash against GOP support for Gov. Scott Walker’s effort to curb public employees’ union rights.

Fueled by millions of dollars from national labor groups, the attempt to remove GOP incumbents served as both a referendum on Walker’s conservative revolution and could provide a new gauge of the public mood less than a year after Republicans made sweeping gains in this state and many others.

Two Democratic incumbents face recalls next week, but even if Democrats win those they will still be in the minority.

via GOP maintains control of Senate – TODAY’S TMJ4.

Barackalypse Now

As the stock market dives 634 more points over the United States government getting downgraded by Standard & Poors, President Obama is looking more vulnerable than ever.  Even some of his African American supporters—who are suffering most from unemployment—are getting disillusioned with him.  In addition to our economic woes are our foreign policy failures, including setbacks in the continuing wars in Afghanistan and Libya.  People are speaking of Barackalypse or Obamageddon.

I thought he was a shoo-in for re-election, but now I’m thinking he is assuming the mantle of Jimmy Carter.  And yet this time there is no Ronald Reagan in the wings.  I’m still not confident that any of the current candidates come across as presidential enough to beat him.

It looks like Texas governor Rick Perry is going to get in the race.  He has scheduled a big speech this weekend and then he is booked to go to New Hampshire and Iowa.  (Why else would he go to New Hampshire and Iowa unless he is going to run?)  He seems to come across well in the presidential gravitas department and could probably unite both tea party activists and establishment Republicans.

Both Republicans and Democrats need to remember that it is not enough to vote for a candidate just on the basis of his or her ideology.   Another consideration is, can this person govern?  If Republicans select a light-weight ideologue who is incapable of effectively addressing the nation’s problems, they will face their own Armageddon.  They will also drag the country down with them.


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