Tag: debt

The 6 Biggest Lies About the U.S. Debt

As Congress nears a vote on the various debt ceiling deals, let’s look at the lies and misinformation that got us into this mess.

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From Alternet, by Arun Gupta

“There is one simple truth about the discussion of the looming U.S. debt crisis: it is largely a compendium of half-truths, distortions, myths and outright lies.”

“For example, is it true that the U.S. debt is unsustainable, which is spurring the budget-cutting fever? Far from it. While U.S. debt is at one of its highest levels ever in terms of gross domestic product, the interest payments in 2011 on the  $14.3 trillion public debt will be a mere $386 billion. This is barely more than the $364 billion paid way back in 1998. In real terms, the U.S. economy has grown nearly 30 percent since then. Rock-bottom interest rates on U.S. government debt account for the low payments today, but the practical effect is that servicing the debt as a percentage of GDP is the lowest it’s been in decades.

Or what about hysterical headlines like “U.S. Debt Default Looms” (courtesy of NPR) unless Democrats and Republicans agree to raise the debt ceiling? They are completely untrue. Richard Wolff, professor of economics emeritus at the University of Massachusetts, Amherst, says, if there is no agreement by Aug. 2 to allow the U.S. Treasury to borrow more funds, then “the government instead would choose among cutbacks on various expenditures such as state and local aid, medical aid, for war, for infrastructure. It would extraordinarily unusual for a government in such a situation to attack its creditors.”

If no deal on the debt ceiling is reached this sucks for the rest of us, such as the millions depending on their portion of the $23 billion in Social Security payments scheduled for Aug. 3. A short delay would do no serious harm, but a longer delay, perhaps just a week or two, would be devastating.

For one, removing income support payments would have a major ripple effect in our consumer-based economy. Spending would drop precipitously on items like food, medicine, transportation, clothing and household goods. Peter Bratsis, a professor of Political Theory at the University of Salaford in England and a Greek-American, says his home country is a cautionary tale. Speaking from Greece, Bratsis said since the debt crisis hit last summer many people’s income have dropped up to 25 percent as wages, pensions and social welfare have been sacrificed to please the banks. As a result “Greece is in an economic depression. In Athens, on every block, you have shuttered bakeries, cafes, shoe stores, plumbers and other small businesses that are closed because either people don’t have the money to spend or are afraid to spend.”

Second, says Wolff, “The U.S. Government is one of the largest buyers, if not the largest purchaser of commodities in the world of oil, of computers, of weapons. In an already shaky global economy, the biggest buyer of goods would be making cutbacks. This would be stupefyingly dumb.” He adds that by playing chicken with the national debt, Washington has already irreparably wounded the economy. “The world depends on the U.S. economy running smoothly. A default would lead governments and companies to rethink their relation to the United States, and this has already happened.”

The point is while the dangers are rife in a delay in raising the debt ceiling the doomsday scenario of a government default on debt is not going to occur. The creditors will be kept happy and there will be no default because that is how government works in a capitalist economy. And even if the impasse dragged on, the Fed could dip into its $550 billion in reserves, including more than $400 billion in gold at current prices, to keep making debt payments.

One blatant lie is that Republicans and Democrats, the Congress and the White House are serious about reining in budget deficits to reduce the long-term debt. They are not. The Congressional Budget Office calculates that the deficit from 2011 to 2013 will be $3.5 trillion. Over the decade it will be $8.5 trillion. Now, lots of numbers are being thrown about on spending cuts over a 10-year period, but they keep dropping – the Senate Democrats are proposing $2.2 trillion in cuts and costs savings while the Republicans weigh in at $915 billion.

Cutting one or two hundred billion dollars a year is meaningless. Wolff says, “Even if you cut the debt $300 billion, you are left with an enormous annual deficit that adds hugely to the national debt they all claim to care so much about. It gives lie to the idea that the Republicans and Democrats are interested in trying to cut the national debt.”

If you really believe shrinking the debt is an imperative, then there are easier ways to do it then stealing grandma’s meds. The Bush wars and tax cuts – which are still going – cost $3.3 trillion from 2002 to 2009. Cutting the trillion-dollar war budget in half, ending the Bush tax cuts (which Obama could have done with no sweat when he was bursting with political capital in early 2009 or by calling the GOP bluff before or after the 2010 midterm elections) and raising tax rates on corporations would pretty much wipe out the deficit over the next decade. In the case of corporate taxes, during the last decade it averaged only 10.7 percent of federal revenues – and since 2008 it’s shrunk to barely 5 percent – versus 29.8 percent in the 1950s.

Of course, the stand-off is based on another lie: that Congress and Obama administration can enforce cuts over a 10-year period. The budget process is an annual exercise. There is no provision whatsoever to make cuts permanent because they can always be undone by Congress, and taxes can always be lowered or costly new wars started, both of which always seem to happen, widening the deficit once more.

There is no end to the falsehoods and fantasies from the chattering classes. “We are in recovery.” So says Ben Bernanke – since 2009 no less. Obama has been saying the same since 2010, while hedging that it is “painfully slow.” Really? Tell that to the 25 million Americans who are unemployed, underemployed or have dropped out of the labor force. This amounts to an unemployment rate of16.2 percent, but the real rate is probably closer to 20 percent after factoring in youth unable to enter the workforce or those who have taken early retirement. Or try telling the 100 million Americans who are effectively caught in poverty (using far more realistic measures than the government does) or the 6.5 million households with mortgages that are delinquent or in foreclosure that we are in recovery.

The notion we are in recovery is based on believing the downturn was “the Great Recession,” a distortion the New York Times helped spread. Paul Krugman is one of the few mainstream commentators saying that not only is there no end in sight to the four-year-long slump, let’s give it a more accurate label such as, “the Lesser Depression.” Suppose the corporate media had been saying “Depression” for the last few years. It would have bolstered support for extraordinary measures to dig out of an extraordinary crisis, such as policies that did work during the last depression: jobs programs, infrastructure, social welfare, stronger labor rights and aid to local governments. But this would mean redistribution of wealth downwards instead of upwards. Therefore, saying recession makes it sound part of the normal boom-and-bust cycle, one we will overcome through the magic of the market as we have so many times before.

We can then move on to the recovery phase, which means getting our economic house in order by reducing the debt, a lie told by Serious People whether pundits, politicians or experts. We are being led to think the wisest course is repeating the major mistake of the Great Depression – enforcing austerity in a deep economic funk. When the New York Times backs huge cuts to social spending, you can be sure the rest of the media assumes squeezing the poor and middle class harder is the tonic for economic health. Sure, the Times may sniffle that Obama’s stunning offer to hack $650 billion from Medicare, Medicaid and Social Security was “overly generous” to Republicans but that is just code for “we in the liberal penthouse support it with mild reservations.” On the other side of the media aisle, the Wall Street Journal endorsed the Republican sadism, saying that none of the critics on the right offer “anything nearly as fiscally or politically beneficial as Mr. Boehner’s plan.”

This is what passes for the range of opinion in the two most esteemed newspapers in the country. That’s because we are still in thrall of the biggest lie of all – market fundamentalism. An eternity ago, in 2009, Newsweek declared, “We Are All Socialists Now.” They were right, but only in the way America has always been socialists: we socialize the rich when they lose money, and then we socialize their ability to profit. (The esteemed economic historian Karl Polanyi argued “laissez-faire was planned.” By that, he meant profit-making depends on government regulation of land, labor, finance and the environment. On top of that, there are outright transfers of wealth that occur during wars, infrastructure building and as part of social reforms, such as the railways, the Cold War, Medicare, the internet, and the bank bailouts.)

Thus, the debate is about differing Democratic and Republican visions on which parts of the welfare state should be sent to the glue factory. “We all must sacrifice,” is the mantra. Never mind that the effect on the national debt will be laughably small. Slashing $650 billion from entitlements – Obama’s burnt offering – will nick a miniscule 3 percent off the national debt by 2020, while the suffering will be enormous. But we must do it to appease the markets.

Pleasing the markets means pleasing the credit rating agencies – Standard & Poor’s, Moody’s and Fitch – an example of cult-like devotion in which the elite command us to drink the Kool-Aid. Like a death watch, the media turn anxiously to the rating agencies to ask the condition of U.S. government debt. Are they going to downgrade it, which would mean higher interest rates and an even bigger debt problem? This is one more big lie as Japan’s huge debt – more than twice the size of U.S. debt as a percentage of GDP – was downgraded in January and “there was no negative impact at all,” according to one analyst.

But first let’s go to the tape and review how the big three credit rating agencies inflated the mortgage bubble. The bubble was driven by the banking industry’s insatiable appetite for debt, the repackaging of dicey mortgages into profitable securities. The agencies, especially Moody’s and S&P, gave investment-grade ratings to almost any sack of residential mortgage backed securities (RMBS) and collateralized debt obligations (CDO) that passed across their desks. By law, banks, pension funds, insurance companies and other institutional investors need investment-grade ratings on these securities to hold them. Since the rating agencies were paid by the issuers, they were raking in the cash by gold-plating shit. Moody’s revenue on these securities quadrupled from over $61 million in 2002 to over $260 million by 2006. For S&P, it went from $64 million to $265 million for CDOs in the same four years and from $184 million in 2002 to $561 million in 2007 for RMBSs.

Don’t think they didn’t know exactly what they were doing. At S&P, one manager emailed a co-worker in December 2006, “Let’s hope we are all retired and wealthy before this house of cards falters.” Then, according to a U.S. Senate report, the ratings firm triggered the financial collapse by downgrading huge amounts of these securities from AAA to junk. In one day, on Jan. 30, 2008, S&P downgraded an astonishing 6,300 ratings. In 18 months the two firms downgraded more securities than they had done in their entire 90-year histories. Once the securities turned to junk, the big players could no longer hold them, which burst the bubble as they were sold in a panic and losses began mounting on the bank’s balance sheets.

We know the rest of the story – the financial collapse, the trillions in bailouts and credit lines, the lack of punishment for executives at any of these firms, the return to obscene profits a year later, the de-fanging of any credible reform. But now, we are being told, the rating agencies word on debt is the word of God.

This time, S&P is not so much looking for a fast buck as nakedly pushing an agenda. In a blatant lie, S&P President Deven Sharma, who was summoned to testify before a House subcommittee on financial oversight on July 27, said his firm was “misquoted” in demanding $4 trillion in cuts and unctuously preached that ratings should be free of politics.

What happened is two weeks earlier, on July 14, S&P issued a detailed statement, explaining that it was placing both long-term and short-term U.S. debt “on CreditWatch with negative implications.” It explained that “there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling.”

It did offer a safe passage. S&P said that if “an agreement would be enacted and maintained throughout the decade” to realize “budget savings of $4 trillion,” then “other things unchanged” it could affirm the stellar ratings on both short- and long-term U.S. debt. But, it warned, any “credible” agreement “would require support from leaders of both political parties.”

S&P knew exactly what it was saying. The only budget number it mentioned (three times) was $4 trillion. By saying both parties needed to sign on to an agreement to be credible, it knew the Republican agenda of strangling the last of social welfare would triumph. And by issuing the statement in the heat of negotiations, it threw its lot in with the Tea Party mob.

S&P was telling Capitol Hill to drive a stake through the heart of the welfare state. To let us peasants know we must till the corporate fields until the day we die. Otherwise, the credit rating deities will rain downgrades upon our heads, blighting the land for future generations.

We must pay now and forever. That is the truth, a truth so crude and cartoonish it seems comical. Which is why we need so many lies.

Arun Gupta is a founding editor of The Indypendent newspaper. He is writing a book on the decline of American Empire for Haymarket Books.

Emphasis Mine

see:http://www.alternet.org/story/151827/the_6_biggest_lies_about_the_u.s._debt?akid=7335.123424.kt7uO7&rd=1&t=2

Taxes are Way Too Low!

If you count payroll taxes, the richest 400 Americans, pocketing over $354 million a year, are paying a lower tax rate than a hospital orderly working for $29,000 a year.

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Robert Borosage, Our Future

”

“.. Washington doesn’t have a revenue problem, it has a spending problem,” says House Majority Leader Eric Cantor (R-Va.). All Republican legislators have been taught to chant this tired Republican “talking point” as if it were the Hare Krishna mantra.

To borrow one of Cantor’s favorite sneers, “How could anyone believe that?” Here’s a graph showing federal revenues as a percentage of GDP. Clearly Washington has a revenue problem.

In fact, Americans are paying the lowest percentage of their income in taxes since 1958. Corporate taxes which brought in over 6% of GDP in 1950 are nownear historic lows of barely 1%. Senator Carl Levin has just introduced the Stop Tax Haven Abuse Act of 2011 targeting the $100 billion in taxes lost annually to offshore tax havens. (Needless to say, House Republicans vow to go to the mat to protect the corporate tax dodges since loopholes are deemed tax hikes in their Fox world)

It gets worse. Hedge Fund billionaires now pay a lower tax rate than their chauffeurs, or the teachers of their children, or the cops that patrol their streets. The IRS reports that the richest 400 Americans – who made an average of $354 million a year in 2007 – paid an effective tax rate of 16.6%, down from 30% in 1995 and 23% in 2002. Even as their incomes doubled from 2001 to 2007, their effective tax rates were virtually halved from 1995.

If you count payroll taxes, the richest 400 Americans, pocketing over $354 million a year, are paying a lower tax rate than a hospital orderly working for $29,000 a year.

Clearly we have a “revenue problem” – and a major league indecency problem.”

emphasis mine

see:http://www.ourfuture.org/blog-entry/2011072814/ignorance-index-iii-revenue-problem

Ten things the GOP Doesn’t want you to know about the debt!

the inconvenient truth that the nation’s mounting debt is largely attributable to wars, a recession and tax policies put in place under his party’s watch.

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From perspectives see:http://www.perrspectives.com/blog/archives/002215.htm

(N.B.: the author of this blog observes that the correct way to describe the results under each POTUS administration is to add the qualifying word ‘administration’  (and perhaps the definite article ‘the’) to each usage, e.g.: the Clinton administration – the POTUS signs laws passed by both houses.)

“Just two weeks after he seconded Treasury Secretary Tim Geithner’s dire warnings about the August 2 deadline to raise the U.S debt ceiling, House Majority LeaderEric Cantor walked out of the budget talks aimed at reaching a bipartisan compromise over deficit reduction. Like Arizona GOP Senator Jon Kyl, Cantor shifted the burden to Speaker John Boehner, Senate Minority Mitch McConnell and President Obama to “get over this impasse on taxes.”

For his part, McConnell promised that no deal to end the GOP’s hostage taking of the U.S. economy will include tax hikes. But while McConnell boasted that “If they couldn’t raise taxes when they owned the government, you know they can’t get it done now,” left unsaid was the inconvenient truth that the nation’s mounting debt is largely attributable to wars, a recession and tax policies put in place under his party’s watch.

Here, then, are 10 things the GOP doesn’t want you to know about the debt:

  1. Republican Leaders Agree U.S. Default Would Be a “Financial Disaster”
  2. Ronald Reagan Tripled the National Debt
  3. George W. Bush Doubled the National Debt
  4. Republicans Voted Seven Times to Raise Debt Ceiling for President Bush
  5. Federal Taxes Are Now at a 60 Year Low
  6. Bush Tax Cuts Didn’t Pay for Themselves or Spur “Job Creators”
  7. Ryan Budget Delivers Another Tax Cut Windfall for Wealthy
  8. Ryan Budget Will Require Raising Debt Ceiling – Repeatedly
  9. Tax Cuts Drive the Next Decade of Debt
  10. $3 Trillion Tab for Unfunded Wars Remains Unpaid

1. Republican Leaders Agree U.S. Default Would Be a “Financial Disaster”
Senator Pat Toomey (R-PA), Rep. Michele Bachmann (R-MN) and White House hopeful Tim Pawlenty are among the GOP luminaries who have joined the ranks of what Dana Milbank called the “default deniers.” But you don’t have to take Treasury Secretary Timothy Geithner’s word for it “that if Congress doesn’t agree to an increase in the debt limit by August 2, the United States will be forced to default on its debt, potentially spreading panic and collapse across the globe.” As it turns out, Republican leaders (and their big business backers) have said the same thing.

In their few moments of candor, Republican leaders expressed agreement with Tim Geithner’s assessment that default by the U.S. “would have a catastrophic economic impact that would be felt by every American.” The specter of a global financial cataclysm has been described as resulting in “severe harm” (McCain economic adviser Mark Zandi), “financial collapse and calamity throughout the world” (Senator Lindsey Graham) and “you can’t not raise the debt ceiling” (House Budget Committee Chairman Paul Ryan). In January, even Speaker John Boehner acknowledged as much:

“That would be a financial disaster, not only for our country but for the worldwide economy. Remember, the American people on election day said, ‘we want to cut spending and we want to create jobs.’ And you can’t create jobs if you default on the federal debt.”

2. Ronald Reagan Tripled the National Debt
Among the Republicans who prophesied the default doomsday scenario was none other than conservative patron saint, Ronald Reagan. As he warned Congress in November 1983:

“The full consequences of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar.”

Reagan knew what he was talking about. (N.B. Really?  Only by accident). After all, the hemorrhage of red ink at the U.S. Treasury was his doing.

As most analysts predicted, Reagan’s massive $749 billion supply-side tax cuts in 1981 quickly produced even more massive annual budget deficits. Combined with his rapid increase in defense spending, Reagan delivered not the balanced budgets he promised, but record-setting debt. Even his OMB alchemist David Stockman could not obscure the disaster with his famous “rosy scenarios.”

Forced to raise taxes eleven times to avert financial catastrophe, the Gipper nonetheless presided over a tripling of the American national debt to nearly $3 trillion. By the time he left office in 1989, Ronald Reagan more than equaled the entire debt burden produced by the previous 200 years of American history. It’s no wonder Stockman lamented last year:

“[The] debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts.”

It’s no wonder the Gipper cited the skyrocketing deficits he bequeathed to America as his greatest regret.

3. George W. Bush Doubled the National Debt
Following in Reagan’s footsteps, George W. Bush buried the myth of Republican fiscal discipline.

Inheriting a federal budget in the black and CBO forecast for a $5.6 trillion surplus over 10 years, President George W. Bush quickly set about dismantling the progress made under Bill Clinton. Bush’s $1.4 trillion tax cut in 2001, followed by a $550 billion second round in 2003, accounted for the bulk of the yawning budget deficits he produced. (It is more than a little ironic that Paul Ryan ten years ago called the tax cuts “too small” because he believed the estimated surplus Bush eviscerated would be even larger.)

Like Reagan and Stockman before him, Bush resorted to the rosy scenario to claim he would halve the budget deficit by 2009. Before the financial system meltdown last fall, Bush’s deficit already reached $490 billion. (And even before the passage of the Wall Street bailout, Bush had presided over a $4 trillion increase in the national debt, a staggering 71% jump.) By January 2009, the mind-numbing deficit figure reached $1.2 trillion, forcing President Bush to raise the debt ceiling to $11.3 trillion.

4. Republicans Voted Seven Times to Raise Debt Ceiling for President Bush
“Reagan,” Vice President Dick Cheney famously declared in 2002, “proved deficits don’t matter.” Not, that is, unless a Democrat is in the White House.

As Donny Shaw documented in January 2010, Republican intransigence on the debt ceiling only began in earnest when Bush left the White House for good.

The Republicans haven’t always been against increasing the federal debt ceiling. This is the first time in recent history (the past decade or so) that no Republican has voted for the increase. In fact, on most of the ten other votes to increase the federal debt limit that the Senate has taken since 1997, the Republicans provided the majority of the votes in favor.

As it turns out, Republican majorities voted to raise the U.S. debt ceiling seven times while George W. Bush sat in the Oval Office. (It should be noted, as Ezra Kleindid, that party-line votes on debt ceiling increases tied to other legislation is not solely the province of the GOP.) As ThinkProgress pointed out, during the Bush presidency, the current GOP leadership team voted 19 times to increase debt limit. During his tenure, the U.S. national debt doubled, fueled by the Bush tax cuts of 2001 and 2003, the Medicare prescription drug plan and the unfunded wars in Iraq and Afghanistan. And Mitch McConnell and John Boehner voted for all of it and the debt which ensued because, as Orrin Hatch later explained:

“It was standard practice not to pay for things.”

5. Federal Taxes Now at a 60 Year Low
Even as Vice President Biden leads bipartisan negotiations to trim at least $1 trillion from the national debt, Republican leaders faithfully regurgitate the refrain that tax increases are “off the table.” In one form or another, Mitch McConnell, Eric Cantor and just about every other conservative mouthpiece parroted Speaker John Boehner’s line that:

“Medicare, Medicaid – everything should be on the table, except raising taxes.”

Which purely by the numbers (if not ideology) is an odd position to take. After all, as a percentage of the U.S. economy, the total federal tax bite hasn’t been this low in 60 years.

As the chart representing President Obama’s 2012 budget proposal above reflects, the American tax burden hasn’t been this low in generations. Thanks to the combination of the Bush Recession and the latest Obama tax cuts, the AP reported, “as a share of the nation’s economy, Uncle Sam’s take this year will be the lowest since 1950, when the Korean War was just getting under way.” In January, the Congressional Budget Office (CBO) explained that “revenues would be just under 15 percent of GDP; levels that low have not been seen since 1950.” That finding echoed an earlier analysis from the Bureau of Economic Analysis. Last April, the Center on Budget and Policy Priorities concluded, “Middle-income Americans are now paying federal taxes at or near historically low levels, according to the latest available data.” As USA Today reported last May, the BEA data debunked yet another right-wing myth:

Federal, state and local taxes — including income, property, sales and other taxes — consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8% of income before rising slightly in the first three months of 2010.“The idea that taxes are high right now is pretty much nuts,” says Michael Ettlinger, head of economic policy at the liberal Center for American Progress.

Or as former Reagan Treasury official Bruce Bartlett explained it this week the New York Times:

In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010. Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.

6. Bush Tax Cuts Didn’t Pay for Themselves or Spur “Job Creators”
That Republican intransigence persists despite the complete debunking of two of the GOP’s favorite myths.

The first tried and untrue Republican talking point is that “tax cuts pay for themselves.” Sadly, that right-wing mythmaking is belied by the massive Bush deficits, half of which (as the CBPP chart in section 3 above shows} were the result of the Bush tax cuts themselves. As a percentage of the American economy, tax revenues peaked in 2000; that is, before the Bush tax cuts of 2001 and 2003. Despite President Bush’s bogus claim that “You cut taxes and the tax revenues increase,” Uncle Sam’s cash flow from individual income taxes did not return to its pre-dot com bust level until 2006.

The second GOP fairy tale, as expressed by Speaker Boehner, is that “The top one percent of wage earners in the United States…pay forty percent of the income taxes…The people he’s {President Obama] is talking about taxing are the very people that we expect to reinvest in our economy.”

If so, the Republican’s so-called “Job Creators” failed to meet those expectations under George W. Bush. After all, the last time the top tax rate was 39.6% during the Clinton administration, the United States enjoyed rising incomes, 23 million new jobs and budget surpluses. Under Bush? Not so much.

On January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, “Bush on Jobs: the Worst Track Record on Record.” (The Journal’s interactive table quantifies his staggering failure relative to every post-World War II president.) The dismal 3 million jobs created under President Bush didn’t merely pale in comparison to the 23 million produced during Bill Clinton’s tenure. In September 2009, the Congressional Joint Economic Committee charted Bush’s job creation disaster, the worst since Hoover:

As David Leonhardt of the New York Times aptly concluded last year:

Those tax cuts passed in 2001 amid big promises about what they would do for the economy. What followed? The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7.

7. Ryan Budget Delivers Another Tax Cut Windfall for Wealthy
Looking at that dismal performance, Leonhardt rightly asked, “Why should we believe that extending the Bush tax cuts will provide a big lift to growth?” At a time ofrecord income inequality which saw the incomes of the richest 400 Americans taxpayers double even as their tax rates were halved, that’s a fair question to say the least.

For Paul Ryan and the Republican Party, the answer is simple: because we said so.

As Ezra Klein, Paul Krugman and Steve Benen among others noted, the House Republicans “Plan for America’s Job Creators” is simply a repackaging of years of previous proposals and GOP bromides. (As Klein pointed out, the 10 page document “looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday, and so cranked the font up to 24 and began dumping clip art to pad out the plan.”) At the center of it is the same plan from the Ryan House budget passed in April to cut the top individual and corporate tax rates to 25%.

The price tag for the Republican proposal is a jaw-dropping $4.2 trillion. And as Matthew Yglesias explained, earlier analyses of similar proposals in Ryan’s Roadmap reveal that working Americans would have to pick up the tab left unpaid by upper-income households:

This is an important element of Ryan’s original “roadmap” plan that’s never gotten the attention it deserves. But according to a Center for Tax Justice analysis (PDF), even though Ryan features large aggregate tax cuts, ninety percent of Americans would actually pay higher taxes under his plan.In other words, it wasn’t just cuts in middle class benefits in order to cut taxes on the rich. It was cuts in middle class benefits and middle class tax hikes in order to cut taxes on the rich. It’ll be interesting to see if the House Republicans formally introduce such a plan and if so how many people will vote for it.

We now know the answer: 235 House Republicans and 40 GOP Senators.

8. Ryan Budget Will Require Raising Debt Ceiling – Repeatedly
Largely overlooked in the media coverage of the Republican debt ceiling hostage drama is this: those 235 House Republicans and 40 GOP Senators who supported Paul Ryan’s 2012 budget bill voted to add $6 trillion to the U.S. national debt over the next decade. And that means, as Speaker John Boehner acknowledged, Republicans now and in the future would have to increase the debt ceiling – repeatedly.

Of course, you’d never know that based on the incendiary rhetoric from the leading lights of the Republican Party and their right-wing echo chamber. Senator Rand Paul(R-KY) said his vote to bump up the debt ceiling would come at the cost of a balanced budget amendment to the Constitution, “the last time we’re doing it.” His South Carolina colleague Jim Demint threatened to filibuster the increase, even if it meant the GOP’s “Waterloo.” The number two House Republican Eric Cantor (R-VA) regurgitated that line, telling Democrats the GOP “will not grant their request for a debt limit increase” without major spending cuts or budget process reforms.” For his part, House Budget Committee Chairman Paul Ryan insisted, “We won’t raise, just simply raise, the debt limit,” adding, “We will vote to have spending cuts and controls in conjunction with the debt limit increase.” As giddy right-wing bloggers like Patterico described the right-wing’s scorched earth strategy:

If Republicans are going to vote to raise the debt ceiling — and not to do so will indeed cause financial chaos — they have to extract concessions sufficient that they can credibly say: this is the last such vote we will ever have to have.

Sadly, as Ezra Klein of the Washington Post explained last month, “Republicans can’t meet their own deficit and spending targets.” The Ryan plan to privatize Medicare, slash and convert Medicaid into block grants, and deliver another tax-cut windfall for the wealthy nevertheless “blows through both their spending and debt caps”:

House Republicans voted to make the Ryan budget law. But the Ryan budget includes $6 trillion in new debt over the next 10 years, which means that to become law, the Ryan budget would require a substantial increase in the debt ceiling. But before the Republicans agree to increase the debt ceiling so that the budget they passed can become law, Republicans are demanding the passage of either a balanced budget amendment that would make the Ryan budget unconstitutional or a spending cap that the Ryan budget would, in certain years (and if you’re using more realistic numbers, in all years), exceed.

It’s no wonder Klein’s Washington Post colleague Matt Miller deemed the Republican budgetary horror story “The Shining – National Debt Edition” before concluding that Boehner’s “awe-inspiring hypocrisy on the debt limit” is one of those moments of “political behavior that can only be dubbed Super-Duper Hypocrisy So Brazen They Must Really Think We’re Idiots.”

9. Tax Cuts Drive the Next Decade of Debt
“President Obama’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying,” the New York Times’ David Leonhardt explained in 2009, adding, “The economic growth under George W. Bush did not generate nearly enough tax revenue to pay for his agenda, which included tax cuts, the Iraq war, and Medicare prescription drug coverage.” That fall, former Reagan Treasury official Bruce Bartlett offered just that kind of honesty to the born again deficit virgins of his Republican Party. Noting that the FY2009 deficit of $1.4 trillion was solely due to lower tax revenues and not increased spending, Bartlett concluded:

“I think there are grounds on which to criticize the Obama administration’s anti-recession actions. But spending too much is not one of them. Indeed, based on this analysis, it is pretty obvious that spending – real spending on things like public works – has been grossly inadequate. The idea that Reagan-style tax cuts would have done anything is just nuts.”

Which is exactly right. Thanks to the steep recession, as the Congressional Budget Office (CBO) and others have documented time and again, the overall federal tax burden as a percentage of GDP is now down to levels not seen since Harry Truman was in the White House. (The two-year tax cut compromise in December didn’t help any, adding $400 billion to the deficit this year and next.) But is the Bush tax cuts themselves, which Republicans want to make permanent and then (as the Ryan budget mandates) lower further, which account for much of the revenue drain into the future.

As a recent analysis by the Center on Budget and Policy Priorities showed, over the next decade the Bush tax cuts account for more of the nation’s debt than Iraq, Afghanistan, TARP, the stimulus, and revenue lost to the recession combined:

10. $3 Trillion Tab for Unfunded Wars Remains Unpaid
Over the next ten years, the costs of America’s wars in Iraq and Afghanistan will decline as the U.S. commitments there come to an end. But almost ten years, 6,000 U.S. dead and over a trillion dollars after the attacks of September 11, it’s time to pay for our wars.

In May, the National Journal estimated that the total cost to the U.S. economy of the war against Al Qaeda will reach $3 trillion. In 2008, Nobel Prize-winning economistJoseph Stiglitz put the price of the Iraq conflict alone at $3 trillion.

But by 2020 and beyond, the direct cost to U.S. taxpayers could reach $3 trillion. In March, the Congressional Research Service put the total cost of the wars at $1.28 trillion, including $806 billion for Iraq and $444 billion for Afghanistan. For the 2012 fiscal year which begins on October 1, President Obama asked for $117 billion more. (That war-fighting funding is over and above Secretary Gates’ $553 billion Pentagon budget request for next year.)

But in addition to the roughly $1.5 trillion tally for both conflicts through the theoretical 2014 American draw down date in Afghanistan, the U.S. faces staggering bills for veterans’ health care and disability benefits. Last May, an analysis by the Center for American Progress estimated the total projected total cost of Iraq and Afghanistan veterans’ health care and disability could reach between $422 billion to $717 billion. Reconstruction aid and other development assistance represent tens of billions more, as does the additional interest on the national debt. And none of the above counts the expanded funding for the new Department of Homeland Security.

But that two-plus trillion dollar tab doesn’t account for the expansion of the United States military since the start of the “global war on terror.” As a percentage of the American economy, defense spending jumped from 3.1% in 2001 to 4.8% last year. While ThinkProgress noted that the Pentagon’s FY 2012 ask is “the largest request ever since World War II,” McClatchy explained:

Such a boost would mark the 14th year in a row that Pentagon spending has increased, despite the waning U.S. presence in Iraq. In dollars, Pentagon spending has more than doubled in 10 years. Even adjusted for inflation, the Defense Department budget has risen 65% in the past decade.

Even as the World Trade Center site was still smoldering, Republicans insisted Al Qaeda represented an existential threat to the United States. President Bush repeatedly compared 9/11 to Pearl Harbor and his war on terror to World War II. But he never asked Americans to join the military or sacrifice at home. Instead, Bush told us to go shopping and “get down to Disney World.”

From a public policy standpoint, post-9/11 America in no way resembles FDR’s response to Pearl Harbor. George W. Bush was the first modern president to cut taxes during wartime. Barack Obama was the second.

Its time, as Bernie Sanders, Al Franken and the Congressional Progressive Caucus each proposed, to begin paying for the unfunded conflicts fought in our name.”

Emphasis Mine

The Ideological Crisis of Western Capitalism

A decade ago, in the midst of an economic boom, the US faced a surplus so large that it threatened to eliminate the national debt. Unaffordable tax cuts and wars, a major recession, and soaring health-care costs – fueled in part by the commitment of George W. Bush’s administration to giving drug companies free rein in setting prices, even with government money at stake – quickly transformed a huge surplus into record peacetime deficits.

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Joseph E. Stiglitz, Project Syndicate From Truthout

“Just a few years ago, a powerful ideology – the belief in free and unfettered markets – brought the world to the brink of ruin. Even in its hey-day, from the early 1980’s until 2007, American-style deregulated capitalism brought greater material well-being only to the very richest in the richest country of the world. Indeed, over the course of this ideology’s 30-year ascendance, most Americans saw their incomes decline or stagnate year after year.

Moreover, output growth in the United States was not economically sustainable. With so much of US national income going to so few, growth could continue only through consumption financed by a mounting pile of debt.

I was among those who hoped that, somehow, the financial crisis would teach Americans (and others) a lesson about the need for greater equality, stronger regulation, and a better balance between the market and government. Alas, that has not been the case. On the contrary, a resurgence of right-wing economics, driven, as always, by ideology and special interests, once again threatens the global economy – or at least the economies of Europe and America, where these ideas continue to flourish.

In the US, this right-wing resurgence, whose adherents evidently seek to repeal the basic laws of math and economics, is threatening to force a default on the national debt. If Congress mandates expenditures that exceed revenues, there will be a deficit, and that deficit has to be financed. Rather than carefully balancing the benefits of each government expenditure program with the costs of raising taxes to finance those benefits, the right seeks to use a sledgehammer – not allowing the national debt to increase forces expenditures to be limited to taxes.

This leaves open the question of which expenditures get priority – and if expenditures to pay interest on the national debt do not, a default is inevitable. Moreover, to cut back expenditures now, in the midst of an ongoing crisis brought on by free-market ideology, would inevitably simply prolong the downturn.

A decade ago, in the midst of an economic boom, the US faced a surplus so large that it threatened to eliminate the national debt. Unaffordable tax cuts and wars, a major recession, and soaring health-care costs – fueled in part by the commitment of George W. Bush’s administration to giving drug companies free rein in setting prices, even with government money at stake – quickly transformed a huge surplus into record peacetime deficits.

The remedies to the US deficit follow immediately from this diagnosis: put America back to work by stimulating the economy; end the mindless wars; rein in military and drug costs; and raise taxes, at least on the very rich. But the right will have none of this, and instead is pushing for even more tax cuts for corporations and the wealthy, together with expenditure cuts in investments and social protection that put the future of the US economy in peril and that shred what remains of the social contract. Meanwhile, the US financial sector has been lobbying hard to free itself of regulations, so that it can return to its previous, disastrously carefree, ways.

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But matters are little better in Europe. As Greece and others face crises, the medicine du jour is simply timeworn austerity packages and privatization, which will merely leave the countries that embrace them poorer and more vulnerable. This medicine failed in East Asia, Latin America, and elsewhere, and it will fail in Europe this time around, too. Indeed, it has already failed in Ireland, Latvia, and Greece.

There is an alternative: an economic-growth strategy supported by the European Union and the International Monetary Fund. Growth would restore confidence that Greece could repay its debts, causing interest rates to fall and leaving more fiscal room for further growth-enhancing investments. Growth itself increases tax revenues and reduces the need for social expenditures, such as unemployment benefits. And the confidence that this engenders leads to still further growth.

Regrettably, the financial markets and right-wing economists have gotten the problem exactly backwards: they believe that austerity produces confidence, and that confidence will produce growth. But austerity undermines growth, worsening the government’s fiscal position, or at least yielding less improvement than austerity’s advocates promise. On both counts, confidence is undermined, and a downward spiral is set in motion.

Do we really need another costly experiment with ideas that have failed repeatedly? We shouldn’t, but increasingly it appears that we will have to endure another one nonetheless. A failure of either Europe or the US to return to robust growth would be bad for the global economy. A failure in both would be disastrous – even if the major emerging-market countries have attained self-sustaining growth. Unfortunately, unless wiser heads prevail, that is the way the world is heading.”

Emphasis Mine

see:http://www.truth-out.org/ideological-crisis-western-capitalism/1310127895

Expand Social Security!

People are willing to pay taxes that they spend on themselves

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From Alternet, By Thomas Geoghegan

“As a labor lawyer I cringe when Democrats talk of “saving” Social Security. We should not “save” it but raise it. Right now Social Security pays out 39 percent of the average worker’s preretirement earnings. While jaws may drop inside the Beltway, we could raise that to 50 percent. We’d still be near the bottom of the league of the world’s richest countries — but at least it would be a basement with some food and air. We have elderly people living on lessthan $10,000 a year. Is that what Democrats want to “save”?”But we can’t afford it!” Oh, come on: We have a federal tax rate equal to nearly 15 percent of our G.D.P. — far below the take in most wealthy countries. Let’s wake up: the biggest crisis we face is that most of us have nothing meaningful savedfor retirement. I know. I started my career wanting to be a pension lawyer. In the 1970s, lawyers like me expected there to be big pots of private pensions for hourly workers. By the 1980s, as factories closed, I was filing hopeless lawsuits to claw back bits and pieces of benefits. Now there are even fewer bits and pieces to get.A recent Harris poll found that 34 percent of Americans have nothing savedfor retirement — not even a hundred bucks. In this lost decade, that percentage is sure to go up. At retirement the lucky few with a 401(k) typically have $98,000. As an annuity that’s about $600 a month — not exactly an upper-middle-class lifestyle. It’s too late for Congress to come up with some new savings plan — a new I.R.A. that grows hair, or something. There’s no time. We have to improve the one public pension program in place.Should we means-test it? No. I don’t care if they go out and buy bottles of Jim Beam: let our elderly have an occasional night out at a restaurant.The most paralyzing half-truth in this country is that people hate taxes. People are willing to pay taxes that they spend on themselves. Two-thirds of those surveyed in a CBS/New York Times poll in January were willing to pay more taxes to save Social Security at its modest level. To “save” it, most of us don’t need to pay. We could lift the cap on high earners, the 6 percent of workers who make over $106,800 a year. If earnings above the cap were subject to the payroll tax with no increase in benefits to high earners, there would be no deficit in the Social Security trust fund in 2037, as projected.

If people are willing to pay more just to “save” Social Security, they should be glad to pay more to raise it.

What does it take to get Social Security up to half the average worker’s earnings? According to the National Academy of Social Insurance, to close the deficit and raise benefits to nearly half of average worker earnings, we would need to find an additional 5 percent of taxable payroll, or find the money elsewhere. If we lift the cap on the payroll tax without paying more benefits to those above it, that gets us 2.32 percent (or a bit less if we slightly increase benefits to the rich). Dedicating revenues from the estate tax at its 2009 levels to Social Security gets another half percent. A few other tweaks, like covering new public employees, add another 0.42 percent. The remainder can be found by raising the payroll tax by roughly 1 percentage point for both employees and employers.

I can hear the argument: It will discourage jobs, blah, blah. While I sympathize with the health costs employers pay (I am an employer, at our tiny law firm), they have had a windfall on pensions. In 1975, when I left law school, around two-fifths of American workers were in defined-benefit plans. Now it’s just a fifth, and dropping. For employers, that’s not the real bonanza.

Retirees today are shortchanged on Social Security because they have been shortchanged on wages for their entire working lives. The labor economist Richard B. Freeman points out that the hourly earnings of workers dropped by 8 percent from 1973 to 2005 while productivity shot up 55 percent or more. The United States is one of the few developed countries where workers are routinely cheated of a share in higher productivity.

And where has the money from the extra productivity gone? It’s gone right to the top, to the top few percent. If wages had been paid fairly based on productivity, there would have been enough money subject to the payroll tax to avoid even a modest shortfall.

As I write, the Democrats are proposing to cut payroll taxes — supposedly to create jobs. But the last cut in the payroll tax, a few months back, led to little or no hiring. And did I mention the Paul Ryan plan? Just wait until the Democrats accept some “reasonable” version of this Republican document.

A bigger pension — a raise in Social Security benefits — is the stimulus this demoralized country needs. Come on, Democrats: think of F.D.R., Robert Wagner, or heck, even Lyndon B. Johnson. Let’s ask ourselves: Who are we for?”

This article first appeared in the New York Times. Thomas Geoghegan is the author of “Which Side Are You On?: Trying to Be for Labor When It’s Flat on Its Back. “

Emphasis mine

see: http://www.alternet.org/story/151373/what%27s_your_retirement_plan_social_security_benefits_should_expand_–_and_here%27s_how_to_do_it?akid=7150.123424.dNU18N&rd=1&t=8

Why is the USA running in the red?

outine increases in defense and domestic spending account for only about 15 percent of the financial deterioration, according to a new analysis of CBO data.

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From: The Washington Post

By Lori Montgomery, Published: April 30

“The nation’s unnerving descent into debt began a decade ago with a choice, not a crisis.

In January 2001, with the budget balanced and clear sailing ahead, the Congressional Budget Office forecast ever-larger annual surpluses indefinitely. The outlook was so rosy, the CBO said, that Washington would have enough money by the end of the decade to pay off everything it owed.

Voices of caution were swept aside in the rush to take advantage of the apparent bounty. Political leaders chose to cut taxes, jack up spending and, for the first time in U.S. history,wage two wars solely with borrowed funds.“In the end, the floodgates opened,” said former senator Pete Domenici (R-N.M.), who chaired the Senate Budget Committee when the first tax-cut bill hit Capitol Hill in early 2001.

Now, instead of tending a nest egg of more than $2 trillion, the federal government expects to owe more than $10 trillion to outside investors by the end of this year. The national debt is larger, as a percentage of the economy, than at any time in U.S. history except for the period shortly after World War II.

Polls show that a large majority of Americans blame wasteful or unnecessary federal programs for the nation’s budget problems. But routine increases in defense and domestic spending account for only about 15 percent of the financial deterioration, according to a new analysis of CBO data.

The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts. Together, the economy and the tax bills enacted under former president George W. Bush, and to a lesser extent by President Obama, wiped out $6.3 trillion in anticipated revenue. That’s nearly half of the $12.7 trillion swing from projected surpluses to real debt. Federal tax collections now stand at their lowest level as a percentage of the economy in 60 years.

Big-ticket spending initiated by the Bush administration accounts for 12 percent of the shift. The Iraq and Afghanistan wars have added $1.3 trillion in new borrowing. A new prescription drug benefit for Medicare recipients contributed another $272 billion. The Troubled Assets Relief Program bank bailout, which infuriated voters and led to the defeat of several legislators in 2010, added just $16 billion — and TARP may eventually cost nothing as financial institutions repay the Treasury.

Obama’s 2009 economic stimulus, a favorite target of Republicans who blame Democrats for the mounting debt, has added $719 billion — 6 percent of the total shift, according to the new analysis of CBO data by the nonprofit Pew Fiscal Analysis Initiative. All told, Obama-era choices account for about $1.7 trillion in new debt, according to a separate Washington Post analysis of CBO data over the past decade. Bush-era policies, meanwhile, account for more than $7 trillion and are a major contributorto the trillion-dollar annual budget deficits that are dominating the political debate….

Most Republicans reject raising taxes as part of the solution; House Speaker John A. Boehner (Ohio) has called it a “non-starter.” But Democrats won’t go for a proposal based solely on spending cuts. The“Gang of Six,” a bipartisan Senate group dedicated to debt reduction, is expected to unveil a strategy as soon as this week that couples sharp spending cuts with a rewrite of the tax code that would raise additional revenue.

(The debt ceiling, set at $14.3 trillion, covers all federal debt, including money the Treasury owes other federal entities, such as the Social Security trust fund. The CBO data focus on the portion of the debt borrowed from outside investors. The debt is the accumulation of annual deficits; if annual budgets are in surplus, the nation can pay down the debt.)

The annual surpluses that set the nation on this course emerged in the final years of the Clinton administration. In the typical American household, a surplus comes as welcome news. But the White House is not a typical household. When Treasury Secretary Robert Rubin saw the budget shift into the black in 1998, he immediately warned President Bill Clinton that, politically, it was a mixed blessing.

Rubin wanted to use the surplus to start repaying the debt, which was then just more than $3 trillion. The White House billed it as “saving Social Security first,” viewing the surplus as an opportunity to shore up the nation’s finances before huge numbers of the baby boom generation began claiming federal retirement benefits. “The problem was a whole other part of the political spectrum wanted to use the surplus for tax cuts,” Rubin said in an interview. “They said they wanted to give the people back their money. Of course, it was also the people’s debt.”

What to do with the surplus became a central issue of the 2000 presidential campaign, with Vice President Al Gore arguing that much of it should be put in a “lockbox” to protect Social Security and Medicare. Bush pushed for a broad tax cut, arguing that taxpayers at all income levels were owed a refund. “Some say that the growing federal surplus means Washington has more money to spend, but they’ve got it backwards,” Bush said as he accepted the GOP nomination in August 2000. “The surplus is not the government’s money. The surplus is the people’s money.”

As soon as he took office, Bush pushed Congress to make good on his tax pledge. Less than a week after his inauguration, he got a boost from Federal Reserve Chairman Alan Greenspan, who testified before the Senate Budget Committee that “tax reduction appears required” to prevent the federal government from accumulating too much cash. Greenspan feared that large surpluses would turn the government into the nation’s largest investor, creating distortions in the markets.

A chorus of skeptics warned against spending the surplus. Some stressed the inherent uncertainty of the CBO projections. Others said a big tax cut would unleash pent-up desire in both parties to pursue expensive priorities without the pay-as-you-go restraints that had helped produce the surplus.

Congress approved a $1.35 trillion tax cut in record time. A second package, worth $350 billion, followed in 2003. Together, they constituted one of the largest tax cuts since World War II, according to the conservative Tax Foundation.

Bush’s first Treasury secretary, Paul O’Neill, resigned after the White House decided to pursue the 2003 measure. “I believed we needed the money to facilitate fundamental tax reform and begin working on unfunded liabilities for Social Security and Medicare,” O’Neill said in an interview. But the White House, he said, was focused on improving economic growth for the fourth quarter of 2004. “They wanted to make sure economic conditions were great going into the president’s reelection.”

Proponents of tax cuts argue that the legislation merely returned tax collections to their appropriate levels. They note that the CBO’s 2001 forecast assumed that tax collections would stay above 20 percent of the nation’s gross domestic product (defined as the total of all economic output) — well above the historic average of 18 percent of GDP.

“It’s not obvious that America was ready to have taxes at a level this high persistently,” said Donald Marron, a former CBO director who now heads the nonprofit Tax Policy Center. “Some degree of tax cutting was inevitable.”

But some key advocates of the tax cuts now say such a large reduction was probably ill-advised.

“Nobody would have thought that all these things would have happened after you cut taxes,” Domenici said. “That you’d have two wars and not pay for them. That you’d have another recession. A huge extravaganza of expenditures” for the military and homeland security after the Sept. 11, 2001, attacks. “You would pause before you did it, if you knew.”

Bill Thomas, the former House Ways and Means Committee chairman who helped shepherd the tax cuts through Congress, defended the 2003 package as “fuel for the economy.” But he said in an interview that the 2001 measure was larded with “stuff that I was not all that wild about,” including bipartisan priorities such as a big increase in the child tax credit and a break for married couples — provisions Thomas believes did little to promote economic growth and amounted to “throwing money out the window.”

“I couldn’t do anything about it,” said Thomas, a California Republican who retired in 2006. “You’re the candy man when you advocate those kinds of tax cuts.”

In the end, Bush cut taxes and spent more money. Good times masked the impact, as surging tax revenues reduced the size of year-to-year deficits during the first three years of his second term. But after the economy collapsed during Bush’s final year in office, deficits — and therefore the debt — began to explode as Obama sought to revive economic activity with more tax cuts and federal spending.

Today, the CBO forecasts are unrelievedly gloomy, showing huge deficits essentially forever. As policymakers grapple with the legacy of the past decade, a demographic wave of senior citizens is crashing at their doorstep, driving up the cost of Medicare, Medicaid and Social Security.

William Hoagland, who was for years a top budget aide to Domenici and other GOP Senate leaders, said it is simplistic to think today’s fiscal problems began just 10 years ago. In 1976, as a young CBO analyst, Hoagland produced a long-term simulation that showed entitlement costs gradually overwhelming the rest of the federal budget.

“This situation really goes back to long before [the Bush administration], which is to say to old dead men that have long left the Congress,” he said.

Still, Hoagland said, the abandonment of fiscal discipline in the wake of the surpluses clearly didn’t help. “Nobody pushed for paying for this stuff,” he said. Not even after “it became very clear in the middle of 2003 that the line had turned on us. And the surpluses as far as the eye could see were no longer there.”

Emphasis Mine

See:http://www.washingtonpost.com/business/economy/running-in-the-red-how-the-us-on-the-road-to-surplus-detoured-to-massive-debt/2011/04/28/AFFU7rNF_story.html?nl_headlines

Yes, Yes, Keep our SS!

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Dr. paul Krugman, NT Times

Social Security turned 75 last week. It should have been a joyous occasion, a time to celebrate a program that has brought dignity and decency to the lives of older Americans.

But the program is  with some Democrats as well as nearly all Republicans joining the assault. Rumor has it that President Obama’s deficit commission may call for deep benefit cuts, in particular a sharp rise in the retirement age.

Social Security’s attackers claim that they’re concerned about the program’s financial future. But their math doesn’t add up, and their hostility isn’t really about dollars and cents. Instead, it’s about ideology and posturing. And underneath it all is ignorance of or indifference to the realities of life for many Americans.

About that math: Legally, Social Security has its own, dedicated funding, via the payroll tax (“FICA” on your pay statement). But it’s also part of the broader federal budget. This dual accounting means that there are two ways Social Security could face financial problems. First, that dedicated funding could prove inadequate, forcing the program either to cut benefits or to turn to Congress for aid. Second, Social Security costs could prove unsupportable for the federal budget as a whole.

But neither of these potential problems is a clear and present danger. Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund. The program won’t have to turn to Congress for help or cut benefits until or unless the trust fund is exhausted, which the program’s actuaries don’t expect to happen until 2037 — and there’s a significant chance, according to their estimates, that that day will never come.

Meanwhile, an aging population will eventually (over the course of the next 20 years) cause the cost of paying Social Security benefits to rise from its current 4.8 percent of G.D.P. to about 6 percent of G.D.P. To give you some perspective, that’s a

So where do claims of crisis come from? To a large extent they rely on bad-faith accounting. In particular, they rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count — because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget — while future Social Security deficits are unacceptable — because hey, the program has to stand on its own.

It would be easy to dismiss this bait-and-switch as obvious nonsense, except for one thing: many influential people — including Alan Simpson, co-chairman of the president’s deficit commission — are peddling this nonsense.

And having invented a crisis, what do Social Security’s attackers want to do? They don’t propose cutting benefits to current retirees; invariably the plan is, instead, to cut benefits many years in the future. So think about it this way: In order to avoid the possibility of future benefit cuts, we must cut future benefits. O.K.

What’s really going on here? Conservatives hate Social Security for ideological reasons: its success undermines their claim that government is always the problem, never the solution. But they receive crucial support from Washington insiders, for whom a declared willingness to cut Social Security has long served as a badge of fiscal seriousness, never mind the arithmetic.

And neither wing of the anti-Social-Security coalition seems to know or care about the hardship its favorite proposals would cause.

The currently fashionable idea of raising the retirement age even more than it will rise under existing law — it has already gone from 65 to 66, it’s scheduled to rise to 67, but now some are proposing that it go to 70 — is usually justified with assertions that life expectancy has risen, so people can easily work later into life. But that’s only true for affluent, white-collar workers — the people who need Social Security least.

I’m not just talking about the fact that it’s a lot easier to imagine working until you’re 70 if you have a comfortable office job than if you’re engaged in manual labor. America is becoming an increasingly unequal society — and the growing disparities extend to matters of life and death. Life expectancy at age 65 has risen a lot at the top of the income distribution, but much less for lower-income workers. And remember, the retirement age is already scheduled to rise under current law.

So let’s beat back this unnecessary, unfair and — let’s not mince words — cruel attack on working Americans. Big cuts in Social Security should not be on the table.

see:http://www.nytimes.com/2010/08/16/opinion/16krugman.html?_r=1&h

emphasis mine

Brave New World

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From Progress Ohio:

“The conservatives—that’s right, the very same folks who just dragged us along on an eight-year drunken binge during which they borrowed-and-spent us into the deepest financial catastrophe in nearly a century—are now standing there, faces full of moral rectitude, fingers pointing and shaking in our faces, righteously lecturing the rest of us on the topic of “fiscal responsibility.”

From the author:

Many in the GOP have not yet realized that they no longer control the three elected branches of Federal Government,  that they have lost the youth vote, much of the geographic US, and their base is narrowing to the wealthiest familes and white Southern males.  Conservatives  have a lock on talk radio, but Progressives have the Internet, and I’ll take that.