Wednesday, September 12, 2012


So whined Media Bimbette Nora O’Donnell this morning as she contemplated the impending “fiscal cliff” and as she put it: “ALL THE TAX CUTS WILL END FOR EVERYONE!”


They NEED to end! We have lived in supply side looney-ville and fantasy land long enough. Now is the time to stop ALL supply side bullshit for everyone, middle class and wealthy 1-percenters alike. Moreover, getting the middle class into the mix will expedite the cuts for the richest, without sterile political wrangling and gamesmanship!

Look, we’ve had two unpaid for “wars”, or extended occupations – depending on your point of view – and a succession of unpaid for Bush tax cuts. It is time to terminate this foolish financial fete and demand BOTH parties halt their supply side bunkum. Yes, both parties! The Dems have been as bad as the Reeps, by: a) extending the Bush tax cuts – which were originally intended to sunset by 2009, given the deficits they generated, and b) creating a new “payroll tax cut” which has already gone on two years and made the social benefit programs (which rely on payroll taxes) even more unstable.

All these horror stories being spread about “Armageddon” and going off “fiscal cliffs” is propaganda and bullshit spread by Neoliberal elites, in high finance and the media. These assholes want MORE tax cuts because they know they can use them to justify austerity measures later. Since these cynical and craven twits won’t change then citizens have to be smart enough to parse the BS and not bite. That means understanding that if you get a tax cut this next year it means major benefits cuts later. SO, leave the tax cut sippy cup out!

As a article pointedly noted yesterday, :"Every citizen, including every politician, should be expected to memorize the formula for aggregate demand":

AD = C + I + G + (X-M)

Where C is consumption; I is investment; G is government spending and (X-M) is the trade deficit or trade surplus, depending on whether exports (X) exceed or are exceeded by imports (M).

Let the contributions to the GDP now be in terms of fractional proportions, and let's see what happens. While C confers a positive contribution of roughly 0.7 (i.e. consumers contribute roughly 70% to the GDP), we have (X-M) at about a negative contribution of (-0.04), and 'I' near zero, although technically - if military spending is deemed a negative investment (i.e. the production can only be used to destroy resources) then I = - 0.5, and government spending is ~ (-0.1) in terms of public sector jobs lost because of cuts to government jobs-educational investment, etc. that transfers to states (i.e. 550,000 fewer teachers, police, firemen). Then: AD = 0.70 - 0.50 - 0.10 -0.04 = 0.70 - 0.64 = 0.06.

Or what one would regard as barely alive and on the fiscal "respirator".

While the Dems and Obama administration did make a few halfhearted efforts to explain and promote this demand-side agenda and its policy prescriptions (e.g. via increasing revenues), again and again, they subsequently compromised. That is, they settled for Pyrrhic victories on the terms set by Republican obstructionists in Congress rather than risk the defeat of plans that could actually have worked. Hence. the stimulus was half the size of what Obama’s own economic adviser Christina Romer argued that it should be. Nearly one third of it was wasted on tax cuts, instead of food stamps that would have ramped up factor C.

Meanwhile, the Dems out-reeped the Reeps by adding their own nefarious payroll tax cuts, which I already showed to be counter productive, and in fact, fueled the future drive to cut what BOTH sides now erroneously call "entitlements".

Sadly, as the author stated it, about the supposedly "liberal" Democrats:

"The truth is that the post-Clinton Democrats are a post-Keynesian — or rather, a pre-Keynesian — party. Between the administrations of Jimmy Carter and Barack Obama, the lessons that New Deal liberals had learned from the Great Depression about demand-side economics were unlearned. The “New Democrats” of the last three decades adopted a completely new economic orthodoxy: supply-side liberalism."

Again, this has been embodied in the willingness to go along with the Reep demand for tax cuts, and even inventing tax cuts of their own (payroll tax cuts) instead of challenging this whole line of egregious thinking which paves the way for social benefits cuts later. This is why I've consistently warned of playing on the Reeps' wicket, but seemingly to no avail.

Again, I associated this tax cut fetishism, this "supply side liberalism" with the discredited beliefs of free market worshipping NEO-liberalism! In this case, the erroneous belief that tax cuts of any type will promote economic growth when the actual empirical evidence shows exactly the converse. See the Financial Times analysis of the Bush tax cuts, from 2001-09 in FT (9/15/10).

As for the upcoming sequestrations which Nora also whined about (referring to “trillions in cuts” – it’s actually only $1.2 trillion for domestic and military - but ought to be twice that for the military alone) don’t get me started. As I’ve noted before these aren’t real cuts in absolute terms, at least to the Pentagon, but rather merely decelerations of existing growth. There’s a difference.

To put a finer point on it, Veronique de Rugy of the Mercatus Center at George Washington University has estimated that even the $600 b in automatic defense cuts that could occur from 2013 to 2021 under the sequester plan adopted last year (by BOTH parties) "would leave the Pentagon with purchasing power equivalent to what it had in 2006". (Denver Post, 'Are Defense Cuts That Bad?', today, p. 19A). Let's also bear in mind that the 2006 defense levels had already been bumped up to twice their (2001) fraction of GDP, which former defense analyst Chuck Spinney noted (in 2004) was tantamount to "a war on Social Security and Medicare."

So, let me laugh when people like Leon Panetta go all weepy at the prospect of these puny forthcoming cuts, which I actually believe ought to be TEN times larger! Btw, another aspect to this has been how the Reeps are now touting increased defense spending as a JOBS bill! When you strip away their bullshit (ibid.) they're not interested in preserving national security per se but preserving "nearly 20,000 jobs" mostly in Reepo districts. Sorry, boys, if you want jobs then we demand you invest in infrastructure, not weapons! And we insist you do so outside the pork-barrel paradigm!

We the People have a choice coming up, as our congress critters keep whining about "fiscal cliffs". We can tell them to STFU and let the tax cuts expire, ALL of them, and use the money for positive investment, or we can play into their hands. That means accepting those cuts, and being much worse off down the line - when a REAL fiscal cliff will be upon us. Arriving with the total insolvency of both Medicare and Social Security - leaving tens of millions to fend for themselves. The choice is ours. We need to be sharpening our letter writing skills right now, to school our reps. And maybe the media hacks like Nora O'Donnell too!

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