How Obama Can do an 'End Run' Around the 'Pukes in the Debt Ceiling Battle

It was amusing to see extremist anti-tax troglydyte Grover Norquist on a TV spot recently ( replayed on the Ed Schultz show) yapping about how the GOP House could hold Obama hostage to spending cuts by bringing up the debt ceiling as a lever every month. He went on to bloviate:"And only when they do what we demand, with those cuts, will we raise their allowance!"

Hey, brainiac! There's no "allowance"! The increase in the debt ceiling is to ensure repayment of the money already spent! It is money you OWE, birdbrain!

Here are some other lesser known facts about our debt before I go on to show how Obama can do an end run around these Goopr fools without having to have new Treasury Sec Jack Lew mint a $1 trillion platinum coin, or for Obama to invoke the 14th amendment and probably incite impeachment proceedings.

- Of the $16.3 trillion up to today, only $5.5 trillion is owed to external nations (e.g. China, Japan etc.)

- $6  trillion is owed to individuals within the country - as in federal pensions ($2.9 trillion) and Social Security (to its Trust Fund) $3.1 trillion, from borrowing to support "wars"

- Another $4.8 trillion is owed to investors within the country, including to bond holders (Treasury bonds and bills) and others.

Technically speaking then, the true national debt (as defined as being owed to outside nations, interests) is only 33.7% of the total. I mention this because this is how most other nations measure their national debt. They do not reckon in what they owe themselves, internally! (For example, Switzerland)

Obviously, as may be seen from the above, several things pop into view:

1) A good chunk of the money, e.g. for wars in Afghanistan and Iraq, was raided from Social Security monies, the Trust Fund namely - which trillions the government now owes beneficiaries.

2) The canard that the Social Security Trust Fund bonds are only "IOUs" cannot possibly be true if they are in fact counted towards the debt! On the other hand, if they were "only" IOUs and possessed no fiscal gravitas, then that $3.1 trillion would be subtracted so we'd "only"have a deficit of $13.2 trillion. Bottom line? If we measured national debt and deficits in the standard ways other nations do there wouldn't have been half the kerfuffle about it. (And since Social Security is funded separately, so long as the payroll tax is there at 6.2%, then it can't contribute to the debt nor does it have any creditors.)


Now how can Obama do his end run and come out ahead in the upcoming debt ceiling brouhaha? The solution was recently offered by Edward D. Kleinbard, a former chief of staff at the Congressional Joint Committee on Taxation, and currently a law professor at the University of Southern California.

He recommends that President Obama threaten to issue scrip or  “registered warrants”,  to issue to existing claims holders (other than those who own actual government debt) in lieu of money. Recipients of these I.O.U.’s could include federal employees, defense contractors, Medicare service providers, Social Security recipients and others.  This money would be as good as actual hard currency or any electronic input. Best part?  Scrip would not violate the debt ceiling because it wouldn’t constitute a new borrowing of money backed by the credit of the United States. It would merely be a formal acknowledgment of a pre-existing monetary claim against the United States that the Treasury was not currently able to pay. The president could therefore establish a scrip program by executive order without piling a constitutional crisis on top of a fiscal one.

How ingenious can you get? Much more sophisticated than having to go out and  mint a trillion dollar coin, eh? (Which, however, is permitted under several obscure clauses in the Constitution to do with the duties of the Treasury Secretary as pertaining to minting coins).

Of course there is the possible problem of confusion with actual Treasury debt. Hence, to be consistent with the law governing claims against the United States more generally the scrip would not pay interest in most cases. And unlike debt, it would have no fixed maturity date but rather would become redeemable in cash only when the secretary of the Treasury was able to certify that there’s enough money available in the Treasury’s general fund to cover it.

Finally, as the professor notes: "the scrip would be transferable, allowing financial institutions to buy it at a high percentage of its face value, knowing that the political crisis would almost certainly be resolved before long."

Kleinbard does point out that the federal "Anti-Assignment Act" generally prohibits the transfer of claims against the United States from one private actor to another, but "the government could waive the act’s application, which is what the president would do here".  Ingenious!


Kleinbard agrees that the strategy "may sound far-fetched, but it has been used before: in fact, California relied on it as recently as 2009."  Beginning in July of that year, California addressed its budget crisis by issuing 450,000 registered warrants, totaling $2.6 billion, to individual and business claimants, including recipients of aid programs, recipients of tax refunds and government contractors.

 Kleinbard adds:

"A federal scrip program, importantly, would not explicitly challenge any constitutional allocation of powers. Nor would there be confusion in the marketplace between valid Treasury bonds and this new paper, which would have a different name, financial terms and legal status. And because the scrip would be transferable, claimants forced to accept it would be able to turn it into immediate cash in private markets, for as long as the Treasury was unable to issue new debt."

Lastly, it is a way of doing an 'end run' in the oncoming debt ceiling crisis, but clearly can't be a final solution.In Prof. Kleinbard's words: "It would be the least awful way to defang the most extortionate demands of Congressional hard-liners — and one that would not permanently damage America’s fiscal standing in the world."

Let us hope Obama uses it when the time comes, as opposed to capitulating to Repuke demands as he did in 2011! 

Get Set for Brutally Harsh Times!

Well, as suspected, Obama caved yesterday to the Repuke deficit terrorists. Yes he obtained MINIMAL "wins" in not having to go through this hellacious rigamarole again in 6 months or a year, and escaping default - but at an enormous cost that may well mean he becomes a 1-termer next year. There is no finessing this abomination, and the Repug fiscal extremists have every reason to gloat and party hearty if the final deal goes through. They have WON, as with a capital W. The Obamanites can spin this narrative any way they wish, but it is assuredly no "compromise" - not when Medicare stands to be viciously de-funded by way of automatic spending cuts and no taxes are on the table!

As pointed out in a blog at Daily Kos:

As Robert Greenstein, of the Center on Budget and Policy Priorities, pointed out in a recent statement about a different proposal, there's just no way to enact spending reductions of this magnitude without imposing a lot of pain. And contrary to the common understanding in the Washington cocktail party circuit, "pain" does not simply mean offending certain political sensibilities. Pain means more people eating tainted food, more people breathing polluted air, more people pulling their kids out of college, and more people losing their homes—in other words, the hardships people suffer when government can't do an adequate job of looking out for their interests.

More immediately, but equally troubling, this agreement would not address our most pressing economic problem: lack of jobs. On the contrary, by reducing deficits starting next year, this deal would do the very opposite of what virtually every mainstream economist now believes we should do: increase consumer demand by pumping more money into the economy

Worse, the dems - pussies that they are- refused to demand more concessions for their side, including extensions of unemployment benefits! Meanwhile the only thing the Repugs are giving up, if at all, are some defense cuts - all of which amount to pork for their districts.

Theoretically, this lamo plan makes a huge deal out of a "committee" of 6 Reeps and 6 Demos who will decide on what further cuts to enact, where. But as we saw with this extended debt ceiling fiasco, that's easier said than done. If no agreement is made by the humans then "automatic" cuts are introduced to the tune of $1.8 trillion, meaning that the Reeps' defense gets zonked half and Medicare gets zonked half.

How is this fucking fair? It merely confirms former defense analyst's Chuck Spinney's prediction that the increase of military spending as percent of GDP (back in 2006) would see military spending squaring off against Medicare. THAT is precisely what we have!

Given these automated spending cuts are most probable - if no 'Gang of 12' agreement emerges by Thanksgiving - it means an immediate $900b cut to Medicare providers. (The gurus who spin this shit assert "beneficiaries won't be affected", only providers). But it doesn't take a genius to predict what will transpire!

As Medicare provider cuts are introduced (an estimated 29% cuts to primary care physicians by January, 2012) the providers will simply cut back their services, or dramatically raise prices. In the worst case scenario, they will simply accept no more seniors into their plans, no matter they just turned 65. In other words, Medicare will have been transmuted into a hollow benefit. On paper, you're supposed to receive it, but in the practical world you don't get dogshit or diddly. You're on your own!

Moreover, this is pegged to worsen each year as the automatic cuts are renewed. Each time, more and more cuts will be exacted and more and more elderly will be without any medical coverage because no one, not even primary care physicians, will accept them! Even now in Colorado (and I'm sure many other states), 1 of 3 seniors over 65 can't get into any physician's practice because they're being denied. As round after round of these cuts continues, we could see most seniors without any Medicare coverage by 2013. Of course, this may well be what the shit head repuke austerity and deficit hawks wanted all along, just as the baby boomers are entering the program by 10,000 each today. And what do we see? A DEM President signing onto this perfidy!

All of this, or a LOT, could have been avoided if Obama had just had enough balls to allow ALL the Bush tax cuts (for rich and middle class) to expire as they were intended to, in December last year. That ONE move would have saved $4 trillion over ten years as opposed to $3.7 trillion now under this horrific deal! At the very least, even if he lacked the balls to let them expire, Obama ought to have tied their extension to a debt ceiling resolution at that point - going past the 2012 election. Then we wouldn't have had to put up with this three ring circus bullshit and national hostage -taking by the Tea Baggers- to enable them to wring out vast concessions on spending cuts they'd never get via legislation.

So now, instead of most citizens simply doing without a few hundred bucks each year, they're going to be clobbered unmercifully by federal cuts! No unemployment benefits, food inspections cut at the FDA (so more people will get salmonella, or tomaine and require hospitalizations, meaning more medical costs), the elderly with no more utility assistance - so they'll either have to roast or freeze in their homes or beg for charity; cutbacks in school lunches, elderly meals; cutbacks in environmental protections - so water will get dirtier - more cancer-causing chemicals- meaning more cancers, more costly chemo treatments (even as chemo drugs are now in sort supply); libraries closing, schools degraded, hospitals and airports reverting to the level of 3rd world nations. The Clean Air act may also be repealed to save coppers, meaning more mercury from utility smokestacks pours out, more acid rain, more effluent - translating into more asthma, more COPD and a whole array of lung disorders.

Perhaps even worst of all, tens of billions in federal matching funds for state Medicaid programs stand to be cut - which usually go to states. But given so many states are themselves now cash-strapped, that means they will have to either drop large numbers from the Medicaid rolls or revamp qualifying criteris - say to the level that anyone earning less than $400/mo. is then ineligible. Then where will all these people turn? Mostly to ERs, passing those costs on to the rest of us!

Yes, this is what we can expect.

In addition, the idea that a nation of 310 million can be run at the level of the domestic spending of the 1950s Eisenhower administration (when there were half as many people) is totally batshit crazy insane. There is no way this can happen. What it means, really, is accepting the quality of life in a low grade third world nation - say like Guyana ca. 1978. In that nation, when I visited then, the unemployment rate stood at over 20%, stores were closed most of the day because of lack of activity, and any people who did dare to venture onto the streets risked their jewelry being cut off their bodies (many women, as I was told, had rings cut off with their fingers by snatch and grab robbers).

So yes, expect a major crime wave with many more robberies and assaults too, as people who are steamrolled try to make ends meet any way they can. Expect also shoplifting epidemics. One thing you can bet on: people on the outs will not just roll over and die! With no job prospects, and no more government support, crime will be the only alternative. Indeed, many will perpetrate it simply to get put into a jail where they'll be assured of 3 hots and a cot!

Consumer spending will also plummet even more, and we can expect consumer contribution to the GDP to perhaps go down to barely 40%, if that. With no business spending, and now no government spending, it portends an aggregate demand collapse of epic proportions. As Economist Paul Krugman put it in today's NY Times, we face a "lost decade" of opportunity and jobs - as bad or worse than what befell Japan in the 1990s. In that period, extended deflation stalked the land since NO one was spending, not government, not consumers or business.

Surely, when people entertain these cuts they will see that they will have no choice but to cut spending. If Medicare is viciously sliced forcing us to pay much more, I already told my wife that we will probably have to start by cutting all charitable contributions first, maybe letting half of them all go. That behavior will likely be repeated many times over, thereby multiplying the pain as the previous provider of last resort - the charities -all take huge hits like they did in the wake of the '08 recession.

Sure, I will still give but the donations now will likely more be $2 or $3 at a time and less often than $5 or $10 monthly. One has to look out for oneself if the government is forced to cut back and one's expenses are significantly increased.

The America on offer will be vastly more brutish, churlish and unliveable but that will be the result of passing this lopsided cave-in piece of trash. Obama would have been better off invoking the 14th amendment and letting the devil take the hindmost.

NO BOGUS DEFICIT DEALS!!!!

The latest, from DailyKos:

By all accounts, it looks like a deal is about to be announced in which the debt ceiling is hiked in exchange for the promise of major spending cuts, including to entitlements, totaling at least $2.4 trillion.

Anything can happen, but it apppears the GOP is on the verge of pulling off a political victory that may be unprecedented in American history. Republicans may succeed in using the threat of a potential outcome that they themselves acknowledged would lead to national catastrophe as leverage to extract enormous concessions from Democrats, without giving up anything of any significance in return.

Not only that, but Republicans — in perhaps the most remarkable example of political up-is-downism in recent memory — cast their willingness to dangle the threat of national crisis as a brave and heroic effort they’d undertaken on behalf of the national interest. Only the threat of national crisis could force the immediate spending cuts supposedly necessary to prevent a far more epic crisis later.


Since last night I've had the ominous feeling that behind-the -doors meetings with Boehner and McConnell at the White House were nearing a "Neville Chamberlain" moment. I deduced this mainly from the shit-eating grins on the faces of the two Repukes which could barely be concealed. As I said in an aside to my wife: "I just hope Obama isn't planning to give away the farm to appease these guys!!"

Then, this morning the leaks began and none of them sounded good which is why the Net and especially Left Blogosphere has erupted like a supernova. Because what those like me smell is a grand betrayal.

MSNBC correspondent Luke Russert in one interlude mentioned trying to reach a point of "equal pain" divvied between both sides. But the plan on the table, for which some details have leaked, is ten times worse than Harry Reid's!

What "pain" might the Repukes endure?

"Some" defense cuts!

What pain might our side endure?

Possibly automatic cuts (up to $1.8 trillion) on Medicare!

Are you shitting me?? Defense cuts on their side for massive Medicare cuts on ours! That's no deal! That's not shared pain!

Meanwhile, Obama (now being called 'O'Bummer' on more and more left blogs) continues to bend over backwards to appease these miscreants to the point where you now actually wonder if he'll give in the whole 9 yards and allow a "balanced budget amendment" which would be the end of this nation. At one time, Obama said emphatically NO deal unless revenues are on the table, at least $400 billion in tax increases (he wouldn't even put the repeal of all the Bush tax cuts on the table).

Then, next, we heard he agreed with the Reid plan which offered NO revenue and $2.7 trillion in justy spending cuts, but at least no entitlement reforms.

Now, we hear that because of Repuke intransigence (and it is THEIR intransigence) he's prepared to cop to this cockamamey "automatic trigger" cum 12-man committee deal that pairs deep social safety net cuts vs. defense cuts for the repukes and again, no taxes!

This is an outrageous piece of bollocks and unworthy of any Dem president. You cannot give all your cards away and take all your D-poker cohorts' money and chips and give to the other side just to get them to keep playing! This is nuts!

Grow some balls, Mr. President! At least stick to your guns and demand the other side allow some revenue increases! You can't put ALL the onus for deficit repair on spending cuts! Apart from wrecking the economy (given it's poison in a demand poor environment) it will eliminate your plans for a 2nd term, by not only engendering a diminished no-growth, high unemployment environment but also pissing off your base!

Now, we need to get into some cartoon logic now which is being circulated by the WH gurus or some aides within. That is, no matter what odious, sellout deal is struck, the progressives will go along and stop bitching and also cease any efforts to force Obama into a primary competition next year.

The cartoon reasoning implicit in this hogwash is that progressives will be so terrified of the nutsos on the Right, say like getting one look at Michelle Bachmann or Sarah Palin and pondering them with the red box, they'll run to the polls to cast votes for Mr. O. Unfortunately, this is batshit crazy-think.

First, it shows these dipshit, pro-sellout aides aren't following the left blogs very carefully (especially the letters sections). One of the recurring themes in them is to just LET Bachmann or Palin and a Repug majority get in to "teach the Democrats how to fight for once".

The reasoning is that since Dems won't act like real Dems, since they take the base for granted given they have the Senate and the Executive, then mayhap being in the political wilderness for 4-6 years (and being forced to fight endlessly) will incite them to grow a spine. I don't say I necessarily see the benefit of this tack, but it is gaining momentum and gathering memetic inertia which will be difficult to stop.

Second, the pusillanimous tactics of the Dems, especially the White House, are beginning to feed the same lackadaisical attitudes embodied by the question: 'What's the point?', that created the massive abandonment of voting last November and drove the Repuke capture of the House. It seems to be accumulating pressure now, especially among the youngest voters, as well as many blacks and the elderly (who may just be put off by possible Medicare cuts on the table).

Do I think Obama will have to face a primary challenger next year? No, but it won't matter. If the base is de-energized because they've beheld their once proud and self-proclaimed fighter cave, it'll all be over but the pundit post -mortems.

Now, WH pseudo-experts may query why the Left and their cohort would "allow" this to happen? The answer inheres in what I call the "American Idol" voting paradigm. (Which I hear - from my wife, an avid fan- has often caused many worthy singers to be ditched in favor of lesser ones because the superior singers' specific fans just assumed everyone else would vote for them.

In the same manner, no single, de-energized pro-Dem person staying home will believe he or she could be uniquely responsible - say if Bachmann wins, or Palin- but will just assume too many more will go to the polls and vote anyway. After all, on many forums and blogs you still see often as many Obama apologists and defenders as critics. So the 'stay home' voter will simply assume those defenders will make up the slack of those like her who refuse to go out, not being motivated enough. Thus, one has at once the disqualification of any personal liability or responsibility for the bad outcome, matched with the passive-aggressive act of rejecting the standard bearer - by simply not showing up. ("Well, I didn't actually vote against him, I just expressed my discontent by not voting!")

But, as we know, that passive strategy can and does backfire, which is why it's so very dangerous and ALSO dangerous for WH über-strategists who believe the "base will be too terrified" not to stay in line. What they aren't processing is that each leftie is supposing his fellows will "remain in line" while he takes the election off as being uninspired!

If this occurs in states in which Dems have lost governorships and legislatures (like Wisconsin, Florida, North Carolina, Indiana) it means Obama could easily lose those states and end up a one-termer. Especially if he loses Colorado too.

The moral of the story? It would be better for Obama to take a chance and courageous dare by invoking the 14th amendment (sec. 4,5) and raise the damned debt ceiling unilaterally, than to accept a tawdry imitation of a deal which will entice his base to finally abandon him as an empty suit...and more talk than 'hope and change'.

If, on the other hand, the repugnant "deal" cited by Daily Kos (top) is made, then we must rely on the House and Senate Democrats to shoot it down by vote. If Obama refuses to save himself, they must do it for him!

THE WAR ON YOU! (Guest Article)

- By Michael Collins

http://www.smirkingchimp.com/thread/michael-collins/37617/the-war-on-you


Let the word go forth from Washington! The corporate rulers occupying our nation's capital have declared war on just about every citizen.

Have no doubt: those in the upper ranges of the top 1% of wealth in this country (aka The Money Party) want to kick you to the curb.

They want to reduce your social security and make you go broke paying for medical care.

They want to lower your wages and trash your retirement.

They ignore the clear facts that we've had negative job growth since 2000 and the situation is just getting worse.

They want to ship jobs, factories, and entire businesses overseas and give companies that do that a big fat tax credit for doing so.

They've been given so much for nothing for so long. Now, they're ready to take it all. It's their time!

The most recent assault is the ridiculous debate about raising the debt ceiling. There should be no debate. Failing to raise the ceiling right now means deliberate default on debts, refusing to pay bills the government can pay. It's called fraud.

The pressing need to fix the budget is a separate issue. Reduced spending and increased revenues should come through broad public involvement and open debate. It mandates that the rulers behave like adults.

But this crisis isn't about putting together a real budget. It's about creating a budget that punishes you, your family, and friends. It's about taking your attention away from your vital interests to maximize income and control by The Money Party.

Were the leaders on either side of the debate serious, the Bush era tax cuts would never have been restored. These cuts on the top 1% were temporary. Guess what? Congress lied. When the temporary tax breaks ran out a few months ago, they were revived and renewed just when we had the greatest need for revenues.

The Money Party won't give up its wars either. Iraq and Afghanistan have added $4 trillion to the national deficit of $14 trillion. Why not stop the wars? How hard is that to figure out?

Getting rid of Bush tax cuts for the super-rich, ending the wars, and moving out of the recession/depression would be huge steps toward balancing the budget. But that won't happen with this Congress and this president. Why? That would cost the financial elite money for taxes and lost income for all those weapons they sell to support the wars.

The Attack on You Began in Earnest Just Years Ago

Congress repealed Depression era banking regulation that kept your banks from risky investments in 1999.

Congress enacted legislation in 2000 that allowed extremely risky investments in real estate and other derivatives, illegal for nearly a century.

In 2001, the big banks and Wall Street celebrated its newly purchased freedoms with a decade-long binge of fraud and risky investments. Like a greedy con artist, they took everything they could from people here and around the world until there was no more to take. We have now hit the wall thanks to them.

The outrageous expenses of wars based on lies caught up with us and shoved the deficit to new heights. The tax cuts for the top 1% took away revenues needed to balance the budget.

The money they steal from the Social Security surplus is no longer enough. They want to keep the tax in place for us and take an even bigger rake-off.

This crisis is manufactured by the ongoing greed of The Money Party. It is funded by the US Treasury.

You pay for it, all of it.

Let's Drop the Pretense Right Now!

One thing I've always abhorred is pretense. The fraudulent and dishonest posturing over some claimed position, but which is really a cover for a deeper, unspoken agenda. Such is the case with all this debt ceiling and "deficit reduction" brouhaha which is merely a conveniently ploy to conceal the real agenda: destroying Social Security and Medicare once and for all. The Tea Party brigands and their ilk know they can't eliminate these programs directly, so are doing it through the "back door" as it were, using a "starve the beast" modus operandi based on draconian spending cuts in combination with preservation of Bush tax cuts that all ought to have expired last December. (Even Alan Greenspan agrees that those cuts need to be retired, a move that would save us $4 trillion over ten years essentially resolving this impasse on deficits with minimal pain)

But this is not what the Tea Baggers and extremist Republicans are about. At the behest of benefactors like Peter G. Peterson, they see a golden opportunity to employ the mania and hysteria for "deficit reduction" as a means to gut Social security and Medicare.

They aren't honest enough to explain or admit the real long term deficit problem hasn't been caused by "wasteful" social spending but by conservatives' own 30-year project of starving federal, state and local governments of revenue via tax cuts for the affluent and for corporations, coupled with insane, unpaid for military spending which for the past ten years has included "off budget" supplementals averaging $150 billion each per year. And how were these paid for? By raiding Social Security monies!

As a wake up call here, in 2010 the total raided Social Security monies amounted to $87 billion out of a total of nearly $140 billion. The grand total raided from S.S. from 2000 to 2010 exceeds $1.92 trillion. THAT is where the Social Security money has gone- to help support off budget accounting gimmicks and disguise the size of the real deficit.

But see, now that 44 million Boomers are ready to collect Social Security - with some 10,000 added each day (and the likelihood its finances will now be a losing wicket), the disgusting pols want to kill it or reduce it so dramatically as to barely allow the elderly to choose between meds and food. This is their golden moment, using "deficit reduction" as the pretext to go after "entitlements".

The problem for these miscreants is that we the aware citizens, can see right through their subterfuge.

We see how the hysteria is being whipped up, and the nation held hostage by a few radical fiscal extremists, to wring every last concession they can from a hobbled Dem party, which can never seem to get ahead of the curve. We can see how their true objective has nothing to do with deficits, but rather adherence to ideological purity in killing social insurance programs.

If these nuts really were invested in solving the DEFICIT problem they could so so easily, just by passively allowing all the Bush tax cuts to expire next year. But that's not what they want! They desire holding the nation hostage to force social program changes and hoping the weak-kneed, pussified Dems will cooperate, which they are.

On another level, beyond the social insurance programs, there is the specter of years of massive spending retrenchment including to food stamps, unemployment benefits, child school nutrition and health care for indigent mothers...as well as utility subsidies for poor seniors. All stand to be on the chopping block if either one of the current plans (Reid's or Boehner's) somehow passes, with no revenues at all.

This has led a group of influential Christians (the only apparent 'real Christians' I can see) to rally in Washington and implore congress to shield the poor from spending cuts (see: 'Coalition of Christians Urges Budget Cutters to Spare the Poor', The Denver Post, July 27, p. 9A).

One of these groups, Sojourners, a liberal evangelical group, has taken out ads in Las Vegas papers which read in part:

The Book of Proverbs teaches that where there is no leadership, a nation falls, and the poor are shunned while the rich have many friends. Sadly, Congress has failed to heed these biblical warnings."

Another ad headlines itself with:

What Would Jesus Cut?

The answer is primarily wasteful military spending, including on two occupations which have brought little constructive benefit to the country, while seeing mammoth waste of taxpayer dollars, whether to private defense contractors (like Bechtel, Halliburton etc.) in Iraq or to Afghan warlords and the Taliban via corrupt banking practices, in Afghanistan. Meanwhile, our own country's infrastrucure is collapsing from neglect and disrepair - even as R-TP-nincompoops on the Hill argue further on what cuts to make (including leaving more than 70,000 jobless as a result of no agreement to an FAA funding!)

Fifty years ago, corporations contributed to 30% of federal tax revenues while they only contribute 4% of them today. For example, right now as I write this, PhRma companies are permitted to leave all foreign, out of country profits off the table in terms of tax scrutiny. Other corporations, via defective laws passed in the 1990s, are allowed to just hang shingles in some little dump in the Caymans or elsewhere, and escape tax liability at home. There was some talk during Obama's 2008 campaign of addressing this, but so far I haven't seen a thing and it continues.

And yet, disreputable Tea Baggers want to take food out of poor seniors' mouths! Just so we are clear on this, let me also provide a quote from the article: 'Stealing From the Poor, Making Rich Richer':

"Social Security isn't broke, but millions of retirees who depend on it are, and many more would be broke without it. The average retired worker's Social Security benefit is just $922 a month--about $11,000 a year. Disabled workers average just $862.

One out of three seniors depends on Social Security for 90 to 100 percent of their income. Two out of three seniors depend on it for more than half their income. Even with Social Security, many seniors must choose between eating and heating, paying the mortgage or paying for medicine."


The preceding article appeared about two years before former Fed Chairman Allan Greenspan's term expired. It had to do with Greenspan's (then) recommendation to congress that cuts in Social Security be used to finance the ongoing Bush tax cuts. In other words, help the rich continue to invest in hedge funds and buy their furs, yachts, blood diamonds and Bentleys off the backs of poor seniors.

That episode over, with seniors able to breathe a tad easier (since the Bush S.S. privatization plan was scotched) we now have the Tea Baggers and conservatives humping and pumping to demand social spending cuts, including to Medicare, Medicaid and Social Security while they tout a bogus "deficit reduction" front, and hold the nation to ransom over a debt ceiling increase.

As for the "solutions" thus far offered (Harry Reid's or John Boehner's) don't make me laugh! What with the news that the GDP is now at the lowest it's been -for the 2nd quarter - in the past two years, ANY prescription relying only on massive spending cuts is a recipe for financial disaster! Don't these IDIOTS grasp that in a low aggregate demand environment you need to spend, not CUT! Are they totally mad? Do they want a second depression? If NO ONE spends, not business, not the consumer, not government - WHO do they think is going to hold up the GDP??? As one blogger, RJ Eskow, recently put it:

"As the economy burns to the ground, nobody's calling the Fire Department. Both parties want to throw gasoline on the fire, and their only disagreement is whether to use regular gas or unleaded."

I couldn't have used a better analogy!


We hope that by the time this fiasco further unfolds with no resolution in sight by Monday, Obama will finally act like a man and leader! This as opposed to an overly cautious, wimpy, former state Senator with a fetish for "splitting differences"! As more and more reasonable voices are adding to the crescendo, if he is a responsible leader - with his oath of office at heart- he MUST invoke Sec. 4 of the 14th amendment to pass the debt ceiling increase on his own! He can't allow a first time ever (hence historic, with his name on it) national default, or even a downgrade! The other side has disclosed it's playing with 52 cards short of a full deck, so he now has to act as the true Grown-up. That means going beyond the conciliator and compromiser -in -Chief, to the Decider, and Agent of Action!

He doesn't need any "approval" from wimpy, conflict-shy aides, or parsing any fine legal arguments (from Lawrence Tribe, or any one else as to the validity of this move), or acting like a Harvard law professor or Spock. He just needs to act like the determined Leader and PRESIDENT we expected him to be, as opposed to a hapless bystander while maniacs seek to tear up what's left of this nation! Making that one bold move will show in no uncertain terms that he's a decisive leader on a par with JFK, and truly ready for a 2nd term. It will also finally staunch this hideous conflation of social spending cuts to deficit reduction. An attachment that the Dems and their leaders never should have allowed to metastasize to this degree anyway!

The Time for Talk is Over, Mr. President!

In a prime time speech of about 22 minutes last night, President Barack Obama made an impassioned plea for political compromise as the hours tick down toward a debt ceiling raise deadline - and possible default. The consequences of the latter, as I noted before, would be unimaginable and could well hurl the country into a much more severe recession or even Great Depression. This is not mere idle speculation or "scare mongering".

And given all that Obama has offered, what was the GOP answer? To essentially spit on him with total contempt, as House Speaker John Boehner followed in a deceitful 9 minute screed redolent with distortion (including saying that his 'cap, cut and balance' law was "bipartisan" when only 5 house Dems voted for it)! Boehner's speech, basically appeasing the Tea Party crazies, disclosed that the Reeps are not prepared to deal nor were they ever. Their objective is not to cut any deficits, but to make Obama a one term President by either: a) hobbling him politically with incessant debt ceiling votes (and Repuke nay votes on debt ceiling raises), or b) enticing him to cut spending massively thereby paving the way for a total collapse in aggregate demand and massive increases in unemployment.

In respect of the last, and playing into the Dem yen to appease the Repukes at all costs, has been the latest plan put on the table by Sen. Harry Reid (who I've always seen as a classic wobbly knee wimp, especially with that weak cracking voice of his). Actually, any acceptance of the "Reid Plan" will also fully ensure a horrific collapse of aggregate demand and spiking unemployment. That plan, with $2.7 trillion in spending cuts and NO revenue, will deliver a massive and debilitating punch to the nation's economic solar plexus by driving aggregate demand down further.

What we need now is more spending not less, since aggregate demand is low. This is not really that difficult to comprehend and is based on "the Paradox of thrift".

The paradox of thrift is that while a once spendthrift family can save itself further financial grief by pulling in the purse strings, it doesn't apply to a nation. When massive saving is done nationally disaster results, namely entrenched deflation such as stalked Japan over the 90s. As deflation sets in, prices collapse (which sounds good on the surface) but employers - lacking any revenues from consumer spending - are forced to cut jobs en masse.

The Wall Street Journal (July 21 edition,'Layoffs Deepen Gloom') already sounded the warning noting that job losses are even greater now with companies at their lowest hiring levels in months. As the article noted:

"Consumer spending is a central worry.. Businesses are worried about the effects of a challenging economy on consumer spending habits"

In other words, unemployment is increasing again because of ailing aggregate demand, mainly since the consumer demand is not keeping pace. People are purchasing less, including eating out and in response, nervous companies (like 'Cracker Barrel') are paring down their work forces not increasing them. So, if this is the case, why on Earth would any sane politico - Reep or Demo- institute a deficit reduction program that ensures an even more challenging economy, and consumer spending tightening even more - with further employer retrenchment? Why do that? In other words, WHY accept the Reid plan (no revenues at all) when it will have as catastrophic an effect as a default ...though likely take somewhat longer?

Spending cuts across the federal board, to the extent they affect or impinge on citizens (transferring risk to them and making them spend more, e.g. on health care, or other necessities) means they will collectively tighten their purses, so the consumer demand will plummet. When it does, investor demand will also plummet because prospective business starters will see no upside in a mass saving environment where consumers aren't prepared to spend a dime of disposable income.

Thus, effectively, the total aggregate demand drops and this means unemployment will increase dramatically as the nation loses whatever remaining vestiges of fiscal stability.

Politicians like Reid and others who spin these stupid debt solutions don't have these issues on their radar for a number of reasons, but one is because they aren't faced with the financial risks and costs many Americans are. As an example, an article in Smart Money ('The New Parent trap', August, p. 38) noted that 49 million Americans or about 20 percent of the population, care for someone over 50 who is ill or aging. This is a number that has steadily increased over the past decade according to the National Alliance for Caregiving. It must be noted ALL of this is done with NO remuneration, and often with employer penalties and salary cuts or benefit cuts because of the need to take time off. These 49 million people are not in any fiscal position to withstand federal cuts that may impact negatively on their current financial positions - which are already shaky. For example, a massive cut in Medicaid or Medicare assistance (affecting those they care for) may well be the last straw. As it is, the contraction in consumer demand follows from the parlous 'tightrope'-walking, expenditure straits many people find themselves in.

Spending cuts of the order of > $2 trillion that affect their welfare are therefore the worst solution imaginable. They not only ensure more employer cuts in jobs, but also less business (capital) investment while making for a hostile economic landscape and one in which it is doubtful Obama could benefit from next year.

No, it is time now Obama stop talking and special pleading and realize the Repubs are Barbarians at the Gate of National Fiscal Sanity who must be stopped. Saved as it were from their own extremism. By further engaging the Repukes as "rational" Obama only makes himself look weak, wimpy and pushed around. He has thus exhausted his cards for playing the "adult" in the room and now verges on looking like the Wimp in the room. No one wants a wimp as president, sad to say.

What Mr. Obama so far refuses to consider is that it's all about politics and WINNING for the GOP. As the authors of Banana Republicans pointed out, for Republicans politics is conducted as warfare, while most Democrats (like Obama and Harry Reid) treat it as a Debating Society meet. This is why Dems always get their asses thrashed. Hell, most times they even get their collective brains thrashed because the Repugs out-gun them in co-opting the language and making it work in their interests (think death taxes and death panels.) Meanwhile, with each language coup the Dems are sitting there like clueless dweebs scratching their butts and wondering what happened. (As I've repeatedly said, this is why Dems need dedicated think tanks along the lines of the Heritage Foundation and American Enterprise Institute for the Repukes).

Both Reid and Obama need to grasp that the Repubs are not, and never have been, the least bit interested or invested in a "kinder, gentler, conciliatory government." No, they want to destroy it to make it unworkable for any Dem, or for any Dem President to ever again get elected.

What is the way out? I already explained it in my July 4th blog but it necessitates Obama finding enormous reserves of cojones and testosterone on the level acquired by JFK when he faced down the Joint Chiefs over the Cuban Missile crisis in October, 1962. (At that time the JCS demanded JFK invade and bomb Cuba, but had he done so an immediate nuclear strike would have resulted since we now know 93 IRBMs were aimed at the U.S. East coast) JFK's solution was to tell the JCS to stuff it, and he employed the naval blockade measure. It required thinking outside the box.

In like manner, the solution for Obama to take, given the Reeps have demonstrated they aren't serious about negotiating, must be from outside the box. But it requires a major character change, i.e. that Obama cease his practice of being the National Conciliator-in -Chief (as well as Professor in chief) with vile, irrational vermin who have no intention of conciliation or compromise.

To that end, Obama's last best choice is to enact the debt ceiling increase on his own, and tell the Reeps to screw themselves. He can do this under the provision of the Constitution (Amendment XIV, Section 4), which stipulates:

"The validity of the Public Debt of the United States, authorized by law, includes debts incurred for payment of pensions ....and shall not be questioned."

It is clear to me that if the Republican Congress refuses to act to raise the debt ceiling (and thereby honor the validity of paying the Public Debt) then President Obama can and MUST issue an Executive Order to override a putatively derelict Congress and invoke Article 4 of Amendment XIV to raise the debt ceiling himself. The alternative, of not doing so, would also violate Article XIV and be lawless while also violating Sec. 4 of Article I. For example, payment of "pensions" (interpreted as Social Security monies) would likely not be made in case of a default. Therefore, debts for such payments cannot be avoided by law and the president must seize the initiative if a derelict congress abdicated its responsibility!

Yes, the game-playing reptile-controlled House (trying to use the debt ceiling as extortion to hold the whole nation hostage) may squeal like stuck pigs and perhaps even initiate a Constitutional crisis, but they have no ballast, no precedent to base it on. Obama can simply argue (or more likely his Solicitor General) that the Republican House has demonstrated fiscal irresponsibility and recklessness in jeapordizing the full faith and credit of the U.S. by gamesmanship, which is what it is. He can refer to the fact that Congress has already enacted 75 measures to raise the debt, including 17 under Ronald Reagan.

Time to step up to the plate, Mr. Obama and rise to the occasion. These are the times that measure the stature of a man, and indicate whether truly great - as JFK was in his hour- or a mouse.

Don't let the Aug. 2nd date pass finding you in the latter class!

Boehner's "gift" to Americans: NO thanks!

John Boehner, the House chairman, may be lots of things but he's no leader. He was presented by President Obama with a deal only a maniac would refuse, and he did. Obama offered him hundreds of billions of "entitlement" cuts - to Social Security and Medicare- the first time any Dem president has ever done so on this magnitude. All he asked in return was not extending the Bush tax cuts, and closing a few loopholes. Boehner's response? Basically to say in so many words: Up yours!

And so we continue to careen ever further toward the Aug. 2nd debt ceiling deadline and a possible default. Make no mistake, the horrific recession we went through two years ago will appear like a walk in the park compared to what a default will bring. No credit, not for businesses or school loans, likely missed checks by veterans and Social security recipients, and no funding by Medicare for any medical needs, or prescription assistance. Do the Reeps care? Not to hear Boehner tell it!

What most got my goat was Boehner's performance at a brief conference after stalking out of his meeting with Obama. The first words out of his mouth were:

"We are going to get the American People's spending cuts!"

Trouble is, I believe 9 of 10 Americans want NO part of them! They don't want to see 10-15% cuts in Social Security disability payments, or Social Security hamstrung by a "chained CPI" that cuts one month's benefits from them every two years. Seniors don't want to see higher Medicare premiums than what they're paying now, especially for Part B - and given the fact there've been no COLAs for 2 years!

Veterans don't wish to see their regular VA pensions "offset" by VA disability payments, i.e. if they receive $850 in the former and $360 in the latter, they don't want to see their total reduced to: $850 - $360 = $490 a month! As opposed to getting their justly earned $1210!

Parents don't wish to see their kids denied school lunches, especially when that may well be the only nutritious meal they receive for the day. Nor do poor mothers want to see the few remaining clinics for them shuttered and barred, making the only option a midnight run to the ER.

Seniors don't want to see their heating oil subisidies cut, especially when winter begins, nor do they want to see their utility assistance pared back now in the dead of summer -especially with global warming-fueled heat waves raging - in which the NIGHT time high temperatures have already broken 98 records according to the NOAA. (Night time record high temperatures are one of the predicted signatures of global warming).

So, no thanks, Mr. Boehner, spare us your cuts. Or,...if you must impose them, do so for the benefit of your Tea Bagger faithful! I'm sure they won't mind!

Meanwhile, when can we expect that you and Mr. Cantor will accept future cuts to your regular (automatic) congressional pay raises?