Replies to post #149143 on Tornado Alley (PROG)

[StephanieVanbryce]

Paul Ryan: Balanced Budget Amendment is not 'realistic'

Joan McCarter Fri Jul 29, 2011 at 09:08 AM PDT

These are so not serious legislators. Paul Ryan, last night. [ http://thinkprogress.org/economy/2011/07/28/281629/paul-ryan-never-believed-in-bba/ ]

http://www.youtube.com/watch?feature=player_embedded&v=pKqk6ci-96c

Speaking with Fox News host Greta Van Susteren, Ryan said it’s not “realistic” to expect that Democratic House Leader Nancy Pelosi (D-CA) and Senate Leader Harry Reid (D-NV) would force the large number of members needed to change the Constitution to “vote against their conscious”:

RYAN: What I never really agreed with is the idea that we would expect Harry Reid and Nancy Pelosi to deliver 40 [and] 15 votes from Democrats for our version of the Balanced Budget Amendment. You know, I just never thought that was realistic, to demand Democrats vote against their conscious for our version of the Balanced Budget Amendment. So I just never thought that would work.

And that unrealistic option is precisely what is Speaker John Boehner is proposing, in the hopes, as ThinkProgress notes, that "the ensuing economic 'chaos' would force Democrats to switch their votes."

Just a reminder: a Constitutional Amendment would require a two-thirds majority, in both chambers of Congress. By August 2nd. Right. [ http://www.archives.gov/federal-register/constitution/ ]


http://www.dailykos.com/story/2011/07/29/1000362/-Paul-Ryan:-Balanced-Budget-Amendment-is-not-realistic?detail=hide

[F6]

America Held Hostage to Two-Party Failure: Government of, by and for the Corporations


President Barack Obama meets with Congressional leaders in the Cabinet Room of the White House in Washington about raising the national debt limit on July 13, 2011. From left: House Speaker John Boehner (R-Ohio), Obama, Senate Majority Leader Harry Reid (D-Nevada) and Senate Minority Leader Mitch McConnell (R-Kentucky).
(Photo: Doug Mills / The New York Times)

by: Michele Swenson, Truthout | Op-Ed
Thursday 28 July 2011

Washington rhetoric waxes Orwellian in proportion to inside-the-Beltway disconnect around cause and effect of the US economic crisis. Ranging from the Ryan Budget - "kill Medicare to save it" - and some Democrats - "cut Medicare and Social Security to save them" - to claims that deficit reduction (not jobs) is "what the people want," to the "greed is good" creed that assigns entitlements in the form of taxpayer bailouts to wealthy financial institutions that take for granted the ability to shift risk for their liar's loans and speculative transactions. "Austerity" and "shared sacrifice" are Washington code for preserving tax advantages and privilege for the wealthiest, while transferring private debt and risk to the public [ http://www.truth-out.org/trickle-down-cruelty-and-politics-austerity/1310134880 ], onto the backs of the working/middle class.

Phil Angelides, chair of the Financial Crisis Inquiry Commission [ http://www.washingtonpost.com/opinions/the-real-causes-of-the-economic-crisis-theyre-history/2011/06/27/AG2nK4pH_story.html ; http://www.huffingtonpost.com/phil-angelides/dodd-frank-anniversary_b_905943.html ], notes that 24 million Americans lack work and nearly $9 trillion in household wealth has vanished since the 2008 economic crisis. The commission's January report detailed "the recklessness of the financial industry and the abject failures of policymakers and regulators that brought our economy to its knees in late 2008."

Writes Angelides, there is "no correlation between who drove the crisis and who is paying the price." The disparity of wealth is stark, as "compensation at publicly traded Wall St. firms hit a record $135 billion in 2010." He notes that, in the face of overwhelming evidence of the causes of economic catastrophe, Wall Street and its allies are revising history, e.g., Republicans like Paul Ryan ignore the fact that "our federal budget deficit has ballooned more than $1 trillion annually since the financial collapse." Instead of confronting the real causes of the deficit, budget shortfalls are conflated with "the long-term challenges of Medicare" as an excuse to shred the social safety net. Rather than rein in widespread lending abuses, Republicans seek to weaken the authority of the new consumer Financial Protection Bureau.

Economist Joseph Stiglitz calls out the titans of finance [ http://www.democracynow.org/2011/4/7/nobel_economist_joseph_stiglitz_assault_on ], who continue to make mega bonuses for their companies' mega losses, even after they set the global economy in a tailspin and shifted all risks for their unregulated credit default swaps onto taxpayers. He describes [ http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105 ( http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105?currentPage=all ) (at http://investorshub.advfn.com/boards/read_msg.aspx?message_id=61714584 )] a nation of, by and for the 1 percent that enjoys 25 percent of economic benefits, largely purchased by Washington lobbyists. The Republican (Ryan) budget plan would cut $5.8 trillion from government spending over the next decade and reduce the corporate tax rate to 25 percent, while increasing next year's Pentagon budget by $17 billion. The highly touted Bowles-Simpson proposal for deficit reduction is a recipe for a weaker economy, warns Stiglitz, as it will decrease jobs, and in turn, decrease revenues. A primary means to decrease the deficit is to increase jobs, a goal that ultraconservatives wrongly equate with large tax breaks for the wealthy - so-called "job creators" - never mind that the Bush tax cuts failed to provide jobs over a decade.

It is easier to destroy than to build democracy. Concerted assaults on democracy over four decades serve the ends of those who deem it their right to rule and reign: Republican religious ideologues and acolytes of Milton Friedman economics. Disaster capitalists precipitate crises by running up huge deficits (during the Reagan and Bush one and two regimes), followed by demands for balanced budgets and deficit reduction, as a means of drastically cutting domestic spending and gutting public education, government jobs and public pensions and shifting all wealth upward.

The political right has laid waste to democratic principles by sabotaging elections and the economy and auctioning government to the highest bidder. Some rightists deem it a "citizen's duty" to challenge the legitimacy of the "ruling regime" by refusing to obey the law - i.e., "destroy the nation to save it." Certain issues should be advanced "for the purpose of prompting a constitutional crisis [ http://www.leaderu.com/ftissues/ft9611/articles/hittinger.html ]," pronounced law professor Russell Hittinger. The 2000 Supreme Court majority selection of George W. Bush reset the bar for challenges to the constitution, as did Citizens United vs. FEC in 2010.

The 1994 Gingrich revolution ushered in the large-scale sell-off of government to corporate interest groups. Corporate lobbyists were invited to write legislation to eradicate regulations for worker safety, labor rights and environmental protections - the so-called "Project Relief" part of the Republican agenda. Simultaneously, Republican House Whip Tom DeLay [ http://www.alternet.org/story/13151/ ] ("The Hammer") pressured corporate political action committees (PACs) to contribute solely to the GOP, reasoning, "People that are pro-free enterprise should support people who are pro-free enterprise."

In 1995, then-GOP Conference Chair John Boehner [ http://www.sourcewatch.org/index.php?title=John_Boehner ] handed out tobacco PAC money checks to Republicans on the floor of the House, even as Newt Gingrich warned lobbyists, "For anyone who's not on board now it's going to be the two coldest years in Washington." Republican leaders in a private 1997 meeting with 200 top corporate executives of the Business Roundtable demanded that all contributions to Democrats cease, or corporations would forfeit access to the Republican Congressional majority. Grover Norquist, riding herd over the "K Street Project," demanded that big business hire GOP-credentialed lobbyists and fire those with Democratic connections. By the 108th Congress, it fell to Sen. Rick Santorum to reward party loyalty by vetting the hiring decisions of major lobbyists. "If you want to play in our revolution, you have to live by our rules," pronounced DeLay [ http://www.salon.com/news/opinion/blumenthal/2006/01/19/abramoff/index.html ].

The "defund-the-left" campaign was abetted by Virginia Lamp Thomas, Supreme Court Justice Clarence Thomas' wife, and a key staff member for then-House Majority Leader Dick Armey, who compiled a hit list of liberal groups and nonprofit groups. More recently, Virginia Thomas reportedly received hundreds of thousands of dollars [ http://articles.latimes.com/2011/mar/06/opinion/la-oe-turley-clarence-thomas-20110306 ; http://jonathanturley.org/2011/03/06/justice-thomas-dangerous-conceit/ ] from groups that had expressed direct interest in the outcome of cases that came before her husband, including Citizens United vs. Federal Election Commission, which struck down any limitations on corporate contributions to elections, sealing the Republican deal to crush democracy.

In the '90s, Democratic leadership, reinforced by such corporate-backed groups as the Democratic Leadership Council [ http://www.alternet.org/election04/20774/ ], turned increasingly to corporate money, away from working people. With both major parties in thrall to corporate money and influence, "we the people" has effectively become "the silenced majority," discounted voices sought out only for votes during election years, an increasingly futile exercise as big money buys candidates and outcomes.

The majority (53 percent) of Americans [ http://www.cbsnews.com/8301-503544_162-20024494-503544.html ] who opposed the 2010 extension of the Bush tax cuts watched in dismay as President Obama started with compromise and met his Republican hostage-takers more than half way. Neither did majority popular support [ http://pnhp.org/blog/2009/12/09/two-thirds-support-3/ ] result in passage of strong financial regulation, importation of lower-cost drugs or government-payer universal health care.

The fatal flaw of Barack Obama's presidency seems to be the compulsion to compromise with the likes of Norquist, bent on destroying democracy by "drowning government in a bathtub." The deficit in public investment imperils us more than the budget deficit, observes former Labor Secretary Robert Reich [ http://aflcionc.org/2011/07/07/robert-reich-its-time-to-invest-in-america/ ], citing tax revenues that are less than 15 percent of the total economy, the lowest in 60 years. Large reductions in federal taxes affect state and local revenues, placing more locales on the brink of bankruptcy - thus fulfilling Norquist's fondest wish for state bankruptcies and "bitter nastiness and partisanship" in state capitals.

The president's failure to lead by using the bully pulpit to educate about the true nature of economic crisis and recovery has resulted in Democrats' surrender to Republicans of the economic narrative around deficits, spending, taxes, health care etc. More than the Tea Party corporate shills, disingenuous rhetoric around the economy and the lack of any counter-narrative by the president discouraged voters from going to the polls in 2010 and will likely discourage them again in 2012.

In 1995, a highly secretive umbrella group of America's right-wing leaders, the little known Council for National Policy Action, circulated a confidential memo urging members to push for a governmental shutdown in order to force President Clinton to cave to their budget demands. Rep. Mark Souder (R-Indiana) was quoted: "This is our maximum point of leverage to insist that parts of the revolution are executed." The brief government shutdown that followed failed to achieve their goals. Republicans have willingly upped the ante, holding the country hostage to the threat of economic catastrophe in order to achieve their long-time goal of gutting all New Deal and Great Society programs, while codifying tax cuts for the wealthy. Americans are again being held for ransom in a naked high-stakes grab for total wealth and power.

The majority of people are hungry for a truth teller/leader, like Sen. Bernie Sanders. Instead, corporate media reloops the one-note deficit propaganda of the right-wing sound machine, not seeing fit to even mention The People's Budget [ http://cpc.grijalva.house.gov/index.cfm?sectionid=70§iontree=5,70 ], written by the Progressive Caucus. The People's Budget would eliminate the deficit sooner than either the proposed Obama or Ryan Budgets and raise a $31 billion surplus in ten years. It would end the main budget deficit drivers - the Bush tax cuts and Middle East wars; restore progressive income and estate taxes; add negotiation of bulk drug rates to Medicare and preserve Medicare, Medicaid Social Security; eliminate tax subsidies for oil, gas and coal companies; close loopholes for multinational corporations; and tax speculative financial transactions. All are goals supported by the majority of people.

Likewise, Medicare-for-All would contribute substantially to economic recovery [ http://robertreich.org/post/4559031328 ]. Reich writes that expanding the Medicare risk pool to include all healthy young and sick elderly would save $58 billion to $400 billion annually and sharply reduce the budget crisis, while also permitting negotiation of lower rates with hospitals, doctors and pharmaceutical companies. Payment reform to reward quality not quantity care would provide additional savings.

Circular talk around the deficit short circuits meaningful action around the creation of jobs and financial and election reforms. Sorely needed to counter the corruption of money in elections are the Fair Campaigns Now Act, free media time for all serious candidates and other remedies such as instant runoff voting and reversing the notion of corporate "personhood." Humboldt County, California, passed a county ordinance in 2006 [ http://www.yesmagazine.org/issues/stand-up-to-corporate-power/democracy-unlimited ] to prohibit nonlocal corporate contributions to elections and also asserting that corporations cannot claim the First Amendment right to free speech. Counties nationwide should follow the lead of a number of counties that have drafted ordinances to deny corporate personhood.

The two main political parties are failing to serve the people, both locked in a dance of dysfunctional political posturing in service of power. In a candid moment this spring, speaking to Charlie Rose, some New York Times correspondents [ http://www.charlierose.com/view/interview/11773 ] acknowledged the sorry state of our politics: Tom Friedman remarked that we are trapped in a "corrupt duopoly." Crony capitalism is the norm in Washington, lamented David Brooks. Both expressed the wish for a reputable third party to break the Washington gridlock.

Now is the moment for voices that have been willfully ignored in recent years to come together to form a true grassroots movement to advocate for progressive change. Sponsored by over 100 groups led by MoveOn.org, "Rebuild the American Dream" house meetings across the country convened starting July 16 and 17, providing the opportunity for participants to begin writing a "Contract for the American Dream" to serve the people.

The time is a now or never to restore the promise of democracy stolen by the oligarchs.


This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

http://www.truth-out.org/america-held-hostage-two-party-failure-government-and-corporations/1311345019 [with comments] [most of the embedded links in the original don't work; those links as reproduced in the above have been corrected and do work]

---

(linked in):

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=65690338 and following

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=65660291 (and any future following)

[StephanieVanbryce]

Debt Crisis Was Fueled by Obama's Weak Negotiations



BRUCE BARTLETT, The Fiscal Times July 29, 2011

On August 4, Barack Obama will celebrate his 50th birthday. Among other things, this means that he was barely alive during the Cuban missile crisis, only in his twenties the year the Berlin Wall fell, and he probably remembers little about the Cold War or the era in which Big Labor could bring the economy to a halt with a nationwide strike. I think this is a partial explanation for why he has been such a poor negotiator in dealing with congressional Republicans, many of whom would rather default on our national debt than allow the debt limit to be raised.

The relevance of the Cold War and Big Labor is that the communists and the labor unions were very, very tough negotiators. During most of the postwar era Republican presidents had responsibility for dealing with Soviet and other communists on a wide variety of diplomatic, military and economic issues. And many Republican administration officials had direct experience in hammering out labor contracts in an era when labor unions were at the peak of their power. I think this gave them valuable experience in negotiating with Congress.

Read any history of the Cold War, especially about the peace talks involving the end of the Korean and Vietnam wars or the difficulty in getting agreements with the Soviet Union on arms limitation or anything else, and you will see how tough it was to accomplish anything. Communists were very difficult to negotiate with and no detail was too small to argue about – much of the early negotiations over ending the Korean War were literally about the size of the table where they would take place. Both sides knew that the Communists would eventually come to an agreement, but part of their strategy was to wear down American negotiators and always get something in return for every concession, no matter how small.

Labor negotiations in most of the postwar era were not much different. Unions were very powerful and the president of the AFL-CIO was among the most important figures in American politics. Union solidarity was strong, public opinion mostly sided with the workers during strikes, and work stoppages in critical industries such as steel or railroads could bring the whole economy to its knees. In 1952, Harry Truman became so frustrated with steel workers, who threatened to halt steel production desperately needed for Korean War armaments, that he nationalized the entire industry in order to keep them on the job.

The Reagan Way
One reason why Ronald Reagan was such a successful president is that he had been president of the Screen Actors Guild, the labor union for movie actors. Not only did this mean that he was the primary negotiator on labor contracts with the studios, but he was also deeply involved in opposing a serious effort by communists to infiltrate Hollywood and take control of its unions after the war.

As president, Reagan understood that he could only negotiate if he held a position of strength and made it clear that he wasn’t afraid to use it. This fact was on vivid display in 1981, when the air traffic controllers union went on strike, threatening to ground the entire airline industry. Reagan warned the controllers that he would fire them if they walked off the job – they were prohibited by law from striking – but they didn’t believe him, thinking they had the government over a barrel. But Reagan was true to his word and he fired them when they ignored his warning. Former Federal Reserve Board chairman Alan Greenspan rightly calls this one of Reagan’s most important domestic actions, which had ripple effects throughout the economy. [ http://www.federalreserve.gov/boarddocs/speeches/2003/200304092/default.htm ]

Similarly, Reagan understood that he needed leverage over the Soviets if he was to negotiate a reduction in nuclear arms and get them to cease their fomenting of revolution in Africa, Latin America and any place else where the opportunity presented itself. That is why he supported a big increase in defense spending and backed a space-based missile defense system, even though it contributed heavily to the deficit. It turned out that the Soviet Union was far weaker than it appeared and when it couldn’t compete, either economically or technologically, it simply collapsed.

When Half a Loaf Is Not Enough
Unfortunately, Obama is really too young to have the kind of experience that previous presidents like Reagan brought to the White House in terms of understanding intransigent enemies and how to deal with them. Consequently, Obama has really been caught flat-footed by the Tea Party era Republican Party. He believed it would respond positively if he offered it half a loaf on just about every issue.

For example, some 40 percent of the 2009 stimulus legislation consisted of tax cuts even though his economic advisers knew that they would have almost no stimulative effect. But Obama viewed them as an important concession to Republicans. Yet despite total rejection of his stimulus package by the GOP, Obama kept the tax cuts rather than reprogramming the money into more effective programs such as state aid or public works. [ http://www.thefiscaltimes.com/Articles/2010/06/08/Stimulus-Package-Bolstered-the-Economy-and-Stemmed-Job-Loss.aspx#page1 ]

We are in the midst of a debt crisis that
stems largely from Obama’s inability to accept
the intransigence of his political opponents.

Nevertheless, Obama offered Republicans another half-loaf by putting forward a health reform plan almost identical to those that they and conservative groups such as the Heritage Foundation had proposed in the 1990s. Obama’s offer was summarily rejected and Republicans suddenly decided that the individual mandate, which previously had been at the core of their own health reform plans, was unconstitutional [ http://healthcarereform.procon.org/view.resource.php?resourceID=004182 ]

Now we are in the midst of a debt crisis that stems largely from Obama’s inability to accept the intransigence of his political opponents. Last December, he caved in to Republicans by supporting extension of the Bush tax cuts even though there is no evidence that they have done anything other than increase the deficit. There were those who told Obama that he ought to include an increase in the debt limit, but he rejected that idea, believing that Republicans would behave like responsible adults and raise the debt limit just as they did routinely when their party held the White House.

Foreseeing that Obama lacked leverage in the debt negotiations that everyone knew were coming, I tried to give him some by explaining why the 14th amendment to the Constitution gave him the authority to disregard the debt limit if the Treasury runs out of cash, as it will next week. [ http://www.thefiscaltimes.com/Columns/2011/04/29/The-Debt-Limit-Option-President-Obama-Can-Use.aspx#page1 ] A number of prominent constitutional scholars such as Jack Balkin of the Yale law school supported my analysis. Bill Clinton agreed as well. [ http://www.thefiscaltimes.com/Columns/2011/07/08/Obama-May-Have-to-Break-the-Law-if-Debt-Talks-Collapse.aspx#page1 ] [ http://www.nationalmemo.com/article/exclusive-former-president-bill-clinton-says-he-would-use-constitutional-option-raise-debt ]

In the first week of July there was a great deal of discussion in the media and on law blogs about the constitutional option and Republicans became noticeably more willing to deal. But on July 7, the Treasury Department publicly ruled out the idea. Republicans immediately stiffened their position and ratcheted up their demands. Nevertheless, Obama has continued to reject any proposal that might give him leverage in the negotiations even as House Republicans appear unwilling or incapable of raising the debt limit before a default occurs.

I think if Obama had the sort of experience that Cold War presidents had in dealing with the Soviet Union or that corporate executives and union leaders had in negotiating labor contracts he wouldn’t have been so naïve about the Republicans, who have never hidden the fact that their only objective is defeating him next year regardless of the cost. It’s not too late for Obama to play hardball, but I fear that it is just not in his nature. [ http://thehill.com/blogs/blog-briefing-room/news/127653-mcconnell-gops-only-option-is-to-defeat-obama-in-2012 ]


http://www.thefiscaltimes.com/Columns/2011/07/29/Debt-Crisis-Was-Fueled-by-Obamas-Weak-Negotiations.aspx#page1

[StephanieVanbryce]

Obama campaign uses Twitter to pressure Republican Congressmen on debt compromise

Kaili Joy Gray Fri Jul 29, 2011 at 10:41 AM PDT

On Monday, President Obama asked American to contact their members of Congress to put the pressure on for a solution to the debt crisis. And the servers on the Hill crashed.

Today, Obama reiterated that message. Guess what happened? [ http://thehill.com/blogs/twitter-room/other-news/174369-obama-twitter-urging-users-to-tweet-republicans-on-debt-ceiling ]

Telephone circuits were reported at near capacity around 11:45 a.m. The office of the House’s chief administrative officer did not yet have total call-in figures, but spokesman Dan Weiser told The Hill: “Call volume is up, some people may experience some busy signals.”

Now the Obama campaign is taking the fight to Twitter:



And that's exactly what the Obama campaign has been doing today, Tweeting contact information for every Republican in Congress, in every state:







Will it work? Will Republicans actually listen to the American people and raise the damn debt ceiling? Who knows? After all, the teabagger wing of the Republican Party has made it pretty clear that they don't care what the American people think. Unless they get to gut Pell grants, slash Medicare and add some teabag nuttery to the Constitution, they're willing to bring on the econopocalypse—because that's what Jesus and Thomas Jefferson would have done.

But it's still a smart move for Obama's team to help the American people direct their #fuckyouWashington anger at the right people: Republicans. [ http://www.huffingtonpost.com/jeff-jarvis/fuckyouwashington-the-sto_b_908117.html ]


http://www.dailykos.com/story/2011/07/29/1000391/-Obama-campaign-uses-Twitter-to-pressure-Republican-Congressmen-on-debtcompromise?detail=hide

[StephanieVanbryce]

Job Outlook Dims as Economy Slows to a Crawl



By MERRILL GOOZNER, The Fiscal Times July 29, 2011

Economic growth in the first half of the year slowed to a crawl, the Commerce Department reported Friday, suggesting there will be few new jobs prospects for the nation’s unemployed in the months ahead and renewing fears of a double-dip recession. [ http://www.thefiscaltimes.com/Articles/2011/07/08/Dismal-Jobs-Numbers-Fuel-Fears-of-Double-Dip-Recession.aspx#page1 ]

Real gross domestic product, the broadest measure of the nation’s output of goods and services, rose at just a 1.3 percent annual rate in the second quarter, far below the 1.8 percent rate economists were expecting. The Bureau of Economic Analysis also sharply lowered its estimate of first-quarter growth, from 1.9 percent to 0.4 percent.

Growth during the first half of 2011 was at the slowest pace since the end of the recession in 2009.

The latest economic news increases the likelihood that next year’s election battle will take place amid a sputtering economy marred by high unemployment. Job growth tends to lag economic performance – companies add jobs only after sales have been surging ahead for some time and demand has exceeded the new output achieved through productivity gains.

“Unemployment could rise in the second half of the year,” says Asha Bangalore, a senior economist at Northern Trust Bank in Chicago. “The first half was severely below potential.”

While there was economic weakness across the board, the political shift in the economic debate in Washington from economic stimulus to fiscal austerity has clearly begun to show up in the numbers. State and local government spending has been contracting for over a year, and the federal government since the first of the year has now joined in the budget-cutting fever.

While federal spending rose in the second quarter compared with the first, its spending was 1.9 percent less than a year ago, according to the Commerce Department. Its revised first-quarter spending numbers showed federal spending was 0.3 percent less than the first quarter of 2010.

"With a fiscal consolidation on the way, it is hard to see the economy getting much stronger. If the debt ceiling is not raised by the end of Tuesday, we could well have another recession on our hands," Paul Dales, a senior economist at Capitol Economics, wrote in a research note reported in The Washington Post. [ http://www.washingtonpost.com/business/economy/us-economy-slows-in-second-quarter/2011/07/29/gIQAPBg3gI_story.html ]

The sobering GDP report is certain to have an impact on the deliberations of the Federal Reserve Board’s Open Market Committee, which reconvenes August 9. “The Fed may have to consider easing,” Bangalore said. [ http://www.thefiscaltimes.com/Columns/2011/06/20/How-the-Fed-Could-Set-Off-a-New-Recession.aspx#page1 ]

The Fed’s so-called quantitative easing policy–by which it buys government debt on the open market–expired at the end of June. With interest rates already near zero, stepping up purchases in the government bond market remains one of the few policy tools left in the Fed’s toolkit as it pursues its twin mandates of maintaining high employment while keeping inflation in check.

Consumers’ willingness to spend appears to be flagging in the face of uncertain job prospects–and perhaps by the unsettled political situation in the country. Personal consumption grew by just 0.1 percent in the second quarter, compared with an increase of 2.1 percent in the first three months of the year. Meanwhile, the personal savings rate edged up to 5.1 percent from 4.9 percent in the first quarter, even though the level of income growth–0.7 percent–remained the same. [ http://www.thefiscaltimes.com/Columns/2011/06/20/Recovery-in-Danger-as-Consumers-Tighten-their-Belts.aspx#page1 ]

The rising savings rate was immediately felt in by durable goods manufacturers. Purchases for longer-lasting products like refrigerators and furniture fell 4.4 percent in the second quarter over the earlier period. Nondurable goods purchases–food, paper, drugs, for instance–rose just 0.1 percent compared with an increase of 1.6 percent in the first quarter.



Reduced consumer spending also showed in the decline in the rate at which imports grew–from 8.3 percent in the first quarter to 1.3 percent in the second quarter. While that pushes up GDP growth since imports are a subtraction from economy activity, it was just one more sign that traffic at the mall was weak during the second quarter. [ http://www.thefiscaltimes.com/Columns/2011/06/06/Economic-Perfect-Storm-Halts-Consumer-Spending.aspx#page1 ]

At least some of the factors weighing down the economy should begin to fade in the second half. Automobile output subtracted 0.12 percentage points from economic growth, largely due to supply disruptions caused by the Japanese earthquake and tsunami. Auto production had grown by more than 1 percent in the first quarter, and a return to that level of growth in the second half of the year could provide some relief for jobless workers in hard-hit Midwestern states.

And in a possible sign that the troubled real estate industry may finally be hitting bottom, residential fixed investment (new homes and apartments primarily) increased 3.8 percent in the second quarter compared to a decline of 2.4 percent in the first quarter. Commercial and industrial fixed investment also rose sharply–6.3 percent–compared with an increase of just 2.1 percent in the first quarter. [ http://www.thefiscaltimes.com/Blogs/Business-Buzz/2011/03/30/Dashed-Hopes-as-Housing-Heads-for-a-Double-Dip.aspx#page1 ]


http://www.thefiscaltimes.com/Articles/2011/07/29/Job-Outlook-Dims-as-Economy-Slows-to-a-Crawl.aspx#page1

[sideeki]

A brilliant post and a keeper. Thanks.

[fuagf]

F6, the number 1, the hostage taking example .. "Suppose, by similar quirk, there was an
arbitrary ceiling on" any more money needed for ammo for wars already committed to would
be a no conflict, and little if any debated, hurdle .. is a beauty .. i keep thinking of this little item, too ..

Rosenthal said a more persuasive argument is that the agreement in April to fund the government .. http://www.washingtonpost.com/politics/reid-says-impasse-based-on-abortion-funding-boehner-denies-it/2011/04/08/AFO40U1C_story.html .. through the remainder of the 2011 fiscal year implicitly increased the debt ceiling. By passing that agreement, Congress essentially instructed Obama to spend money in the coming months. To pay for programs Congress authorized, the government will have to borrow money.

“It’s basically an order to the executive — pay this money,” Rosenthal said. Even if the debt ceiling would block
him from doing so, “when two laws are in conflict, the more recent law is understood to supercede the first law.”

http://www.washingtonpost.com/business/economy/obama-democrats-not-ready-to-play-14th-amendment-card-with-debt-ceiling/2011/07/06/gIQAVU1O1H_story.html

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=65049179

ok .. chug chug .. on to number 2 ..

[fuagf]

Number 2), just suggests that James Fallow is a polite sort of chappie, while giving more, albeit unnecessary, evidence that
that tea party novitiates are ideologically quick-sanded, which is even worse for them because of their heavy cement-heads.

"No one had pointed out to him, or he had forgotten, or he didn't realize, that during a recession, raising taxes
and cutting budgets are bad for the same reason. They both reduce demand and make a recession worse."

Number 3) .. well .. it again .. it's unbelievable .. points to the brick-brain problem ..

"It fails the test of basic logic. Or perhaps basic knowledge part #2. If you look at the numbers, like the chart after the jump, you can see that budget-balancing involves a theshold choice. You can be for preserving tax cuts in toto, or you can be for cutting the deficit. But because the tax cuts have played such a major role in creating the deficit, if you have any regard for math or logic you really can't be for both. But most House Republicans are."

fresh air time ..

[fuagf]

F6, all must read the links in here

The Democrats have too many problems to mention. At other times, their blind spots or special interests have been the bigger impediment to sensible policies. For what it's worth, I am in the camp that feels that President Obama's instinct for conciliation [ http://www.theatlantic.com/politics/archive/2011/07/get-over-it-this-is-who-obama-is/242600/ ] has ill-served him [ http://www.thedailybeast.com/articles/2011/07/27/obama-s-reason-fetish-leaving-him-defenseless-on-the-debt.html ], his party, and the country in this instance. I wish he had made a stronger case [ http://www.theatlantic.com/politics/archive/2011/07/time-for-a-this-is-bullshit-speech/242404/ ] and taken a harder line -- and that he would even now be contemplating the "14th Amendment [ http://www.politico.com/news/stories/0711/60036.html ]" alternative in the national interest.

and further to links inside them .. all who haven't, believe-you-me, that section comes highly recommended from a most reputable source.

[F6]

Obama, auto leaders celebrate 54.5-m.p.g. fuel-economy deal

President Barack Obama called a new agreement for 2017 to 2025 fuel economy standards “the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil.”
AP PHOTO
Jul. 29, 2011
http://www.freep.com/article/20110729/BUSINESS01/110729025/Obama-auto-leaders-celebrate-54-5-m-p-g-fuel-economy-deal [comments at http://www.freep.com/comments/article/20110729/BUSINESS01/110729025/Obama-auto-leaders-celebrate-54-5-m-p-g-fuel-economy-deal ]


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Obama Says Congress Can Learn Something About Compromise From The Auto Industry

July 29, 2011
http://blogs.abcnews.com/politicalpunch/2011/07/obama-says-congress-can-learn-something-about-compromise-from-the-auto-industry.html [with comments]


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Issa launches investigation into Obama's new fuel economy standards
07/29/11
http://thehill.com/blogs/e2-wire/677-e2-wire/174467-issa-launches-investigation-into-obamas-fuel-economy-standards [with comments]


===


(linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=65087245 (and preceding) and following

[StephanieVanbryce]

A Deadly Letter ?

43 Republican Senators Sign Letter Opposing Reid Debt Plan

In a blow to Senate Majority Leader Harry Reid's hopes to get his debt limit plan through the Senate in the coming hours, Republicans have released a letter decrying his proposed legislation. Read it below:

July 29, 2011

The Honorable Harry Reid

Majority Leader

United States Senate

S-221 Capitol Building

Washington, D.C. 20510-0001

Dear Leader Reid:

We are writing to let you know that we will not vote for your $2.4 trillion debt limit amendment which, if enacted, would result in the single largest debt ceiling increase in the history of the United States. In addition to this unprecedented increase in borrowing authority, your amendment completely fails to address our current fiscal imbalance and lacks any serious effort to ensure that any subsequent spending cuts are enacted.

The plan you have proposed would not alter the spending trajectory that is putting our economy and national security at risk. In return for an unprecedented $2.4 trillion debt limit increase, your amendment reduces spending by less than $1 trillion over the next decade. Setting aside the $200 billion shortfall between the CBO scored savings and the $2.4 trillion debt limit increase, identified by the Congressional Budget Office, most of the proposal's alleged savings are based on a false claim of credit for reductions in war-related spending that were already scheduled to occur. This amendment proposes no change to our military posture and, for that reason, these savings are the sort of widely ridiculed accounting gimmick that breeds cynicism about our ability to tackle our fiscal challenges. The only possible justification for a $2.4 trillion increase in borrowing authority is to allow the President to avoid any accountability for these issues before his 2012 election. It is by constantly putting off these tough decisions that we have found ourselves with a national debt nearly equal to the size of our gross domestic product. The time for action is now, we cannot wait until we accumulate another $2.4 trillion in debt.

For all of these reasons, we must oppose your unprecedented $2.4 trillion debt limit amendment. Given the nation's enormous future spending challenges, it would be irresponsible to give the President this unprecedented additional borrowing authority without requiring the enactment of significant spending reductions and reforms. We urge you to abandon this reckless proposal and instead pursue a more responsible course of action that would rein in spending, reassure the financial markets, and help promote private sector job growth.

Sincerely,

Republican Leader Mitch McConnell Republican Whip Jon Kyl

Senator Lamar Alexander Senator Kelly Ayotte

Senator John Barrasso Senator Roy Blunt

Senator John Boozman Senator Richard Burr

Senator Saxby Chambliss Senator Daniel Coats

Senator Tom Coburn Senator Thad Cochran

Senator Bob Corker Senator John Cornyn

Senator Mike Crapo Senator Jim DeMint

Senator Michael Enzi Senator Lindsey Graham

Senator Chuck Grassley Senator Orrin Hatch

Senator Dean Heller Senator John Hoeven

Senator Kay Bailey Hutchison Senator James Inhofe

Senator Johnny Isakson Senator Mike Johanns

Senator Ron Johnson Senator Mark Kirk

Senator Mike Lee Senator Richard Lugar

Senator John McCain Senator Jerry Moran

Senator Rand Paul Senator Robert Portman

Senator James Risch Senator Pat Roberts

Senator Marco Rubio Senator Jeff Sessions

Senator Richard Shelby Senator John Thune

Senator Patrick Toomey Senator David Vitter

Senator Roger Wicker


http://talkingpointsmemo.com/wires/live_wire/live_wire.html#1302

[F6]

Al Franken Unveils Sign During Senate Floor Speech On Debt Crisis: ‘Welcome Terrorists’

7/27/11

http://www.youtube.com/watch?v=Dpm91xHyMKo [this YouTube video courtesy of the ever-clueless Glenn Beck] [headline from/embedded at http://www.mediaite.com/tv/al-franken-unveils-sign-during-senate-floor-speech-on-debt-crisis-welcome-terrorists/ ; also embedded at http://nymag.com/daily/intel/2011/07/al_franken_is_getting_started.html ]

[StephanieVanbryce]

Here are the ( tenative) outlines of a debt-ceiling deal that congressional leaders and the Obama White House are firming up in preparation for a possible announcement as early as Sunday afternoon.

In many respects, the deal will, if approved by all parties, resemble the contours of a short-lived pact negotiated last weekend by House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev. Obama rejected that deal, forcing Congress to wrestle with other inferior legislative options throughout the week.

Among the newest wrinkles, according to informed sources, is an agreement to extend the current $14.3 trillion debt ceiling very briefly to give the legislative process time to work without resorting to emergency, hurry-up measures.

President Obama has said he would only sign a short-term extension (days, not weeks) if it were linked to an extension of borrowing authority that lasts beyond the 2012 election.

According to sources, the Senate would use the military construction appropriations bill, one currently available for action, as the vehicle for the short-term extension. This element of the arrangement, like everything else, is subject to modification. But those close to the negotiations expect Congress to slow things down without jeopardizing the nation's full faith and credit. A debt extension of days would achieve that goal.

Other component parts of the tentative deal include:

$2.8 trillion in deficit reduction with $1 trillion locked in through discretionary spending caps over 10 years and the remainder determined by a so-called "Super Committee."

The Super Committee must report precise deficit-reduction proposals by Thanksgiving.

The Super Committee would have to propose $1.8 trillion in spending cuts to achieve that amount of deficit reduction over 10 years.

If the Super Committee fails, Congress must send a balanced-budget amendment to the states for ratification. If that doesn't happen, across-the-board spending cuts would go into effect and could touch Medicare and defense spending.

No net new tax revenue would be part of the special committee's deliberations.

http://nationaljournal.com/budget/outlines-of-debt-compromise-emerge-20110730

[F6]

Jefferson’s Tea Party Moment


Sound familiar? In 1947, the Republican insurgent Robert A. Taft pushed through legislation curbing the power of unions. Thousands in New York City demanded that President Harry S. Truman veto the bill; he did, but the veto was overturned.
Sam Falk/The New York Times


Brian Stauffer

By SAM TANENHAUS
Published: July 30, 2011

Sam Tanenhaus is the editor of The New York Times Book Review.

WHATEVER the outcome of the debate on the debt ceiling, everyone seems to agree that it has been one of the most alienating spectacles in recent political history — a peculiarly Beltway form of theater, with much of the public still confused about what exactly is at stake.

But here is a disquieting fact: In one version or another, this conflict, centered on protest against the federal debt, has been going on almost since the beginning of the Republic.

America’s first elected opposition party, the Democratic-Republican Party formed by Thomas Jefferson and James Madison in the 1790s, promised a “second revolution” whose axioms included “the general principle that payment of debt should take precedence of all other expenditure,” as Henry Adams put it in “History of the United States of America During the Administrations of Thomas Jefferson,” his monumental study.

The trouble, as Adams noted, was that this principle conflicted with another, “reduction of taxes; and the revenue was not sufficient to satisfy both demands.”

The solution was to trim the size of government. The biggest departments were the Army and the Navy, which were duly cut back. It seemed a sensible solution since Jefferson, along with the public, wanted no more wars. But the Barbary pirates were attacking American merchant ships, and since taxes were needed to pay for a series of naval battles, Jefferson authorized a new federal fund, in violation of his anti-Federalist politics.

Démarches of this kind became the essence of Jefferson’s two terms. He forswore “entangling alliances” with foreign powers, but when Napoleon offered to sell France’s holdings in the Louisiana territory, Jefferson accepted. He raised the $15 million fee by issuing government bonds and taking over payment of the French debt to American citizens. Some objected to Jefferson’s annexing “a foreign people and a vast territory,” Adams wrote. Others protested that Jefferson, the devout anti-monarchist, had recast himself as the virtual king of this new land acquisition.

Thus did Jefferson’s mission to eliminate the debt and repeal taxes — “the foundation for his system of politics abroad and at home,” as Adams described it — yield to the practical demands of governing a young, ambitious nation.

For all this, Jefferson remains the originator of the anti-statist movement, with its aversion to debt and taxes, that is dominating the debt-ceiling impasse and has been a defining and recurrent strain of American politics. He has had many ideological successors, up through today’s Tea Party movement.

In the past, conservatives attained office espousing small-government politics only to see those principles subverted by political realities that led them, time and again, to enlarge the government they fervently meant to starve. By this measurement, Jefferson and his heirs have been abject failures. But in other, more crucial ways, perhaps not.

THE anti-debt politicians of 2011 are in some respects the direct descendants of Robert A. Taft, the Ohio legislator who led the Republican insurgency in the late 1940s and early 1950s, when the party briefly held majorities in Congress and set in motion a rigorous plan to roll back the New Deal by scaling back federal government and advocating pro-business policies.

Taft wanted to slash taxes by 20 percent, skewed toward middle- and lower-income groups, and he opposed the billions spent on reconstructing European democracies via the Marshall Plan. In this instance his loathing of big spending combined with his Jeffersonian suspicion of “entangling alliances [ http://www.ashbrook.org/publicat/dialogue/moser.html ]” with other countries, including corrupt “socialist” ones like Great Britain. (This isolationism also characterizes many Tea Partiers, who have been relatively quiet on foreign policy issues.)

Taft succeeded in getting a huge tax cut, though the battle with President Harry S. Truman, who insisted that revenue was needed to conduct the cold war, raged for 15 months and included two presidential vetoes.

At the same time, Taft drafted the Taft-Hartley Act, which repealed major labor initiatives enacted during the New Deal, including the closed union shop and industry-wide bargaining. This legislation prefigured the recent actions that have curbed the bargaining power of state employees in Wisconsin and New Jersey, and the protests were equally forceful. In New York City, as many as 100,000 union members gathered, demanding that Truman veto the bill. He did. But the veto was overturned, perhaps Taft’s crowning legislative victory.

In both these cases, Taft and his “Old Guard” allies found a good deal of support from Congressional Democrats — without them, Truman’s vetoes would have held. And this suggests that the nation, or much of it, agreed that the New Deal had gone too far, but only in selected areas. Taft might have been convinced that “hardship and poverty can be eliminated in America without extending government welfare services,” as he declared in 1950, but the public liked Social Security. Taft deplored farm subsidies, but farmers didn’t. Truman’s policies might have posed “a threat to the basic institutions of our modern civilization,” including the family, religion and “the character and the moral fiber of the people,” but he had been re-elected nonetheless (thanks in part to heavy turnouts of union members).

It wasn’t just Democrats who perpetuated “big government.” During the next 60 years, conservatives continued their crusade, only to be thwarted as one Republican leader after another fattened the federal leviathan — whether through the interstate highway system built under Dwight D. Eisenhower, the new federal agencies established under Richard M. Nixon, the huge budget deficits incurred by Ronald Reagan, or the Medicare prescription drug bill [ http://www.nytimes.com/2005/02/09/national/09medicare.html ] passed by a Republican Congress and signed by George W. Bush.

There was the occasional insurgency, usually in Congress. In 1996, Newt Gingrich, the House speaker, had his own Tea Party moment, quite like the current one, when the danger of a credit default punctuated a long budget struggle with President Bill Clinton, who softened the Republicans’ call to increase Medicare payments by the elderly. But Mr. Gingrich’s strategy backfired. Public opinion turned against the Republicans, and Mr. Clinton sailed into a second term.

The current debt-ceiling crisis is more complex, partly because the government isn’t so much divided — as it was in the Clinton years — as it is fractured, with Democrats in control of the Senate and a Republican majority in the House.

On the surface, the debate did not appear to be especially ideological. Until last week or so, Barack Obama and the House speaker, John A. Boehner, had been bargaining amicably, both leaders suggesting that an accord was in sight. There was initially broad agreement as well between the two competing debt-reducing plans that inched their way through the House and the Senate. Neither called for tax increases, and both would save billions by nibbling at the edges of Medicare and Social Security.

The ideological battle — between the sworn enemies of government and those who acknowledge its uses — lies elsewhere, within the Republican Party, and, more narrowly still, within the Republican caucus of the House of Representatives. Before the House passed the bill on Friday, Mr. Boehner struggled to impose discipline on his own troops, in particular the 87 freshmen, many elected as tribunes of the Tea Party. According to some reports, he tried to educate them in the practicalities of governance, and in the dangers of default. But those lessons were not easy to sell to brash newcomers who arrived in Washington vowing to undo government and who, months later, felt no particular loyalty to seasoned party regulars. The bill they finally passed would raise the debt ceiling in two installments, contingent on Congressional approval of a constitutional amendment requiring a balanced federal budget. Democrats in the Senate instantly blocked the bill.

AND here is where these Republican insurgents differ from their forerunners. Old Guard Republicans were equally devoted to their principles. But they included the principle of traditional lawmaking achieved through compromise.

Taft’s nickname, Mr. Republican, reflected his unquestioning allegiance to his party, even when it disappointed him — as it did on each of the three occasions he was denied the presidential nomination, the last time after a bitter convention fight with Eisenhower that left many convinced the nomination had been stolen from him. Yet, in a remarkable instance of statesmanship, Taft made peace with Eisenhower and helped him advance policies, domestic and foreign, that Taft had sharply questioned but that kept the country on course in the early years of the cold war.

Taft managed this because his conservative credentials were impeccable. No one could reasonably accuse him of selling out. And he chose to do it because, while he might have been a radical, he was not an insurrectionist. He was the leader not of an outlying faction but of a well-established wing of the Republican Party.

For this reason, despite his misgivings, he helped originate the consensus era whose disappearance many now lament — a time when, amid cold war exigencies, America enjoyed growing prosperity at home and exerted a steadying presence abroad. It was a time, too, when both parties shared responsibility for governance. Both understood that “ideologically, the American public is conservative; in practice it is liberal,” to quote Daniel Patrick Moynihan, who worked for four presidents — two Democrats and two Republicans — before he became a legislator himself.

Each Republican president in that era discovered that the rhetoric of small government often clashed with what the public wanted. This truth has resurfaced in the Obama years, even among some adamant dissenters in Mr. Boehner’s caucus, through their actions if not their words. For instance, almost two dozen House Republicans have tried energetically to grab multimillion-dollar federal projects [ http://www.nytimes.com/2011/07/20/us/politics/20freshmen.html ] for their home districts.

Contradictory? Absolutely. Hypocritical? Possibly. But such reversals are inescapable in politics. Jefferson executed as many as any other president. At the end of his four volumes, published in the late 19th century, Henry Adams summarized the paradoxical results of the “second revolution.”

Jefferson, he wrote, “had undertaken to create a government which should interfere in no way with private action, and he had created one which interfered directly in the concerns of every private citizen in the land. He had come into power as the champion of States- rights, and had driven States to the verge of armed resistance. He had begun by claiming credit for stern economy, and ended by exceeding the expenditures of his predecessors. He had invented a policy of peace, and his invention resulted in the necessity of fighting at once the two greatest Powers in the world.”

These defeats, Adams suggested, added up to a victory. Jefferson transformed a young republic into a nation. Taft, for his part, believed “a government’s integrity and stability in domestic affairs should be its principal virtue” — the very qualities our latter-day insurgents seem to distrust.

*

Room For Debate
Debt Lessons From Taft to Bush

A crash course in how we got to the current standoff over the nation’s possible default.
http://www.nytimes.com/roomfordebate/2011/07/20/presidents-and-their-debts-fdr-to-bush

*

© 2011 The New York Times Company

http://www.nytimes.com/2011/07/31/sunday-review/us-has-lovehate-relationship-with-debt.html [ http://www.nytimes.com/2011/07/31/sunday-review/us-has-lovehate-relationship-with-debt.html?pagewanted=all ] [comments at http://community.nytimes.com/comments/www.nytimes.com/2011/07/31/sunday-review/us-has-lovehate-relationship-with-debt.html ]

---

(linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=65775441 and preceding and (future) following

[StephanieVanbryce]

How the Debt Plan Will Work



http://www.ritholtz.com/blog/2011/08/how-the-debt-plan-would-work/

[StephanieVanbryce]

Sorry, I’ve Started Seeing Someone Else

After years on the rocks, Wall Street is ready to break up with the GOP.



David Callahan | August 11, 2011

For more than a century, big business has counted on the Republican Party to do its bidding in Washington. Given recent debates over taxes and regulation—in which GOP lawmakers have catered to corporate interests—it might seem that not much has changed.

The past few weeks, though, show that everything has changed. Today’s Republican Party is turning out to be the worst friend business could imagine, led by politicians who don’t understand the modern economy, and, worse, are ready to blow it up on principle.

This spring, as a GOP beholden to the Tea Party geared up for brinksmanship on the debt ceiling, lobbyists for Wall Street and corporations begged Republican leaders to back off. These pleas were ignored, and now a few trillion dollars in shareholder equity, wealth owned primarily by the top 10 percent of the richest Americans and corporate executives, has gone poof.

The story of Republican economic incompetence long predates the Tea Party. The rise of the new right in the 1970s, based largely in the Western United States, pushed aside an Eastern Republican establishment that knew its way around major financial institutions and believed in fiscal prudence. In his memoir about serving as Ronald Reagan’s budget director, David Stockman wrote of a White House that fundamentally didn’t understand fiscal policy and made gigantic amateur errors in projecting growth rates and tax revenues. That spawned huge deficits and the need for Reagan to reverse nearly half of his 1981 tax cuts. (Yes, Reagan raised taxes: not once, but 11 times.)

The old Republican establishment enjoyed a last hurrah under George H.W. Bush and his Treasury secretary, Nicholas Brady, a graduate of Yale and Harvard who got his start at the august Wall Street firm of Dillon, Read, and Company. Bush was serious enough about fiscal responsibility to back tax hikes to reduce the deficit, but he and Brady proved clueless about how to deal with new competitors like Japan or the recession of 1990–1991.

By the mid-1990s, the GOP had moved squarely to the fringe on economic policy. While Bill Clinton’s centrism might have laid the groundwork for a new era of bipartisan economic policy-making, it was not to be because Southern conservatives like Phil Gramm, Dick Armey, and Newt Gingrich pushed the GOP to an extremist anti-tax position. That shift elevated ideology above all else and further sidelined those Republicans who thought in pragmatic terms about the economy.

One such Republican was Paul O’Neill, the former CEO of Alcoa who served as George W. Bush’s first Treasury secretary. O’Neill, who had spent a decade as a numbers cruncher at the Office of Management Budget before going to the private sector, found himself marginalized by a president who—despite his Harvard MBA—was alarmingly disinterested in economic policy. In a chilling book about O’Neill’s tenure at Treasury, the journalist Ron Suskind depicted an administration of ideologues that squelched internal debate about the economy and pushed this topic to the backburner. It was O’Neill who famously quoted Vice President Dick Cheney as saying “deficits don’t matter,” a nonchalance about debt that rationalized tax cuts during wartime and trillions in borrowing.

In retrospect, it was sheer luck that Bush happened to have a Treasury secretary, Henry Paulson, who understood financial markets when the 2008 crisis erupted. Paulson barely bothered to consult his know-nothing boss as he worked to avoid another Great Depression.

All this history—a troubling stew of incompetence and extremism—helps explain why so many business and financial leaders have defected to the Democratic Party since the 1990s and flocked to Barack Obama’s candidacy in particular. (The willingness of Democrats to cater to corporate interests in return for campaign cash has been another factor.) A big irony here is that the more adamant the GOP has become about cutting taxes and gutting regulations, the more it has alienated segments of the business world—the reverse of the effect you might imagine. By the early 2000s, even as Bush enacted huge tax cuts for the rich, Democrats—for the first time—started raising more money than the GOP did from executives who worked in hedge funds, private equity, venture capital, and technology companies. Al Gore won four out of ten of the wealthiest counties in 2000. John Kerry won six out of ten in 2004. Obama won eight out of ten in 2008. The majority of business leaders remain Republican. But, as it turns out, there are many executives and investors who don’t embrace a libertarian vision of economic growth. They don’t think that turning back the clock to 1925 and freeing America’s Horatio Algers from taxation and red tape is how to advance in today’s global economy.

Rather, many believe in a collective vision of wealth creation in which government plays an important role in managing the economy and investing in things like infrastructure, education, and scientific research. Last year, for instance, a group of top CEOs came together to create the American Energy Innovation Council and called on the federal government to invest $16 billion a year in clean energy—just the kind of spending that today’s GOP ridicules. Of course, many business leaders also see government as indispensable in moments of crisis, whether that means stimulating demand with public spending or bailing out large financial institutions. Obama’s stimulus was infinitely more popular on Wall Street than on Main Street.

Once upon a time, there were plenty of Republican leaders who balanced this liberal worldview with a commitment to balanced budgets and a light regulatory touch. Not any longer. Just try finding a GOP presidential contender who has anything positive to say about the Troubled Asset Relief Program or the stimulus, two policies that were unequivocally good for business and the economy.

Six months ago, it was common to hear executives and investors expressing buyer’s remorse about supporting Obama in 2008. To be sure, some of these folks will be lining up behind the Republican nominee in the 2012 election, especially if it is Mitt Romney. But for many other business leaders, the debt-ceiling fiasco is likely to serve as a fresh reminder that today’s GOP can’t be trusted when it comes to the economy.


http://prospect.org/cs/articles?article=were_just_not_that_into_you

[StephanieVanbryce]

Standard and Poors has now clarified that it’s actually the Tea Party who opposed raising the debt ceiling, those
that were willing to default ... were the primary reason for the downgrade:

A Standard & Poor’s director said for the first time Thursday that one reason the United States lost its triple-A credit rating was that several lawmakers expressed skepticism about the serious consequences of a credit default — a position put forth by some Republicans.

Without specifically mentioning Republicans, S&P senior director Joydeep Mukherji said the stability and effectiveness of American political institutions were undermined by the fact that “people in the political arena were even talking about a potential default,” Mukherji said.

“That a country even has such voices, albeit a minority, is something notable,” he added. “This kind of rhetoric is not common amongst AAA sovereigns.”

S&P: Debt default skeptics fueled ratings downgrade
http://www.politico.com/news/stories/0811/61147.html