I’ve got about five minutes to blog this morning, so … I want to call your attention to a column by David Leonhardt in the New York Times on the way forward for the economy. It makes sense to me, but let me know what you think.
Reid Wilson reports for the National Journal that GOP congressional leaders are trying to educate House freshman and other death-eaters that the debt ceiling really does have to be raised, like it or not.
Privately, House Republicans have been driving home the message that a failure to increase the debt ceiling would be a disaster. Sources said Boehner has been “aggressive,” in one aide’s words, in articulating the need to reach a deal.
In a presentation to the House Republican Conference on Friday, Jay Powell, a former Under Secretary at the Treasury Department under George H.W. Bush and a visiting scholar at the Bipartisan Policy Center, laid out just what would happen if a deal isn’t reached.
On August 3, according to Powell’s presentation, the federal government would be on the hook for $32 billion in committed spending, including $23 billion in Social Security checks, $500 million in federal worker salaries, $1.4 billion owed to Defense Department vendors and $100 million in refunds the IRS owes to businesses. On the same day, the government will take in only $12 billion in revenue, giving the government a $20 billion cash deficit. By August 15, when the federal government is on the hook for a $29 billion interest payment, the cash shortfall will have grown to $74 billion—and possibly more, if interest rates on U.S. debt rises.
In other words — you’ve had your fun posturing on Fox News, boys. Now it’s time to get serious. Whether the pea-brains can be educated is an open question, of course
I guess some of the newbs started to get it when Paul Ryan got up and explained it to them. I guess they would have been better off getting Limbaugh to do it; then maybe more of them would have understood. Scholars and politicians in your own party who have been around awhile, not gonna listen to that. Bring in Ryan, who has no idea how our economy works, ok, we’ll listen to him.
My son, going into 4th grade, has a better sense of what happens if you default on the debt than these desk-carving tea baggers.
I understand that it is easy to be upset when things are not going right (Nov 2010).
But I have learned that most problems do not have ‘easy’ (read: sound bite) solutions.
If these first-term repub house members were elected by low-information voters, then they have a problem explaining a ‘yes’ vote to those same low-information voters.
But, I do not believe that many of them will be primaryied by anyone further to the right.
Leonhardt’s article was very interesting. Gloomy, but interesting.
This is going to sound either counterintuitive and/or insane.
First things first, even if they can convince the Teadiots to do the right thing and raise the debt ceiling, there will be no relief coming for people in these tough economic circumstances, but at least we’ll still have a relatively normal economy.
Now, here’s where I go all weird on you:
-Don’t look for help anytime soon, there will be no attempt at relief until 2013. Until then, there’s no incentive for Republicans who are looking to sweep back into power on the backs of disenchanted, angry, and broke and broken voters.
-OK, now let’s say Obama wins, and the Democrats gain back the House and keep the Senate. A stimulus package will be on the table by the end of January. I’m hoping it will be a big one, but I have my doubts – big ones, because they will want to look fiscally responsible.
-If the Republicans beat Obama with Jeb, or Rubio, or Mittens, or whoever, they will work on a good sized stimulus package, along with huge tax cuts, naturally (deficits suddenly won’t matter again), to take credit for any recovery, particulary if they control one or both houses of Congress (note: yes, some of the Teatards will have been voted out of office, though some others may come in – yes, our voting public IS both that stupid AND that ignorant – due largely to a cowed, compliant, or complicit MSM).
-If Obama wins, but there’s a Republican Congess, I think there will also be a decent sized stimulus, in the hopes that they can take credit for anything positive in time for the 2016 Presidential (again deficits won’t matter).
So, what I’m saying is that in the short term, we may be better off under Republicans than Democrats. I can see them spending more to stimulate the economy than the Democrats. Of course, the cost of any recovery will be Social Security, Medicare, Medicaid, S-Chip, and any and every program that’s part of the social safety net.
I’m really not at all optimistic about our future. We need to completely redo our economy. We were supposed to have transitioned from a manufacturing economy to a consumer economy. And it did happen. But we can’t afford to consume anymore, so, now, what?
Except for the rich, we can’t afford to consume enough to keep the economy going.
So, really, what is next? Green energy?
Of course, one thing we could do to put people to work is to rework our infrasructure – trillions and trillions of dollars worth. Paying decent wages, with benefits.
But the only way to do this is tax the living sh*t out of every rich mofo at the Ike years level, raise the Paris Hilton tax, and make sure corporations pay their fair share – which also means making up for not paying their fair share for decades.
I don’t see that happening, do you?
Why would it be a disaster now? What makes this debt ceiling any different then any other?
My husband and I were talking about fear politics last night. Remember when if we pulled out of Vietnam the Communists would win and the world as we know it would be gone? How many young men died or were maimed, how many families diminished because their sons perished on this altar of fear politics/
When republicans can coherently tell me why this is so important, I will listen. Otherwise they are fear mongering hypocrites that would sell their souls to the devil if it would get them in power again!
The debt ceiling has never not been raised. If it is not raised this time, it will be the first time in U.S. history.
If you’re asking why Republicans won’t raise it, it’s mostly because they are just plain nuts.
I have to agree with the NYT article. I’ve suggested that to others in private discussions. In a sense, it’s what Ford said about paying his workers enough to buy his product–give them money and they will spend. Which is why when FDR created work, the economy improved.
In the end, I don’t think anyone can deny we have been a consumer-based economy for a long time. While corporations believe they have a world outside our borders to sell to, that same world is working for sub-standard pay to create the products who also cannot afford to buy them. I don’t know if they realize, or care, that they are starving their customer base in order to satisfy both Wall Street and their own pocketbooks.
It goes back to the government creating jobs to help create consumers who in turn help businesses create jobs to meet the demand of new growth. It has to be the government who initiates it because, lord knows, businesses won’t spend the money on their own to hire people in order to stimulate the economy.
I read the piece by Leonhardt. He seems to have it right.
My family and I are in an economic stagnation due to debt, loss of income due to the economic down turn, and the loss of our home equity. Beyond that, my wife’s car needs new tires and shocks, the princess is of to college in August, I have some small but costly health issues, my wife and I will “hit” 60 is about 3 years, the A.C. unit (life support if you live in Fl.) is on it’s last legs, and that will be a really big bill.
Mrs Erinyes went to the market yesterday, and said food costs are much higher than a year ago. Gas is going up again. Everything from insurance to underwear is up in price, but wages are stagnant, commissions are down, and If I were unemployed, I would be at my wit’s end.
There are several things I think would really help; a mortgage holiday for 6 months, stop forclosures for 2 years,suspend all income and payroll taxes on any income over 40 hrs per week, get the green revolution of clean energy (wind, solar, ocean currents, deep sea vents) going with massive fed. intervention, get the hell out of Afghanistan, Iraq, and Pakistan; close the loop holes in the tax structure that gives billions to the mega wealthy and multinational corporations.End the power of the lobbys.
Fear is playing a huge part in delaying a recovery; when people that have “disposable” income, and they are buying gold , weapons, and freeze dried food instead of remodeling the kitchen or visiting the theme parks, that really hurts the economy.
“What makes this debt ceiling any different then any other?”
I would say this one is more politicized(and urgent) than any other. Failing to act swiftly will cause a cascade effect, and end up being more costly in the long run, kinda like bouncing a bunch of checks in one month.
Great comment, Chris.
“it’s mostly because they are just plain nuts.”
You got that right, “suicide bomber nuts”.
erinyes,
Good luck to your familes Princess in college! 🙂
“Remember when if we pulled out of Vietnam the Communists would win and the world as we know it would be gone?”
After Viet Nam, we got all cozy with the Chinese Communists to annoy the USSR. Big mistake; the world as we KNEW it IS dead and buried.
Wealth is moving from the developed world to the cheap labor countries who did not EARN it. Why can’t we make consumer electronics/textiles/software here in the US instead of playing on on un-level field where one side has weak currency, no QC, no environmental laws, and an endless supply of cheap/prison labor?
Comment #77 in the Leonhardt article really nails the failure of trickle-down.
Tom B – It’s all out of our hands. The market is a benevolent deity; the corporation is its great and most worthy representative on earth.
And the ‘benevolent deity’ has ruled that we are now to live in a society in which the privilege of disposable income is contingent on the existence of disposable people. Besides, under monopoly-finance capital (which we’re under) an accumulation of misery is a necessary condition corresponding to the accumulation of wealth.
Chris, I have my doubts whether what you said is true any more. When the world is your oyster, when people in the US are in competition with billions worldwide for jobs, there isn’t much point for a US company to sell to cash strapped locals, when there are billions overseas who are in a better position to buy your products. Recall that GM is selling more cars (or making more money, I forget which) outside the US these days. I’d like to be shown that I’m wrong.
The Leonhardt article doesn’t make it clear what he means by moving away from an (admittedly unsustainable) consumer economy to an export economy. I envision everything from low wage sweatshops, people crowded together into tenements, to the brilliant, but very few Silicon Valley geniuses creating the next internet phenomenon.
Gulug, I see only two problems with your scenarios. Further stimulus, especially with Republicans in control is unlikely. Remember, tax breaks are the only fiscal policy they understand or care about. And I think I read that for at least the Senate, it’s very unlikely to pass into Democratic control, due to demographics.
Thanks, ‘Gulag!
“And the ‘benevolent deity’ has ruled that we are now to live in a society in which the privilege of disposable income is contingent on the existence of disposable people.”
It ain’t working for me. I think we need to reform our trade policies. Go to Germany– lots of German stuff on the shelves. Go to Walmart– EVERYTHING made in China.
What makes this debt ceiling any different then any other?
Because Obama is the President.. The repugs aren’t nuts — at least in the conventional sense..they are so blinded with the desire to take down Obama’s administration it’s become.. abandon all reason and consequences be damned.
No matter what the repugs do..they’ll never convince me that Obama has an ounce of responsibility for the situation we are in. I’ll always follow a voice of moderation and reason.
Did anybody happen to catch little Paulie’s recital on the Morning Joe Show? It was sad to watch as he strained like a grade schooler at a spelling bee to remember his lines. He mechanically repeated all his talking points, but it was obvious he didn’t know what he was repeating..When asked about raising revenue he skipped a groove and moved on to repeating his talking points…The question never registered with him and he went into the default mode stock answer of ‘You don’t raise taxes in a recession…The truth is that, spending cuts or raising taxes are two sides to the same coin, and the only difference is who bears the burden, and who gets the benefit.
Leonhardt is on target (and I think it can be traced back to Reagan deciding that “finance” was going to be the driver of the economy). Everyone took out equity loans and ran up the CC debt on the fantastical advice of our financial overlords, and BOOM, here we are. Not going to do that again.
Becoming an export economy mostly means letting the dollar sink in value so the goods look cheap overseas. We still produce a lot of stuff, we just don’t employ many people to do it. It also can be demagogued easily (We Need A Strong Dollar!). But it needs to happen, and it will breathe some life into the economy.
Oh, and I believe we have (1) more people now employed in “green” jobs than in the steel industry, and (2) produce more power from “green” sources than from nuclear. And in much of the country, solar PV cells are now competitive with the power company.
But fortunately we have Republicans to protect us from the evil of teaching children about energy efficiency (that’s the first of the amendments in the list).
Gordon said: I believe we have (1) more people now employed in “green†jobs than in the steel industry, and (2) produce more power from “green†sources than from nuclear.
I can’t say anything about #1 above, but as for #2 – sadly, we’re no where near replacing nukes with wind/solar power. According to the Wikipedia page on Energy policy of the United States, “In 2010 Wind power accounted for 2.3% of the electricity generated in the United States.” Solar power provides less than 1%. Nukes, on the other hand, provide about 19.5 % of US electricity generation.
Now, I don’t doubt that wind/solar power generating capacity will continue to increase in the USA. As for how many jobs it provides, I’m uncertain. A lot of the equipment is (surprise) made in China. There are, of course, local jobs provided in installing and maintaining the equipment.
Candide: I can’t find the link. The number was (I think) global (might have reflected the huge solar installation that just went online in Spain). It definitely included hydro, and I think it reflected that many nuclear sites (Japan and Germany) are offline pending safety investigations.
On the jobs: that does include people who are not directly producing clean energy. Though it’s probably a fair trade with the way the steel industry counts their jobs.
Even if you take out all the hype, it still describes a very different universe than the one that Sen. Inhofe inhabits.
Oops. here’s the link for the dramatic title.
And here’s one link for the competitive price story.
Hi Gordon,
The link is here:
http://en.wikipedia.org/wiki/Energy_policy_of_the_United_States
The reason why I didn’t publish that link (or any other links) is because I’ve found that when I include a link in my posts, almost inevitably my post gets put in a queue “awaiting moderation.” That’s an automatic feature which our host, Maha, can’t turn off. I’ve asked her if she could “white list” users who have established that they aren’t trolls, but she said she doesn’t know if there is any way to do this. I believe that this site runs on WordPress – if anyone here knows how to create a white list with this software, it would be helpful if you email our host and let her know how to do this.
I’m in Asia, and my time zone is 12 hours different from Maha’s, which means that most of my posts already arrive very late in the day (US time). Occasionally, I’m the first poster for the same reason. Unfortunately, because my posts already arrive very late in the day (when they are unlikely to be read), I hate to get stuck in a moderation queue overnight. So that’s why I hesitate to post links.
Anyway, I’ve got nothing against “green power” – I’m a big believer in global warming, the ultimate disaster that may well destroy human civilization. Rest assured that I am not in Senator Inhofe’s camp. However, we are unfortunately still quite far away from producing sufficient energy from wind/solar that we can shut down nukes. Indeed, any energy that we can produce from green sources would be best used to first shut down coal-fired power-plants. I fear that by shutting down the nukes first, we’ll wind up burning more coal, with disastrous consequences.
I wonder if the repugs will be playing the song Happy days are here again at their 2012 convention?
In his memoirs, John Kenneth Galbraith (ambassador to India in the early 1960s) recounted how prime minister Nehru warned him that the Chinese and the Vietnamese were not the friends of each other that the U.S. thought they were (keep in mind the domino theory). We didn’t listen and when we finally pulled out, the two countries battled each other.
Re Vietnam — one of the Eisenhower-era accomplishments of the Barking Mad Right was to run anyone with knowledge of Asia out of the State Department as punishment for “losing China.” This guaranteed that the people who “advised” us into Vietnam had absolutely no idea what they were talking about.