A missed opportunity in a self-created crisis

Raising the debt limit should not be an issue.  In fact, raising the debt limit is one of the the most mundane and routine things the government does. Until now.

Now we are facing a self-made crisis.  Whether that crisis is a result of a decade of unchecked spending and ill-advised tax cuts as some claim or a product of government gridlock as other say, it is a problem we created.  And now we are only a week away from running out of money.

Despite the fact that this is a self-made crisis, it is still an opportunity.  For all my roasting of the Tea Party, they are right that we do need substantial, long-term budget cuts.  This is an opportunity to enact some of those cuts.

We are on the verge of missing the opportunity.  Tea Party intransigence is really the only obstacle.  Democrats have reluctantly agreed to cuts in entitlement programs and normal Republicans had agreed to revenue increase through rewriting the tax code.  In fact, the deal was more than Republicans should have hoped for, prompting a former Republican House leader so say, "My God, declare victory."

But that didn't happen and we are inching closer to August 2nd, the date when the government will have to decide which bills it will pay and which it won't.  There is no good scenario; even if we raise the debt ceiling, the current political situation does not lend itself to a deal that would put us on the right track.  We need substantial cuts and substantial new revenue and neither seems likely.

Democrats for their part hate to see entitlement cuts even a little bit even though, as John Boehner put it last night, those programs won't exist for his children if we don't make changes to them.

However Boehner and his Republican counterparts are propagating a myth that has been worn out for decades - that low taxes lead to economic growth.  This manipulation of Reaganomics ignores the facts of Reagan's presidency as well as Clinton's presidency.  Bruce Bartlett, a former advisor to President Reagan blames the Bush tax cuts for the current recession.  Yes, low taxes stimulate growth but they are not the be-all-end-all to the economy.  Somehow this has become Republican doctrine even though the man given credit for it didn't believe it.  President Obama invoked Reagan in his speech to America last night, pointing out the President Reagan did raise taxes and called on wealthy Americans to pay their fair share.

It is not too late to escape this self-made predicament, but more importantly it is not too late to take advantage of this situation.  President Obama and John Boehner made their cases last night in the latest round of sparring, but both men know the reality of the situation and both are willing to make the necessary compromises.  The problem is the Tea Party whose members have taken a good idea and completely lost sight of what needs to be done.  If those members of the House can be convinced that their position is disastrous for America - which it is - then perhaps we will take advantage of our self-made crisis.

Ideas

It's crunch time; we are a eight days away from default so we need to get moving.  Democrats don't want cuts to entitlement programs and Republicans don't want higher taxes but the President has it figured out: he doesn't want to deal with this same issue over and over and over so he wants a big package that will cut spending and increase revenue.  How can we get there?

1. Raise the retirement age.  Some people think this is draconian.  I think Americans live longer than we used to and work at jobs that are less physically demanding.  And besides, if you save responsibly you can still retire whenever you feel comfortable, you just won't get a check from Uncle Sam until you turn 68 or 69.

2. Raise the Medicare enrollment age.  Again, sounds draconian, but upping the enrollment age to 66 from 65 saves money.  Obamacare should also help contain healthcare costs, but some members of government - despite their professed crusade against the deficit - aren't interested in controlling those costs.

3.  Raise the floor of the highest tax bracket to a million from $250,000 and then let the Bush tax cuts expire for everyone in that bracket.  Republicans will never do it, but we need the revenue and those people can afford to pay more.  Many of them, Warren Buffett for example, have ASKED to pay more.  If Democrats are willing to make sacrifices to entitlement programs, Republicans need to compromise on revenue.  Taking the super-rich helps close the deficit and does not stifle growth.

4.  Cut defense spending.  Do we really need enough nukes to eliminate life on Earth 5x over?  Can't we just settle on having enough to kill every living thing on the planet once?  And if we can kill every living thing on the planet even 2x, do we really need as many conventional weapons?  The largest tank battle in history was fought in 1943...why don't we trim a few tanks.  How about that amphibious landing vehicle for the Marines?  Let's pay for that so we can use it in reenactments of Iwo Jima since that is the only conceivable reason we would need it.  Seriously Pentagon, trim the budget.  We can still have - and still do have - the world's largest and most powerful military even if we cut defense spending.

5.  Stop subsidizing corn.  That's all that needs to be said.

6.  Stop subsidizing oil companies.  Or, at the very least, mandate that those funds be used to invest in renewable technologies.

7.  Reform the tax code.  There are many things that I am glad to have my tax money pay for: Medicare; Social Security; defense; and other programs.  I am not ok that my tax money is used to giver further tax breaks to people who are rich enough to buy their own jets.  That's really not ok.  Get rid of those loopholes.

8.  Incentivize areas of growth.  I know this involves spending and not cutting, but to really fix the deficit we need to fix the economy and to fix the economy we need to put Americans back to work.  Private companies can and should take the lead in fields such as sustainable energy, but a little push from the government can spur investments and put people to work.  If done wisely, this will pay for itself many times over.

Some of these areas of focus don't amount to much, for example cutting ethanol and oil subsidies only save a little when compared to the size of the deficit, but why waste money?  We need to be linking funds to outcomes.  For that matter we could probably afford to reevaluate our foreign aid packages.

This plan also requires sacrifices from both sides.  Democrats are loathe to reform entitlement programs but we must do so eventually.  Raising the retirement age and Medicare enrollment age are good first steps and buy time for Obamacare to (ideally) help rein in medical costs.  Republicans won't even consider raising taxes, but the additional revenue created by letting taxes cuts on the wealthy expire and reforming the tax code are critical to closing the deficit and do nothing to hurt economic growth.  If each side gives a little, a lot of good could be done.

There are many in Washington today who would gladly embrace such a plan, but as long as the Tea Party gets its way then gridlock will continue as America counts down to default.

Disaster Looming

Here is a surprise for you: Republicans are uncooperative and determined to ruin America...what a revelation.  The latest chapter in their new book "How to ruin a nation" was written yesterday as John Boehner pulled out of talks with President Obama AGAIN saying that a deal was never reached because he and the president have "different visions for our country."

John's right; Democrats and Republicans have different visions for the country.  One of those visions involves avoiding default, the other involves wrecking the world economy, tainting the honor of America and ending the age of American hegemony through self-imposed default.  Can you imagine what people in some of the Euro-zone countries who have been forced into default and are suffering mightily right now must be thinking?  How embarrassing.  We may default not because we cannot pay but because we will not.

While I still maintain hope that a deal will get done, I agree with President Obama that real governing is going to be impossible as long as one house of Congress is being run by 70 morons drinking tea.  Even if we raise the debt ceiling then what?  Until the next election no one in government will legislate, everyone will campaign.  The impasse on the debt ceiling is a symptom of the broader problem that one of the two parties is not interested in responsibility or the future of America - they are interested in saying no to the president and getting themselves reelected, America's credit rating be damned!

This dramatic debacle has been going on long enough and there isn't much else to be said at this point.  I'm optimistic for a deal, but truthfully, it will be a bad one even if Republicans are willing to compromise.  We need entitlement reform, but the Tea Party is swinging Paul Bunyan's axe with a blindfold on and failing to address the issue - the rising cost of healthcare.  Of course, we don't know how successful Obamacare will be in fixing that issue.

And no amount of entitlement reform is going to fix our broken economy.  Politicians, it seems, have forgotten that we are in a recession.  Companies aren't hiring because no one is buying but rather than focusing on unemployment, the president has let Republicans hijack the debate and focus on spending, a problem to be sure, but a secondary one.  Even if we get a deal to raise the debt limit we are focusing on the wrong issue.  This is probably part of the grand Republican scheme to make sure Obama isn't reelected, but the Republican party is run by the Tea Party these days and those people are fools so I'm not convinced that they've really through the political implications of their actions.

A brief default - if in name only - seems increasingly likely and will probably be nothing more than a wake-up call to Washington, but if the Tea Party is as set in their ways as it seems they are then we really could be looking at disaster for the world economy and we would have no one to blame but ourselves or rather the handful of people who put their ideology over the well-being of their country.

A poorly thought out plan

Brought to you, of course, by the Tea Party.  A balanced budget amendment to the Constitution.  Perhaps it reads well; maybe it even sounds good rolling off the tongue, but have you thought about it?

Balanced budget, each year the government spends no more than it takes in - sounds phenomenal! In fact, ideally, that's what our fiscal books would look like year in and year out.  So what's the problem?

The problem is that things never work out ideally.  Say, for example, that the United States of America must go to war.  What would we do?  We would be bound by the Constitution to spend no more than we take in, so we could cut all other government spending or send the troops off to battle with pikes and Civil War muskets.

What about a recession, when the government should be engaged in deficit spending to dig the economy out of a hole (what about right now Tea Party!)?  What would we do then?  Would we allow the economy to stagnate because we can't spend more than we take in...wait a minute...

Conversely, what if we had a surplus?  Would that be a problem?  We can't spend more than we take in but can we take in more than we spend?  Would we be bound to spend the extra cash? After all, surpluses year after year after year can lead to deflation and economic stagnation.  That's no good.

We would be wise to remember that just a decade ago, before W., America was running a surplus, taking in more money annually than we spent.  Some poor decisions and an unplanned on economic crisis turned those annual surpluses into deficits, but there is a time for deficits.  Deficit spending is not bad if it is needed.  Is 14 trillion bucks in debt a problem?  Well yes, but spending when the economy is slumping is textbook economics.  Furthermore, massive savings may be good for you and I, but not for Uncle Sam.  Uncle Sam should use his surplus money to pay off his debts, but once we've reached that point, we don't want him building up an account.  That's bad for the economy too.

A balanced budget is good - in an ideal world, we would balance the budget every year, but of course in an ideal world we wouldn't have recessions, natural disasters or wars either.

A way out or a way backwards?

Mitch McConnell has a plan to save America from default and a plan to save his party from political disaster.  What is this bold plan?  To abdicate responsibility from government by ceding to the president the right to raise the debt ceiling.  This saves the American economy from the calamity of default and spares Republicans from having to vote for raising the debt ceiling.  It is politics at its best and responsibility at its worst and yet this may be the plan that saves the economy.

Despite perhaps representing an escape plan for the economy, this is a sad misuse of power and a scary harbinger of the way American politics is heading.  Too often, politicians from both parties think they have been elected to promote the interests of the party over the interests of the nation.  Right now, Republicans are very guilty of this offense.  Rather than compromise and take a deal that left any good conservative salivating, Republicans refused to give even a little, perhaps believing that a blow to the economy would help their chances in 2012.

All of this was done of course in the name of the great Ronald Reagan, the impeccable president, the flawless man, the god among politicians.  Ask Republicans about him and they'll swoon and perhaps tear up a bit before telling you how he was America's savior.  They'll also either forget to mention or be ignorant of the fact that the man raised taxes when he had to...rather than carrying on Reagan's legacy - which has been neatly whitewashed by Republicans to begin with - the modern conservative movement is going backwards, further to the right than their hero.

This abdication of power is not only an embarrassing moment for American politics, but along with other recent Republican moves, it represents a further hardening of a system that has already become too rigid. Lately it has become en vogue for Republicans to sign pledges to their constituents making promises to do or not to do certain things.  There is certainly nothing wrong with making campaign promises, it is in fact how one gets elected.  But the nature of American politics is that the parties must compromise, and the more outrageous pledges Republicans sign, the harder it becomes for them to make the sacrifices necessary for governing.

Never mind how ludicrous some of the pledges are - pay close attention to the Marriage Vow for some amusement - the fact that Republican presidential candidates have already signed away their right to cooperate is bad news for a system of government that is based on competing interests finding common ground.

I don't want to put all the blame on Republicans.  Democrats did recently force through Obamacare without incorporating Republican ideas - though to be fair Republicans had few ideas but many scary lies to tell.  Both parties are guilty of retreating into their ideological shells and refusing to govern responsibly, but the recent Republican political blueprint of holding America hostage with outrageous demands and then refusing to agree even when Democrats offer everything but the kitchen sink is a dangerous for our country.  Furthermore, signing pledges committing to ignore the other guy makes responsible government impossible and sets the stage for even more political gridlock that our country cannot afford.

They Warned Us

That sounds kind of like the tag line for a bad sci-fi movie which makes it even more unfathomable that we are talking about America's credit rating.  Today, Standard & Poor's warned that there is a 50% chance it will cut America's credit rating in the next 3 months.  This just day two days after Moody's made the same threat.

That doesn't strike me so much as a threat as it does a plea.  Look America, S&P is telling us, you don't have it together, you need to get it together, and we're trying to give you a nudge for your own sake and for the sake of the global economy - FIX IT! A 50% chance in 3 months...they have warned us.

But the warnings are falling on deaf ears.  The Tea Party-led insurgency that has taken over the Republican Party is immune to facts, sense and reality, and now the United States of America finds itself weeks away from defaulting on it's loans. Such a stunning event would not only ravage the American and global economy, but it would undoubtedly significantly undermine America's position as the world's leader and usher in challenges to American authority from all around the globe.

Nevertheless, no warning, no sense, no facts will sway the Tea Party, a group so wrapped up in its own ideological cloak of lunacy that it will see our country bankrupt before it agrees to compromises that are overwhelmingly in its favor.  Just a few weeks ago, Republicans produced a chart - created by a conservative think tank - that showed the best way to decrease a deficit was 85% spending cuts and 15% tax increases.  So when they get that offer from the President what do they do?  Well you know the answer to that.

In a sad and funny way I feel sorry for the Republican establishment.  Not that they really deserve any sympathy since they bear much of the burden for creating this mess, but like poor Victor Frankenstein they have created a monster they cannot control.  The Tea Party has taken over and - like Frankenstein - will strangle the life out of its creator.  Like Dr. Frankenstein, the Republicans will pay dearly in the next election, but unfortunately, before that happens, the nation will suffer just as Frankenstein's family did.

Now, poor Mitch McConnell - for whom I have no respect - finds himself having to make proposals giving President Obama all the power to raise the debt limit just so he can save America from default and save Republicans from having to vote on raising the debt limit.  It is a cheeky political move but at least Mitch knows that default isn't an option.  He isn't interested so much in the American economy as the Republican party, but he knows the effects of a default would be so terrible that Republicans would suffer greatly next year if one were to happen.

And imagine what life must be like for John Boehner - for whom I have slightly growing admiration - who has negotiated cuts that would be considered a massive Republican triumph if they were to be enacted!  The man has managed to cut more in spending cuts then Republicans could have hoped to dream for, more in fact than most Republicans are probably comfortable with given how they will be used as ammunition against the party in the next election.  Nonetheless, if Republicans really believed what they are preaching - they don't - then they would be salivating over this deal.  But no, nothing can sate the bloodlust of the Tea Party.  Oh and have I mentioned that taxes are off the table?

And so the warning shots that Moody's and Standard & Poor's have fired across our bow in the last few days will have no effect.  America is weeks away from default and despite warnings and deals that Ronald Reagan couldn't have dreamed of and would have leapt at in a heartbeat, those carrying his banner have steadfastly refused to blink.

The most ironic part of this is that all of these cuts are done in the name of confidence.  If we cut, cut, cut, American businesses will have the confidence to start investing and hiring.  Aside from the obvious point that there is no math behind this, only a confident belief in confidence, Republicans are doing everything they can to make the nation more jittery.  Every day that we get closer to defaulting we become a little less confident.  And so Tea Party, no only have you held America hostage, but you've done so in the most hypocritical and silly way possible, by undermining your own talking point.

A Cloudy Offensive

Just four days ago I was optimistic that Obama and Boehner were going to be able to negotiate a compromise on the budget and raise the debt limit while simultaneously putting the nation on sound fiscal footing through a combination of spending cuts and new taxes.  Silly, naive me.

I had forgotten, as the president put it, that in American politics "folks are rewarded for saying irresponsible things." Obama is talking, of course, about the Tea Party, the group of radicals yanking Boehner's leash.  Rather than accepting a compromise in which they would get four trillion in spending cuts for roughly a trillion in new revenues.  Sensible people recognize that this is an excellent deal and Republicans would be fools not to take it.  They will suffer for this politically when the time comes, which of course is an appealing prospect, but it's not worth the crisis that America will have to endure if these idiots get their way.  Unfortunately for our great nation, the far right isn't interested in compromise.  A four to one ratio? Scoff, come back when you've given us everything we want and asked for nothing in return.  That wouldn't be realistic even if the Tea Party had good ideas, but they don't they have horrible ideas.  Ideas that could potentially bankrupt America.  And now they've pulled the entire Republican party into this trap.  Republican presidential candidates are balking at compromise, and as a result of all the pressure, Boehner has retreated.

And so where there was sunshine in America's financial future just days ago, now there are clouds.  And so now is the time for the president to take the offensive.  Perhaps his advisors are telling him that taking this aloof, holy high-ground is good for his chances of reelection, but it is time for Americans to know the drunk.  It is time to debunk the myth that taxing the super rich will harm the economy.  It is time to explain to America that the problem with the economy isn't spending, it's unemployment.  If we put people back to work they will start buying, if they start buying companies will start to produce more and hire more.  There is no demand, so there is no need for supply.  There will be a time for cutting, but by fixing the economy, we will go a long way towards fixing the deficit.  By fixing the deficit now we will in all likelihood destroy the economy.

If the Tea Party gets its way there will be no deal on the debt ceiling and America will default.  If America defaults the economy will tank.  If the economy tanks, maybe people will blame the president.  This is the only reason to vote against raising the debt limit.  By refusing to accept a compromise that includes 4 trillion dollars worth of spending cuts in exchange for 1 trillion in new revenue, Republicans will fully expose themselves as the ideological hypocrites they are.  All this posturing about fixing the economy and they've been made an offer they can't refuse, but they are refusing it, and if Boehner can't shake the Tea Party's yoke, then all of America will suffer as a result.

Good luck Mr. President.  I hope you can use the communication skills you employed so successfully during your campaign to show Americans how bad a Tea Party future will be.

Farewell

I think it is appropriate today to bid farewell to NASA's shuttle program.  After 30 years of ferrying Americans into space and expanding human horizons, the workhorses will be retired following the last trip of the Atlantis which blasted off today.

I lament the end of the shuttle program and what I can only hope will be a hiccup in - rather than a winding down of - our quest to explore space.  It saddens me that we are now ceding this exploration to Russia and perhaps China, but again, I'm hopeful that human space exploration will again become a priority of the United States.

When I was younger I wanted to be an astronaut although now it seems like not pursuing that career may have been the right choice.  However, the United States should always be the country at the forefront of space exploration, and as humanity looks towards a future (albeit very distant) among the stars, I sincerely hope that our politicians find it within them not to sacrifice science at the alter of austerity.

Good luck to the Atlantis on it's final mission and here's to hoping that US space travel is dormant only for a very brief period.

Daylight

Maybe.  Obama and Boehner are dancing in the arena, getting chummy on the links and perhaps starting to move towards a real compromise, you know, one in which each sides gives in order to get.  

The latest news is that Boehner went to a secret meeting with Obama at the White House over the weekend.  If I didn't know any better I would be inclined to think the two were friends, having sleepovers and staying up late to sneak out and throw toilet paper over the Washington Monument...I hear Boehner has quite the arm.  

So it was encouraging to hear that Boehner is now open to new sources of revenue.  Meanwhile, Obama has apparently indicated that he wants even more spending cuts.  Also, hell froze over.  

While president and speaker tango together, the rest of the country waits to see if the Republican hostage crisis will end soon and Americans can breathe easier knowing that America will not default on its debt.  After all, a default would be disastrous and do exactly the opposite of what Boehner claims Republicans are trying to do: "give American businesspeople the confidence to invest in our economy."  

So Boehner, like all sensible Republicans and Americans knows the importance of raising the debt limit. And undoubtedly, after all his posturing to the Tea Party, he has realized that raising taxes on rich people or closing loopholes that allow the super-rich to avoid taxes does nothing to harm the economy.  The fun facade of "no new taxes" seems to be crumbling under the weight of the arithmetic heaped upon it.  It was fun to imagine a world in which we could eliminate the debt by taking the axe to every non-military program paid for by the government.  But it seems Boehner has either decided that the political winds have changed or he is just sick of being dragged through the mud by the Tea Party.  

Either way, today's developments are positive for America.  I am curious to see what Obama and Boehner can come up with.  Will the final budget be a bipartisan creation?  Will Obama fold and give up way too much?  Will Boehner actually agree to higher taxes?  Talk about reality television drama!

I have faith in the President, and a growing respect for John Boehner, and I do believe that the two of them will find a way to put our nation on sound financial footing without destroying the economy.

The Politics of Taxes

Logic says that lower taxes are good politics and perhaps that is true most of the time.  I once had a college professor tell me that he voted with his pocketbook, a statement I found to be a sad indication of the state of American education, but nonetheless, it makes sense, we would all rather have more dollar dollar bills.

However popular low taxes might be, it is probably a safe bet that blackmail is equally unpopular, and it is with this in mind that I write today's post.

You see, the Congressional deficit hawks, the true idealistic fools in the Tea Party and their puppets, the Republican leadership have done a remarkable job of making a secondary issue - the deficit - into the only issue.  Forget fixing the economy, forget putting people back to work, if only we can derail our economy further by slashing spending and defaulting on our debts, we might just ruin the credibility of the United States forever, not to mention conjuring the second coming of the Great Depression.

With this mindset, Republicans have taken the fight to the historically timid political party known as the Democrats.  Like they have been wont to do in the last decade, Democrats, when under fire, have abandoned all their good ideas and let Republicans take control of the debate.  This capitulation has resulted so far in "negotiations" in which the sides have "compromised" on trillions of dollars in spending cuts.  Yet when Democrats propose even feeble tax increases Republicans storm away from the negotiating table in a hissy fit.

Given how much Republicans have extracted from Democrats - far too much in all likelihood - a normal person would probably expect that they would be willing to give up at least a meager amount in return.  In fact, a normal person would probably expect that they would even give up a modest amount.  But no, the word taxes scares Republicans the same way that insects scare four year olds.  And so when taxes come up in the discussions, Republicans heed the command of their Tea Party overlords and run far, far away.

And so Americans, when they visit the polls next year will know with 158937984% certainty that no current Republican would ever consider raising taxes.  But as appetizing as that sounds, they will also know that - for the time being - all Republicans are willing to resort to blackmail.  They are willing to hold the nation's economy captive; they are willing to get and get and get and not give anything in return.  They are the party of purity, but their unfortunate brand of purity is toxic to our country's health.

Perhaps voters will be lured by low taxes and vote with their pocketbooks.  But more likely, people will realize that Republican strategy risks destroying our nation's economy and they will realize how corrupt it is to place the well-being of the party over the well-being of the United States.  Of course, if Republicans get their way, we won't have to wait until next year's elections to know all this; it will become obvious next month when Republicans, having extracted trillions of dollars in concessions still led the country into default by refusing to compromise.  And then America will get to choose between the party who was willing to bend too far to save the nation and the party who wasn't willing to bend at all.  One party may look weak, but the other will be exposed as the corrupt and intellectually bankrupt group of people they are, a group whose stubborn purity led America to disaster.

Happy Birthday

Happy 235th Birthday America.  For all the problems our nation faces, I am proud to be an American.  This is the best nation on the planet and we are all fortunate to live here.

I hope that all Americans had a safe, happy and fun holiday weekend.  It is nice to relax and spend time thinking about how lucky we are.

God bless America and all Americans.

Tomorrow we will be back to making important decisions about the future of our nation, but today, we should celebrate how lucky we are to be Americans!