Thursday, August 4, 2011

The Courage and Clarity of Keith Olbermann On The True Meaning of the Debt Crisis Fiasco

"To The Streets"‬‏
Keith Olbermann's Special Comment of August 1, 2011
Current TV


The truly great thing about the amazing Keith Olbermann is that he cares far more about truth, honesty, and justice than he does in pretending that any real, decent, and intelligent journalist can possibly remain "objective" and 'dispassionate' about the fundamental realities and conflicts of our time and the extraordinary impact that they have on actual human lives TODAY. This is what the 'free press/free media' was really designed to do despite the disgusting fact that very few journalists in this country very rarely ever take this grave responsibility seriously. As always thank you Keith for your brilliance, your courage, and your relentless, unflagging commitment to actually educating others and always communicating in a mature and engaging manner with your audience. If only there were far more like you in this increasingly backward and corrupt society...


Wednesday, August 3, 2011

The Ideological and Social Consequences of the Debt Ceiling Fight and Its Devastating Impact on the Real Crisis of National Unemployment


Actual Truth and Consequences in the realm of the contemporary U.S. political economy or social Reality vs. Fantasy...(again)...


The Hostage Crisis Continues: Why Obama Can't Pivot to Jobs and Growth
3 August 2011
by Robert Reich

Robert Reich's Blog | Op-Ed

With the hostage crisis behind him, the President is now ready to talk about the nation’s real problem.

Nine paragraphs into his remarks today announcing the nation has paid most of the ransom the radical right demanded as a condition for maintaining the full faith and credit of the United States (he didn’t use these exact words), the President pivoted to the agenda he should have been talking about all along:

“And in the coming months I’ll continue also to fight for what the American people care most about: new jobs, higher wages, and faster economic growth.”

But what precisely will he fight for now that the debt deal has tied his hands?

He says he wants to extend tax cuts for middle class families and make sure the jobless get unemployment benefits.

Fine, but the new deal won’t let him. He’ll have to go back to Congress after the recess (five weeks from now) and round up enough votes to override the budget caps that now restrict spending. What are the odds? Maybe a little higher than zero.

He says he wants an “infrastructure bank” that would borrow money from private capital markets to pay private contractors to rebuild our nations roads, bridges, airports, and everything else that’s falling apart.

Fine, but the new deal he just signed may not let him do this either – if the infrastructure bank relies on federal funds or even federal loan guarantees to attract private money. The only way he could create an infrastructure bank without sweetening the pot would be by privatizing all the new infrastructure. That means toll roads and toll bridges, user-fee airports, and entry fees everywhere else.

Apart from its potential unfairness to lower-income people, such a privatized infrastructure would have the same effect as a tax increase. After paying more for roads and bridges and all other infrastructure, Americans would have less cash for to spend on goods and services. That means no boost to the economy.

The President also wants to complete trade deals and reform the patent process. These may make the economy slightly more efficient, but they’re not going to have any perceptible positive impact on the lives of the 26 million Americans who are now either looking for work, working in part-time jobs but needing full-time ones, or have given up looking.

More importantly, the deal he just signed makes it impossible for the President and Democrats to launch any major jobs program – no WPA or Civilian Conservation Corps, no major lending program to cash-starved states and locales, no new help for distressed homeowners, and so on. Nada.

“We’ve got to do everything in our power to grow this economy and put America back to work,” the President says, now that the hostage crisis is over.

But the sad truth is he and the nation remain hostage to the ideology of right-wing Republicans who won’t let the government spend more money. Yet if the government can’t spend more – at least this year and next, until the pump is primed and the economy is growing again – we won’t see job growth. And without job growth, the economy will remain anemic.

That’s why even the stock market is reacting badly to the end of the hostage crisis.

If you hadn’t noticed, the number of people unemployed or underemployed keeps growing. (We’ll know Friday how many it added in July, but remember it needs to add 125,000 a month just to keep up with the growth of the labor force. Anything below 125,000 means we continue to slide backward.)

The reason: Consumers, who are 70 percent of the economy, haven’t been able to pick up the slack. That’s because they’re still deep in debt. Their homes have plummeted in value. They can’t borrow. Their jobs are on the line and their wages are dropping.

So where will the demand come from if not government? The radical right points to the alleged “failure” of the stimulus program as evidence that government spending doesn’t work. The fact is it did work – it saved at least 3 million jobs, and would have saved far more if the stimulus was on the scale needed and directed to job creation.

To be sure, pump-priming is more difficult when the well is almost dry, as it is now. And widening inequality – the rich taking home an increasing share of the nation’s total income and wealth – has left the vast middle class with even less purchasing power.

But the pump still needs to be primed.

And the well has to be filled: The nation must also push for real tax reform that reverses the surge toward inequality – raising taxes on the wealthy, cutting them for the middle, and expanding the Earned Income Tax Credit for the poor.

To do this, though, requires that Americans understand the truth. But where will they learn it?

The radical right has not only captured the federal budget. In convincing so many Americans the problem is the size of government rather than their shrinking paychecks and growing economic insecurity, the radical right has also captured the American mind.


Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including The Work of Nations, Locked in the Cabinet, Supercapitalism, and his most recent book, Aftershock.

Economist Richard Wolff On the Actual Reality of the U.S. Political Economy and the Ideological Conflict Over National Priorities

Prior to House Speaker John Boehner (R-Ohio) speaking at a news conference about his bill to extend the debt ceiling, field recorders are laid out on top of a podium, on Capitol Hill in Washington, July 28, 2011. The political posturing around the debt ceiling "crisis" has distracted from the hard issues underlying US economic decline. (Photo: Stephen Crowley / The New York Times)


Actual Truth and Consequences in the realm of the contemporary U.S. political economy or social Reality vs. Fantasy...


A Tale of Two Lootings
3 August 2011

by Richard D. Wolff

Truthout | News Analysis

The political posturing around the debt ceiling "crisis" was mostly a distraction from the hard issues. The hardest of those - underlying US economic decline - keeps resurfacing to display costs, pains and injustices that threaten to dissolve society. Its causes - two long-term trends over the last 30 years - help also to explain the political failures that now compound the social costs of economic decline.

The first trend is the attack on jobs, wages and benefits, and the second is the attack on the federal government's budget. The first trend enables the second. A capitalist economy suffering high unemployment with all its costly consequences shapes a bizarre, disconnected politics. The two major parties ignore unemployment and the system that keeps reproducing it. They argue instead over how much to cut social programs for the people while they agree that such cutting is the major way to fix the government's broken budget.

The first trend amounts to looting the US working class (the media softens that to "disappearing middle class"). Since the 1970s, real wages have been flat to declining, while productivity per worker has risen steadily. What employers give workers (wages) has remained the same while what workers produce for their employers (profits) rose. Workers and their families responded by working ever more hours and borrowing ever more money to get or keep the "American dream." By 2007, they were physically exhausted, families emotionally stressed and deeply anxious about the debts that their flat real wages could no longer sustain. When the system crashed, zooming unemployment, further wage and benefit reductions and home foreclosures made everything still worse for most Americans.

The second trend was looting the government. This happened because exhausted and stressed workers turned away from participation or even political interests after the 1970s. In contrast, employers used the profits made possible by flat wages and rising productivity to buy politicians, parties and policies. More than ever before, businesses and top executives grabbed the levers of political power. They made government serve their interests. Starting in the 1980s, Washington lowered business taxes, deregulated businesses, cut taxes on executives' and other high incomes, increased spending on the military-industrial and medical-insurance complexes, provided more opportunities and freedom for financial speculation, and so on. To distract people from recognizing, debating, or opposing this political shift, more was also spent on social programs and supports.

Washington was thus deprived of tax revenues (chiefly on corporations and the richest individuals) while spending more on defense, business supports and social programs. As this gap between revenues and expenditures rose, Washington kept borrowing ever more. Rising annual budget deficits added to the national debt. When the private capitalist system crashed in 2007, business and the rich made sure the government spent vast sums to bail out banks, insurance companies and large corporations and to revive the stock market. Accordingly, government deficits and debts zoomed upward.

Business and the rich made trillions from both trends. By keeping workers' wages flat, profits soared as employers alone kept the full fruits of rising worker productivity. Employers and the rich profited further by getting Washington to lower their taxes. They then lent at interest to the government what they no longer needed to pay in taxes. After all, the government needed to borrow precisely because it had stopped taxing corporations and the rich at the rates of the 1940s, 1950s and 1960s. Business and the rich happily financed a political system that converted their tax obligations into secure, well-rewarded loans to the government instead.

Looting the working class and the state widened the gap between rich and poor in the US to what it was a century ago. Now the corporations and the rich want the state, whose budget they looted, to cut back social supports and services for the working class whose wages and productivity they also looted.

Republicans yell "class warfare" against advocates of a return to the 1940s tax rates on business profits, and the 1950s and 1960s rates on high-income individuals. Both were far higher than they are today. "Class warfare" better describes government policies since the 1970s. Business and the rich made sure those policies shifted the burden of federal taxation from business to individuals and from rich individuals to everyone else.

Despite this double looting of working people and the state, many victims direct their anger at the government instead of those who control the government. Unemployed millions fired by private capitalist employers (or suffering wage and benefits cuts imposed by them) blame the government, not their employers. Millions foreclosed out of their homes by private capitalist banks blame the government. They want the government punished, made smaller and weaker, and they are desperate to avoid further taxes. Republicans promise to do all that. Those who fear that a smaller, tax-starved government will do even less for them hear Democrats promising to cut less than Republicans. This is politics disconnected from economic realities (for example, high unemployment) and twisted into a contest between more and less government spending cuts imposed on a working class already reeling from economic crisis.

Neither party dares to return taxes on corporations and the rich to what they were. Neither party dares to advocate that government hire the unemployed to rebuild the US, to spend their government-job wages on maintaining their mortgages (reviving the housing industry) and thereby stimulate the whole economy from the bottom up. Above all, neither party dares admit that so long as production remains in the hands of tiny groups of rich shareholders and boards of directors, they will keep looting the system.

Can the US do better than this capitalist system's performance? We need to debate honestly and decide whether and how we can do better. We should have had the courage to debate that over the last 50 years. The cold war - and the priorities of corporations and the rich - prevented that. Now it's long overdue. We need new political organizations mobilizing people to demand and engage that debate, theoretically and also in practical, political struggles.


Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst where he taught economics from 1973 to 2008. He is currently a Visiting Professor in the Graduate Program in International Affairs of the New School University, New York City. He also teaches classes regularly at the Brecht Forum in Manhattan. Earlier he taught economics at Yale University (1967-1969) and at the City College of the City University of New York (1969-1973). In 1994, he was a Visiting Professor of Economics at the University of Paris (France), I (Sorbonne).

Why The President Must Awaken From His Present Political Coma--And What It Means for 2012

President Barack Obama during a news conference about debt ceiling negotiations, July 29, 2011. (Photo: Philip Scott Andrews / The New York Times)


All I can say here is WAKE UP MR. PRESIDENT because your present political course/coma is helping no one but our mutual enemies...


A President in Reverse Tuesday
2 August 2011

by William Rivers Pitt
Truthout | Op-Ed

"Obama's starting point was a demand for a "clean," unencumbered bill to raise the ceiling; House Speaker John Boehner said no. What would have happened if Obama refused to budge? We don't know because that's not his style. It would be nice, someday, to find out."

-- Eugene Robinson, The Washington Post, 8/1/2011

The United States of America is different today, different in a fundamental and dramatic way, and is a better place now only for a few thousand people who are rich enough to remain above the effect of this transformation. For the rest of us, the 99% who stay up nights worrying about health care bills, retirement, finding a job, keeping a job, and aging parents who now dangle above a deliberately frayed safety net, it is a colder and more dangerous country we call home.

If I hear one more person try to tell me the deal cut between Congress and the White House was as good as we can expect, that it isn't all bad, I might vomit on them. This whole thing has been a disaster, and no amount of spin can alter the fact. Mr. Obama has taken to the habit of abject retreat with such gusto that he should be outfitted with one of those beeping devices they put on trucks to alert people when they go in reverse. At least that way, we will have some warning the next time this Democratic president backs away from the very policies and priorities he was elected to protect and defend.

We sure could have used such a signal during this debt-fight calamity.

I want a clean debt bill. Beep-beep-beep, never mind.

I want, no, I demand revenue enhancements - not from new taxes, but from closing loopholes - and I will reject any bill that does not include them. Beep-beep-beep, forget I said that.

We must protect Social Security and Medicare. Beep-beep-beep, but now I look good to Independent voters, or something, right?

It has become an all too familiar sound, really.

I will close Guantanamo. Beep-beep-beep.

There needs to be a public option in the health care reform bill. Beep-beep-beep.

The Bush-era tax cuts? Beep-beep-beep-beep-beep-beep.

An interesting thing happens when someone backs up. They get smaller in your vision, receding slowly but surely until they are all but invisible. So it is with this president, who goes into the 2012 election season a small fraction of the man who would supposedly make history.

George W. Bush took the historic budget surplus left by President Clinton and squandered it on tax cuts, further enriching those few thousand people who didn't need the money. Mr. Bush delivered us into crushing debt with two interminable wars, which many of those few thousand people continue to profit from wildly. A number of those people - the Wall Street and banking magnates - are directly and personally responsible for the recklessness and greed that very nearly annihilated the American economy, and as of this date, not only have they eluded justice for their crimes, but have been richly rewarded.

They were rewarded again with this bill. Try to spin it any other way, and you're wasting your time with me. They were rewarded, and the weight of that reward will fall on your neck and mine. Again.

As bad as this situation is, it could have been a great deal worse. "Cut, Cap and Balance" would have blown the economy to the far side of the moon, as would Boehner's initial failed attempt at this legislation. There are cuts to the defense budget, and the social safety net did not take it in the teeth as savagely as the berserkers within the GOP caucus desired. And, yes, we did manage to avoid defaulting on the debt limit for the first time in history.

That is hardly the point. In the end, Mr. Obama accepted the premise proffered by the GOP that the debt limit increase had to be tied to massive cuts. This was simply not true, and he failed utterly to make this clear. He demanded new tax revenues from closed loopholes be part of the deal, and then surrendered that position. He swore to protect the social safety net, and spent virtually the entire debate trying to give it away.

This was not a case of two steps forward and one step back, but was instead no steps forward and two steps back. The kind of cuts included in this bill are exactly, precisely the wrong medicine for an ailing economy, and for the people who make up that economy. We now stare down the yawning barrel of a double-dip recession, and that's only if we're lucky.

Worst of all, Mr. Obama has proven to the Tea Party nutjobs that hostage-taking works, that threatening not only the American economy but the global economy with comprehensive disaster is a proper way to pursue policy initiatives. Imagine if a member of the House Insanity Caucus had broken into a nuclear missile silo and threatened to launch unless Reagan's face was carved on Mt. Rushmore...and got what he wanted, and was allowed to go free.

What's next? You really think they won't try this again at the first opportunity? Of course they will, and why not? It worked like a charm.

They got away with it, just like Mr. Bush and his cronies got away with lying us into war while bankrupting the country, just like the "defense" contractors who skimmed billions from the war funding, just like the Wall Streeters and banksters who stole our future from us.

They got away with it, and so they will try it again somewhere down the road...and there will be Mr. Obama, receding slowly into the distance. Again.

Robert Reich Tells the Whole Truth About the Abject Capitulation of President Obama and the Democratic Party to the Right in the Debt Crisis Fight

President Barack Obama speaks about a debt deal at the White House on Sunday night in Washington, July 31, 2011. Obama announced that leaders of both parties in the House and Senate have reached an agreement with him to raise the government's debt ceiling. (Photo: Philip Scott Andrews / The New York Times)

Ransom Paid Monday
1 August 2011

by Robert Reich
Robert Reich's Blog | Op-Ed

Anyone who characterizes the deal between the President, Democratic, and Republican leaders as a victory for the American people over partisanship understands neither economics nor politics.

The deal does not raise taxes on America’s wealthy and most fortunate — who are now taking home a larger share of total income and wealth, and whose tax rates are already lower than they have been, in eighty years. Yet it puts the nation’s most important safety nets and public investments on the chopping block.

It also hobbles the capacity of the government to respond to the jobs and growth crisis. Added to the cuts already underway by state and local governments, the deal’s spending cuts increase the odds of a double-dip recession. And the deal strengthens the political hand of the radical right.

Yes, the deal is preferable to the unfolding economic catastrophe of a default on the debt of the U.S. government. The outrage and the shame is it has come to this choice.

More than a year ago, the President could have conditioned his agreement to extend the Bush tax cuts beyond 2010 on Republicans’ agreement not to link a vote on the debt ceiling to the budget deficit. But he did not.

Many months ago, when Republicans first demanded spending cuts and no tax increases as a condition for raising the debt ceiling, the President could have blown their cover. He could have shown the American people why this demand had nothing to do with deficit reduction but everything to do with the GOP’s ideological fixation on shrinking the size of the government — thereby imperiling Medicare, Social Security, education, infrastructure, and everything else Americans depend on. But he did not.

And through it all the President could have explained to Americans that the biggest economic challenge we face is restoring jobs and wages and economic growth, that spending cuts in the next few years will slow the economy even further, and therefore that the Republicans’ demands threaten us all. Again, he did not.

The radical right has now won a huge tactical and strategic victory. Democrats and the White House have proven they have little by way of tactics or strategy.

By putting Medicare and Social Security on the block, they have made it more difficult for Democrats in the upcoming 2012 election cycle to blame Republicans for doing so.

By embracing deficit reduction as their apparent goal – claiming only that they’d seek to do it differently than the GOP – Democrats and the White House now seemingly agree with the GOP that the budget deficit is the biggest obstacle to the nation’s future prosperity.

The budget deficit is not the biggest obstacle to our prosperity. Lack of jobs and growth is. And the largest threat to our democracy is the emergence of a radical right capable of getting most of the ransom it demands.


Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including The Work of Nations, Locked in the Cabinet, Supercapitalism, and his most recent book, Aftershock.

Monday, August 1, 2011

The Debt Ceiling/Debt Crisis Bill is Not a 'Compromise'--It's A Disaster


This folks is where rank cowardice, opportunism, fear, indifference, megalomania, hypocrisy, dishonesty, cynicism, and HUBRIS always winds up in the end. As Krugman, Hacker, and Hathaway all point out so clearly it is precisely these factors and these factors alone that are responsible for what has happened and why. And guess WHO (aside from the venal Republicans and the pathological Tea Party) is the sordid ringleader and major culprit of this massive public theft of the American people by the wealthiest and most powerful people in this country? Here's a clue: In 2008 he received the largest number of popular votes for any presidential candidate in U.S. history...


"...And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts.

Republicans will supposedly have an incentive to make concessions the next time around, because defense spending will be among the areas cut. But the G.O.P. has just demonstrated its willingness to risk financial collapse unless it gets everything its most extreme members want. Why expect it to be more reasonable in the next round?

In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe it’s just me, but I see a pattern here.

Did the president have any alternative this time around? Yes.

First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didn’t, he replied that he was sure that Republicans would act responsibly. Great call.

And even now, the Obama administration could have resorted to legal maneuvering to sidestep the debt ceiling, using any of several options. In ordinary circumstances, this might have been an extreme step. But faced with the reality of what is happening, namely raw extortion on the part of a party that, after all, only controls one house of Congress, it would have been totally justifiable.

At the very least, Mr. Obama could have used the possibility of a legal end run to strengthen his bargaining position. Instead, however, he ruled all such options out from the beginning.

But wouldn’t taking a tough stance have worried markets? Probably not. In fact, if I were an investor I would be reassured, not dismayed, by a demonstration that the president is willing and able to stand up to blackmail on the part of right-wing extremists. Instead, he has chosen to demonstrate the opposite.

Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels..."


The President Surrenders
July 31, 2011
New York Times

A deal to raise the federal debt ceiling is in the works. If it goes through, many commentators will declare that disaster was avoided. But they will be wrong.

For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.

Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.

The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.

Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.

And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts.

Republicans will supposedly have an incentive to make concessions the next time around, because defense spending will be among the areas cut. But the G.O.P. has just demonstrated its willingness to risk financial collapse unless it gets everything its most extreme members want. Why expect it to be more reasonable in the next round?

In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe it’s just me, but I see a pattern here.

Did the president have any alternative this time around? Yes.

First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didn’t, he replied that he was sure that Republicans would act responsibly. Great call.

And even now, the Obama administration could have resorted to legal maneuvering to sidestep the debt ceiling, using any of several options. In ordinary circumstances, this might have been an extreme step. But faced with the reality of what is happening, namely raw extortion on the part of a party that, after all, only controls one house of Congress, it would have been totally justifiable.

At the very least, Mr. Obama could have used the possibility of a legal end run to strengthen his bargaining position. Instead, however, he ruled all such options out from the beginning.

But wouldn’t taking a tough stance have worried markets? Probably not. In fact, if I were an investor I would be reassured, not dismayed, by a demonstration that the president is willing and able to stand up to blackmail on the part of right-wing extremists. Instead, he has chosen to demonstrate the opposite.

Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels.

It is, of course, a political catastrophe for Democrats, who just a few weeks ago seemed to have Republicans on the run over their plan to dismantle Medicare; now Mr. Obama has thrown all that away. And the damage isn’t over: there will be more choke points where Republicans can threaten to create a crisis unless the president surrenders, and they can now act with the confident expectation that he will.

In the long run, however, Democrats won’t be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nation’s economic security, gets to dictate policy? And the answer is, maybe it can’t.

July 31, 2011

Our Unbalanced Democracy
New York Times

New Haven

OUR nation isn’t facing just a debt crisis; it’s facing a democracy crisis. For weeks, the federal government has been hurtling toward two unsavory options: a crippling default brought on by Congressional gridlock, or — as key Democrats have advocated — a unilateral increase in the debt ceiling by an unchecked president. Even if the last-minute deal announced on Sunday night holds together, it’s become clear that the balance at the heart of the Constitution is under threat.

The debate has threatened to play out as a destructive but all too familiar two-step, revealing how dysfunctional the relationship between Congress and the president has become.

The two-step begins with a Congress that is hamstrung and incapable of effective action. The president then decides he has little alternative but to strike out on his own, regardless of what the Constitution says.

Congress, unable or unwilling to defend its role, resorts instead to carping at “his” program, “his” war or “his” economy — while denying any responsibility for the mess it helped create. The president, on the defensive, digs in further.

Take recent events in Libya. The president didn’t try very hard to get Congress to agree to the intervention, some say, because he didn’t think he had the votes. Congress, for its part, has been unwilling or unable to defend its constitutional and statutory power to authorize a war.

In a single day, the House voted down a resolution that would have approved the war and then, just hours later, voted down a bill that would have denied the president the power to spend any new money on the war. Not surprisingly, the war continues without a single Congressional vote to support it, and Congress’s power to authorize military action has taken a hit from which it may never recover.

The problem is not limited to war. For decades, presidents have been making more frequent use of executive orders, signing statements and agency regulations, as well as sole executive agreements with other nations (instead of treaties or Congressionally authorized international agreements).

Earlier this year, the Environmental Protection Agency began regulating greenhouse-gas emissions at some energy plants and factories after efforts to address the problem through legislation stalled. Members of Congress were angry about the end run, but, predictably, they failed to do anything about it.

The ultimate consequence in each case is the same: Congress is saved from its inability to govern by being cut out of the process. Senators and representatives avoid taking responsibility for the most important decisions, and thus can’t easily be held accountable for poor choices.

Meanwhile, the president gets a poisoned chalice: increasing unilateral power, but reduced ability to share responsibility — or blame. Whether President Obama or members of Congress would bear the greater pain if the economy imploded because of a default is unclear. Either way, 535 legislators would have essentially gone AWOL.

It doesn’t have to be this way. It is time to pursue reforms that allow Congress to act effectively. While it’s easy to assume that more checks are always desirable — that the harder it is to make policy decisions, the better they will be — the debt crisis shows this isn’t true.

Failing to raise the debt ceiling stops money already approved by Congress from being spent. If lawmakers see the debt ceiling as real, they will exercise less judgment in the ordinary budget process, on the reckless belief that fiscal restraint can somehow be imposed down the road.

Legislative obstacles like the debt ceiling are a source of mischief, not precaution. They aren’t found in the Constitution; they were put in place by previous Congresses seeking to tie the hands of their successors. Far from encouraging more responsible governance, they often have the opposite effect.

Unnecessary supermajority requirements are another culprit — the Senate filibuster chief among them. It has been transformed over the last generation from an extraordinary step taken by disgruntled minorities into a hard-and-fast “rule of 60” that makes compromise extraordinarily difficult. And when Congress fails to meet this extra-constitutional threshold, it is no surprise that the president tries to work around it.

Fast-track procedures that limit amendments and require an up-or-down vote may appear to limit Congress’s power, but could actually strengthen it by discouraging the executive from going it alone. If prior debt-ceiling legislation had included a fast-track provision, with an automatic increase that would go into effect in the case of inaction, much of the acrimony and brinkmanship of the past few months could have been avoided.

After the debt crisis ends, the democracy crisis must be tackled. Nobody wins when our constitutional system falters: not the president, who gains unilateral power but loses a governing partner; not Congress, which gets to blame the president but risks irrelevance; and certainly not the American people, who have to bear the resulting dysfunction.

Jacob S. Hacker is a professor of political science at Yale. Oona A. Hathaway is a professor of international law at Yale.

July 31, 2011

To Escape Chaos, a Terrible Deal
New York Times

There is little to like about the tentative agreement between Congressional leaders and the White House except that it happened at all. The deal would avert a catastrophic government default, immediately and probably through the end of 2012. The rest of it is a nearly complete capitulation to the hostage-taking demands of Republican extremists. It will hurt programs for the middle class and poor, and hinder an economic recovery.

It is not yet set in stone, and there may still be time to make it better. But in the end, most Democrats will have no choice but to swallow their fury, accept the deal and, we hope, fight harder the next time.

For weeks, ever since House Republicans said they would not raise the nation’s debt ceiling without huge spending cuts, Democrats have held out for a few basic principles. There must be new tax revenues in the mix so that the wealthy bear a share of the burden and Medicare cannot be affected.

Those principles were discarded to get a deal that cuts about $2.5 trillion from the deficit over a decade. The first $900 billion to a trillion will come directly from domestic discretionary programs (about a third of it from the Pentagon) and will include no new revenues. The next $1.5 trillion will be determined by a “supercommittee” of 12 lawmakers that could recommend revenues, but is unlikely to do so since half its members will be Republicans.

If the committee is deadlocked, or its recommendations are rejected by either house of Congress, then a dreaded guillotine of cuts would come down: $1.2 trillion in across-the-board spending reductions that would begin to go into effect by early 2013.

Negotiators have tried to make this penalty mechanism as unpalatable as possible to provide an incentive for the supercommittee and Congress to avert it. For Democrats, the penalty would include cuts to Medicare providers. The penalty for Republicans should have been new tax revenues, but of course they refused to consider that and got their way. Instead, their incentive will be trying to avoid large cuts in the military budget.

Democrats won a provision drawn from automatic-cut mechanisms in previous decades that exempts low-income entitlement programs. There is no requirement that a balanced-budget amendment pass Congress. There will be no second hostage-taking on the debt ceiling in a few months, as Speaker John Boehner and his band of radicals originally demanded. Democratic negotiators decided that the automatic cut system, as bad as it is, was less of a threat to the economy than another default crisis, and many are counting on future Congresses to undo its arbitrary butchering.

Sadly, in a political environment laced with lunacy, that calculation is probably correct. Some Republicans in the House were inviting a default, hoping that an economic earthquake would shake Washington and the Obama administration beyond recognition. Democrats were right to fear the effects of a default and the impact of a new recession on all Americans.

President Obama could have been more adamant in dealing with Republicans, perhaps threatening to use constitutional powers to ignore the debt ceiling if Congress abrogated its responsibility to raise it. But this episode demonstrates the effectiveness of extortion. Reasonable people are forced to give in to those willing to endanger the national interest.

Democrats can look forward to the expiration of the Bush tax cuts next year, and will have to make the case in the 2012 elections for new lawmakers who will undo the damage.

Obama's Bad Bargain
by William Greider
July 27, 2011
The Nation

The most distressing outcome of the deficit hysteria gripping Washington may be what Barack Obama has revealed about himself. It was disconcerting to watch the president slip-slide so easily into voicing the fallacious economic arguments of the right. It was shocking when he betrayed core principles of the Democratic Party, portraying himself as high-minded and brave because he defied his loyal constituents. Supporters may hope this rightward shift was only a matter of political tactics, but I think Obama has at last revealed his sincere convictions. If he wins a second term, he will be free to strike a truly rotten “grand bargain” with Republicans—“pragmatic” compromises that will destroy the crown jewels of democratic reform.

The president has done grievous damage to the most vulnerable by trying to fight the GOP on its ground—accepting the premise that deficits and debt should be a national priority. He made the choice more than a year ago to push aside the real problem—the vast loss and suffering generated by a failing economy.

As a conservative reformer, Obama embraced a bizarre notion of “balance.” The budget cuts he first proposed would have punished the middle class and vulnerable three times with a big stick, shrinking Social Security, Medicare and Medicaid benefits while hitting the wealthy only once with a modest tax increase. When Democrats complained that this wasn’t fair, Obama adjusted the “shared sacrifice” to a dollar-for-dollar ratio. Take a dollar from working stiffs who need these programs, take a dollar from the superrich who don’t need a tax break. How fair is that?

Obama’s facile arithmetic essentially scrapped the Democratic Party’s longstanding commitment to progressive taxation and universal social protections. The claim that cutting Social Security benefits will “strengthen” the system is erroneous. In fact, Obama has already undermined the soundness of Social Security by partially suspending the FICA payroll tax for workers—depriving the system of revenue it needs for long-term solvency.

The mendacity has a more fundamental dimension. Obama helped conservatives concoct the debt crisis on false premises, promoting a claim that Social Security and other entitlement programs were somehow to blame while gliding over the real causes and culprits. Social Security has never contributed a dime to the federal deficits (actually, the government borrows the trust fund’s huge surpluses to offset its red ink).

This mean-spirited political twist amounts to blaming the victims. There should be no mystery about what caused the $14 trillion debt: large deficits began in 1981, with Ronald Reagan’s fanciful “supply side” tax-cutting. Federal debt was then around $1 trillion. By 2007 it had reached $9 trillion, thanks to George W. Bush’s tax cuts for the wealthy and his two wars in Iraq and Afghanistan, plus the massive subsidy for Big Pharma in Medicare drug benefits. The 2008 financial collapse and deep recession generated most of the remainder, as tax revenues fell drastically. Obama’s pump-priming stimulus added to the debt too, but a relatively small portion.

Whatever supposed solutions Congress eventually enacts, the misleading quality of the debt crisis should become widely understood once the action is completed. The debt and deficits will probably keep expanding, because the economy will remain stagnant or worse, with near 10 percent unemployment and falling incomes, and that is fundamentally what drives deficits higher. It should become obvious that deficit reduction did nothing to revive economic growth or to create jobs. In fact, cutting federal spending may make things worse, because it withdraws demand from the economy at the very moment when demand for goods and services is woefully inadequate.

At some point, then, the president will have to change his tune. Instead of mimicking the penny pinchers, Obama will have to say something about the nation’s real problem—the sick economy and the terrible consequences facing millions of families. But it’s not clear he will have much to say beyond small-bore suggestions and the usual pep talks. If he does a sudden about-face and proposes big ideas for job creation, will anyone believe him?

The White House evidently thinks it’s good politics for 2012 to dismiss the left and court wobbly independents. Obama no doubt assumes faithful Democrats have nowhere else to go. It’s true that very few will wish to oppose him next year, given the fearful possibility of right-wing crazies running the country. On the other hand, people who adhere to the core Democratic values Obama has abandoned need a strategy for stronger resistance. That would not mean running away from Obama but running at him—challenging his leadership of the party, mobilizing dissident voices and voters, pushing Congressional Democrats to embrace a progressive agenda in competition with Obama’s.

To be blunt, progressives have to pick a fight with their own party. They have to launch the hard work of reconnecting with ordinary citizens, listening and learning, defining new politics from the ground up. People in a rebellious mood should also prepare for the possibility that it may already be too late, that the Democratic Party’s gradual move uptown is too advanced to reverse. In that event, people will have to locate a new home—a new force in politics that speaks for them.



I'm in 100% agreement with the comments of Senator Bernie Sanders (I-Vermont) below


Senator Bernie Sanders (I-Vermont) issued the following statement today after he voted against a Senate deficit- reduction proposal:

"The Republicans have been absolutely determined to make certain that the rich and large corporations not contribute one penny for deficit reduction, and that all of the sacrifice comes from the middle class and working families in terms of cuts in Social Security, Medicare, Medicaid, LIHEAP, community health centers, education, Head Start, nutrition, MILC, affordable housing and many other vitally important programs.

"I cannot support legislation like the Reid proposal which balances the budget on the backs of struggling Americans while not requiring one penny of sacrifice from the wealthiest people in our country. That is not only grotesquely immoral, it is bad economic policy."

The Ideological and Politcal War Over The Debt Crisis and Its Serious Economic and Social Consequences’-livelihoods-votes-few-unappeasable-

Progressives Say Obama's Deal With Nutters "Trades Peoples’ Livelihoods for the Votes of a Few Unappeasable Right-Wing Radicals"
by John Nichols
July 31, 2011
The Nation

"Given the choice between a Republican and someone who acts like a Republican, people will vote for the real Republican all the time," said Harry Truman.

If the 33rd president was right, then Barack Obama just did himself and his party a world of hurt.

Faced with the threat that Tea Party-pressured Republicans in the House really would steer the United States toward default, and in so doing steer the U.S. economy over the cliff, Obama had to do something. But instead of bold action -- borrowing a page from Ronald Reagan to demand a straight up-or-down vote on raising the debt ceiling; borrowing a page from Franklin Roosevelt to pledge to use the authority afforded him by the Constitution to defend the full faith and credit of the United States -- the president engaged in inside-the-beltway bargaining of the most dysfunctional sort.

In cutting a deal with congressional Republicans [1] that places Democratic legacy programs -- Social Security, Medicare and Medicaid -- at risk while cutting essential programs for working families and the poor, Obama has positioned himself and his administration to the right of where mainstream Republicans such as Howard Baker, Bob Dole and George H.W. Bush used to stand in fights with the fringe elements of their party.

Now, the fringe is in charge of the GOP. And Obama is cutting deals to satisfy Republicans that Britain's banking minister describes as "right-wing nutters." [2]

Obama and Democratic congressional leaders are claiming that they have done everything in their power to avert deep cuts in Social Security, Medicare and Medicaid. And it is true that they have given the Republicans (and their paymasters) less than House Budget Committee chair Paul Ryan was demanding with a budget proposal that turned Medicare into a voucher program and began the process of privatizing Social Security.

But a compromise with total destruction can still do a lot of damage.

The president's bow to the political extremism -- and the economic irrationality [3] -- of a tiny circle of "right-wing nutters" in Congress and their dwindling Tea Party "base" will, according to reports based on briefings by White House and GOP aides, "raise the debt limit by about $2.7 trillion and reduce the deficit by the same amount in two steps. It would cut about $1 trillion in spending up front and set up a select bicameral committee to put together a future deficit-reduction package worth $1.7 trillion to $1.8 trillion. Failure of Congress to pass the future deficit-reduction package would automatically trigger cuts to defense spending and Medicare."

An aide familiar with the deal The Hill newspaper that the Medicare cut would not affect beneficiaries. "Instead," according to the report, "healthcare providers and insurance companies would see lower payments."

But that's still a squeezing of Medicare in order to meet the demands of congressional Republicans who have spent the past six months trying to put the program on the chopping block.

Congressional Progressive Caucus [4] co-chair Raul Grijalva says Obama and his negotiators have bent too far to the extremists. Like many progressives, Grijalva favored the straight up-or-down vote on debt ceiling. "Had that vote failed," he argued, "the president should have exercised his Fourteenth Amendment responsibilities and ended this manufactured crisis."

Instead, the president blinked in the face of Republican recalcitrance. And in so doing Obama agreed to what the Progressive Caucus co-chair decsribed as "a cure as bad as the disease."

"This deal trades peoples’ livelihoods for the votes of a few unappeasable right-wing radicals, and I will not support it," Grijalva declared Sunday afternoon. [5] "Progressives have been organizing for months to oppose any scheme that cuts Medicare, Medicaid or Social Security, and it now seems clear that even these bedrock pillars of the American success story are on the chopping block. Even if this deal were not as bad as it is, this would be enough for me to fight against its passage."

How widespread that sentiment will be within the House Democratic Caucus remains to be seen. While Senate Majority Leader Harry Reid, D-Nevada, has signed on with the president, House Minority Leader Nancy Pelosi, D-California, says she must meet with caucus members before taking a position.

Grijalva is far from the only member who is upset with the deal.

Congresswoman Donna Edwards, D-Maryland, slammed the deal. [6]

"Nada from million/billionaires; corp tax loopholes aplenty; only sacrifice from the poor/middle class? Shared sacrifice, balance? Really?" she complained, via Twitter, on Sunday.

Grijalva objected, in particular, to the lack of shared sacrifice.

"This deal does not even attempt to strike a balance between more cuts for the working people of America and a fairer contribution from millionaires and corporations. The very wealthy will continue to receive taxpayer handouts, and corporations will keep their expensive federal giveaways. Meanwhile, millions of families unfairly lose more in this deal than they have already lost. I will not be a part of it," the Arizona congressman explained. "Republicans have succeeded in imposing their vision of a country without real economic hope. Their message has no public appeal, and Democrats have had every opportunity to stand firm in the face of their irrational demands. Progressives have been rallying support for the successful government programs that have meant health and economic security to generations of our people. Today we, and everyone we have worked to speak for and fight for, were thrown under the bus. We have made our bottom line clear for months: a final deal must strike a balance between cuts and revenue, and must not put all the burden on the working people of this country. This deal fails those tests and many more."

But Grijalva's gripe was not merely a moral or economic one.

It was political, as well.

"The Democratic Party, no less than the Republican Party, is at a very serious crossroads at this moment. For decades Democrats have stood for a capable, meaningful government – a government that works for the people, not just the powerful, and that represents everyone fairly and equally. This deal weakens the Democratic Party as badly as it weakens the country," explained Grijalva. "We have given much and received nothing in return. The lesson today is that Republicans can hold their breath long enough to get what they want. While I believe the country will not reward them for this in the long run, the damage has already been done."

The question that remains is: How much damage? How much damage to vulnerable Americans? How much damage to the global reputation of the United States as a functional state? How much damage to a U.S. economy that is threatened by rising unemployment? How much damage to the image of the Democratic Party as a defender of working families?

There will still be a good deal of warngling over this deal. It could be rejected. It could be altered. But it cannot be defended as a sound or necessary response to a manufactured debt-ceiling debate and the mess that House Speaker John Boehner, R-Ohio, has made of it.

That is why the co-chair of the Congressional Progressive Caucus says: "I will not support the emerging debt deal."

"I will have no part of a deal that cuts Social Security, Medicare and Medicaid to appease the farthest reaches of the right wing of the Republican Party," argues Grijalva. "It is unconscionable to put these programs on the chopping block and ignore the voices and beliefs of the millions of Americans who trust us to lead while continuing to give handouts to the ultra wealthy and the largest corporations. There is no human decency in that."



Philip Scott Andrews/The New York Times
President Obama spoke about a debt deal on Sunday.

July 31, 2011

Leaders Reach Deal to Raise Debt Ceiling
New York Times

WASHINGTON — President Obama and Congressional leaders of both parties said late Sunday that they had agreed to a framework for a budget deal that would cut trillions of dollars in federal spending over the next decade and clear the way for an increase in the government’s borrowing limit.

With the health of the fragile economy hanging in the balance and financial markets watching closely, the leaders said they would present the compromise to their caucuses on Monday morning in hopes of averting a default before a Tuesday deadline.

President Obama spoke from the White House on Sunday night, telling reporters that “the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid a default.”

Just before Mr. Obama spoke on television, the two Senate leaders, Harry Reid and Mitch McConnell, took the floor to endorse the pact as well.

“I am relieved to say that leaders from both parties have come together for the sake of our economy to reach a historic, bipartisan compromise that ends this dangerous standoff,” said Mr. Reid, the majority leader.

The agreement came after a day of wrangling over Pentagon cuts, and it still must be sold to the Senate and the House, with the House providing a particular challenge.

As conversations flowed between the White House and Capitol Hill, Mr. Reid publicly embraced the compromise that would tie deep spending cuts to a debt increase, though his plan to bring it to a vote as early as Sunday were put off, as was a tentative meeting of Senate Democrats to review it.

According to Congressional and administration officials, the delay was attributable to efforts by Speaker John A. Boehner, Republican of Ohio, to limit immediate reductions in the Pentagon budget and better protect it from future cuts in order to cement votes from defense hawks. He needs those votes to win approval of the plan in the House.

While architects of the compromise stopped short of declaring they had a final agreement, a framework had emerged calling for at least $2.5 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling.

The tense, last-minute negotiations were taking place against a backdrop of uncertainty, with a looming threat of a costly downgrade of the nation’s credit rating and with investors worried about the global economic impact of a possible default. The political stakes were unusually high as well, with leaders in both parties staking out positions that may well be central to their re-election chances in 2012.

If the compromise were to be nailed down, attention would immediately turn to selling it to the rank-and-file. The leadership was anticipating objections from Republicans that the plan did not go far enough while Democrats were wary that Medicare spending would take a hit.

Despite the remaining political and procedural hurdles, the predominant mood on Capitol Hill was one of cautious relief that the gears were turning to produce legislation that would eliminate the threat of a potential government default after Tuesday.

Referring to the tortuous negotiations, Senator Dianne Feinstein, Democrat of California, said: “Sausage making is not pretty. But the sausage we have, I think, is a very different sausage from when we started.”

She noted that the proposed caps on federal spending, combined with creation of a new evenly divided panel to cut the deficit further, could fundamentally change federal finances.

But not everyone was pleased. “It may be the best we can do,” said Senator Jeff Sessions of Alabama, the senior Republican on the Budget Committee. “But I do not think it’s enough.”

With the talks appearing to make progress, the Senate blocked a Democratic proposal for a debt limit increase on a vote 50-49, falling 10 votes short of the 60 required to limit debate. But all attention was on the negotiations.

White House aides were in a flurry of meetings as they prepared for the prospect of announcing a deal. After weeks of political theatrics and Congressional votes that appeared to go nowhere, the mood at the White House on Sunday afternoon was one of cautious optimism.

But Obama administration officials are also aware of the precarious risk the president was running if he strikes a deal that Congressional Democrats find hard to swallow. Mr. Obama’s top political aides, including Vice President Joseph R. Biden and the senior White House adviser David Plouffe, were on the phone Sunday afternoon with Democratic leaders, who gathered in the Capitol Sunday afternoon to explore the outlook for the measure.

A major question mark remained the House of Representatives, where a vote on the agreement could occur Monday and where Mr. Boehner has found it difficult to corral the most conservative wing of the rank-and-file. While the bipartisan deal would be expected to attract significant Democratic support, Mr. Boehner must still persuade many of his members to get behind it and would be pushing for at least half of the House Republicans to back it.

In an e-mail to Republican House members, Mr. Boehner noted that “discussions are underway on legislation that will cut government spending more than it increases the debt limit, and advance the cause of the balanced budget amendment, without job-killing tax hikes.”

“Those talks are moving in the right direction, but serious issues remain,” the speaker wrote.

Under the plan as described by officials briefed on its outline, the debt limit would be increased by $900 billion in the first installment, subject to a Congressional vote of disapproval that President Obama would be able to veto. To prevent a default, $400 billion would be added immediately.

A second increase of $1.2 trillion to $1.5 trillion would be available subject to a second vote of disapproval by Congress. At the same time, a new joint Congressional committee would be created to find a like amount of cuts.

If the evenly divided committee failed to agree on a plan, Congress would either have to approve a balanced budget agreement or accept an across-the-board cut in spending in line with the committee’s goal, with 50 percent of the savings coming from the Pentagon beginning in 2013. Medicare would also sustain cuts, though the reductions would be capped.

The rationale for picking such favored programs as the Pentagon for Republicans and Medicare for Democrats was to provide a strong incentive for the new committee to avoid a deadlock and deliver a deficit reduction plan that could clear Congress.

According to Democratic officials close to the talks, among the final sticking points that were worked out were efforts to exempt the Medicaid program from reductions under the automatic spending reductions and make certain that the Medicare cuts hit health care providers, not beneficiaries.

Negotiators did agree that any deal would not include language that could lead to a new formula for the annual cost-of-living adjustments for Social Security beneficiaries that could save more than $100 billion in the first 10 years. While many economists have long said the existing formula overstates inflation, many Democrats oppose any change that would reduce benefits from current law.

Dropping the proposal from the White House-Congressional talks reflected in part the influence of Representative Nancy Pelosi, the Democratic minority leader, whose negotiating hand has been strengthened since she will have to deliver a significant number of Democratic votes for House passage of any solution given the likelihood that Mr. Boehner will face significant loss of Republican votes.

Senators said they expected that the plan as it was being portrayed would attract a bipartisan vote even though both Democrats and Republicans would have reservations.

Senator Mike Johanns, Republican of Nebraska, said that from the terms of the deal described to him, “I think I will be satisfied and supportive.” After years of work, he noted, Congress has become “serious about cuts in spending.”

Robert Pear and Jackie Calmes contributed reporting.
This article has been revised to reflect the following correction:

Correction: July 31, 2011

An earlier version of this story incorrectly stated when the automatic cuts would occur if Congress does not approve a second round in a few months. They would occur at the end of the year 2012, not 2011.

Economist Richard D. Wolff On The Fraudulent Political Theatre Surrounding the Debate on the U.S. Deficit

Richard Wolff: Debt Showdown Is Political Theater Burdening Society's Most Vulnerable (Video)
Friday 29 July 2011
by Juan Gonzalez and Richard D. Wolff,
Democracy Now! | Interview

Republicans have agreed to a vote today on a budget plan they say will cut the deficit $917 billion over 10 years. The move sets the stage for a showdown against unified Democratic opposition in the Senate and threats of a White House veto. To discuss the debt talks and economic austerity worldwide, we’re joined by Richard Wolff, Emeritus Professor of Economics at University of Massachusetts Amherst and author of several books, including "Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It." "This is political theater in which two parties are posturing for the election coming next year," says Wolff. "To put it in perspective, the number of times the government has raised the debt ceiling since 1940? Ninety, almost twice a year. This is a normal, automatic procedure. Every president, Republican and Democrat, has asked for it."


JUAN GONZALEZ: After weeks of infighting, Republicans have agreed to vote today on a budget plan they say will cut the deficit $917 billion over 10 years. The move sets the stage for a [showdown] against unified Democratic opposition in the Senate. Independent Senators Joe Lieberman and Bernie Sanders are promising to block it. White House spokesman James Carney warned yesterday that time is running out to reach a compromise. Carney also said Treasury Department officials may soon have to decide who will get government checks and who won’t, if the Treasury loses borrowing authority.

PRESS SECRETARY JAY CARNEY: Among the many obligations we have, the 80 million checks that the Treasury Department alone issues, payments that it issues every month, of the 1.2 billion payments the federal government makes in a year, those include veterans’ payments, Social Security payments, disability payments. They include the bills to contractors, small businesses, big businesses, that do work with the government, the people who manufacture the ammunition that we send to our troops in Afghanistan. And choices then have to be made. And it’s a Sophie’s choice, right? Who do you save? Who do you pay? That’s an impossible situation that this country has never faced, and should never face, if Congress does what it was elected to do and does its job.

AMY GOODMAN: White House spokesperson Jay Carney.

To discuss the debt talks, we’re joined by Richard Wolff, Professor Emeritus of Economics at University of Massachusetts Amherst, visiting professor here in New York at New School University, also hosts a weekly program on WBAI called Economic Update.

Welcome to Democracy Now!


AMY GOODMAN: So we are watching this dance in Washington. The House is going to vote today around the issue of the debt ceiling. The Senate says it’s dead in the water. President Obama is vowing to veto. What does this all mean?

RICHARD WOLFF: Well, basically, your word "dance" is perfect. This is theater. This is political theater in which the two parties are posturing for the election coming next year, using this occasion—to put it in perspective, the number of times the government has raised the debt ceiling since 1940? Ninety, almost twice a year. This is a normal, automatic procedure. Every president, Republican and Democrat, has asked for it. When they ask, typically, the representatives of the other party say, "Well, you’re not managing the government real well," and then they vote for it. And that has happened over and over again. So what you’re seeing is a decision, politically, to make it theatric, out of what otherwise would have been a normal procedure.

A hundred years ago, the Congress said, in order to control the government and not to allow businesses and rich people to be able to invest in government money easily, we’re going to have the government limit how much can be borrowed. That was the idea. Now it became automatic, as we became a debt society—excuse me—and so, suddenly, the Republicans basically decided to make theater, to run their campaign a little early this year, and to slow it all down and make a big to-do.

The world expects that this will have to be undone in a few days or weeks. They’re kind of amazed to see it being stretched like this, this old, normal procedure. And the assumption is that the politics in the United States has become as dysfunctional as our economic situation. And so, that’s the danger, that this rigmarole, this theater, is really a sign that normal life in the United States has been disrupted on a scale that people haven’t seen before.

JUAN GONZALEZ: But when you say that the Republicans decided to make theater out of it, it seems to me that the Democrats also have participated in the process by making this seem like it’s—Armageddon will occur unless we get this done by August 2nd. And in essence, at times it seems almost like the Obama administration is seeking this deadline to start moving in a more centrist direction economically that it has wanted to do, but has been absent the type of crisis that it would be able to convince the American public that it needs to do.

RICHARD WOLFF: There are certainly signs of that. And they’re very troubling to many of us who are economists, right, left and center, because basically, the Democrats have said, "We will do massive cuts. They just won’t be as massive as the Republicans want." And then they will appeal to the American people in the hope that Americans will choose the lesser evil: the Democrats who won’t cut so terribly compared to the Republicans.

And the Republicans are appealing to folks that are very upset by the economic situation, don’t know who to be angry at. In the American way, they get angry at the government. It’s a little bit amazing, if you take a step back. The overwhelming majority of people who’ve lost our jobs in this crisis have been fired by private employers. The overwhelming majority of people who have been thrown out of their homes have been—have had that happen because a private bank has gone to court to get that to happen. And yet, the American people have this tendency, built into our culture, to leap right over the person who’s actually done you the damage and to blame the government. And so, the government, in general, and the particular government of Mr. Obama, is the target, and the Republicans are playing on this. And that’s their ploy.

And the Democrats are saying, "Well, we’re not so bad. We’re going to tax the rich, just a little, and the corporations a little less. And that’s something the Republicans won’t do. And we will protect your Social Security, at least more than..."

But you’re right. In the process, everything moves over to massive cutting. And besides the morals of that, it’s economically crazy. In an economic situation where recovery is very poor, very uneven, to have the government cut back, the way that spokesman for the White House just told us, is to make an economic situation that’s bad worse. So you see a kind of political game being played at the cost of worsening the underlying economic situation. And for the world, that suggests a society that’s not working.

AMY GOODMAN: Let’s go to President Obama on Monday night, when he addressed the nation, reiterating his call for what he described as a "balanced approach" to deficit reduction involving spending cuts and tax increases on the wealthy.

PRESIDENT BARACK OBAMA: The first approach says, let’s live within our means by making serious historic cuts in government spending; let’s cut domestic spending to the lowest level it’s been since Dwight Eisenhower was president; let’s cut defense spending at the Pentagon by hundreds of billions of dollars; let’s cut out waste and fraud in healthcare programs like Medicare, and at the same time, let’s make modest adjustments so that Medicare is still there for future generations; finally, let’s ask the wealthiest Americans and biggest corporations to give up some of their breaks in the tax code and special deductions. This balanced approach asks everyone to give a little, without requiring anyone to sacrifice too much. It would reduce the deficit by around $4 trillion and put us on a path to pay down our debt. And the cuts wouldn’t happen so abruptly that they’d be a drag on our economy or prevent us from helping small businesses and middle-class families get back on their feet right now.

JUAN GONZALEZ: Shortly after the President addressed the nation on the budget crisis Monday night, House Speaker John Boehner responded in a televised address.

SPEAKER JOHN BOEHNER: The President is adamant that we cannot make fundamental changes to our entitlement programs. As the father of two daughters, I know these programs won’t be there for them and their kids unless significant action is taken now. And the sad truth is that the President wanted a blank check six months ago, and he wants a blank check today. This is just not going to happen.

AMY GOODMAN: Richard Wolff, economist, author, Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It, I did actually hear the reference to war by President Obama, but it’s rarely, rarely raised by Democrats or Republicans. One of your colleagues, Joe Stiglitz, said, over time, the wars in Iraq and Afghanistan will cost $5 trillion.

RICHARD WOLFF: There are a number of things that are not on the table. And frankly, I’m amazed that the President refers to what he does as a "balanced approach." First of all, the war and its enormous costs, off the table in any serious way. Going back to a serious taxation of corporations and of the rich in America, just, for example, at the scale that they were taxed in the ’50s, ’60s and ’70s, off the table.

Basically what’s being done is to suggest that now, after a "recovery," in quotations, that has only recovered the stock market and corporate profits and bank reserves, that has done nothing about unemployment and foreclosure—we haven’t had a balanced economic arrangement in this country for years. So, suddenly we’re going to be balanced in what’s coming next. That’s a strange kind of logic. Why is there not facing up to the war, the fact that you’re not taxing the rich? And perhaps the worst, we’re at a crisis because we have an economic system that hasn’t worked well, and the government bailed out banks and corporations by using public money. That was done to help them. It hasn’t helped many other folks. So now is not the time to do balance. Now is the time to correct the imbalance that has built up over all these years. And I think that would be where the President really ought to start.

JUAN GONZALEZ: But you do argue, contrary to some other liberal economists like Paul Krugman, that the deficits are a major problem and that the increasing deficit spending of the U.S. government has to be brought under control. So that would seem to indicate that your main push would be to obviously cut war spending, but also to raise taxes significantly.

RICHARD WOLFF: The most amazing thing to me is that we talk about fixing a government budget that’s in trouble, and we don’t talk about the revenue side in a serious way. That is an amazing thing. If you look at what happened to the American budget over the last 20 or 30 years, the culprit is obvious. We have dropped corporate taxes. We have dropped taxes on the rich.

Let me give you a couple of examples to drive it home. If you go back to the 1940s, here’s what you discover, that the federal government got 50 percent more money year after year from corporations than it did from individuals. For every dollar that individuals paid in income tax, corporations paid $1.50. If you compare that to today, here are the numbers. For every dollar that individuals pay to the federal government, corporations pay 25 cents. That is a dramatic change that has no parallel in the rest of our tax code.

Another example. In the ’50s and ’60s, the top bracket, the income tax rate that the richest people had to pay, for example the ’50s and ’60s, it was 91 percent. Every dollar over $100,000 that a rich person earned, he or she had to give 91 cents to Washington and kept nine. And the rationale for that was, we had come out of a Great Depression, we had come out of a great war, we had to rebuild our society, we were in a crisis, and the rich had the capacity to pay, and they ought to pay. Republicans voted for that. Democrats voted for that. What do we have today? Ninety-one percent? No. The top rate for rich people today, 35 percent. Again, nobody else in this society—not the middle, not the poor—have had anything like this consequence.

So, over the last 30, 40 years, a shift from corporate income tax to individual income tax, and among individuals, from the rich to everybody else. To deal with our budget problem without discussing that, putting that front and center, making that part of the story, that’s just a service to the rich and the corporations. There’s no polite way to say otherwise. And there’s something shameful about keeping all of that away and focusing on how we’re going to take out our budget problems by cutting back benefits to old people, to people who have medical needs. There’s something bizarre, and the world sees that, in a society that has done what it has done and now proposes to fix it on the backs of the majority.

AMY GOODMAN: And the argument that you give the money to the corporations and to the banks, and they will help people? They are the generator of jobs?

RICHARD WOLFF: The Republicans say it, and President Obama has said it repeatedly. He is going to provide incentives, he said, for years now. He is going to provide inducements and support for the private sector to put people back to work. We have a 9.2 percent unemployment rate. That’s what it’s been for the last two years. That policy has not worked. If corporations were going to do what the President gave them incentives to do, they would have done it. They’re not doing it. There’s no sign they’re going to do it. You have to face: that policy didn’t work.

What’s the alternative? Well, we don’t have to look far. Roosevelt, in the 1930s, the last time we faced this kind of situation, went on the radio in 1933 and 1934, and he gave speeches. And in those speeches, he said the following: if the private sector either cannot or will not provide work for millions of our citizens, ready, able and willing to work, then the government has to do it. And between 1934 and 1941, the federal government created and filled 11 million jobs.

The most amazing thing in the United States is not that we are not doing it. The most amazing thing is, there’s no bill to do it, there’s no discussion to do it. The president of the country never refers to it, keeps telling us—and the Republicans do the same—that the private sector is where we should focus our expectations. The private sector has answered: "We are not going to hire people here. We’re either going to hire no one, because we don’t like the way the economy looks, or we’re going to hire people in other countries, because they pay lower wages there." That’s a response of the private sector taking care of itself. It’s not a responsible way to run a society.

JUAN GONZALEZ: And one issue that you raised, in terms of how the corporations and bank profits have recovered tremendously, but—and many of these companies are sitting on huge piles of cash, that rather than invest in new machinery or bring in new workers, they’re just sitting on their money, and presumably investing it, because they’re not going to put it in at the bank rates or CD rates, so they’re obviously investing the money that they have, rather than create those jobs.

RICHARD WOLFF: Well, even more interesting, and maybe a bit of a shock to folks who don’t follow this, what the corporations are doing when they hold back the money—because it’s not profitable for them to hire—in large part, is they lend it to the United States government to fund these deficits. The United States government refuses to tax corporations and the rich. It then runs a deficit. It spends more than it takes in, because it’s not taxing them. And here comes the punchline. It then turns around to the people it didn’t tax—corporations and the rich—and borrows the money from them, paying them interest and paying them back. If the United States wanted to stimulate our economy in an effective way—

AMY GOODMAN: Pay even tax-deductible interest.

RICHARD WOLFF: Right, also. But if the government really wanted to do something, go get the money from them, stimulate, which will help them, and if you tax them to do it, you wouldn’t have a national debt. You wouldn’t run a deficit. We’re running a deficit because the people who run this society would like us to deal with our economic problems, not by taxing those who have it, the way we used to, but instead by endlessly borrowing them. And now the ultimate irony, we’ve borrowed so much as a nation from the rich and the corporations, they now are not so sure they want to continue to lend to us, because we’re so deeply in debt. And they want us instead to go stick it to poor people and sick people instead. It’s an extraordinary moment in our history as a nation.

AMY GOODMAN: We have to break, but we’re going to come back. Lots of people are sending us questions. They’re tweeting them in. They’re sending it to us on Facebook. You can go to or We want to hear from you. We’re talking to Richard Wolff, who’s at New School University here in New York. His new book is _Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It." Stay with us.


AMY GOODMAN: Our guest, Richard Wolff. His book, Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It. And people are sending us in questions. There is, as Richard Wolff says, an enormous hunger to understand all this. Eli Rivers on Facebook asks, "Given how the masses are getting continually and increasingly financially punished for events they had little or nothing to have caused, is it reasonable to assume that there will be major political upheavals in the near future? It seems we are almost at a breaking point." Professor Wolff?

RICHARD WOLFF: Yes, I think the—in a sense, that’s coming here in the United States, your previous guest explaining the gaps in wealth among the people, becoming more and more extreme. The signs are everywhere of a society like ours polarizing in a way that is going to undercut assumptions about what it means to be an American, expectations about realizing an American Dream. Those things are falling away, and people have to face that, and they’re upset. I think part of what we call the Tea Party is simply an expression, not so much of this or that ideological persuasion, but of a level of upset about economics and the future for their own children, that makes people look somewhere for something.

Europe also, I think, shows us the future. In Europe, where people are more organized, in trade unions, in socialist, communist and other political parties, there are vehicles that these institutions provide for public anger and public disagreement to be voiced in a reasonable and consistent way. In all the major countries of Europe, not just Greece, Portugal, Ireland and those that are in trouble, but in France and Germany and so on, there have been massive public actions in the streets showing that people do not want, to use one of the slogans in France, do not want the costs of an economic crisis to be borne by the mass of people who didn’t cause it and who have already suffered from it, and that has to stop. And that is shifting European politics. And while we don’t have the level of organization of people in this country that they do, I do think we will build them again, we will rebuild them from what they were before, because there has to be a change from the very direction that the questioner asks. And I’m sure that’s coming.

JUAN GONZALEZ: But in Europe, you have the remarkable situation that the more conservative parties are being pressured by the street to adopt more conciliatory policies in terms of dealing with the crisis, whereas in the United States—

RICHARD WOLFF: Going the other way.

JUAN GONZALEZ: —the more liberal parties are being—are seeing no pressure from the street, are increasingly moving to the right, in terms of how they see the need to deal with the crisis.

RICHARD WOLFF: It’s a wonderful case study. The German example is probably the best one—the biggest economy in Europe, the most important, run by a woman now named Angela Merkel, who runs that society. She did a remarkable thing over the last two months. She said there will be no bailout of Greece, unless banks are made to pay a part of the cost. Other governments in Europe didn’t have the courage. Why is this woman, a conservative, wanting to make sure the banks pay? Because she lost the last three bi-elections, and the critics of her are saying, "Your political career is over if you don’t stop making everyone in the society pay, except those who, A, caused this crisis, and, B, have been bailed out by the government to this point." So she actually changes. And I think that’s a sign that the pushback from masses of people, which will take many different forms, is already underway there and will come here.

AMY GOODMAN: Why are the people in the United States so different?

RICHARD WOLFF: I think it’s the question of organization. Over the last 50 years, we, the collective American people, have let the organizations that express mass concerns about economics atrophy. We’re at the end of a 50-year decline of our trade union movement. We don’t have the kinds of political parties we used to have in this country and that were very powerful in this country. And so, we don’t have the vehicles to articulate, express and bring political force to the way people feel. And so they go wherever there’s a little bit of organization—Tea Party—even if it’s a little strange and a little outside their frame, because it’s something. I think the message of other people will be, if we can form the kinds of organizations that articulate these positions, there are a lot of people out there ready, willing and able to become part of that.

AMY GOODMAN: This is another question from Facebook. Steve Cipolla asks, "Does it continue to make sense to refer to U.S. economic policy in isolation? Isn’t the real long-term threat to economic (and political) stability the persistence of increasing global income inequality?"

RICHARD WOLFF: Yes, but we are still dealing with corporations that have their bases, most of them, here in the United States. Are they more global than ever? Yes. Is that a serious problem? Absolutely. You know, 30, 40 years ago, we spoke about corporations moving production jobs out of the United States. Ten or 15 years ago, we began to talk about outsourcing, moving white-collar jobs out. The most recent addition to that is the decision of corporations, as they look around the world, to say, you know, the growth of our market, the growth of demand, it’s in Asia, it’s in Latin America, it’s in parts of—it’s not here. The American people are exhausted. Their wages are going nowhere. We have high unemployment. And the fact is, no one is going to lend them much more money because they’re tapped out. So they’re not a growing market.

So you see American corporations literally focused, for production and for consumption, elsewhere. That means they’re going to take care of themselves in the world. And if we don’t want to be left behind, if we don’t want the United States to become a backwater, then the freedom of corporations to do what they want has to be reined in. And that’s a difficult issue for Americans to confront and deal with. And we live in an ideology in which we’re supposed to believe that what corporations choose to do will magically be the best for all of us. It hasn’t worked that way. That’s why we are where we are. Basic change is the order of the day.

JUAN GONZALEZ: And in other regions of the world, that change is occurring. We’ve covered quite extensively here on Democracy Now! the changes in Latin America, where actually the income and the wealth gap is shrinking in the past decade for the first time in the memory of the political establishment of Latin America as a result of all of the socially oriented governments that have come to power.


JUAN GONZALEZ: It’s a completely different path from what’s going on here in the United States.

RICHARD WOLFF: And I think it also speaks to our situation, because before that happened, before you had Evo Morales, before you had Chávez, before you had—and whatever you think of their particular policies, you had an upswelling of people saying the status quo that has got us into this dead end is not tolerable. And they developed new organizations. They rebuilt old organizations. And suddenly, basic changes in policy, which reined in the power of private enterprise, which said that capitalist enterprises are not the be-all and end-all of how to run a society, those kinds of movements attracted millions of people, gained political power. And there really is no reason to believe that our society is immune or unable to do, in its own way and its own traditions, something similar.

JUAN GONZALEZ: Well, I want to ask you about another question Brian Clifford asks on our Facebook page. "In the current moment, people in liberal democratic states seem to have internalized capitalism as a natural and unquestionable order. How does the left rupture such subjectivities?"

RICHARD WOLFF: Good question. You know, again, it’s our history. For 50 years, it has been unacceptable politically in the United States to ask what is basically a straightforward question. We have a particular economic system. It’s called capitalism. We have every right as a society to ask of that system, is it working? Is it working for us? Do the benefits and the costs balance themselves out in a way that says we want to keep the system, or that says we want to change the system, or that says we ought to look for an alternative system? We’ve been afraid to ask that question. We’ve been afraid to have public debates. That’s the legacy of the Cold War. We can’t afford anymore to not do that. We have to do as the questioner says: raise the question.

As it is put in a very powerful slogan in Germany by a new party that now gets 12 percent of the national vote, here’s their slogan—it’s in Germany: Can Germany do better than capitalism? And their answer is yes. And that has forced a conversation about this system, its limits, its strengths and weaknesses. That’s long overdue in the United States. And one of the results of this crisis, and now of this governmental paralysis, is to give a strong impetus to asking those questions. And that doesn’t mean accepting the alternatives of the past. The old efforts of going beyond capitalism had strength, but they also had horrible weaknesses. We will learn from that, as human beings always have. And we can forge a country out of an opening of the debate about this economic system. And I want to be part of that, and I think the American people are ready and interested in doing it, as well.

AMY GOODMAN: I want to thank you very much for being with us. Richard Wolff, an economist, just back actually from Europe, but teaches here in New York at New School University. His book is called Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It.