recession

President Obama Gave Speaker Boehner the Debt Ceiling to Play With in 2010

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And here we are again! It started in 2010. The Bush tax cuts were about to expire. There was leverage to negotiate a debt ceiling raise or to just let them expire. How do I know there was leverage? I know Republicans like tax cuts for the rich, and there was a deal for the purpose of extending them with Republican votes. It passed with those Republican votes, which led to this whole thing because there was no debt ceiling raise included.

Maybe others are unaware of this? I don't know. It doesn't matter though; the uninformed shouldn't dictate fantasy as reality in a reality based community. This is the actual reality and why we are worried about a global financial calamity with regard to a possible political default on the public debt, which is a choice and otherwise impossible for a sovereign currency issuer.

Obama on the Debt Limit — December 2010

Q Mr. President, thank you. How do these negotiations affect negotiations or talks with Republicans about raising the debt limit? Because it would seem that they have a significant amount of leverage over the White House now, going in. Was there ever any attempt by the White House to include raising the debt limit as a part of this package?
 

THE PRESIDENT: When you say it would seem they’ll have a significant amount of leverage over the White House, what do you mean?
 

Q Just in the sense that they’ll say essentially we’re not going to raise the — we’re not going to agree to it unless the White House is able to or willing to agree to significant spending cuts across the board that probably go deeper and further than what you’re willing to do. I mean, what leverage would you have –
 

THE PRESIDENT: Look, here’s my expectation — and I’ll take John Boehner at his word — that nobody, Democrat or Republican, is willing to see the full faith and credit of the United States government collapse, that that would not be a good thing to happen. And so I think that there will be significant discussions about the debt limit vote. That’s something that nobody ever likes to vote on. But once John Boehner is sworn in as Speaker, then he’s going to have responsibilities to govern. You can’t just stand on the sidelines and be a bomb thrower.

You know, we on the left knew what this would lead to. You don't trust John Boehner with the full faith in credit of the United States unless one is completely clueless or an economic nihilist. The resulting signs we are starting to see of a financial panic in response to the prospects of a default on top of the ongoing depression, the jobs crisis, the continuing climate and ecological crisis all converging into one huge Epochal crisis, point to a special kind of disdain for the public that all our elected leaders have for us. I mean, we have enough problems without adding to them through a self induced global financial then economic crisis caused by the President's pursuit of a deficit terrorist grand bargain whether through incompetence or outright corruption.

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John T. Harvey: Austerity Leads To... Austerity!

In the real world and the reality based community, there is talk about austerity from people who understand the nuances of it and macroeconomic accounting identities. They point out the undeniable fact that there is austerity in the UK, the Eurozone, and yes, the United States. This interactive chart will show this, though I can't embed it here. So instead, I will add a small snapshot of some of the data.

Net spending in the United States has steadily declined since it rose from 2008 to 2009 when the inadequate stimulus(only $500 billion of direct spending at about 1.5 percent of GDP) was passed. Stimulus packages don't exist in a vacuum, and you have to count all government spending, which basically shows how exactly the numbers, including the stimulus as this does, didn't close the output gap. And since the numbers didn't, that is actually austerity. After all, spending went up in the UK and Eurozone from 2008 to 2009 as well, and since then, their spending has declined. Even though it is on a higher level, it is being cut at an even more alarming rate with its fate set to go below our miserable level by 2017.

I have pointed this out before. Sometimes I get frustrated, and point this out harshly, because some pride themselves on denying this established data to support whatever a politician in their party says or does. I don't know why. Denying reality is not going to give resources to people who need them. There is a reason my last diary has been cited by the reality based Post Keynesian MMT community, in which I am truly grateful for and humbled by; it is the truth.

The real economy of jobs and wages continues to go nowhere thanks to the lack of deficit spending and an illogical debate in DC about how much austerity we need to appease the invisible bond vigilantes and confidence fairies. It is neoliberal deficit terrorist economic insanity based on lies. And on that note, it is my pleasure to republish a piece by someone in the reality based economic community whom I can now proudly say is a friend of mine, Post Keynesian MMT economist John T. Harvey. He, once again, brings clarity to these matters in a way that only he can.

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John T. Harvey: "The Coming Recession: How Fiscal Responsibility is Economic Suicide"

As you might have heard the economy is contracting while unemployment remains high inching higher especially in real terms again while Washington is too stupid or corrupt across the board to notice. I can't say I didn't see this coming even as just an above average layman. All this focus on austerity is detrimental. After all, spending is actually income and so are deficits which are the life blood of the private sector in the economy when it comes to those sectoral balances you hear me always harping about.

And on that point I refer to Post Keynesian economist Wynne Godley as he along with MMT economist L. Randall Wray predicted this crisis in 2000 and that matters. Therefore it's safe to say the Post Keynesian school is pretty much vindicated. And part of this tradition can be read in Forbes magazine every month. Imagine that! I have thanks to discovering the work of the most excellent Post Keynesian/MMT economist John T. Harvey.

I have to thank NY brit expat for introducing me to John whom is not only a brilliant economist, but an all around cool guy who is very approachable and has an awesome taste in music. He stresses that the economics discipline hasn't made economics very understandable to the general public and he's right; however, you wouldn't know that by reading his many excellent pieces on why everything people think they know about debt and deficits is absolutely wrong. As John points out, it's not only wrong, it pervades this entire ignorant and corrupt political debate happening right now over this stupid sequester that was a creation of the White House and Congress.

As you will read down below, this horrible self induced debt ceiling pro austerity political show where never is heard an encouraging word like full employment, but instead for Peter Peterson's enjoyment, idiotic words praising deficit terrorism(budget balance and cutting our safety net) rules the day. It only amounts to economic decay and a likely recession on the way depending on how much deficit spending is cut in the coming days.

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No, This Fiscal Scam Won't Be Different Than 2011. Stop Deluding Yourselves

Of course that can be easy to do with corporate media hacks parading around as "journalists" basically working to preserve the corrupt machine they feed off of. They're feeding people revisionist nonsense about the so called fiscal cliff; nonsense like how because of the President was reelected he has more leverage this time. As if Democrats ever use leverage after they win elections like how they kept funding the Iraq war in 2006 after their opposition to the war gave them those mid term victories. Nancy Pelosi also took impeachment of the war criminal GWB off the table so future war crimes could be committed.

And then in 2008 after winning an unprecedented majority in both Houses of Congress, higher than at anytime leading up to that point on the GOP's end, we were told we didn't have a mandate for progressive polices despite the fact that the right's neoconservative Laissez-faire ideology had been fully discredited.

The Mandate Manipulation Machine Enters Stage Right

As I predicted a while back, the Partisan-Industrial Complex in Washington, D.C. has deployed its quadrennial Mandate Manipulation Machine to make sure that the 65 million Americans who voted for Barack Obama remember that America giving more than 340 electoral votes to an African American billed as a Islamic Marxist terrorist means there is no mandate for real change in this, a country obviously more conservative than ever.
 

A cursory glance at the newspapers today shows the media teeming with stories quoting incoming Obama administration officials, Democratic Party leaders and spokespeople for corporate front groups insisting that actually, no real change can be made, and what small-bore changes can happen, will have to happen in the very distant future, not soon. My favorite was the one-two punch from Senate Majority Leader Harry Reid (D-NV) and Democratic National Committee chair Howard Dean. Upon hearing of his bigger senate majority, Reid said on Tuesday, "This is not a mandate for a political party or an ideology.

And of course we now know that was Democrats' way of telling us they would waste the crisis that elected them, keep TBTF, not prosecute anyone who caused the crash, dump the EFCA, enact Dolecare instead of a public option or Medicare Buy In, and go half ass on all qualitative legislation. This is what actually led up to the mid term losses in 2010. And keep in mind this 2012 election victory doesn't even compare to the victory in 2008.

And yet they tell us we will see a new reinvigorated President and Congress. They tell us they are confident this time. They tell us that this time Democrats know they have a mandate for progress so things will be different than when the debt ceiling debacle made fools of them all. No, this is actually what the White House is telling us; the same thing as after the 2008 election victory now in 2012.

Axelrod: Talk of mandate 'foolish, generally untrue'

Obama senior campaign adviser David Axelrod downplayed talk of an election mandate on the "fiscal cliff" on Thursday.
 

Axelrod said presidents always talk after an election about a mandate, but he called such talk "foolish." President Obama and congressional Republicans are bracing for talks on tax hikes and spending cuts that are now set to be implemented in January.
 

“Everyone’s going to have to come to the table in the spirit of getting things done, but on this issue of particularly the fiscal cliff — presidents always say, ‘I have a mandate'; that's a foolish word and generally untrue,” Axelrod told MSNBC’s "Morning Joe" on Thursday.

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WH Advisor David Plouffe and Goldman Sachs CEO Agree That Medicare and Medicaid Must be Cut

Cross posted in Orange

Yes, it's true. If the White House would like to disavow David Plouffe's words now is the time. Time is running short but it's pretty obvious that he speaks for the White House given that David Plouffe is the President's closest confidante. If you have the stomach to sit through this forum it's right there for you to see, but I'll post the relevant portion that matches up with Lloyd Blankfein's mentality that the 99% need to sacrifice Medicare and retire later for the fantasy deficit crisis he, the White House, and Congress are peddling to the American people.

The President's closest adviser is telling his base that additional cuts to pay down the deficit(not the 716 billion to Advantage, fraud, or providers from the 2010 CBO baseline on the effects of the ACA) in Medicare and Medicaid are coming and to be ready for them.

Senior White House advisor David Plouffe warns Republicans and Democrats alike must take political hits in order for deal to be had

"The only way that gets done is for Republicans again to step back and get mercilessly criticized by Grover Norquist and the Right, and it means that Democrats are going to have to do some tough things on spending and entitlements that means that they'll criticized on by their left," Plouffe said at his alma mater in conversation with former McCain campaign manager Steve Schmidt.
 

[.........]
 

Plouffe added that while the White House wants to engage in comprehensive tax reform, they know they must also "carefully" address the "chief drivers of our deficit": Medicare and Medicaid.

Lloyd "Sell them shitty deals with the blessing of the US DOJ" Blankfein whole heartedly agrees with Plouffe. He's also visiting the White House today. I have a feeling whatever good feelings labor and progressive groups had yesterday were perhaps misguided given the statement we just heard from David Pouffe. That and of course basically the priority of making capital whole on the backs of labor as 93% of the "recovery" goes into Lloyd Blankfein's pocket since 2010.

Goldman Sachs CEO: Entitlements must be contained

BLANKFEIN: You're going to have to undoubtedly do something to lower people's expectations -- the entitlements and what people think that they're going to get, because it's not going to -- they're not going to get it.
 

PELLEY: Social Security, Medicare, Medicaid?
 

BLANKFEIN: You can look at history of these things, and Social Security wasn't devised to be a system that supported you for a 30-year retirement after a 25-year career. ... So there will be things that, you know, the retirement age has to be changed, maybe some of the benefits have to be affected, maybe some of the inflation adjustments have to be revised. But in general, entitlements have to be slowed down and contained.

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