Blog

Conservatives say they want to “bring back” the old USA, the one that existed during those decades of the twentieth century they only seem to see through a gauzy golden haze. Whatever its problems, that country was a place where Republicans and Democrats agreed on two simple principles: That the most fortunate among us should pay their fair share, and that our government must invest in the nation and its future.

When Rick Perry says he wants to bring back “the America I where I grew up,” he’s talking about the era when Dwight D. Eisenhower, a Republican President, built the Federal highway system. One of the reasons Eisenhower was able to do that is that the top tax rate was much higher than it is today. While today’s highest marginal today is 35% and capital gains are taxed at only 15%, the highest tax bracket was 91% the year Rick Perry was born.

Whenever I talk about tax brackets I’m attacked by right-wingers who say I don’t understand, that high taxes discourage job creators. They’ll say things like “You hippies just don’t get it! If taxes are too high rich people will stop working and investing. The Job Creators will go away!”

Well, I do get it. When I spent a student year in Great Britain the top marginal tax rate was 102%. Once a person reached a certain level of income, they had to pay more in taxes than they earned. And a few years before that, George Harrison made a compelling case against the 95% tax bracket on the Revolver album by singing “Taxman.” (The line is “that’s one for you, nineteen for me.” I make that a 95% marginal tax rate, but you can check my math if you like.) (more…)

Most Americans, the 99 percent, feel the pressure of indebtedness. When they owe a friend a buck, their conscience bothers them until they’re square. They pay their bills, working second jobs if necessary. They meet mortgage obligations even when underwater.

That’s why there was a deficit Super Committee. Americans don’t like debt, including bills owed by their government. It weighs on them, even when it’s borrowing by Washington to create jobs and speed recovery.

But for the majority of millionaires – the 1 percent — incurring debt does not evoke anxiety. They’re numb to the feeling of responsibility that indebtedness induces in the 99 percent. They believe they owe nothing to their country or society despite all they’ve gained. They feel no duty to repay America for creating the environment that enabled them to amass all that wealth.

Thus the Super Committee failed.

The committee was searching for $1.2 trillion over 10 years. The Bush tax cuts, which disproportionately benefited the rich, cost $2.8 trillion over the past decade. But the 1 percent obstructed a return to the pre-Bush-balanced-budget-era tax rates and would sneer at the mere suggestion that they pay the much higher marginal rates the wealthy accepted after World War II to settle those government debts. In fact, Republicans on the Super Committee actually proposed additional tax cuts for the rich. (more…)

Congress gave us a wonderful Thanksgiving present when we got word that the supercommittee “superheroes” were hanging up their capes. While many in the media were pushing the story of a dysfunctional Congress that could not get anything done, the exact opposite was true. The supercommittee was about finding a backdoor way to cut social security and Medicare, and create enough cover that Congress could get away with it.

It is important to remember the basic facts about the budget and the economy. Contrary to the conventional wisdom in Washington, it is easy to show (by looking at the website of the Congressional Budget Office) that we do not have a chronic deficit problem. In 2007, prior to the collapse of the housing bubble and the resulting economic downturn, the deficit was just 1.2% of GDP.

The deficit was projected to remain near this level for the immediate future, even if the Bush tax cuts did not expire, as originally scheduled in 2011. If the tax cuts were allowed to expire, then the budget was projected to turn to surplus.

All this changed when the collapse of the housing bubble wrecked the economy. The story is simple, the housing bubble generated over $1tn in annual demand by stimulating record levels of construction and causing a home equity-driven consumption boom. This demand disappeared when the bubble burst. This is what created the large deficits that we are now seeing.

The $1tn-plus deficits are replacing lost private-sector demand. Those who want lower deficits now also want higher unemployment. They may not know this, but that is the reality – since employers are not going to hire people because the government has cut its spending or fired government employees. The world does not work that way.

While this is the reality, the supercommittee was about turning reality on its head. Instead of the problem being a Congress that is too corrupt and/or incompetent to rein in the sort of Wall Street excesses that wrecked the economy, we were told that the problem was a Congress that could not deal with the budget deficit. (more…)

Republicans have made quite the show of disparaging the Dodd-Frank financial reform law, calling for its repeal, refusing to provide regulators with the funds to implement it, and blocking nominees for key regulatory positions. Rep. Scott Garrett (R-NJ) took the latest step in that campaign yesterday, introducing a bill that would repeal an important Dodd-Frank safeguard for the financial system.

One of the key factors that led to the housing bubble’s boom and bust was the ability of subprime mortgage lenders to make a loan and then turn around and sell the entire loan to Wall Street. As the Center for Public Integrity wrote, “lenders were selling their loans to Wall Street, so they wouldn’t be left holding the deed in the event of a foreclosure. In a financial version of hot potato, they could make bad loans and just pass them along.” This fueled a dramatic decline in lending standards and gave subprime lenders every incentive to push loans onto people, since the lenders could divorce themselves from all the risk associated with a loan that didn’t pan out.

Dodd-Frank requires that lenders retain at least five percent of their loans, so that they have some “skin in the game.” Republicans on the House Financial Services Committee — following Financial Service Committee Spencer Bachus’ (R-AL) call to “serve the banks” — want to the repeal that requirement:

(more…)

Sorry deficit fanatics, this one has nothing to do with the cost of the stimulus or the deficits run-up during the Obama years. We’re talking real money here. We’re talking about plans to raise the age of Medicare eligibility to 67.

To deficit hawks everywhere this is a great way to save the government money. Life-expectancy at age 65 is roughly 20 years. Therefore raising the age of eligibility for Medicare by two years would shave roughly 10 percent off the program’s budget. (The actual saving would be somewhat less since it is cheaper to treat people when they are 65 and 66 than in their 80s or 90s.) For a program that is projected to cost more than $1 trillion a year (at 5 percent of GDP) in a decade, and even more in following decades, this would amount to real savings.

But the cost of this savings is a much higher health care bill for beneficiaries. As it is now, millions of people in their 60s struggle to hang onto jobs that provide health care insurance or do without, hoping that they can make it until 65 without a major medical problem. This proposal pushes the magic age out two more years. (more…)

Visit msnbc.com for breaking news, world news, and news about the economy

The GOP can’t come up with an original ad concept?

Just days from a potential default, House Speaker John Boehner (R-OH) this afternoon rejected Senate Majority Leader Harry Reid’s (D-NV) plan for raising the debt ceiling, saying he can’t support any plan that doesn’t cut entitlement programs like Social Security and Medicare. Reid’s plan, just hours old when Boehner aimed to kill it, essentially called the GOP’s bluff, giving them exactly what they have been asking for all along — spending cuts matching the increase in the debt ceiling and no new revenues.

The White House had already signed onto Reid’s conservative plan, making it the best hope of averting a crisis since Boehner walked out of negotiations Friday. “This is an offer that Republicans can’t refuse,” said Sen. Charles Schumer (D-NY).

Apparently not. The Reid plan “makes no changes to the biggest drivers of our deficit and our debt and that would be entitlement programs,” Boehner said at a late afternoon press conference, flanked by other GOP leaders. This demand seemed to be a brazen moving of the goal posts, as entitlement cuts never appeared to be red-line demand for Republicans for raising the debt ceiling.

(more…)

After pushing the government to brink of shutdown last week, Republican Congressional leaders are now preparing to push America to the edge of default by refusing to increase the nation’s debt limit without first getting Democrats to concede to large spending cuts.

But while the four Republicans in Congressional leadership positions are attempting to hold the increase hostage now, they combined to vote for a debt limit increase 19 times during the presidency of George W. Bush. In doing so, they increased the debt limit by nearly $4 trillion.

At the beginning of the Bush presidency, the United States debt limit was $5.95 trillion. Despite promises that he would pay off the debt in 10 years, Bush increased the debt to $9.815 trillion by the end of his term, with plenty of help from the four Republicans currently holding Congressional leadership positions: Speaker John Boehner, House Majority Leader Eric Cantor, Senate Minority Leader Mitch McConnell, and Senate Minority Whip Jon Kyl. ThinkProgress compiled a breakdown of the five debt limit increases that took place during the Bush presidency and how the four Republican leaders voted: (more…)

By Ian Fletcher
Senior Economist, Coalition for a Prosperous America

I shall leave aside for now the strategic question of whether America should stiff China, i.e. repudiate our roughly $3 trillion in obligations to them. Strategically, repudiation of debt and other instruments on this scale is obviously something analogous to the atomic bomb in warfare: a very extreme option, with serious negative side effects, and not something to be taken lightly.

My question in this article is, rather, the ethical question: does America have the right to stiff China? Frankly, we quite arguably do.

Any serious ethical argument on this question turns upon the fact that China has not honored obligations it has assumed towards us, so therefore we are not obliged to honor our obligations towards it. This sounds like a technicality, but in fact, China’s failures to honor its obligations run into the trillions of dollars.

Let’s start with currency manipulation. China engages in this practice to a massive degree, spending roughly a billion dollars a day to drive down the renminbi-dollar exchange rate. And yet China has agreed, by becoming a signatory to the Articles of Agreement of the IMF, not to do so. Article IV, section 1 of this document–which China voluntarily signed–reads: (more…)