Blog

Dave Johnson
Fellow, Campaign for America's Future

This year, the Social Security system projects that it will pay out $46 billion more in benefits than it will collect in cash. It made up for the shortfall by redeeming Treasury bonds bought in years when there were cash surpluses.

Here is the mistake, thanks to Dean Baker: Social Security Is NOT Selling Government Bonds,

This is not true. The Social Security trust fund is projected to earn $114.9 billion in interest on the bonds it holds. It will use a portion of these earnings to pay current benefits. It will not be redeeming its bonds.

Social Security has a huge trust fund — if you think $2.6 trillion is huge. That trust fund is invested in US Treasury Bonds, and earns interest.

When you hear that Social Security is “in trouble’ or “going broke” you are hearing from people who ignore this huge, huge trust fund and the interest it earns. This trust fund, along with the money people pay in, means that Social Security has enough to pay full benefits until 2037. Even then it will still be able to pay everyone more than they receive today. (Yes, more, because of cost-of-living adjustments.) (more…)

Jared Bernstein
Senior Fellow, Center on Budget and Policy Priorities

The deficit-reduction super committee could always pull a rabbit out of a hat, I guess, but the likelihood of anything but gridlock has been low from the beginning. I give the Republicans some credit for breaking the no-tax-increase-ever pledge, but their offer is so fundamentally unbalanced — $300 billion in revenue increases from closing expenditures in exchange for rate cuts that will amount to almost $4 trillion in tax cuts — that it can’t taken seriously.

But my point here is about something else. There’s a meme developing that if the committee were to gridlock, markets would react badly, interest rates would rise, and the message that “US = Greece” would be clear to all. To which I say: nonsense.

In fact, I’d encourage you to generally respond to the statement: “if X happens, markets will react badly” with a healthy dose of skepticism. Half the time, this formulation is scaremongering, used to garner support for your side. And the other half, even experienced analysts don’t know how the market will react (remember the S&P downgrade-interest rates on US Treasuries fell after the announcement… go figure).

Most recently, the landscape is littered with Chicken Little warnings about the impact of current US levels of indebtedness on interest rates. At the end of the day, these alarmists do a lot more harm than good, because someday Chicken Little will be right, and no one will listen to him.

In this case, market players have of course priced in the possibility of the super committee failing to agree on a plan. I’m not saying these players are all-knowing or even particularly rational, but if they haven’t figured out that gridlock is the likely outcome, they’ve got no business betting on markets. (more…)

Harold Meyerson

By Harold Meyerson
Editor-at-Large of The American Prospect

Wisconsin is just the tip of the iceberg. The Republican war on unions goes far beyond Gov. Scott Walker’s attempt to end collective-bargaining rights for public employees in his state or Gov. John Kasich’s effort to do the same in Ohio.

For a more comprehensive view of the Republicans’ war on unions, we need to focus on what Republicans in Washington did last week. In the House, Republicans passed, as part of their continuing resolution to fund the federal government through September, a provision that slashed the funding of the National Labor Relations Board (NLRB) by one-third.

But the truly breathtaking measure was an amendment by Rep. Tom Price (R-Ga.) to defund the NLRB – closing it down altogether – until the fiscal year ends in September. The measure failed Thursday because 60 Republicans joined every Democrat present in voting no, but three-quarters of House Republicans – 176 of them, including Majority Leader Eric Cantor (Va.) and Majority Whip Kevin McCarthy (Calif.) – voted yes. In other words, the House leadership supported abolishing the right of American workers – in the private sector no less than the public sector – to bargain collectively.

It is, after all, the NLRB that conducts the elections through which private-sector workers choose or reject a union. It is the NLRB that polices business and labor misconduct and that has the power to rule a strike or lockout unlawful. No other agency of government has that power. Defunding the NLRB would be like defunding every election board in the country during presidential and congressional elections: People would maintain, theoretically, their right to elect their officials, but there’d be no one to print the ballots or count the votes. (more…)

Bill Scher

By Bill Scher
Executive editor of LiberalOasis.com

The White House deficit commission is expected to vote in two days — on Wednesday, Dec. 1 — on a final report of recommendations. And it will likely not be much different than the draft released by its co-chairs Erskine Bowles and Alan Simpson.

Bowles said last week: “We aren’t going to make it softer than it is today. It’s going to be a tough report. If we get 14 votes, great. If we don’t, then by God, we’ll put it out there.” (14 out of 18 is needed to trigger an agreement with Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to vote on the recommendations.)

Though today’s Washington Post reports: “Bowles and Simpson are rewriting their plan to accommodate the concerns of commission members, though the two insist, in Simpson’s words, that it will not be watered down to ‘mush’ for the sake of winning votes.”

That was an odd sentence in a W. Post report that claimed we already had a “consensus” for what Simpson-Bowles are offering. It’s a strange consensus that doesn’t have the votes in hand, let alone any obvious support from the broader public, as my colleague Dave Johnson observed. (more…)

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

This, from the Washington Post‘s conservative pundit George Will:

Total spending by parties, campaigns and issue-advocacy groups concerning every office from county clerks to U.S. senators may reach a record $4.2 billion in this two-year cycle. That is about what Americans spend in one year on yogurt, but less than they spend on candy in two Halloween seasons. Proctor & Gamble spent $8.6 billion on advertising in its last fiscal year.
Those who are determined to reduce the quantity of political speech to what they consider the proper amount are the sort of people who know exactly how much water should come through our shower heads — no more than 2.5 gallons per minute, as stipulated by a 1992 law. Is it, however, worrisome that Americans spend on political advocacy — determining who should make and administer the laws — much less than they spend on potato chips, $7.1 billion a year?

In a word, Mr. Will, yes. (more…)

Michael Winship

By Michael Winship
Senior writer at Bill Moyers Journal on PBS

(With apologies to the late, great Damon Runyon)

So I am in Washington, DC, our nation’s capital, admiring the buildings and the fine monuments and so forth, when I run into my very dear friend Gorilla Bagsley, whom I have not had the pleasure of seeing for many a year.

We shake hands with joy indeed and Gorilla says to me, come and have a drink for old time’s sake. I have not imbibed in a very long time, I tell him, and fear that such a thing will give me gas, but he persuades me to come into an establishment he knows and to bend an elbow with a pint of something pale and weak while he imbibes a beverage of a more muscular variety.

I have not been with Gorilla since he and I were young and flimflamming the tourists around New York Harbor, telling them that the Statue of Liberty is green on account of it was a gift from the generous people of Mars. Now here he is in Washington, which to me is passing strange. For if Boston is the home of the bean and the cod, as the poet once said, then surely Washington is the home of the scheme and the fraud, and so I ask Gorilla, who I thought had gone the route of the straight and narrow, what he is doing in such a place.

“Oh,” he says. “This is a wonderful place.”

“Why?” I ask, and Gorilla replies, “Because, dear pal of mine, it is coin-operated.” (more…)

Bill Scher

By Bill Scher
Executive editor of LiberalOasis.com

The country may be cynical. The country may be dissatisfied. The country may be angry.

But the country does not want to stop Barack Obama.

An ABC News poll this week found that: “For all their economic gripes, 52 percent of Americans say they’d rather have President Obama than his predecessor in control of economic policy, vs. 35 percent who’d prefer to have former President Bush in charge.

Also, a new focus group analysis finds middle-class mothers have “patience” with Obama underneath the initial disappointment at the pace of change. W. Post’s Ruth Marcus reports:

They are less enraged than unconvinced. “It’s hard to trust him,” one woman in St. Louis said, but it turned out that what she meant was not that Obama wasn’t trustworthy — it was that she was uncertain that matters would improve. “A lot of things have happened since he’s been in office, so we tend to blame him,” she said. “And things haven’t turned around very quickly, so what is going to happen next? You don’t know.” …

Neil Newhouse, a Republican pollster who viewed the groups, said he was struck by these voters’ seeming patience with the president. “I’ve seen it before that people want him to do well. But the clear voicing of sympathy for the guy was a surprise for me. They feel sorry for what he inherited and what he’s got to deal with. . . . There’s frustration he hasn’t been able to figure it out. There’s a clear sense that he’s not the guy they voted for two years ago, but they still have hope that he can still be that guy.” (more…)

Zach Carter

Zach Carter
Economics Editor, AlterNet; Fellow, Campaign for America’s Future

The Washington Post has published a very silly op-ed by Chrystia Freeland accusing President Barack Obama of unfairly “demonizing” Wall Street. Freeland wants to see Obama tone down his rhetoric and play nice with executives in pursuit of a harmonious economic recovery. The trouble is, Obama hasn’t actually deployed harsh words against Wall Street. What’s more, in order to avoid being characterized as “anti-business,” the Obama administration has refused to mete out serious punishment for outright financial fraud. Complaining about nouns and adjectives is a little ridiculous when handcuffs and prison sentences are in order.

Freeland is a long-time business editor at Reuters and the Financial Times, and the story she spins about the financial crisis comes across as very reasonable. It’s also completely inaccurate. Here’s the key line:

“Stricter regulation of financial services is necessary not because American bankers were bad, but because the rules governing them were.”

Bank regulations were lousy, of course. But Wall Street spent decades lobbying hard for those rules, and screamed bloody murder when Obama had the audacity to tweak them. More importantly, the financial crisis was not only the result of bad rules. It was the result of bad rules and rampant, straightforward fraud, something a seasoned business editor like Freeland ought to know. Seeking economic harmony with criminals seems like a pretty poor foundation for an economic recovery. (more…)

Robert Creamer

By Robert Creamer
Political organizer, strategist and author

Ever wonder how Wall Street bankers manage to make tens — and sometimes hundreds — of millions of dollars? How do people who really don’t produce anything manage to siphon such gigantic sums from the pockets of the people who produce goods and services — who actually create the wealth?

The answer is that they have managed to gain almost monopolistic control of the keys to world financial markets, to sources of capital that are necessary to finance equity investments and bonds for everyone from the largest international corporations to new start-ups.

But, you may ask, how can this be? In the kind of competitive financial markets envisioned by Adam Smith, competition should create multiple gateways to these capital markets. What’s more, price competition should prevent massive overcharges by the underwriters of big financial deals.

On Friday, Aug. 20, Washington Post financial columnist Steven Pearlstein published an insightful article examining the reasons why there is so little price competition on underwriting deals between Wall Street’s big banks.

He points out that the big investment banks would normally stand to make almost $450 million in fees on the $15 billion stock offering by General Motors. In this case, though, the federal government owns most of the stock. Goldman Sachs — convinced that it would never be named lead underwriter because of its legal and PR issues — decided to do something that is never done on Wall Street: undercut the fee structure. It shocked its rivals by violating an unwritten law of the investment banking world — it engaged in price competition. (more…)

Dave Johnson

By Dave Johnson
Fellow with Campaign for America’s Future

House Minority Leader John Boehner (R-OH) gave a speech this week describing his party’s positions on jobs and the economy going into the fall election. Summary: Our economic policies destroyed the country’s economy and millions of lives, but it made a few of my buddies really REALLY rich, so let’s do more of it.

I write about the specifics of Boehner’s call to return to disastrous trade policies below, but first I just have to say a few words about his economic ideas in general and how utterly wrong they are. In the speech Boehner said we have an “economy stalled by ‘stimulus’ spending.” But according to FOX News’ Wall Street Journal, yesterday the CBO reported that “the impact of the stimulus program estimated … the plan lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points.” In addition, the Washington Post reported, “The CBO said the act also increased the nation’s gross domestic product by between 1.7 percent and 4.5 percent in the second quarter, indicating that the stimulus may have been the primary source of growth in the U.S. economy.”

Boehner also said that “each dollar the government collects is taken directly out of the private sector.” This is the old “taxes take money out of the economy” argument, which is intended to trick people into thinking that the money just disappears instead of being used to pay for the schools, courts, agencies and infrastructure that enable businesses to thrive and drive the country’s prosperity. If you think that President Eisenhower’s spending on the Interstate Highway System “took money out of the economy” you really need to see someone about your problems and not take them out of the rest of us. (more…)