Government of S&P, By S&P and For S&P

July 28th, 2011

A number of analysts are finally getting around to asking some very sensible questions regarding the power and influence of Moody’s, Fitch, and Standard & Poor’s in the debt limit boondoggle.


Although we probably should have started this conversation months ago, it's better late than never. Robert Reich draws attention to the fact that the "$4 trillion in savings" figure we've been hearing Republicans insist upon day after day is a target specifically set by S&P, an unelected private firm.

One More Time...

July 26th, 2011

One more time. Higher taxes do not discourage growth. Period.

Policy Vs. External Shock

July 25th, 2011

While drawing attention to a very interesting chart (below via), James Fallows makes some strong points about what drives the deficit most:

"...it identifies policy changes, the things over which Congress and Administration have some control, as opposed to largely external shocks -- like the repercussions of the 9/11 attacks or the deep worldwide recession following the 2008 financial crisis. Those external events make a big difference in the deficit, and they are the major reason why deficits have increased faster in absolute terms during Obama's first two years that during the last two under Bush. (In a recession, tax revenues plunge, and government spending goes up - partly because of automatic programs like unemployment insurance, and partly in a deliberate attempt to keep the recession from getting worse.) If you want, you could even put the spending for wars in Iraq and Afghanistan in this category: those were policy choices, but right or wrong they came in response to an external shock.

The point is that governments can respond to but not control external shocks. That's why we call them "shocks." Governments can control their policies. And the policy that did the most to magnify future deficits is the Bush-era tax cuts. You could argue that the stimulative effect of those cuts is worth it ("deficits don't matter" etc). But you cannot logically argue that we absolutely must reduce deficits, but that we absolutely must also preserve every penny of those tax cuts. Which I believe precisely describes the House Republican position."

The Jobless Recovery - A Simple Explanation

July 25th, 2011

The reason job creation has been largely collapsed for the last decade has never been made more clear than this; via PoliticsUSA:

"In a recent report in a JP Morgan memo to their investors from Michael Cembalest, the chief investment officer he says, “US labor compensation is now at a 50-year low relative to both company sales and US GDP.” Cembalest continues to explain why corporate profits are so strong while the rest of the working class are feeling the pinch, “reductions in wages and benefits explain the majority of the net improvement in margins.” 75% of the increase in profit margins directly correlate with the reduction in workers’ wages."

A little over a decade ago, a fundamental redefining of investment concepts took hold throughout America's boardrooms. A policy of depressing wages, off-shoring profits, extending work hours and decreasing benefits was instituted at a vast majority of our corporations at the expense of both development and expansion. One does not need to be a Keynesian to see that this trend, coupled with the massive Bush 2 tax cuts, has ultimately resulted in a net negative effect on domestic demand.

From the JP Morgan Report

The long term non-sustainability of this posture seems not yet to have dawned on the executives or shareholders involved. Nor, it seems, has it occurred to them that refusal to invest in the very country which has made their fortunes possible is very nearly unpatriotic.

And You Thought The Bush Tax Cuts Were Bad?

Jun 16th, 2011

You may have heard about Republican Presidential hopeful Tim Pawlenty's recent tax proposals. Most analysts have focused their attention on Pawlenty's insistence that his plan would spur an annual growth rate of 5%. Such a claim is, as economist Michael Ettlinger of the Center For American Progress put it, "patently ridiculous."

As TPM reported, withering criticism is coming from the right as well:
"The trend growth rate is not going to be 5% in the United States," Douglas Holtz-Eakin, director of the CBO under President Bush and a top GOP advisor, told TPM. "The market just doesn't support that. It just doesn't."

While a brief spurt of high growth is not uncommon coming out of a deep recession, sustained 5% growth appears a bridge too far. Pawlenty cited expansion periods under Reagan and Clinton as models, but neither president achieved comparable numbers -- in fact from 1980-2000 there was only one time in which growth surpassed 5% at all, a 7.2% boom in 1984 that immediately leveled off the next year.

"It's impossible" Robert Reischauer, former CBO director under Presidents Bush Sr. and Clinton and current president of the Urban Institute, told TPM. "You get growth because of investment, an increased labor force, a rise in human capital, and innovation. Add all those components together and they don't sum up to 5% given what the labor force is going to be and the investment possibilities are."

While a critique of so stunning a claim is necessary, it is perhaps more valuable to look at T-Paw's numbers next to the disastrous Bush cuts of 2001 and 2003. The crippling expansion of the deficit that would result from these policies is not hard to estimate... merely to fathom. If we are ever going to grapple with the U.S. debt in an adult manner, we have to reject this devotion to the provably false supply-side mantra of the tax-cut as "cure-all."

From Chuck Marr at The Center For Budget and Policy Priorities

Kevin Drum sums it up perfectly:
"As usual, a bone is thrown to us schmoes making 50 grand or so: our after-tax incomes would go up about 5%. Let's all go to Disneyland! But the real action is at the high end: income increases of 15-20% for the wealthy. Party time! And the super-rich millionaire class? It's Katy bar the door: they'll see their after-tax income go up by a walloping 33%. Time to buy that second yacht!

Say what you want about how boring Pawlenty is, but he knows his audience: scraps for the middle class who aren't in on the con while the wealthy who understand exactly what's going on rake in billions. Is that cynical behavior from this son of a milk truck driver? Sure. But hardly a surprise from anyone who knows the Republican Party's real power base. Pawlenty obviously knows it better than most."

Indeed. This proposal seems to have a lot less to do with organizing the country's finances than expanding the former Governor's campaign chest. But there are plenty of reasons to believe that the rest of the Republican field will embrace the plan generally. And this is dangerous.

Wow. Just Plain Wow.

May 10th, 2011

In spite of 10 years of tax cuts that have turned a surplus into the most crippling debt in our nation's history, Rush says "It's demonstrably proven that tax cuts increase revenue." Actually, it's been proven that such statements are some serious bullshit.

From Media Matters:

Not Enough Paper Hats

May 5th, 2011

As the Great Recession deepened last year, many conservative Republicans tried to have it both ways.

On the one hand, they attempted to smear President Obama's fiscal proposals as "job-killing." They played childish games and argued that his administration was "bad" for employment. They also sought to portray the collapse of new job creation as something that had only become a crisis a day or so after the inauguration of the new Democratic administration. 

The Paul Ryan Pamphlet Part 2 - Defense

April 11th, 2011
by F. Grey Parker

© copyright 2011 S. Harris

Having examined Rep Paul Ryan's (R-WI) Path To Poverty in some detail, it's been frustrating watching so many rightist partisans and pundits respond by lavishing praise upon its "seriousness." My first critique, focusing on the tax implications alone, argued that it is largely removed from economic science as we know it.


It was satisfying to see Paul Krugman say much the same thing and for the same reasons a few of days later. He does, after all, have a little more experience reading budgets than I do.

"They should have waited until people who know how to read budget numbers had a chance to study the proposal. For the G.O.P. plan turns out not to be serious at all."

The Paul Ryan Pamphlet Part 1 - Taxes

April 5th, 2011
by F. Grey Parker

My first reaction when I finished reading The Path To Prosperity, Rep Paul Ryan's (R-WI) highly anticipated "budget," was to wonder where the rest of it was. It's like an introduction without a following body of work. The calculated lack of specificity is stunning. It's a buffet of political talking points.

There are certainly many scary charts, spooky graphs and a lot of Neo-Con think-tank phrases. But to call it a "budget" is an insult to arithmetic itself. In fact, at his press conference earlier this afternoon Ryan said it "is not just a budget, it’s a cause." With all due respect, faith doesn't secure the outcome of financial equations.

Let's look at the Ryan scheme:
"Keeps taxes low so the economy can grow. Eliminates roughly $800 billion in tax increases imposed by the President’s health care law. Prevents the $1.5 trillion tax increase called for in the President’s budget. Calls for a simpler, less burdensome tax code for households and small businesses. Lowers tax rates for individuals, businesses and families. Sets top rates for individuals and businesses at 25 percent. Improves incentives for growth, savings, and investment"

Taxes are at their lowest levels in modern history and have been for years. There has been no corresponding expansion of the economy. What's more, the $800 billion in prevented "tax increases" he touts is predicated on the complete repeal of HCR. That is not going to happen. There is no demonstrably broad benefit to the U.S. economy from the hyper-wealthy having a tax rate of 25%. A 10% drop in the corporate rate with not one single loophole singled out for elimination is ridiculous.

We have to substantially raise taxes and soon. I say it. Krugman says it. Reich says it in no uncertain terms. In fact, a majority of Americans say it. And yet, Ryan skips merrily through an alternate reality. 

Ryan actually cites economic projections from the Heritage Foundation as supporting data within the plan itself. The same Heritage Foundation that said "pro growth tax cuts... always create jobs" while arguing for the extension of the disastrous  W Tax Cuts that didn't create jobs. As a matter of fact, the weakest ever post-Depression job creation accompanied that fiscal policy. Of course, that's not what Heritage had projected prior to their initial implementation. Matt Yglesias dug up this gem today.

Heritage  prosperity projections that they insisted would follow passage of the W Tax Cuts...

The entire payroll expansion under W came to 2.3% which is almost six times smaller than the expansion rate under just 4 years of Jimmy Carter! Ryan's plan is a larger dose of the same failed "stimulative policies" which have caused this mess. But by all means, let's assume that Heritage is totally correct... this time.

The subject of our revenue in-stream is carefully packaged alongside political triggers designed to provoke panic:

"As economic growth deteriorates, it becomes harder for the government to raise revenue through taxes, and a vicious cycle ensues. If the nation ultimately experiences a panicked run on its debt, it will be forced to make immediate and painful fiscal adjustments (like the austerity program that has provoked riots in Greece)"

America/Greece comparisons are absurd. They are also dishonest. The crisis in Greece was caused by two principal factors. The first is that their economy was so much smaller than ours and not complexly diversified. The second is that they invested their national treasure heavily in our own under-regulated derivatives markets. These are the same markets that Mr. Ryan doesn't want to "over-regulate."

What actually makes it "harder for the government to raise revenue through taxes," is cutting taxes, allowing rampant loophole abuse and refusing to impose taxes in the first place.

The obvious initial steps towards solving our problems are as follows; Expire the W Tax Cuts, return the highest marginal individual rates to Eisenhower Era levels and set the top corporate tax rate on profits at a flat 15% with no loopholes. 

Describing Ryan's collection of fantasies as Reaganomic nonsense, which I did earlier today, is actually unfair to the Gipper. When President Reagan was confronted with the destructive and unsustainable reality of tax rates that were substantially higher than today's, he signed bills into law which raised them 7 times. 

One must wonder. If Rep. Paul Ryan and his ilk were presented with an actual Reagan budget today, would they portray it as "progressive?"

This "Path" isn't conservatism. It's corporatism. It's less Jefferson than it is Mussolini.

Reich On Taxing The Rich

April 4th, 2011

On Friday, I wrote a plea for a return to some sense of sanity regarding tax policy.

Today, Robert Reich wrote:

"Here's the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.

Source - The Center for Budget and Policy Priorities - CBPP

Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma -- even if we cut back on our bloated defense budget -- it wouldn't be nearly enough.

The vast majority of Americans can't afford to pay more. Despite an economy that's twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they're employed they're earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That's less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that's only because so many families now have to rely on two incomes.)"

We are quickly running out of time to right our course. The proof of the deepening plutocracy which drives our monetary policy is revealed in the hard numbers showing a majority of Americans were opposed to the extension of the "W Tax Cuts" for the hyper-wealthy. Tomorrow, it appears Rep. Paul Ryan (R-WI) is going to double down on this madness. This is because they don't care what the people think. 

Our window of opportunity is closing.

A Sad Devotion To A Failed Religion

March 22nd, 2011

The near fundamentalist conservative mantra that "pro growth tax cuts always create jobs" is no longer merely dubious or cynical or even statistically wrong. It is either delusional or it is willfully evil. Last week, Scott Keyes of Think Progress interviewed Newt Gingrich regarding his beliefs regarding revenue, corporate tax loopholes and growth. Newt's responses are nothing less than stunning. It's one thing that Newt declares continued allegiance to this particular falsehood:

"GINGRICH: I just want to say this because it’s an important difference in how we approach this. If we give you an incentive to do something right that creates more jobs, that is not a loophole. That’s an incentive. If you then intelligently follow that incentive and create more jobs, we should celebrate that as a good thing."

Fair enough. If, however, the policy in question not only fails to create jobs but actually corresponds to the worst job creation in American history, the appropriate response is not to argue a decade later that you need to do more of it. What's genuinely frightening and corporatist to a degree not heard since the early part of the last century (the second quote) is this:

"GINGRICH: First of all, if they make millions and millions in profit, they probably employ thousands and thousands of people and those thousands and thousands of people are contributing a lot to America."

Read that again. He declares that corporations need pay nothing. Because their workers pay taxes. Corporations shouldn't. I should. And you should. And that single mother working from week to week should. Again, this is either madness... or it is pure fucking evil.

The Top 1%

March 22nd, 2011

The devotion to tax cuts as a recipe for job growth is universally endorsed by the American conservative movement. This is increasingly hard to fathom. During the last decade, the most dramatic conversion of this theory into actual policy was undertaken. We must face the fact that the results of this experiment have not only failed to maintain balanced economic expansion relative to population, they have actually crippled it. The resulting collapse in revenue has put our country's credit rating at risk. If we do not eliminate a vast majority of corporate tax loopholes and raise the top marginal personal rate by at least 3 to 4 percentage points, the dream of America is very likely lost. Even the architects of trickle down theory are declaring this continued article of faith to be a disaster. I stipulate that furtherance of these tax codes is closer to insanity. Late last year, the following graphic was published by Jay Kimball. Let us revisit it, shall we? The vast American middle class could never have been created in the first place had this monetary system been in place from the 30s through the 70s.

Quote Of The Day 2

March 17th, 2011

‎"The Bush Tax Cuts were the biggest fiscal mistake in history." -- David Stockman, Reagan's Budget Director

The Real Reason We Risk Our Rating

Jan 14th, 2011

There is increasingly bad news on the horizon regarding the United States' AAA financial rating. Any number of factors are included in yesterday evening's WSJ piece on the chances that S&P and Moody's may be forced to lower that rating. 

This would be, to put it delicately, a disaster of epic proportions. The problem with the piece is that it doesn't actually provide much context for the primary reason both institutions brought this up last year. It also relegates the most important factor to the 16th paragraph.

"...measures of the U.S. debt burden include federal debt to revenue, estimated to average 397% of gross domestic product until 2020. The ratio of interest to revenue, meanwhile, is expected to rise to 17.6% by 2020, nearly double last year's level. These are "quite high for an Aaa-rated country," Moody's said in its report."

REVENUE. Say it with me. "Revenue." Got it? What's glaringly missing here is the fact that Moody's and S&P affirmed in December that the rating might have to lowered due to extension of the "W Tax Cuts." 

The Big Trend

Jan 4th, 2011

After years of slavish devotion to Reaganomic fantasy and the effects of the "W. Tax Cuts," we have a very predictable economy. True, it is an inequitable, unsustainable and shameful sort of reverse Socialism, but it is something we can really count on. Enjoy the 112th Congress. This is what they want to make "permanent."

From the CBPP:
"The average income of the bottom 90 percent of households fell 7 percent from 2007 to 2008, in inflation-adjusted dollars, the largest one-year drop for this group since 1938.  The loss in 2008 more than wiped out the increase from 2002 to 2007, leaving the average income for the bottom 90 percent of households at its lowest level since 1996.”

Teddy Roosevelt On Taxing The Very Rich

Dec 20th, 2010

Framing the argument against the extension of the "W Tax Cuts" in a far superior manner than any of it's modern foes, are these words form Teddy Roosevelt.

"We grudge no man a fortune in civil life if it is honorably obtained and well used. 

It is not even enough that it should have been gained without doing damage to the community. We should permit it to be gained only so long as the gaining represents benefit to the community.... The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and … a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate." 
emphases ours

Why Extending The "W Tax Cuts" Was Nonsense

Dec 20th 2010

A MAJOR HAT TIP TO GEORGE STOCKER FOR GRAPHIC ASSISTANCE WITH THIS

I have said for several years that the "W Tax Cuts" were a bona fide disaster. There is no legitimate argument to the contrary. We now live in a state of permawar on 2 fronts, we have radically expanded corporate welfare in as many other ways as possible and our infrastructure is collapsing. We need to invest in America on a level not seen since... well, frankly, on a level not seen.

The chart and figures posted below are from The Wall Street Journal

The single argument for extending this failed policy has been that it will create JOBS.

The Heritage Foundation:

"Pro growth tax cuts... always create jobs."

Except they didn't. Under George W. Bush, we added 7.5 million fewer jobs to the economy than we did under 4 years of Jimmy Carter. It's worth noting that the American population was roughly 80 million fewer people in the Carter Era. When viewed per capita, this is beyond poor; It represents the fundamental collapse of job creation as we used to know it. There is much to learn from these numbers and others we will be publishing using them as context.

When? For the love of God, are these tax policies going to start "stimulating?"

President	Jobs created	Jobs at end of term	Jobs at start of term	Payroll expansion	Jobs created per year in office	Population growth	Percent change in population
George W. Bush	3.0 million	135.5 million	132.5 million	2.3%	375,000	22.0 million	7.7%
Bill Clinton	23.1 million	132.5 million	109.4 million	21.1%	2,900,000	25.2 million	8.9%
George H.W. Bush	2.5 million	109.4 million	106.9 million	2.3%	625,000	12.5 million	4.8%
Ronald Reagan	16.0 million	106.9 million	90.9 million	17.6%	2,000,000	17.3 million	7%
Jimmy Carter	10.5 million	90.9 million	80.4 million	13.1%	2,600,000	9.8 million	4.3%
Gerald Ford	1.8 million	80.4 million	78.6 million	2.3%	745,000	5.1 million	2.3%
Richard Nixon	9.4 million	78.6 million	69.2 million	13.6%	1,700,000	12.3 million	5.7%
Lyndon Johnson	11.9 million	69.2 million	57.3 million	20.8%	2,300,000	11.3 million	5.6%
John F. Kennedy	3.6 million	57.3 million	53.7 million	6.7%	1,200,000	8.2 million	4.3%
Dwight Eisenhower	3.5 million	53.7 million	50.2 million	7%	438,000	23.3 million	12.8%
Harry Truman	8.4 million	50.2 million	41.8 million	20.1%	1,100,000	N/A	N/A

Quote Of The Day - Tax Cut Extension Edition

Dec 20th, 2010

"The definition of insanity is doing the same thing over and over again and expecting different results". -- Albert Einstein

The Tax Deal And Public Opinion

Dec 13th, 2010

Saving The Rich part 1

Nov 30th, 2010

Rachel Maddow lays out what the Republican greed monkeys are planning for our troubled economy.

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