Obama yokes seniors to a phoney CPI

From austerity to rebellion?

Robert Skidelsky, a Keynesian political economist, thus addressed the scourge of deficit mania:

This, the official doctrine of most developed countries today, contains at least five major fallacies, which pass largely unnoticed, because the narrative is so plausible.

First, governments, unlike private individuals, do not have to “repay” their debts. A government of a country with its own central bank and its own currency can simply continue to borrow by printing the money which is lent to it. This is not true of countries in the eurozone. But their governments do not have to repay their debts, either. If their (foreign) creditors put too much pressure on them, they simply default. Default is bad. But life after default goes on much as before.

Second, deliberately cutting the deficit is not the best way for a government to balance its books. Deficit reduction in a depressed economy is the road not to recovery, but to contraction, because it means cutting the national income on which the government’s revenues depend. This will make it harder, not easier, for it to cut the deficit. The British government already must borrow £112 billion ($172 billion) more than it had planned when it announced its deficit-reduction plan in June 2010.

Third, the national debt is not a net burden on future generations. Even if it gives rise to future tax liabilities (and some of it will), these will be transfers from taxpayers to bond holders. This may have disagreeable distributional consequences. But trying to reduce it now will be a net burden on future generations: income will be lowered immediately, profits will fall, pension funds will be diminished, investment projects will be canceled or postponed, and houses, hospitals, and schools will not be built. Future generations will be worse off, having been deprived of assets that they might otherwise have had.

Fourth, there is no connection between the size of national debt and the price that a government must pay to finance it. The interest rates that Japan, the United States, the UK, and Germany pay on their national debt are equally low, despite vast differences in their debt levels and fiscal policies.

Finally, low borrowing costs for governments do not automatically reduce the cost of capital for the private sector. After all, corporate borrowers do not borrow at the “risk-free” yield of, say, US Treasury bonds, and evidence shows that monetary expansion can push down the interest rate on government debt, but have hardly any effect on new bank lending to firms or households. In fact, the causality is the reverse: the reason why government interest rates in the UK and elsewhere are so low is that interest rates for private-sector loans are so high.

As with “the specter of Communism” that haunted Europe in Karl Marx’s famous manifesto, so today “[a]ll the powers of old Europe have entered into a holy alliance to exorcise” the specter of national debt. But statesmen who aim to liquidate the debt should recall another famous specter — the specter of revolution.

A damning judgment of Boehner’s recent budget

Robert Greenstein of the Center on Budget and Policy Priorities wrote:

House Speaker John Boehner’s new budget proposal would require deep cuts in the years immediately ahead in Social Security and Medicare benefits for current retirees, the repeal of health reform’s coverage expansions, or wholesale evisceration of basic assistance programs for vulnerable Americans.

The plan is, thus, tantamount to a form of “class warfare.” If enacted, it could well produce the greatest increase in poverty and hardship produced by any law in modern U.S. history.

This may sound hyperbolic, but it is not. The mathematics are inexorable.


In short, the Boehner plan would force policymakers to choose among cutting the incomes and health benefits of ordinary retirees, repealing the guts of health reform and leaving an estimated 34 million more Americans uninsured, and savaging the safety net for the poor. It would do so even as it shielded all tax breaks, including the many lucrative tax breaks for the wealthiest and most powerful individuals and corporations.

President Obama has said that, while we must reduce looming deficits, we must take a balanced approach. The Boehner proposal badly fails this test of basic decency. The President should veto the bill if it reaches his desk. Congress should find a fairer, more decent way to avoid a default.

Just to remind ourselves of our current situation, the current and prospective Federal debt has not produced a fiscal crisis, Social Security is not in trouble, the United States has one of the lowest tax to GDP ratios of all the OECD countries and an austerity budget can trigger a severe economic contraction during a time of high-unemployment. This whole ‘debate’ is class war in its simplest and vilest form. It is a war that the rich are winning, as Warren Buffet pointed out.

Well, I’ll be God Damned

H.R. 2411 (July 6, 2011), the Reduce America’s Debt Now Act of 2011, wants “To provide for an employee election on Form W-4 to have amounts deducted and withheld from wages to be used to reduce the public debt.”

There is a word for this kind of thing: Chutzpah.

And, to make matters worse, the generous patriot who donates a part (or all!) of her income to reduce the Federal deficit will still need to pay taxes on the money she donated to the Federal government!

The Secretary shall include on such certificates a reasonably conspicuous statement that any amounts deducted and withheld from wages under subsection (a) are not deductible as charitable contributions for Federal income tax purposes.

Simon Black offers the following assessment of this legislation:

There are so many things utterly wrong with his piece of legislation, it’s hard to know where to begin other than by saying that such intellectual and philosophical perversion is only capable of springing from unprincipled sociopaths whose sole capability is the destruction of value.

I cross-posted this article to Fire Dog Lake