Words of wisdom from Riotstan

The Guardian today reports that the aristocrat George Osborne, currently Britain’s Chancellor of the Exchequer, feels optimistic about the future and Britain:

The chancellor used his emergency statement to parliament to say that recent events in the global economy had “vindicated” the government’s deficit reduction programme, putting in a bullish performance after the Bank of England downgraded its UK growth forecasts for the fifth time this year.

George Osborne made the second of two emergency government statements, speaking after nine days of economic upheaval and one day after Bank of England governor Sir Mervyn King warned of more economic “turbulence” ahead, saying “headwinds were becoming stronger by the day”.

In his statement, Osborne acknowledged this squall of bad economic news, saying the FTSE had fared badly in the past month. “The huge overhang of debt means the recovery will be longer and harder than we had hoped,” he said.

“This is the most dangerous time for the global economy since 2008, and we should be clear about that.”

But he sought to turn events to his advantage, telling parliament the UK had become a “safe haven” for stock markets in recent days, with the unpredictability of stocks making an investment in UK bonds more attractive. Referring to recent market turbulence, he said: “The market for our government bonds has benefited.”

Tory Realism

Quote of the day

The International Financing Review (h/t Cate Long) points to the altered “country risk” assessment the United States courts with its mindless, absurd, ridiculous and irresponsible debt limit ‘debate’:

It is not clear yet if the US Congress will raise the nation’s debt ceiling in time to avoid a default, but the country’s gilt-edged credit rating is clearly now vulnerable to a downgrade, and that is going to have a lasting effect, regardless of the outcome in Washington.

Imagine that another country was threatening to default out of choice — and imagine what the President, congressmen and senators would say if that country owed money to the US. The volume would be deafening as US officialdom made the most of its bully pulpit to demand that the nation in question lived up to its obligations. They would point out that no internal dispute could possibly provide an excuse for threatening to default – and that such a decision would irreparably damage that country’s credibility.

They would be right, of course, and the same applies to the US.

Well, we’ll see. After all, America is exceptional.

Quote of the day

Attaturk asks:

Who actually won [the Congressional wrangling over the debt limit vote] last night, the hypocrites, the assholes or the insane?

He also answers his question:

Oh yeah, it is still a tie and also all of them.

What’s wrong with this thought?

In a widely read and much discussed article, Elizabeth Drew wrote:

Someday people will look back and wonder, What were they thinking? Why, in the midst of a stalled recovery, with the economy fragile and job creation slowing to a trickle, did the nation’s leaders decide that the thing to do —in order to raise the debt limit, normally a routine matter — was to spend less money, making job creation all the more difficult? Many experts on the economy believe that the President has it backward: that focusing on growth and jobs is more urgent in the near term than cutting the deficit, even if such expenditures require borrowing. But that would go against Obama’s new self-portrait as a fiscally responsible centrist.

First, let us consider the point which Drew got right: America’s political situation is now in such a low state and likely produce a bizarre outcome with respect to the “debt limit” and “budget priorities” conflicts that future Americans — along with others around the world — will find it difficult if not impossible to understand and explain what happened in the summer of 2011. It is telling that a routine matter like increasing the debt limit triggered a budget conflict. This fact strongly suggests that Washington was waiting for the occasion to run wildly into this risky future.

Let us turn to what is wrong with her thinking. Obama is not a fiscally responsible centrist. The broadly construed reasons for making this judgment: He’s not fiscally responsible and he’s not a centrist. How might one reasonably call Obama a fiscally responsible politician when he has already refused to use the 14th Amendment and Coin Seigniorage options to manage the debt limit political problem? With this double refusal Obama has publicly embraced Federal debt default as an acceptable political risk for him and the country he governs. Now, to my mind, befuddled as it is by leftwing thinking, defaulting on the nation’s debts is as obvious a case of fiscal irresponsibility as one could imagine. Promising to do so if pushed is no improvement at all. So, Obama is not a fiscally responsible president.

Furthermore, how might anyone consider Obama a centrist when he has embraced a reactionary political economics? Choosing to throw millions into poverty is always a politically reaction path. And this is the path Obama has put his name on. Perhaps this Democratic President does sit between the far rightists and the moderates and leftists in his own party. But that fact, assuming its veracity for the sake of the argument, only reveals the vacuity of the term, “centrist.” Even though he might be a centrist in this sense of the word, Obama would remain a reactionary in the substantive sense of that word, albeit a reactionary who sits between the farther rightists and the undifferentiated mass sitting to his left. There is little that is tempered, rational, pragmatic and thus moderate about this President’s politics. He fights for the programs he believes to be best.

Drew’s erroneous Obama interpretation may originate in her belief about Obama’s ‘right turn’:

The question arises, aside from Obama’s chronically allowing the Republicans to define the agenda and even the terminology (the pejorative word “Obamacare” is now even used by news broadcasters), why did he so definitively place himself on the side of the deficit reducers at a time when growth and job creation were by far the country’s most urgent needs?

It all goes back to the “shellacking” Obama took in the 2010 elections. The President’s political advisers studied the numbers and concluded that the voters wanted the government to spend less. This was an arguable interpretation. Nevertheless, the political advisers believed that elections are decided by middle-of-the-road independent voters, and this group became the target for determining the policies of the next two years.

That explains a lot about the course the President has been taking this year. The political team’s reading of these voters was that to them, a dollar spent by government to create a job is a dollar wasted. The only thing that carries weight with such swing voters, they decided — in another arguable proposition — is cutting spending. Moreover, like Democrats — and very unlike Republicans — these voters do not consider “compromise” a dirty word.

Pace, Drew, it is a matter of public fact that Obama wanted to cut Social Security and other entitlements since the early days of his administration, and his desires were reported to be such at the time. Knowing this about Obama’s intentions, I would argue that the President is not a weakling or a deal-maker willing to bridge two extremes; rather, he is a Machiavellian virtuoso who has used the Congressional Republicans as his stalking horse. As Michael Hudson observes, “Obama has come to bury Social Security, Medicare and Medicaid, not to save but kill them.” The reality of the moment shows that, “The President and his men simply support terrible policies.” And it is because of his masterful statecraft that the President now sits in just the place he wants to be — holding an axe over the neck of America’s New Deal liberalism. The fall of this axe will be Obama’s radical change we can believe in.

Mike Lee likes California so much

Senator Mike Lee (R-UT), Senate class of 2010, wants a Constitutional amendment to impose a ⅔rds supermajority requirement on the Congress whenever it votes for a tax increase. This, of course, is the Constitutional limit on democratic governance that has made California a basket case economy. Lee discussed his desires on Hardball with an incredulous Chris Mathews:

Ian Millhiser of ThinkProgress calls Lee’s gambit extortion:

So Lee wants to rewrite our Constitution to [sic] that the American people must always live under conservative governance, regardless of who they elect, and he’s got a simple plan to force his colleagues in Congress to make this happen. That’s a mighty nice economy we’ve got here, it would be a shame if Mike Lee had to break it.

And so it is.

Quote of the day

Dean Baker writes about the intransigence of the Congressional Republicans:

The tension is building in the budget talks as the calendar closes in on the Aug. 2 drop-dead date. According to Treasury Secretary Geithner, this is the date where the government would no longer have the money to pay its bills and a default on the debt would be looming.

As many have noted, including me, a default on the debt would be an absolute disaster for the financial system. We would see the same sort of freeze up of lending as we did after the collapse of Lehman in September of 2008; although this time would almost certainly be much worse.

With U.S. government debt no longer the rock-solid pillar of the world financial system, banks would instantly lose much of their capital. They would not only have to write-down the value of government debt, but also all the assets backed by the government, like Fannie Mae- and Freddie Mac-issued mortgage-backed securities.

This would almost certainly push the major banks into insolvency. J.P. Morgan, Citigroup, Goldman Sachs and the rest would suddenly be back in the welfare line. And any rescue would almost certainly not restore them to their former strength and profitability like the last one did. If the government defaulted on its debt, Wall Street would take a shellacking and it would never again be the center of world finance.

This is why we knew all along that the Republicans in Congress were not serious about their threats over allowing the government to default. While these people might be happy to kick poor people in the face, to take hard-earned wages and benefits away from working people, and to shove retirees out onto the street, the Republican congressional leadership is not about to cross Wall Street. After all, who pays for the campaigns?

This meant that the Republicans were always going to fold if President Obama didn’t cave. The only question was when and how.

Obviously Baker does not think much of the Republican’s commitment to an abstract principle like fiscal responsibility:

The idea that Republicans in Congress were going to force big cuts in the country’s most important programs — Social Security, Medicare and Medicaid — by taking Wall Street hostage with the debt ceiling is absurd. It was only necessary for President Obama to call their bluff.

The bottom line is that the debt ceiling is a gun pointed first and foremost at Wall Street’s head. And, there is no way on earth that Wall Street is going to let the Republicans pull the trigger.

Capital’s iron fist

After reading the transcript of Obama’s 7.11.2011 Press Conference, I would normally feel the need to say something snarky about lesser-evil voting and the ‘pragmatic attitude’ which motivates the left to throw its lot in with the Democratic Party. But there is no reason to do that now. Obama has shown himself to be such a tool that only those leftwingers who refuse to see something so plain and obvious as him would continue to support him and his party.

I suppose we can be grateful for one thing. The Democratic Party, thanks to Obama’s brutal economic project, can no longer pretend to be the party for the rest of us. It today stands tall as capital’s naked iron fist. The Republicans should stand in awe of what Obama is now proposing, of what he wants to accomplish.