Clarity on the deficit and the so called debt crisis

Posted by on Tuesday, July 26, 2011 · 22 Comments 

 

There’s a saying in business that one can not manage what he’s not measuring and he is certain to mismanage what he refuses to measure properly.

Let me ask you a question.  If you’re working somewhere, it’s likely that you have a 401(k) or a 403(b) type of savings plan for retirement.  If you do, would you consider it a wise move to raid your retirement contributions to fund your everyday living expenses?  Yes, people do this, but is this really wise? It’s generally not for several reasons, but the main problem revolves around the idea that you can’t “spend it” and “have it” too and if you were to come to me for financial advice, I’d tell you that you either need to cut your living expenses or go out and get another job to increase your income if you wish to preserve your retirement nest egg.    Saving money is always the choice between current consumption and delayed gratification.  But even determining where the spending or lack of income problems lie requires that one measure properly or do the accounting.

Just as it would be foolish to spend your retirement savings now and expect that you’ll have something set aside for later, it would still be even more foolish to construct your household budget on the basis of draining your retirement savings to cover your current living expenses.  By doing this, you’re actually planning to rob from your future to finance your current spending.

Just as this advice would hold for an individual, it also holds for a government.  The government has collected a retirement nest egg called social security and its somewhat like a 401(k) in that it’s deducted and earmarked specifically from your paycheck.  If you look at your paycheck, you’ll see three different federal taxes that are withheld : Federal income taxes, FICA (Social Security) and Medicare.  Why are there three separate federal taxes as opposed to just one, especially since they’re going to the same US Treasury?  Well, they’re separate because they’re specially earmarked for a certain purpose.  The social security and medicare taxes are earmarked specifically for those purposes and are to fund those specific entitlements.  The federal income taxes are for general discretionary spending.  When you hear people talking about raising or cutting taxes, it generally applies to this latter component.  It might be helpful to think of each of these taxes in terms of three different buckets like this:

Bucket 1—Federal Income Taxes (Discretionary Spending)

Bucket 2- FICA (Social Security)Taxes

Bucket 3- Medicare Taxes

When you think of these as three separate buckets, it’s easy to visualize how things are earmarked and the idea is that whatever goes into a bucket is segregated and set aside for specific purposes.  So what goes into the social security bucket should only be used for social security.  The same applies to medicare.  Separating and accounting for funds earmarked for certain purposes is called Fund Accounting.  In other words, Fund Accounting keeps separate tabs on money collected that’ s earmarked for certain purposes and matches it up with related expenditures in the same bucket. 

Well that’s simple enough.  Three different buckets for three different taxes and we’re keeping everything separate so we know what’s what.  But what happens when one bucket begins to get empty while the others are full?  Well, sometimes there’s what’s known as interfund borrowing and the empty bucket gets filled with water “borrowed” from one of the other buckets, but this generally is for a temporary exigency and should be replaced whenever the empty bucket fills back up from its own water source (funds).  It’s somewhat irregular when a bucket is permanently on empty and its only source of “water” is from  another bucket, yet this irregularity is constantly the situation between the buckets for Federal Income Taxes and Social Security.  The Federal Income Tax bucket is running empty and its source of water has been the social security bucket.  The Federal Income Tax bucket is running out of water for two reasons: insufficient income taxes and too much spending.  The greater part of the spending from that bucket (approximately 40%-50%) is defense spending.

It used to be that when we talked about the federal budget, we only were talking about Bucket 1. Buckets 2 and 3 for Social Security and Medicare were considered “off budget” because they held funds specifically for the entitlements.  That was the case up to the administration of Lyndon Johnson.  Johnson decided to bring the Social Security and Medicare buckets “on budget” to mask the money he was spending on the Vietnam War.  This could happen because the social security bucket had an “excess” (i.e. more people working to pay taxes into social security than the outflow to retirees).  Bringing these buckets on budget had the effect of shrinking the percentage that defense spending represented of the total expenditure pie and every president since Johnson has used this sleight of hand to hide the excessive level of defense spending buried in Bucket 1.   To make matters worse, the excess water in the bucket for Social Security has been drained out to cover the expenditures in Bucket 1.

Measuring things properly sets up a far different analysis than what we’re hearing out of the political class.  Once we’re measuring things properly by tracking the funds separately as originally intended, it is clear that there are three separate problems with each bucket or fund:

 

  1. The Federal Income tax bucket has been severely underfunded due to insufficient taxes and excessive spending.  Nearly half of all expenditures from this bucket are for military spending and the bulk of that winds up in the coffers of the nation’s weapons manufacturers.  The huge deficit in this bucket has been funded in part by the excess from the social security trust fund and the rest by borrowing. 
  2. The Social Security tax bucket has an excess as measured by the difference between inflows and money paid out to retirees.  This is so because the number of workers paying in is greater than those who are drawing benefits.  This is expected to change dramatically as the baby boom generation retires in earnest. The excess has always been illusory because it was really insufficient to fund the actuarially determined liability for benefits.  People are basically living much longer than assumed and the taxes here are insufficient to cover that even as the fund shows an excess.  As I mentioned, what makes matters worst for this fund is that the money has been taken and used for general spending.  The money can not be paid back absent a substantial increase in income taxes.
  3. The Medicare/Medicaid tax bucket’s problems revolve around the high cost of medical care, demographics and unfunded benefits such as Bush II’s prescription card plan. 

If you’ve followed me up to this point, then it should be clear the fallaciousness of republican’s tax cut mantra and the political class’ attempts to cut entitlement spending instead of defense spending.  In effect, the tax cuts from Reagan on down to Bush were financed with Social Security Taxes.  That also means that our unbridled war spending has also been effectively financed by Social Security Taxes and our retirement money is setting in the coffers of the munitions manufacturers and that of other recipients of corporate welfare.  That fact needs to be absolutely clear to everyone.

Has anyone from Obama on down proposed any cuts for the war budget?  Has the T-party? In other words, has anyone proposed how they intend to fix the problem in bucket 1 without involving buckets 2 and 3?  Not as I recollect.  Within the past month, a new defense/war spending appropriation was passed with a $ 17 billion increase over the prior years’ with full bi-partisan support and absent the fractious dissension we’re hearing now.  Has anyone proposed how they intend to return our stolen retirement money back to its rightful bucket? No, that discussion is totally off limits.

This so called debt crisis is one that’s been totally created.  That’s not to suggest that the republican party isn’t full of idiots, it surely is,  but this “crisis” is nothing but an attempt to create conditions where the American people are about to get fleeced.  The political class wants to create fear so as to prep everyone for draconian measures that were on the backburner anyway and creating a crisis is the only way they figure that they can get the people to accept the pre-planned austerity measures.  We have even the bond rating agencies playing their assigned roles in this.  These are the same guys who couldn’t properly rate all the mortgage backed debt that blew up and yet they suddenly have the legitimacy to threaten the credit rating of the US?  No, I’m not buying it.  This is a set up.

Yes, the entitlement funds have problems, but a step towards resolving them begins with 1) returning our social security tax money to the fund set up for it  2) resolving the problems in discretionary spending and 3) straightening out the accounting so people can clearly analyze the problem.  Either raise tax rates to cover defense/war spending so the people know exactly how much this is costing them or cut dramatically those expenditures.  But don’t continue this scam and tell me that you’ve got to cut entitlements after that money has been stolen to finance profligate war/defense spending.  We nearly outspend the rest of the world combined and it’s a very good chance that much of that is rife with fraud and corruption.

Basically, if you’re not hearing anyone talk about cutting defense, then that’s tacit confirmation that they’re proposing to continue the same game that’s been played for years.  Of course, I’m aware that the administration thinks that it will save a trillion by winding down the Afghan and Iraq conflicts, but that’s not enough.  There needs to be steep cuts in the military budget and a total overhaul of thinking as far as foreign policy is concerned.  If presented a clear choice between retirement, healthcare and education versus filling the coffers of the military industrial complex and incessant meddling abroad, the people will chose the former.  The problem is that this clear choice is not presented, but muddled in the numbers, in untruthful debate and the creation of a crisis , all of which we’re witnessing now over the debt ceiling.

 

 

 

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  • Black Diaspora

    Excellent explanations–clear and easy to follow.

    “The political class wants to create fear so as to prep everyone for draconian
    measures that were on the backburner anyway and creating a crisis is the only
    way they figure that they can get the people to accept the pre-planned austerity
    measures.”

    This seems to be the trajectory. We will know one way or the other in a few days. It will be disappointing to know that the Kabuki was nothing more than a prelude to a climax that was determined months ago. 

    Recently, someone asked an astute question: Why didn’t Obama and the Democrats in congress include passage of a debt ceiling increase as part of the deal when the Bush taxcuts were extended?

    One answer (mine): Both parties wished to use the debt ceiling as an additional leverage (in the minds of the American people, that is) to make significant changes to entitlements.

    This crisis is designed to get us all to go along to avert an economic disaster, and to breathe a sigh of relief when a last minute, saved by the bell, avoided a bullet, last ditch effort is negotiated to rescue our bacon from the fire, creating a win-win for both sides.  Taxes won’t be raised. Entitlements will be cut. And if not entitlements, other cuts upon which the American people depend. And the American people, once again, won’t see how they’ve been manipulated. 

    Party faithfuls on both sides, although not happy with the outcome (perhaps Congressional Republicans will be), will say this is how it had to be: No other choice existed.

    Tea Party Republicans may be the one sticking point in this calculus of mine: Both parties may be trying to salvage a plan that preceded Tea Party input (think obstinacy to go along with raising taxes).  It’s not working quite the way both sides had hoped. President Obama would be seen as the one with a Republican gun to his head, if he didn’t capitulate, and Obama capitulates to keep the American government from defaulting, thereby creating a bigger financial crisis with nationwide, if not worldwide, impact.

    Obama would insist on revenues, either from new taxes or stripping away tax credits, loopholes, or corporate subsidies.  (House Speaker Boehner slipped once and said that there was no reason to continue oil subsidies for oil companies enjoying record profits.) In return, Obama would give Boehner what he wanted: entitlement reform, a nudging up of the age when one could start collecting Social Security, means-testing, and a reduction in the COLA rate.

    Let’s face it: Entitlements are Democrats sacred cows. The Republicans in congress, and Tea Party freshmen aren’t going to care one whit if entitlements are gutted.  Some in their base might, and that’s showing up in the polls. 

    So it’s down to the wire. If both sides reach a resolution sooner than late, it would deflate all that build up to a climax: The make-believe crisis would lack the necessary drama, suspense, and urgency required for both sides to maximize its full potential. 

    I’ve believed this for sometime. I hope I’m wrong.  

    • http://theafricanamericanclarioncall.com Greg L

      >>>I’ve believed this for sometime. I hope I’m wrong<<<

      As have I.  I too hope I'm wrong, but the chances of that are fading fast.  The gaming continues today with the new IMF chief weighing in and the dueling plans.  Reid has dropped income tax increases from his plan and the only substantive difference between his plan and the House's plan that I can discern is the size of the deficit reduction and the size of the increase in the debt limit which impacts the timing of when this will be revisited.  Effectively now, we have a synthesis where the Dem's have basically agreed with the House republican proposal.  Why didn't Obama do something about the debt ceiling back when the Bush tax cuts were extended?  I don't think he really wanted to as it doesn't make sense to extend the cuts and then find yourself six months later fighting over the debt ceiling and deficits that these very cuts perpetuate.  I tell you, this is all political theatre–that I'm convinced of. 

      If there was a time for the people to be paying attention, now is it.  By sleight of hand, they're robbing us to ensure that the bond holders get paid and the munitions manufacturers continue to be lined up at the government trough.

      I think your assessment is spot on BD and I, for one, am thoroughly disgusted at this point.

    • http://theafricanamericanclarioncall.com Greg L

      A few more comments in response to your note BD. 

      Today, I’m listening to a few talk shows and the focus is on a statement made by Donald Trump indicating that the republicans should opt for default unless they get everything they want from Obama including a repeal of the healthcare legislation.  The idea is being promoted that these people want to make Obama a one term president.  When one hears that, the first reaction is anger as all of the non-cooperation that the republicans have exhibited up to date would appear to confirm that they wish to sabotage Obama’s presidency and among some, that’s no doubt true, but ultimately I’m forced to stop and think especially when I suspect that there’s a possibility that someone is doing something to deliberately cause anger and dissension.   Those conditions aren’t optimal for rational analysis and behavior and this is precisely what’s wanted. 

      I’ve used this analogy before, but this reminds me of a wrestling match where the bad guy is hitting the good guy with a set of brass knuckles everytime the referee turns his back.  Those in the audience become highly engaged in the battle as they yell out to the ref what’s happening, but he never sees it to throw out the bad guy.  All the while, the good guy never mounts an effective defense or offense which makes the audience all the more angry.  The bad guy wins and the audience is highly upset at the injustice, so they’ll be back for the rematch to see if the good guy wins next time.  The businessmen and wrestlers involved in all of this have to keep things close where no one gets too far ahead in wins as they have to keep the audience engaged as they are.  Meanwhile, behind the scenes, both wrestlers and the promoters are happily counting their take.

      Right now, the WWF match, referred as American politics, is designed to keep the fight real close.  If one party wins the presidency, the other controls one or more houses of congress and vice versa.  The base on either side believes their guy is the good guy and is outraged at what the ref is letting the bad guy get away with.  This reduces the electorate to a state of  outrage and it’s more focused on that than the fact that where it matters, there’s policy consensus between the two parties. As you point out, the respective bases are being bamboozled. 

      There’s policy consensus on war and foreign policy—the republicans have not tried to reign in Obama’s foray into Libya.  The republicans have been silent on the expansion of the Afghan conflict and have not criticized Obama’s handling of the war. Both of these have budgetary impact.   There is policy consensus on the bank bailouts and the massive accommodation given Wall Street. The party of no hasn’t criticized any of this nor has it laid into the Fed’s money printing which as resulted in a stealth tax  better known as inflation.  Inflation over the past year has weighed down most people more than any possible tax increase.

      All of this is just a bunch of bull.  Of that I’m convinced

      • Black Diaspora

        “I’ve used this analogy before….”

        It’s an apt analogy. The spectators aren’t in on the con, believing that both sides are honest brokers, when it fact all parties are united in the deception, and in dividing up the spoils. 

        The only real players here (true believers, that is) are the Tea Party wing of the Republican party. They have staked their position: They want nothing that smacks of a tax increase. Boehner would like a compromise that would reform Social Security, but the Tea Party caucus isn’t cooperating. As a result, Obama continues to up the ante in an attempt to sweeten the deal, hoping to do with enticements what Boehner can’t deliver with persuasion–get the Tea Party faction to budge on tax increases.
        Contrary to what one Washington pundit has stated (Obama’s has positioned himself to take political advantage over the Republicans by appearing to be reasonable by offering cuts to Social Security, knowing full well that Boehner can’t deliver the votes for a compromise.), Obama truly wanted to use this prefabricated crisis to reform Social Security (to strike a really big deal), and still seem as though he had no other option–thereby keeping the support of his base, and turning their anger against Republicans.The Tea Party is the only reason that a deal hasn’t been struck. The problem: both sides have boxed themselves into a corner–Obama standing strong on tax increases (perhaps slipping a bit by endorsing Harry Reid’s plan), and Boehner falling short on offering up tax increases, which threatens to scuttle their backroom negotiations.Obama could, at any time, end this supposed crisis by invoking the 14th Amendment, something he said he wouldn’t do. Of course not. Where’s the fun in that? If Obama resort to an invocation of the 14th Amendment, then the pretense of a crisis is over, and all players can pick up their marbles and go home, neither side getting what they came to the playground to get.John Carney, Senior Editor, CNBC.com believes that there’s another viable option–the Fed option–that could rescue us from the debt ceiling impasse.”The Fed currently owns about $1.63 trillion of Treasurys. It can sell these
        through its open market operations. All
        Fed income that exceeds the Fed’s costs are
        remitted to the U.S. Treasury Department. Which means that the revenues from
        selling Treasurys could be used to fund government operations instead of
        borrowing.” More here: http://www.thestreet.com/story/11197422/1/could-the-fed-rescue-us-from-the-debt-ceiling.html?puc=_atb_html_pla10&cm_ven=EMAIL_atb_htmlHere’s something curious: Big Finance isn’t panicking. They have as much to lose here, as the electorate, if the government defaults. Do they know something we don’t? 

        • Black Diaspora

          Again, my comment didn’t publish as intended. 

        • http://theafricanamericanclarioncall.com Greg L

          >>> Obama truly wanted to use this prefabricated crisis to reform Social
          Security (to strike a really big deal), and still seem as though he had
          no other option–thereby keeping the support of his base, and turning
          their anger against Republicans<<>>John Carney, Senior Editor, CNBC.com believes
          that there’s another viable option–the Fed option–that could rescue
          us from the debt ceiling impasse.”The Fed currently owns about $1.63
          trillion of Treasurys. It can sell these through its open market operations.<<<

          This is entirely plausible BD mainly because the fed has basically played this role previously with its money printing operations that were supposed to "stimulate employment".  The political stasis over more stimulus prompted the Fed to act a year ago and the current manufactured crisis may cause it to act again.  Of course, that throws policy formation to the same private interests who are pining for more interest payment and bailouts.  Also, it pretty much lines up with the move to privatize everything else– so why not privatize a solution for this crisis also and that perhaps why the Wall Street boys aren't panicking.

          I can't say it enough times.  Not matter how this thing goes down, it's a set up akin to a coup.

          • Black Diaspora

            “Also, it pretty much lines up with the move to privatize everything else– so why not privatize a solution for this crisis also and that perhaps why the Wall Street boys aren’t panicking.”
            Privatizing the solution: Why not? (Smirking!) Big Corp is running the show anyway. Thanks to the courts, and congress, the necessary structure is now in place for corporations to prevail despite the will of the people.

            Several Congressional Reps. are calling for Obama to invoke Amendment 14 as the obvious solution to this debacle. We both know why this Nuclear Option, if it’s enacted at all, will come, if it comes at all, as close to the deadline as is possible. Waiting puts more pressure on Tea Party holdouts, with the hope that they’ll come to their senses and take the deal Boehner and Obama has hammered out.

            Defaulting will do nothing but aggravate an already bad economy. By capitulating to Republican demands for deeper cuts, even without raising revenues, forestalls an economic Armageddon. This is why, in this game of chicken, the president can’t be the last man standing.  Yet, by acting, he’ll betray himself as weak, and lose the respect of his base, and that could mean no second term. 

            Wall Street has this much assurance: If Tea Party Republicans force a default, options exist to avert a catastrophe. If push comes to shove, Congressional Democrats, couple with pressure from the American people, will force Obama to seize control, and honor his sworn statement to protect the Constitution. Fulfilling Constitutional demands as outlined in the 14th Amendment certainly falls within his constitutional purview and sworn duty, if Congress fails to act.

            For Obama to do otherwise is tantamount to allowing the Titanic to sink because all hands on deck are in full mutiny, but he can still steer around the threatening iceberg.

            Obama’s hands are on the helm. He should exercise his captaincy, now that his deal with Boehner has soured, and steer the ship of state to safety. If he doesn’t, he may as well jump ship with other mutineers, because the American people will blame any and all who had a hand in this, and punish them accordingly.

             

            • http://theafricanamericanclarioncall.com Greg L

              >>>Obama’s hands are on the helm. He should exercise his captaincy, now
              that his deal with Boehner has soured, and steer the ship of state to
              safety. If he doesn’t, he may as well jump ship with other mutineers,
              because the American people will blame any and all who had a hand in
              this, and punish them accordingly.<<<

              Very true, however, invoking the 14th amendment to handle this matter will result in all out war.  If you think the outcry over the health care bill passage was bad, it wouldn't compare to this.  There could be legislators literally fighting on the house floor.  The legal wrangling could take awhile to sort out, so this may very well be the thing to do.

              The ironic thing is that either set of cuts. while in the wrong places, are also quite miniscule  in relative terms as they occur over a 10 year period.  A spike in interest rates could easily wipe out those savings in a heartbeat and considering that rates are at historic lows, that's more likely than not even if the US retains its AAA debt rating.  This is why this whole thing is a red herring and rather meaningless at this point except to the extent that it opens the door for far deeper cuts down the road.  As it is, we're still going to be running deficits as far as the eye can see.  Tea Party notwithstanding, none of these guys is serious about true reform which begins with an overhaul of our military and foreign policy stances IMO.

              Looking at Reid's proposal,  the crux of this is going to hinge on the timing of when this issue is revisited.  I'm not sure how Obama's invoking of the 14th could impact upon that timing, but it would certainly avert a default and allow for deficit and debt discussions to occur in an environment not marked by crisis.

              The 2012 elections ought to be interesting.  I think everyone is damaged goods here and it will get down to who is perceived to be less damaged.  If the republicans run one of these T-Party crazies, Obama will have a lock on it.  If they run a moderate republican (highly unlikely), they might have a chance.  Obama's going to have a problem with his base though.  There are a lot of people who are upset and disappointed with him

              • Black Diaspora

                “Very true, however, invoking the 14th amendment to handle this matter will
                result in all out war.”

                Yes, it will. And I’m not sure if that’s a bad thing. It would cast
                Republicans as the party who not only want Obama to “fail” but the entire
                country. It would force the American people to take a hard look at how the
                system works, or don’t work, and how a few in congress can stick it to the
                majority for the sake of advancing their political agendas. It would bring Tea
                Party members of the congress in sharp relief, giving the country an opportunity
                to see what they’re really about, and that it’s not about the welfare of this
                country, but their corporate sponsors. It would, finally, show the president as
                decisive, and willing to put the peoples interests above the interests of party
                politics–something that Republicans aren’t willing to do.

                “As it is, we’re still going to be running deficits as far as the eye can
                see. Tea Party notwithstanding, none of these guys is serious about true reform
                which begins with an overhaul of our military and foreign policy stances
                IMO.”

                As long as our credit rating isn’t downgraded, we can run awhile on credit,
                giving the economy sometime to heal, and recuperate. This is not a good time to
                impose austerity measures, as it will siphon money out of the economy at a time
                when our economic gas tank is virtually empty.

                As you’ve stated, true reform extends beyond just cutting back the federal
                government. Corporate America would jump for that, but the American people
                would, indubitably, suffer because of a loss of government intervention in
                keeping corporations honest–food safety, environmental safety, drug safety,
                just to name a few.

                “Tea Party notwithstanding, none of these guys is serious about true reform
                which begins with an overhaul of our military and foreign policy stances
                IMO.”

                True. That and trade deficits, banking practices, health costs, and the
                corporate stranglehold on legislators and our legislative process.

                “I’m not sure how Obama’s invoking of the 14th could impact upon that timing,
                but it would certainly avert a default and allow for deficit and debt
                discussions to occur in an environment not marked by crisis.”

                This makes the Nuclear Option ideal. Both sides would have to deal honestly,
                and in the open, without holding the American people hostage, or subjecting them
                to the threat of hostage-taking, just so that they conspire to undo what was
                done for America’s benefit.

                Further, no group in the government should have the power to detonate a bomb
                to bring down the economic superstructure of the whole country. The Tea Party,
                operating in that capacity, becomes less the Tea Party, and more the TNT
                Party.

                “Obama’s going to have a problem with his base though. There are a lot of
                people who are upset and disappointed with him.”

                I’m accused of only saying nice things about Obama. So let me break with that
                dubious distinction: Obama has become too clever by half, and has, as one pundit
                has described him, operated more as a moderate conservative than a liberal.

                His negotiations usually begin at a place where too much has been surrendered
                without a punch being thrown. His judo is just not that good, that he can allow
                his opponents to beat themselves using the force of their own movements (balance
                and leverage) against them.

                And rather than he and Boehner conspiring against the American people to
                create consensus using the crucible of crisis, level with the American people:
                Explain why adjustments to Social Security are necessary. Why test the national
                patience, and fray the national nerve? Some people are living paycheck to paycheck.
                If business don’t like “uncertainty,” just think how heads of households must
                feel when members of our government can’t come together and pass an increase in
                the debt ceiling without making it a worldwide sporting event, with the whole
                world as spectators, all having a vested interest in the outcome.

                • http://theafricanamericanclarioncall.com Greg L

                  >>>Yes, it will. And I’m not sure if that’s a bad thing. It would cast
                  Republicans as the party who not only want Obama to “fail” but the entire
                  country. It would force the American people to take a hard look at how the
                  system works, or don’t work, and how a few in congress can stick it to the
                  majority for the sake of advancing their political agendas. It would bring Tea
                  Party members of the congress in sharp relief, giving the country an opportunity
                  to see what they’re really about….politics–something that Republicans aren’t willing to do.<<<>As long as our credit rating isn’t downgraded, we can run awhile on credit,
                  giving the economy sometime to heal, and recuperate. This is not a good time to
                  impose austerity measures, as it will siphon money out of the economy at a time
                  when our economic gas tank is virtually empty.<<>>His negotiations usually begin at a place where too much has been surrendered
                  without a punch being thrown. His judo is just not that good, that he can allow
                  his opponents to beat themselves using the force of their own movements (balance
                  and leverage) against them.<<>>And rather than he and Boehner conspiring against the American people to
                  create consensus using the crucible of crisis, level with the American people:
                  Explain why adjustments to Social Security are necessary. Why test the national
                  patience, and fray the national nerve? Some people are living paycheck to paycheck.
                  If business don’t like “uncertainty,” just think how heads of households must
                  feel when members of our government can’t come together and pass an increase in
                  the debt ceiling without making it a worldwide sporting event, with the whole
                  world as spectators, all having a vested interest in the outcome.<<<

                  For them to truly explain the problem with social security, they'd have to explain how that money has been stolen and is sitting in the coffers of the munitions manufacturers.  They'd have to explain just how much our foreign policies and being the policemen of the world have cost us.  That's something their corporate handlers aren't going to allow.

                  I think we've reached a historical  inflection point economically and politically in this country and unfortunately, we don't have the leadership that the country really needs at this point.  More than anything, what we have here is a crisis of leadership and the situation at hand makes that clear for all to see.

                  • Black Diaspora

                    “For them to truly explain the problem with social security, they’d have to explain how that money has been stolen….”You’re right: leveling with the people would give them all a black eye. Why explain, when they can shift the argument: It’s not wall street greed and political corruption that are the blame for our economic descent, it’s those entitlement programs, with Social Security leading the way. It’s social programs that are draining the national treasury, not military adventurism, and corporate extraction of what little wealth we’re still holding on to.This alliance of the government with corporate rapaciousness is rapidly transforming our government into a kleptocracy, if it’s not there already.You probably read the Pew report. White America hasn’t suffered as much of a loss of wealth as their Latino and black counterparts. Of course, this isn’t surprising: It just shows that the gap between the haves and the have nots is as much about race as it is about an American dream that’s gone awry.”The median wealth of white households is 20 times that of black households and 18 times that of Hispanic households, according to a Pew Research Center analysis of newly available government data from 2009.These lopsided wealth ratios are the largest since the government began publishing such data a quarter century ago and roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession that ended in 2009.”
                    http://pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-highs-between-whites-blacks-hispanics/
                    Following the Kabuki that is the negotiations between Republicans and Democrats over raising the debt ceiling, is firming up another belief of mine: The Congress now has three competing parties, not two–Democrats, Republicans, and the Tea Party. 
                    Although more aligned philosophically with Republicans, the Tea Party is emerging as an autonomous party that has its own legislative and ideological reasons for existing, and aren’t going to walk in lockstep with Republicans when their ideology is threatened.
                    We saw this earlier in some of the comments of a Tea Party adherent who posted here for a while. As long as Republicans pushed their aggressive policies, they had an ally. Once they deviated from those policies, the Tea Party deserted the direction of Republican leadership, with an intransigence, and an independence that was as defiant as it was reckless.
                    We have always had a cure for cancer: Kill the patient, and the cancer dies along with him. It’s as though the Tea Party faction within the Republican party is saying: We have a cure for Big Government, and an ever-expanding budget, kill the government and the problems that are now vexing us will cease to exist. 
                    This notion of killing the patient in order to kill the disease seems to have taken root in the Tea Party and sets it apart from the Republican party. 
                    For the Tea Party, a resurrected patient is better than a sick patient.  But to resurrect the dead has always been the stuff of miracles.  And that is precisely what will be needed, if the Tea Party takes this unprecedented risk and kill the patient, thinking that by dying the patient will experience a glorious rebirth, much like the the phoenix that emerged renewed from its own ashes. 

                    • http://theafricanamericanclarioncall.com Greg L

                      >>>The Congress now has three competing parties, not two–Democrats, Republicans, and the Tea Party. Although
                      more aligned philosophically with Republicans, the Tea Party is
                      emerging as an autonomous party that has its own legislative and
                      ideological reasons for existing, and aren’t going to walk in lockstep
                      with Republicans when their ideology is threatened.<<<

                      BD, why does it seem that the republican party seems to attract extremists of all strips?  Remember the religious right?  The neocons?  I think the T-party is just the latest iteration of extremist groups who've found a home there and they will destroy the republican party.  This really started the day after Obama was elected.  Steele and others were attempting to swing the party to a more moderate path, but were stopped cold in their tracks by Limbaugh and Co.  Remember David Frum who spoke out against the wisdom of their intransigence on Healthcare?  He immediately lost his job.  Any republican who was trying to pursue moderation and negotiation has basically been tarred and feathered.  I maintain that it's also interesting that none of the grownups in the republican party have stood up to be counted.  It's like they've been intimidated into silence.  Either they're scared or they're a part of this thing. 

                      It's one thing if the T-Party actually represented the people, but you can tell that they don't as they pretty much line right up with corporatism and militarism.  The same revulsion they're supposedly showing here over the budget hasn't been found when it comes to reigning in war spending or any of the things that are real issues.  It's clear to me that these people have basically been funded to do someone's bidding and they're definitely not about the people's business no matter how much they claim to be.  Basically, these people want to pursue a coup by any means necessary and if they lose this, I don't doubt there'll be the same sort of reaction as we saw in the aftermath of the healthcare passage.  In a way, I feel they want to force the issue so they have an excuse.  There is a plan and it would seem that there's some serious money and organization behind the plan.

                      But caution is always in order, as a game may be underfoot here.  At every turn the democrats have given them what they wanted and now we've arrived at a point where there are no tax increases and I'm sure in the final version, if there is one, they'll have everything they want.  Basically, no one has challenged them and no one has stood in the gap to turn them back.  With no effective challenge, it's like good cop bad cop.  If the Dems were really standing in the gap, they would have mounted a serious challenge from the gate, beginning with not extending the Bush tax cuts.

                      I continue to watch this closely as I'm sure you are.

                       

                    • Black Diaspora

                      “BD, why does it seem that the republican party seems to attract extremists of all strips?  Remember the religious right?  The neocons?  I think the T-party is just the latest iteration of extremist groups who’ve found a home there and they will destroy the republican party.”
                      The Republican party is moribund, the result of a self-inflicted wound. It’s written: “Ye shall know them by their fruits.” Were it not for the “fruits” they bear, this party would be no more extremist than the Democrats.  Look around on the web. Conservative and Republican bloggers are a self-centered, angry, mean-spirited bunch.  

                      If that’s the content of  your character, then the Republican party is the place for you. It’s a natural match. The party’s reputation has been well earned. Left to Republicans, gays and lesbians would never marry, our military would screen for gays and lesbians, and the hope of marriage for gays and lesbians would be as likely as it was for blacks marrying whites in the South years ago.

                      Women would be imprisoned for an abortion, and would have to carry their baby to term no matter how they were impregnated: incest, or rape.  Planned Parenthood would be defunded in every state, and unions and collective bargaining would be relics from our not too distant past.

                      Yet, the Republican party claim that it’s the party of freedom. Republicans say that they don’t need a government to tell them what to eat, and what light bulbs they should be able to buy and use in their homes. 

                      Corporations would be able to pollute at will, and the government must allow mining in around the Grand Canyon, whether environmentalists believe it’s a good idea or not. Deep Water drilling permits would be granted whether oil companies can demonstrate effective containment procedures or not.

                      With “fruits” like this, what’s not to love! 

                      “I maintain that it’s also interesting that none of the grownups in the republican party have stood up to be counted.”

                      McCain spoke out, only to later retract his remarks. It was a sad spectacle. McCain’s grovelling before Sean Hannity was pathetic.  See both videos here. You need to hurry: They’re disappearing fast. http://speaknowconservatives.org/2011/07/29/john-mccain-attacks-tea-party.aspx

                      But you’re right: “none of the grownups in the republican party have stood up to be counted.” I suspect that many of them can’t handle the backlash that’s bound to follow.

                      “The same revulsion they’re supposedly showing here over the budget hasn’t been found when it comes to reigning in war spending or any of the things that are real issues….”

                      True. If the T-Party really cared about our mounting debt, what better way to reduce that debt than in reining in the defense budget. The T-Party back what its backers back–a government that’s so anemic that it can’t carry out its regulatory mandates. These mandates are interfering with the Koch brothers’ desire to amass more billions, as they’re compelled to comply with one regulation after the other.

                      You’d think they could carry these billions with them, as Egyptian Pharaohs believed. Well they can’t. They came here with nothing and they’ll leave with nothing.

                      “At every turn the democrats have given them what they wanted and now we’ve arrived at a point where there are no tax increases and I’m sure in the final version, if there is one, they’ll have everything they want. ”

                      And this is only the beginning. They have a mission, and that mission, in part, is to diminish federal power over corporations. Yes, I suspect that they will be the winners here, if there are any. But that winning will be short-lived. Like Republicans, T-Party folk are ruthless. But unlike Republicans, the T-Party has taken ruthlessness to another level. If you compromise, you’re seen as weak, and unworthy to serve in congress. If you agree to raise taxes, you’re seen as a traitor and, when you come up for reelection, you will get the boot and replaced by someone more dependable.

                      The losers: The American people. But then, it’s hard to empathize with an electorate that’s willing to cut its own throat to smite the power of government.

                    • http://theafricanamericanclarioncall.com Greg L

                      >>McCain spoke out, only to later retract his remarks. It was a sad
                      spectacle. McCain’s grovelling before Sean Hannity was pathetic.  See
                      both videos here. You need to hurry: They’re disappearing fast. http://speaknowconservatives.o…<<<

                      BD, thanks for this video.  I had previously seen the other one when McCain on the senate floor, but had not seen the one with Hannity.  He's groveling while trying to make a weak defense as well.  It interesting how the video closes with Hannity repeatedly blaming Obama for spending, the debt and the creation of this crisis and McCain closes by saying that these problems occurred before Obama.   Fox is disgustingly the propaganda arm of the republican party. ( Interestingly enough, Murdoch is out of the news this week.)

                      I think that the Koch brothers, Murdoch and a few others have gotten together and are driving this whole thing, which is why folks like McCain are so fearful.   McCain doesn't fear the voters per se, but a well funded campaign that can be run against him. ( Similarly, I think Obama exhibits this same fear.)  The undue influence of Murdoch and others in the political process is clear.  By the extremist positions they fund, they win whether or not their expressed position wins the day as effectively they've pushed everything rightward as far as the debate in the country goes.

                      This is a small group of people who realize that organization and money can make one appear to be much larger than they actually are and they've dug in. 
                       
                      Obama appears to have continually yielded a tactical advantage to these people to the great detriment of those who voted for him.  He's a moderate conservative and if there's no room within the republican party for these people, there's certainly no room outside of it.  The country is to the left of both him and the tea party and any position, particularly a populist one, that's left of where we're at now would have overwhelming support, yet he refuses to stand in the gap.  His refusal to do so leaves this challenge largely unmet and that's almost unforgivable because that's what the people sent him there to do.

                      My feelings are obviously conflicted.  The T-party is a farce, yet they're not being called out or pushed back.

                    • http://theafricanamericanclarioncall.com Greg L

                      BD,

                      I ran across this article today on S & P’s role in this.  I happen to think that this debt circus is going to result in higher rates on treasuries anyway, whether they downgrade or not.  Japan and China are certainly not going to be comforted by the show we’re witnessing, but the one thing this article made me think about is your insistence that these people are trying to sabotage the economy and all of this craziness lends much credence to this theory.  Check out this report on S & P.  I think they may be working with the tea party folks and may explain their intransigence :

                      http://firedoglake.com/2011/07/29/is-standard-and-poors-manipulating-us-debt-rating-to-escape-liability-for-the-mortgage-crisis/

                    • http://theafricanamericanclarioncall.com Greg L

                      >>>You probably read the Pew report. White America hasn’t suffered as much
                      of a loss of wealth as their Latino and black counterparts. Of course,
                      this isn’t surprising: It just shows that the gap between the haves and
                      the have nots is as much about race as it is about an American dream
                      that’s gone awry.”The median wealth of white households is 20 times that
                      of black households and 18 times that of Hispanic households, according
                      to a Pew Research Center analysis of newly available government data
                      from 2009.These lopsided wealth ratios are the largest since the
                      government began publishing such data a quarter century ago and roughly
                      twice the size of the ratios that had prevailed between these three
                      groups for the two decades prior to the Great Recession that ended in
                      2009.”
                      http://pewsocialtrends.org/201…<<<

                      BD,  and as I read about this, I thought about Joe Bageant's 60 million strong white underclass and where they'd show up in these stats.  I think if we look at broad averages, then the conclusion is that whites have made out like bandits, but I think that conclusion ought to be that "some" whites have.  It might be interesting to parse those stats and exclude the upper 5% that owns 80% of the wealth and then measure where everyone is at.  I suspect that we'd all line up pretty close as far as declines in net worth are concerned and the conclusion would then focus on the wealth disparity between the upper 5% and the lower 95%.  That's something they'd prefer not to put a focus on as that would tear asunder the whole idea that whites have something to protect from blacks and hispanics rather than all of us being jerked by the same system.  Widespread focus on that would obviously place this entire debt ceiling debate in another context.

                    • Black Diaspora

                       ”It might be interesting to parse those stats and exclude the upper 5% that owns 80% of the wealth and then measure where everyone is at.  I suspect that we’d all line up pretty close as far as declines in net worth are concerned and the conclusion would then focus on the wealth disparity between the upper 5% and the lower 95%.” Good point. Here’s a definition of “median and mean income.” If the study had been conducted as you suggested, the results would have been more dramatic:”Median income is the amount which
                      divides the income distribution into two equal groups,
                      half having income above that amount, and half having income below that amount.
                      Mean income (average) is the amount obtained by dividing the total
                      aggregate income of a group by the number of units in that group. The means and
                      medians for households and families are based on all households and families.
                      Means and medians for people are based on people 15 years old and over with
                      income.”
                      “I suspect that we’d all line up pretty close as far as declines in net worth are concerned and the conclusion would then focus on the wealth disparity between the upper 5% and the lower 95%.  That’s something they’d prefer not to put a focus on as that would tear asunder the whole idea that whites have something to protect from blacks and hispanics rather than all of us being jerked by the same system.”

                      Coming at this time in our national discourse, it’s hard not to believe that the Pew Research Center, like many in our media, is carrying water for the government and the wealthy few in our nation. 

                      If the American people aren’t getting the information they need to make informed decisions regarding their welfare, and the information they are given is designed to keep them ignorant, we may be walking around in a desert of misinformation for years before we find our way out.

                      “Widespread focus on that would obviously place this entire debt ceiling debate in another context.” 

                      I would hope so. However, the truth isn’t hidden. It’s plain sight. High unemployment, government bail outs, outsourcing, government corruption, too big to fail, trade deficits, high cost of health insurance, foreclosures in the millions, fighting two wars, attacks on unions, suppression of voting–these are indicators of something seriously wrong in our society. 

                      If we would just focus on what we know, rather than on what we’re told about what we know, we’d take appropriate steps to undo what has been done to us, rather than fighting among ourselves. As long as they can keep us at each others throats, we’ll be blaming all the wrong things, and all the wrong people for the state of our economic well being. 

  • Black Diaspora

    It appears that the crisis has rumbled through, belying the prognostications of forecasters who predicted a violent storm that could potentially sweep away all the gains that the economy had made in recent months. Below, find what I wrote on two different occasions about this manufactured crisis:

    “This crisis is designed to get us all to go along to avert an economic disaster, and to breathe a sigh of relief when a last minute, saved by the bell, avoided a bullet, last ditch effort is negotiated to rescue our bacon from the fire, creating a win-win for both sides.  Taxes won’t be raised. Entitlements will be cut. And if not entitlements, other cuts upon which the American people depend. And the American people, once again, won’t see how they’ve been manipulated.”
    “Defaulting will do nothing but aggravate an already bad economy. By capitulating to Republican demands for deeper cuts, even without raising revenues, forestalls an economic Armageddon. This is why, in this game of chicken, the president can’t be the last man standing.  Yet, by acting, he’ll betray himself as weak, and lose the respect of his base, and that could mean no second term. ”

    From what I can gather, this deal went down without revenue increases. This marked the second time in negotiations with Republicans that the president came away without much to show for his effort. And as I’ve predicted, this won’t bode well for him: “he’ll betray himself as weak, and lose the respect of his base, and that could mean no second term.”

    In the days ahead, this will be the drumbeat coming from the Left, and from his most ardent supporters, disappointed once again in Obama’s ineffectual performance in the face of stiff opposition.

    I surmised that Boehner was at odds with the T-Party faction over its unwillingness to compromise, but that’s only because pundits suggested that possibility. Rethinking this, I believe Boehner used the supposed intransigence of the T-Party to take a hard-line negotiating stance, suggesting that he didn’t have a viable alternative he could pursue. 

    Again, the Democrats and Obama have been out-maneuvered. In a few months, just in time for elections, the electorate will have forgotten the brinkmanship that brought us so close to an economic disaster, and vote their wallets and pocketbook.

    • http://theafricanamericanclarioncall.com Greg L

      >>>From what I can gather, this deal went down without revenue increases.
      This marked the second time in negotiations with Republicans that the
      president came away without much to show for his effort. And as I’ve
      predicted, this won’t bode well for him: “he’ll betray himself as weak,
      and lose the respect of his base, and that could mean no second term.”

      In
      the days ahead, this will be the drumbeat coming from the Left, and
      from his most ardent supporters, disappointed once again in Obama’s
      ineffectual performance in the face of stiff opposition.<<>>I surmised that Boehner was at odds with the T-Party faction over its
      unwillingness to compromise, but that’s only because pundits suggested
      that possibility. Rethinking this, I believe Boehner used the
      supposed intransigence of the T-Party to take a hard-line negotiating
      stance, suggesting that he didn’t have a viable alternative he could
      pursue. 

      Again, the Democrats and Obama have been out-maneuvered.
      In a few months, just in time for elections, the electorate will have
      forgotten the brinkmanship that brought us so close to an economic
      disaster, and vote their wallets and pocketbook.<<<<

      There's no question that Boehner, the T-Party (i.e. big business) and Standard and Poors formed the unholy troika here with the dems forced to make it a foursome (although some might dispute the term "forced" here).   As was suspected from the outset, this whole thing was contrived to move us down the road of austerity; the same road that's being traveled by the rest of the globe.  They know that the economic situation is falling apart, so they're grabbing the lifeboats before everyone else realizes how badly the ship is listing.  Obama's job, in part, was to not only prevent this raid, but to prosecute those who ran us into the iceberg to begin with.

      • Black Diaspora

        I was preparing to respond to your comment with an analysis of the vote in the House to extend the debt ceiling. But then, I heard this special comment from Keith Olbermann. It said so many of the things that I was planning to say–and then some–that I decided to refer you to it, by appending this link to a video clip of the comment. He labeled his comment the 
        The Four Great Hypocrisies of the Debt Deal http://current.com/shows/countdown/videos/special-comment-the-four-great-hypocrisies-of-the-debt-dealLet’s talk after you have had a chance to watch it.

        • Black Diaspora

          The link didn’t publish. Here it is again. Let’s talk after you have had a chance to watch it:

          http://current.com/shows/countdown/videos/special-comment-the-four-great-hypocrisies-of-the-debt-deal

          • http://theafricanamericanclarioncall.com Greg L

            Thanks for this video BD.  In effect, it’s a call to arms and one that’s well overdue I might add.  It’s also a call for all of us to wake up and start to move beyond the sorts of diversions that keep our minds tied up with minutiae and really begin paying attention.  That will allow us to act first with knowledge and then with a strategic focus. 

            I’m old enough to remember a time where everyone was politically sentient. I suppose the events and circumstances that the country was going through in the late 60′s and early 70′s couldn’t let one be otherwise.  I was 12 years old when MLK was killed; too young to be involved but old enough to know what was going on and I remember vividly the discussions and just the level of awareness that all of us had even as pre-teens and teens.  Of course,  we all were ultimately seduced by the promise of the good life just as the pre-teens and teens now are seduced by video games. music and etc. Basically, there’s been a conspiracy of sorts to put us to sleep.  Hopefully, this will have awakened us from our slumber.

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