. . . there are no paradigm-busters, few challenged assumptions, little input from nonunion labor, the middle class elderly, or youth activists who will be living with these establishment policies for years
Note: We are pleased to welcome local financial and investments manager Rocky Boschert as the RoundUp's Financial Editor. Rocky currently is writing a weekly short-tips column for the Personal Finance page. In addition, he will be providing a monthly front page column about broader financial and economic issues. Here he offers a timely commentary on the highly publicized deficit reduction commission reports now in the news, with some of his own homespun suggestions. Agree with Rocky or not, his suggestions make a lot of sense for a critically important issue that is overblown with rhetoric and political stalemate – and no real action from either side of Congress to speak of. Be kind to Rocky. Try your best to keep your comments on topic without resorting to personal attacks and name-calling. Thanks.
Send your comments and news tips to roundup.editor@gmail.com, to Mr. Boschert at arrowbiz@texasorp.com or click on the "comments" button at the bottom of the story
By Rocky Boschert
Financial Editor
The recent reports by the two deficit commissions – one appointed by President Obama (fiscalcommission.gov) and the other from the private Bipartisan Policy Center (bipartisanpolicy.org) – do not lack specifics.In fact, they are so specific that they obscure the drastic need for a more diverse public finance philosophy that is really eating away at the heart and soul of a sound American economic system.
Clearly, the professional composition of the two task forces were designed to achieve a legislative consensus on Capitol Hill, where there are self-styled centrists, moderates, conservatives and liberals, but all with a clear corporatist bent. As a result, there are no paradigm-busters, few challenged assumptions, little input from nonunion labor, the middle class elderly, or youth activists who will be living with these establishment policies for years. Even union advocacy is glaringly lacking.
Warring factions
In other words, middle class Americans are asked to sacrifice much, but certainly not the top of the economic heap. Both panels include very modest cuts in the vastly bloated military budget whose sector empire takes half of the entire federal government’s discretionary spending (not including the insurance programs Medicare and Social Security). Yet already a tentative suggestion by the Commission’s Co-Chairs to “save” $100 billion in the Pentagon budget by 2015 was called “catastrophic” by Secretary of Defense Robert M. Gates.
Not surprisingly, the two reports make no mention of ending the economically disastrous Iraq occupation or Afghanistan war, or stopping defense contractor lobbies from bleeding the Pentagon budget with the development of outdated and low tech war machinery.
Herein lays the problem throughout these reports. They do not come to grips with the need for fundamental changes to expand the economy as if people matter first – to locate new revenues, launch long-overdue public works programs with their job creation throughout communities in America, and reduce the kind of deficits which are empty economic programs that create no real wealth, such as corporate welfare bailouts and giveaways.
For example, there is much reference to tax reform that rearranges tax rates. The private task force — chaired by Alice Rivlin and former Senator Pete Domenici (R- NM) would eliminate special tax rates for capital gains and dividends. Ok, but why not shift the incidence of some taxes from middle class workers to a Wall Street tax – a tiny sales tax on purchases of speculative derivatives that are engaged in primarily by the rich; or a one penny a trade tax on stock and bond transactions that economists say would raise several hundred billion dollars a year?
Since Wall Street banks got blank checks from the US Treasury during the bailouts, it is time they paid some “interest” on the free loans that allowed them to maintain their elite lifestyle.
Unhealthy fiscal prescriptions under health care
Both reports go for what they call medical malpractice reform. What they mean is they would not do anything about the over 100,000 Americans who die and many more sickened every year from hospital and physician malpractice, not to mention adverse affects from over-prescribed drugs and hospital-clinic infections. No, by reform they mean cutting back on judicially-decided damages now being awarded to far less than the one-out-of-ten victims who even file a claim. Prevention is the way to save lives and money – a policy entirely ignored by the bogus attention to medical malpractice lawsuits addressed by the two commissions.
In reality, the best policy outcome would be a government mandate to contain future health-care costs by allowing Medicare and Medicaid to use its bargaining power with drug companies and medical suppliers to reduce or control rates; by allowing Americans to buy drugs from Canada; by applying the antitrust laws to health insurers; and yes, by giving the public an option to buy their health care from a government-run public option. If people don't like it, they can simply buy their health care from the insurance companies.
More policy inadequacy
There is no mention in either report about ending foreign corporate tax havens for U.S. companies that would bring in nearly $100 billion a year. And, remarkably, though some mention is made of tax compliance, they ignore the regular estimate by the Treasury Department of $300 billion a year in uncollected corporate taxes.
Three other large areas were ignored
First is cracking down on corporate crime, including at least $250 billion dollars in annual health care billing fraud and abuse. (See: http://www.corporatecrimereporter.com/sparrow091409.htm). Both the fines, the disgorgement back to the defrauded and the deterrence to corporate crime amount to very large sums of money.
Second, the commission-co-chairs and the task force avoided recommending the proper pricing of our commonwealth assets that are regularly given away free (e.g. the public airwaves and hard rock minerals, such as gold and silver, on federal land) or at bargain basement fees (the national forest timber and other minerals).
Third, although both reports emphasize the need for economic growth, there was no reference to revising global trade agreements that have left our country's huge trade deficits and its workers in dire straits. Keeping industries and jobs from moving to repressive regimes like China so US corporations can re-export products to the U.S. should not have been ignored.
But then, with all the real life solutions not addressed in the two deficit reduction reports, we simply have to look at the professional composition of these elite establishment Task Forces, and we see why.
11 comments:
"Try your best to keep your comments on topic without resorting to personal attacks and name-calling."
Oh my God. Does he mean at me or the others who write the comments?
I'm glad to see we have someone locally who can write intelligently and sensibly about these economic issues. We all know, or should know, that how our national debt is handled will affect all of us. I have read that one of the deficit reduction recommendations includes elimination of the home mortgage interest tax deduction, a non-starter for middle class like me. Why do we, and not the super wealthy, keep getting such a raw deal? I will be watching very closely the positions taken by the GOP and Democrats in the Congress, especially on the issue of letting the so-called tax cut for the rich expire at the end of the year. Thanks for writing about this Rocky.
Question to ponder...
Why does the U.S. borrow money when they can simply "coin" it?
Monetary inflation happens the same in either case. When we borrow, we throw in compounded interest and an obligation to others.
A serious "Debt Commission" would examine this question, and many others that are going unexamined. Unfortunately, we don't have a serious "Debt Commission"... Its a dog and pony show.
“Question to ponder...
Why does the U.S. borrow money when they can simply "coin" it?”
Apparently you haven’t been paying attention to current events, the “Fed” has been running the printing presses day and night printing $100 bills. The total is advertised at $600 billion. The more they print the less your dollar is worth. This is not the answer!
Apparently Bernanke (Fed Reserve czar) thinks printing money and pumping it into the banking system is the answer.
In fact, his current plan implementation to "inflate" assets by pumping money into the system via a Wall Street banking "POMO" infusion, is largely the reason the stock market is going up. It is to create the "illusion" (as some say) of wealth creation to get Americans to start consuming again and to get banks lending again. A "dog and pony show?"
The smart naysayers (smart in my opinion) point out that it is only when housing prices start going up again that we will know the worse is over. And the same naysayers believe we are one more national housing price drop away from the bottom.
In the meantime, middle class worker unemployment benefits are held hostage to tax cuts for the rich by the Republicans and some Democrats.
Also, here is an interesting update to the article from the recently released FOMC minutes:
"The $700 billion Wall Street bailout signed into law by President George W. Bush was minimal compared to the trillions and trillions of dollars in near-zero interest loans and other financial arrangements the Federal Reserve doled out to most major financial institution in this country. Among those are Goldman Sachs, which received nearly $600 billion; Morgan Stanley, which received nearly $2 trillion; Citigroup, which received $1.8 trillion; Bear Stearns, which received nearly $1 trillion, and Merrill Lynch, which received some $1.5 trillion in short term loans from the Fed.
We also learned that the Fed's multi-trillion bailout was not limited to Wall Street and big banks, but that some of the largest corporations in this country also received a very substantial bailout. Among those are General Electric, McDonald's, Caterpillar, Harley Davidson, Toyota and Verizon.
Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations including two European megabanks -- Deutsche Bank and Credit Suisse -- which were the largest beneficiaries of the Fed's purchase of mortgage-backed securities. Deutsche Bank, a German lender, sold the Fed more than $290 billion worth of mortgage securities. Credit Suisse, a Swiss bank, sold the Fed back more than $287 billion in mortgage bonds."
To be clear, much of this happened under President Obama and the Democrats - but the Republicans were certainly not complaining. If you remember correctly, the Reps focused much of their "socialist" outcry toward the automakers - while walking toward the November elections with their hands extended out behind their backs toward the Wall Street banks. In fact, the Reps got at least three times as much November election campaign money from the big Wall Street banks than the Dems.
You are all intelligent enough to make your own conclusions about our "two-party" Federal political system - and who really benefits and who suffers from all the austerity "recommendations" over social security and our entitlement system.
Apparently both the Republicans and the Democrats can agree on one entitlement program: corporate welfare.
The second anonymous misunderstands the first anonymous' question.
The terms "print" or "coin" don't require 3-D paper and metals. They are mostly adding numbers to electronic account balances.
If the government plans to spend - say, $5 Trillion - more than it takes in, the Fed "creates" money in account balances, literally out of thin air, as part of creating the debt.
The point of the question is that the government could simply "create" the account balances out of thin air without any debt agreements.
Think that through...
The last Anon that tried to explain “Coin”, it is thinking like that that has us in the mess we are in now. We would be so much better off without the Fed. Our government manipulating the economy instead of letting the chips fall where they may, has taught us nothing. It is all about the Banks and Wall Street and if you think increasing the money supply is going to help any of us mere mortals you are nuts. Frankly, all of that is “re-distribution of wealth”, Republican style. Sadly, Obama is too lightweight to do battle in that arena so he joins in.
I say tax the crap out of Companies that move or establish their manufacturing operations in foreign countries then tax the import of their products. If an American company (GM) is about to fail, the government should let it. No more bailouts for anyone. Try and get that idea through Congress. The recent Republican landslide is only a start toward a Libertarian takeover, Ron Paul we need you.
Last Anonymous: be careful what you wish for.
Libertarians who believe in "freedom with responsibility" are right on. But many so-called libertarians are unwilling to see that we are too far along in the "corporatization" of the US economic system to mindlessly take a government hands-off approach to Wall Street and big business corporate regulation.
In a smaller less developed economic system, a purist libertarian free markets system could work fine. But now, in this huge nation's current failing condition, libertarian ideals end up being passively irresponsible justification for more corporate control over our lives.
I know I will take heat for this perspective. But at this time in US economic history, our nation is now in the early stages of inevitable imperialist decline - as all global powers eventually submit to.
Opportunistic politician chearleaders like Sarah Palin and Mitt Romney are riding the wave of national anger based on doubting American exceptionalism, when in fact our nation is no longer exceptional economically.
Unless something truly positive occurs politically in the US, we will be reduced to ineffectual extreme left and right parties - with the big corporation party absorbing (i.e "castrating") what's left of the best aspects of the "duopoly" Republican and Democratic parties.
Great article. But do you actually think either politiecal party will favor the individual orver the corporate "person"?
Last Anonymous: If voting citizens have any poltitical power left at all, we can force our elected officials to choose the individual over the corporation by firing them at election time if they are corrupted by lobby money.
But politicians are human, corporations are not. Hurting a company's profits is the only way to punish a company acting in a manner that socially destructive.
Mass organized boycotts are the only strategy that will change our political system. If Americans are going to be forced to sacrifice wages, benefits, social security, and quality health care because we see the manipulation of the decline of our job security, then we can in turn force a decline in corporate profits by implementing selective consumption as a way to force political change.
This is the best article Rocky has written for the Roundup. His understanding of the many financial issues facing our country is comprehensive. What's your take on the current tax bill being debated?
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