Archive for the ‘debt’ Category



“Have you seen men handed refusals
Till they began to laugh
At the notion of ever landing a job
Muttering with the laugh,
‘It’s driving me nuts and the family too,’
Mumbling of hoodoos and jinx,
fear of defeat creeping in their vitals—
Have you never seen this?
or do you kid yourself
with the fond soothing syrup of four
“Some folks won’t work’??

Have you seen women and kids
step out and hustle for the family
some in night life on the streets
some fighting other women and kids
for the leavings of fruit and vegetable
or searching alleys and garbage dumps
for scraps?
Have you seen them with savings gone
furniture and keepsakes pawned
and the pawn tickets blown away
in cold winds?
by one letdown and another
in what you might call slums—

To be named perhaps in case reports
and tabulated and classified
among those who have crossed over
from the employables into the

Stocks are property, yes.
Bonds are property, yes.
Machines, land, buildings are property, yes.
A job is property,
no, nix, nah nah.
The rights of property are guarded
by ten thousand laws and fortresses.
The right of a man to live by his work—
what is this right?

Engineer of Knowledge Said:

Hello Laci. I thought I would pass this on.

Company Towns
By Carl Sandburg

You live in a company house
You go to a company school
You work for this company,
according to the company rules.

You all drink company water
and all use company lights,
The company preacher teaches us
What the company thinks is right.

This poem written decades ago still speaks true today.

Sir John Rose, the Chairman of Rolls Royce, on the economy

This is a quotation from Sir John Rose, the Chairman of Rolls Royce, which is something that should be considered in light of the US budget debates.

We must be realistic about the state of the UK economy. A rebalancing is necessary and there will be no quick fix to restoring public finances to some sort of sustainable balance.

To draw an analogy, if the UK was a business, the shareholders would be asking serious questions. The current model appears to be that we can grow our business by growing overhead, by applying better terms and conditions to support functions than to wealth creators, and by paying dividends out of borrowings not all of which are recognised on the balance sheet.

We are also asked to believe that service levels will inevitably suffer if the costs of delivery are reduced. This need not be the case. As any business will confirm, service levels will reflect prioritisation, proper definition of desired outcomes, concentration on reducing waste and investment in productivity.

In the UK, the debate needs to focus on how to make the pie bigger, rather than how it is sliced. We must concentrate on creating an environment where the enablers of wealth creation, which government can influence, are world class. In defining the right policies, there are many examples against which we can assess ourselves, but we must measure honestly and then take the necessary actions to be competitive. Importantly, there must be the will to apply policy consistently and over the long term.

If we get wealth creation right, distribution and consumption will follow. It cannot be done in the reverse order.

Media Malpractice on the Debt Debate

The convention in mainstream journalism is that the new stories give you the facts, and the columnists give you their opinions (hopefully backed by facts). But in the coverage over the debt ceiling and budget debates sometimes you’re better off heading straight to the columns. Today offers a good example. In the Washington Post (7/15/11), Ezra Klein lays out the political dynamic that is rarely explained. As Klein writes, the White House has decided to:

offer Republicans a deal that is not only much farther to the right than anyone had predicted, but also much farther to the right than most realize. In addition to the rise in the Medicare eligibility age and the cuts to Social Security and the minimal amount of revenue, it would cut discretionary spending by $1.2 trillion, which is an absolutely massive attack on that category of spending.

In the New York Times (7/15/11), Paul Krugman writes:

President Obama has made it clear that he’s willing to sign on to a deficit-reduction deal that consists overwhelmingly of spending cuts, and includes draconian cuts in key social programs, up to and including a rise in the age of Medicare eligibility. These are extraordinary concessions. As the Times’s Nate Silver points out, the president has offered deals that are far to the right of what the average American voter prefers — in fact, if anything, they’re a bit to the right of what the average Republican voter prefers!

The conventional coverage–which pits Obama’s offer against Republican intransigence–tends to gloss over these facts. The front-page article in the Times today by Jackie Calmes explains the debate as being between Obama’s desire to raise taxes on the wealthy and cut the deficit, while Republicans prefer “smaller government” and lower taxes. It quotes Sen. John McCain saying that the “president keeps talking about spending more money”–with no explanation that Obama is actually proposing to reduce non-security domestic federal spending as a percentage of GDP to its lowest level in 50 years.

These are the limits in the media debate. The fact that the public would seem to prefer an entirely different type of budget deal is a non-factor. The fact that such plans exist–the People’s Budget of the Congressional Progressive Caucus, for instance–is all but ignored by the corporate media. Senate Democrats have floated a similar plan. A competent press corps would cover these proposals, if only for the sake of telling citizens that such options are available–that reducing the long-term deficit is possible without slashing spending on programs that people support.

But the media would much prefer a budget debate that pits Obama’s Republican-leaning plan against the Republicans who oppose that plan. Unfortunately, there is another budget proposal coming from the left which get absolutely no play in the USMSM (includes “Public Broadcasting”). This People’s Budget is the exact antithesis of what is being mentioned in USMSM. The People’s Budget eliminates the deficit in 10 years, puts Americans back to work and restores our economic competitiveness. Additionally, this budget protects Social Security, Medicare and Medicaid and responsibly eliminates the deficit by targeting its main drivers: the Bush Tax Cuts, the wars overseas, and the causes and effects of the recent recession.

Our Budget Puts America Back to Work & Restores America’s Competitiveness
• Trains teachers and restores schools; rebuilds roads and bridges and ensures that users help pay for them
• Invests in job creation, clean energy and broadband infrastructure, housing and R&D programs

Our Budget Creates a Fairer Tax System
• Ends the recently passed upper-income tax cuts and lets Bush-era tax cuts expire at the end of 2012
• Extends tax credits for the middle class, families, and students
• Creates new tax brackets that range from 45% starting at $1 million to 49% for $1 billion or more
• Implements a progressive estate tax
• Eliminates corporate welfare for oil, gas, and coal companies; closes loopholes for multinational corporations
• Enacts a financial crisis responsibility fee and a financial speculation tax on derivatives and foreign exchange

Our Budget Protects Health
• Enacts a health care public option and negotiates prescription payments with pharmaceutical companies
• Prevents any cuts to Medicare physician payments for a decade

Our Budget Safeguards Social Security for the Next 75 Years
• Eliminates the individual Social Security payroll cap to make sure upper income earners pay their fair share
• Increases benefits based on higher contributions on the employee side

Our Budget Brings Our Troops Home
• Responsibly ends our wars in Iraq and Afghanistan to leave America more secure both home and abroad
• Cuts defense spending by reducing conventional forces, procurement, and costly R&D programs

Our Budget’s Bottom Line
• Deficit reduction of $5.6 trillion
• Spending cuts of $1.7 trillion
• Revenue increase of $3.9 trillion
• Public investment $1.7 trillion

But as the Economist pointed out: “Mr Ryan’s plan adds (by its own claims) $6 trillion to the national debt over the next decade, but promises to balance the budget by sometime in the 2030s by cutting programmes for the poor and the elderly. The Progressive Caucus’s plan would (by its own claims) balance the budget by 2021 by cutting defence spending and raising taxes, mainly on rich people.”

Naturally, the Koch Brothers and their ilk wouldn’t approve of such a budget, which is why it gets no air time. Obama is the perfect sell out who follows the line of his big donors.

But, the real problem is that the people who are screaming about the government will be screaming even louder when they see they have been sold out by their government.

see also:
Media Malpractice on the Debt Debate
Budget of the Congressional Progressive Caucus Fiscal Year 2012
The courageous Progressive Caucus budget

Living within your means

Thanks to Southern Beale for her 18th of May post, Americans Live Within Their Means & Other Wingnut Fantasies , which has had me thinking, but there has been an increased sense of urgency about this topic as the U.S. Economy grows closer to a possible default.  While the US is one of the largest economies in the world, it is the only one where this type of budget kerfuffle could happen.  Reduction of the Budget deficit will effect every American’s standard of living, yet people are being lulled into a bizarre sense of denial of where the current course of event will take them.

SoBeale is also annoyed by the Right Wing chant that goes along the lines of  “American families have to live within a budget, and so should the federal government”.   As SoBeale points out, this just ain’t true since the American consumer debt, which doesn’t include mortgages, is $2.43 trillion as of March 2011. Total U.S. revolving debt, which is almost entirely credit card debt, was $796.1 billion, as of March 2011. In fact, in March U.S. credit card debt increased for the second time since 2008, which the Wall Street Journal presented as a good thing:

U.S. consumers in March increased their credit-card debt for the second time since the financial crisis flared, giving a sign of hope that consumer spending could boost an economic recovery that has lost some steam.

In its monthly report Friday on borrowing, the Federal Reserve also said overall consumer credit outstanding rose, up $6.02 billion to $2.426 trillion. The increase, the sixth in a row, was bigger than expected. Economists surveyed by Dow Jones Newswires had forecast a $4.8-billion rise in consumer debt during March.

SoBeale mentions that  Jared Bernstein, who  was Chief Economist and Economic Adviser to Vice President Joe Biden and a member of President Obama’s economic team before leaving the White House to become a senior fellow at the Center on Budget and Policy Priorities writes that the  family budget analogy gets misused.

Graphic shows federal debt held by public as percentage of GDP

Anyway, the US is heading towards the Debt Ceiling showdown, which is a magnificent big of US political theatrics from a nation where political theatrics has become a nasty part of the social system.  Governments run debts when the revenues do not pay for the required governmental functions.  Economists debate the level of debt relative to GDP that signals a “red line” or dangerous level, or if any such level exists. In January 2010, Economists Kenneth Rogoff and Carmen Reinhart stated that 90% of GDP might be an indicative danger level.   Of course, the Budget “mess” is real more about spending priorities than any real crisis.  In particular, the spending on “entitlement programmes”.  The Pew Research Centre found that:

For the public, reducing the deficit is a much lower priority than preserving the benefits provided by Social Security and Medicare: In mid-June, 60% said it was more important to keep these benefits as they are, while just 32% said it was more important to reduce the deficit. Less affluent Republicans view preserving entitlements as more important, while Republicans with higher incomes prioritize deficit reduction. Democrats across income categories say it is more important to keep benefits as they are.

Of course, the usual right wing trick is to mention the word “Taxes” which causes a disgust in the average American’s mind.  This is despite the fact that the US system of taxation is one of the world’s most regressive systems.  The “Bush Tax Cuts” basically only helped the wealthy, yet they were not accompanied by budget cuts to offset the cuts in revenue, but that’s another issue altogether.

The problem is that the National Debt is not the problem as the graph showing how much of that debt is held by private entitites above points out.  There are certain words that cause people to have bad reactions, such as taxes and debt, especially if they are not aware what these really entail to the average person.  The real threat is a default on the National Debt, which is something that the founders didn’t allow.

The United States has had public debt since its inception. Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly reported value of the National debt as $75,463,476.52 on January 1, 1791. The US had the option of honouring this debt or defaulting and chose the path of honouring it. The founders knew full well if they failed to honour the government’s debt obligations that it would impact the national economy. Unfortunately, those who wish to claim legitimacy by incorrectly following the founders’ “ideals” are more than willing to choose the opposite course of action.

Ultimately, is this all theatrics? Section 4 of the 14th Amendment to the US Constitution states:

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

Could that offer a way out of the current budget mess? Or is the US looking at creating one of the worst economic disasters through its ignorance?

Time will only tell if reason will prevail. I have to admit that I am not terribly optimistic about the situation. There are too many people to blame for this happening. I can sound off, but I do not have the power to influence policy, which makes me somewhat blameless. I have done what I can to sound the warning, but like the warnings of climate change, I think they will go unheard.


Center on Budget and Policy Priorities
Policy Basics: Deficits, Debt, and Interest
Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits
Critics Still Wrong on What’s Driving Deficits in Coming Years
How the Right exploits single issues and manipulates religious faith to direct workers into voting for candidates who are a threat to their economic interests.

Deficit games

Nothing like a little voodoo economics to scare the crap out of the ignorant US public. Let’s talk about the budget deficit and how large the national debt happens to be.

Guess what? The US deficit is mostly the fault of the Bush tax cuts, the Bush wars, and the financial collapse that happened during the Bush presidency. At this point, though, this is more in the nature of a religious debate than a factual one, and conservatives are going to keep repeating the same tired disinformation about the deficit regardless of any evidence one way or the other.

Of course, there is a shift of wealth with the rich getting richer and the poor getting poorer, and everybody else seeing their standard of living drop.

Personally, I wish these ideas would go away, they are a bad idea for the US and a worse idea for the rest of the world.

Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits
The Deficit Chart Republicans Hate

Eban Pagan and Self-Made wealth

OK, I put the last post I wrote about Eban into the Private category for a while since I don’t want to shill for someone who is selling get rich quick schemes. I decided to make it public again since I’ve been listening to the things Eban says on his blog:

Eban has been saying a lot of things I have about economics, which is why I am making the last post public and making this post.

Not to mention he commented here. He made his comment in the slavery post.

Only you can decide whether what Eban wants to teach you is something that meets your needs, but I think that what he says is worth giving a listen.

Especially since I say a lot of the same things when I talk about money. HIs latest post is really to the point:

Self-Made wealth

O.K., I’m a bit wary when people send me things telling me how to get money, but I received a link to Eben Pagan’s Self Made Wealth Blog.

The only reason I am passing this on is that he says some of the things I say here about fiat money and debt.

And he doesn’t ask for money up front.

I’ve always had this belief that if someone is onto something that will really make you rich, they aren’t going to need to ask you to pay for the secret. There’s no theory here, it’s just very practical, down-to-earth information that has been the cornerstone of why the rich get richer while the poor get poorer.

Maybe I’m a little too hopeful, but the video I watched has me very interested in what this person has to say.

Posted 07/01/2011 by lacithedog in debt, Eban Pagan, economics, economy, Fiat Money, money