A Pivotal Moment in American History

Senator Bernie Sanders on the Debt Limit Debate

With one week to go before an Aug. 2 deadline for raising the nation's debt limit, the stakes are enormous. Some in Congress continue to press for steep cuts in programs for working families. Social Security, Medicare and Medicaid remain in jeopardy. Funds for education, child care, nutrition, affordable housing, environmental protection and energy independence also are at stake. When Republican leaders talk about $3 trillion or $4 trillion in spending cuts over the next 10 years, with no new taxes on the wealthy and large corporations, please understand what they mean.

SOCIAL SECURITY — The average Social Security recipient who retires at age 65 would get $560 less a year at age 75, under a proposal to change the formula which determines cost-of-living adjustments. The same retiree would get $1,000 less a year at age 85 than under current law. Another provision pushed by House Republicans would require that Social Security always be solvent for 75 years, an avenue to even larger cuts in benefits. All of this would take place despite the fact that Social Security has not contributed one penny to the deficit and has a $2.6 trillion surplus. MEDICARE — Raising the eligibility age from 65 to 67 is one proposal. Another would cut benefits by as much as $500 billion over 10 years. How are 66-year-old Americans with modest means going to afford health insurance with a private company especially if they have medical problems? It's not going to happen. They are going to suffer. Some will unnecessarily die. MEDICAID — At a time when 50 million Americans already have no health insurance, Republicans and some Democrats are proposing to cut hundreds of billions of dollars from Medicaid. That means that many men, women and children will lose the health insurance they have. According to a Harvard University study, some 45,000 Americans die each year because they don't get to a doctor when they should. How many more will die if Medicaid is slashed? How many children will be thrown off the Children's Health Insurance Program? EDUCATION — Childcare and college education already are unaffordable for millions of working families. Head Start has long waiting-lists. If Republicans and some Democrats get their way, Pell grants and other educational programs will be deeply slashed. Affordable childcare and a college education will no longer be possible for many families in our country. ENVIRONMENT AND ENERGY — Forget about the government having the ability to protect the people from corporations who want to evade Clean Air Act and Clean Water Act regulations. With massive cuts in the EPA, the resources will not be there. Forget about this country having the investment capability to transform our energy system to energy efficiency and sustainable energy. Forget about creating millions of jobs rebuilding our crumbling infrastructure and improving our public transportation system. We don't have to make these cuts. Adopting a fair budget plan which ends tax breaks for the wealthy and large corporations and makes real cuts in military spending is the kind of shared sacrifice that the American people want

The Debate Over the National Debt ad Deficit Reduction is a Smokescreen to Distract the Country from the Real Issues.

While the new class of conservative Republicans, spurred on by the Tea Party, hold fast to their pledge not to raise taxes, the government is picking up steam in its charge to the economic disaster of a default. If the issue were really about the deficit and the debt, then there would have been an agreement on the debt ceiling and a default would be avoided at all costs. But the ongoing debate is only the side story. It would seem that the real story behind the breakdown in negotiations has a dual plot, first to make the economy so bad under an Obama administration that it will ensure a Republican victory in 2012 and secondly to dismantle the social welfare programs that serve low and moderate income people and the elderly.

In the right-wing, conservative view of the world, social security and Medicaid are tantamount to Socialism. These two programs, that are mandatory for all workers to pay into, are perhaps the most successful social welfare programs created as part of the New Deal and the War on Poverty. Prior to these two programs, older Americans represented the highest number of people living in poverty. That number has been reversed as millions of older Americans were moved out of poverty. As a result of the success of these two programs, there have been numerous attempts by Republicans to destabilize both. Most famously was George Bush’s failed attempt at privatizing social security, which would have transferred millions if not billions of dollars out of the pockets of retirees and into Wall Street traders and speculators.

Less known but much more devastating was the unfunded prescription drug program passed into law by George Bush. When a conservative Republican proposes a new social welfare benefit, we should be afraid, we should be very afraid. Not only has this new benefit been paid with borrowed monies, but in reality it was designed to be a subsidy for the enormously profitable pharmaceutical industry. A little known piece of the authorizing legislation denied Medicare the ability to negotiate drug prices. So, as the largest purchaser of prescription drugs, Medicare is the only health insurer that pays list price for prescription drugs. This one proviso costs the government billions of dollars every year. So masquerading as a benefit to seniors, this was little more than a nail in the coffin of Medicare and a drain on the federal budget.

It appears that it is only when there is a Democrat in the White House, that Republicans begin to care about the debt and the deficit. George Bush’s greatest legacy to the American people were two unfunded wars, an unfunded tax break for the wealthiest Americans and the unfunded prescription drug benefit. All of these paid for with borrowed dollars. Where were John Boehner, Paul Ryan, Mitch McConnell and Eric Cantor when their party was running up the debt at record levels?

The author of the “no-tax” pledge that has captivated Congressional Republicans is Grover Norquist, an influential conservative activist. In his own words, Norquist provides the true rationale for the current deadlock: ”I don’t want to abolish government, I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bath tub.” In his world the deficit is not the issue, it is government itself. By keeping the focus on the debt ceiling and away from the real ideology informing the debate, we never get to the real issues that are faced by everyday working Americans. The issues that only government is big enough to tackle.

Oh, before I forget, these same Congress members who want to take away social welfare benefits from working Americans, have one of the best welfare packages offered to any workers anywhere. Congress members receive an annual salary of $174,000, more than three times the average household income in the country. Additionally they get almost 75% of their health insurance costs paid by the government, and they can receive as much as $36,000 a year in pension benefits after serving only five years at age 62. That is two and half times greater than the average social security benefit of $14,00, received by American retires, most of whom have no pension and minimal savings. Not bad for what is essentially a part-time job.

So lets’ take a look at some of those real issues that are being masked by the phony debate about the federal debt. As long as the focus is on the debt ceiling and not on these real issues, more and more Americans will find themselves facing real economic emergencies, not the type manufactured by a desperate Republican Party.

The Real Issues Index

173,000 Number of jobs lost in June 2011

14.1 million Number of individuals unemployed in June 2011

6.3 million Number of US workers unemployed for more than six months

8.6 million Number of involuntary part-time workers

2.7 million Number of discouraged workers not counted as part of the labor force

9.2 % Official government unemployment rate

16.6% True unemployment rate

2.6 million Number of households earning less than $25,000 per year

40 million Number of people living in poverty in US

15.5 million Number of children under age 18 living in poverty

$22,350 Official poverty threshold for a family of four

58.5 Per cent of people in the US who will spend at least one year in poverty during their lives

1.7 million Number of foreclosure filings in first six months of 2011

222,740 Number of foreclosed properties in June 2011

2.3 to 3.5 million Number of people who are homeless in US

23 Per cent of homeless families who have children

When John Boehner walked out on the negotiations he walked out on the American people. When he called tax increases “job killers,” he lied to the American people. It was the Bush tax cuts, bank deregulation, corporate tax giveaways, two unfunded wars, tax advantages to corporations who move jobs offshore, bailing out the banks and union busting policies – all supported by Mr. Boehner and his followers – that have caused this problem. Until our so-called representatives are willing to address these, the real issues, the debt crisis will never go away, and our economy will continue its slide to third world depths.

Debt Reduction, Supply Side Economics and the Great Recession

While the new mantra of the current crop of Republicans in Congress is debt reduction and tax relief to get the economy going again, they should look at the role of their own party’s policies in creating the mess of an economy that we are all experiencing.

Let’s begin by taking a look at the Republican insistence on debt reduction as a pre-requisite to any budget deal. In the last three decades, supply-side Republican presidents have added more to the national debt that any previous Democratic president. When Ronald Reagan entered office with a promise to cut government and reduce the budget, the national debt stood at $1.9 trillion, when the champion of trickle down economics left office the national debt stood at $3.75 trillion, a staggering 97% increase. In just eight years, President Reagan increased the annual deficit from $99 billion to $252 billion. Most of this growing annual deficit and the huge increase in the national debt was a result of a bloated military budget and tax cuts targeted to corporations and the wealthiest Americans. While the US debt was growing so was the average household debt. In eight years, under Reagan’s trickle down economics, average household debt increased from 60% of income to 119%, making the average American household more vulnerable to the vagaries of the marketplace.

In spite of this growth in the debt, “Reaganomics” would continue to influence Republicans claiming that businesses and wealthy Americans needed to become unfettered by onerous taxes and regulations so that they could create jobs and lift the economy. Under Reagan, this march toward deregulation of the financial marketplace began with gutting the federal regulations on mortgage lending, put in place as a result of the first foreclosure crisis during the Great Depression. This first step toward financial deregulation demonstrated once again how we as a society are ahistorical (not a real word but it seems to work here). These mortgage lending regulations, and indeed the whole host of regulations governing the practices of the financial industry were put into place because they were needed to protect Americans against the veracious appetite of the banking industry.

Next, the administration and Congress focused on freeing the Savings and Loans from “onerous” federal regulations. This included steps such as lifting regulations on the types of investments they could make, allowing for riskier investments; changing the way S & L’s recorded assets and liabilities artificially inflating their bottom line, allowing them to take on more risk with less of a cushion to fall back on; and delaying the closure of insolvent S & L’s allowing them to take on more debt without sufficient reserves.

Inheriting the trickle down theory of supply side economics, which he once referred to as “voodoo economics,” and a national debt of $3.75 trillion, George Bush the First went about increasing the national debt by 59% in just four years to $4.98 trillion. Halfway into his presidency the bill began to come due from the Reagan administration’s deregulation of the Savings and Loan industry. As their risky and often ethically and financially questionable investments began to fail, what has been called the “greatest collapse of financial institutions since the Depression,” was under way. As in the current financial industry meltdown, the administration rode in on its white horse, committing taxpayer dollars to bail out wealthy bankers and investors. Once again demonstrating how our so-called free market system is in reality a hybrid economic system – socialism for the rich and capitalism for everybody else. By the time the dust settled on the S & L bailout, the government had spent $123.8 billion in taxpayer dollars, while the industry only put up $29.1 billion of its own.

But President Bush had a personal incentive to spend taxpayer dollars on the bailout. Two Bush sons, Jeb and Neil, were deeply involved in financial dealings in the S & L industry. At the ripe old age of 30, Neil Bush was made a director of the Silverado Savings & Loan. A mere three years later, Silverado closed costing taxpayers $1.66 billion. While a director, the younger Bush brother approved loans to businesses in which he had an interest and received a $100,000 loan, with no obligation to pay it back, from an individual doing business with the bank. At the same time, brother Jeb was defaulting on a $4.6 million loan from another S & L.

Bill Clinton entered the White House with an inherited national debt of $4.98 trillion. In his eight-year tenure, Clinton increased the debt by 13% to $5.64 trillion. While this increase may not be cause for celebration it was lest than one-quarter of the debt increase amassed by the previous administration in only four years. However, Clinton proved to us that free market deregulation and supply side economics are not solely the property of Republicans. As President, Clinton signed into law the most sweeping deregulation of the banking industry, sweeping away the fail-safe protections put in place after the Great Depression, lifting almost all of the restraints on the giant monopolies dominating the financial industry. The Financial Services Modernization Act of 1999 repealed the Glass-Steigall Act of 1932, which mandated the separation of investment banking from commercial banking, rules put into place as a result of the banking meltdown that caused the Great Depression. This paved the way for a spate of bank mergers and takeovers that created the myth of “too big to fail.”

Clinton and the Republican controlled Congress paved the way for the coming bank meltdown and George Bush, his successor in the White House, added into the mix his brand of supply side economics, clinching the sprint towards economic catastrophe. As President, George Bush quickly turned the Clinton budget surplus into record budget deficits and increased the national debt by 46% up to $8.2 trillion. He first began whittling the surplus down by sending out tax refund checks to American taxpayers, telling the public that they surplus was theirs to do with as they chose. Then we were gifted with the now famous Bush Tax Cuts that were targeted overwhelmingly to the wealthiest Americans. These were justified by the fantasy that if wealthy individuals paid less in taxes they would have more money to invest and create jobs. Although this has been proven wrong over time, and it is fact that the Bush tax cuts did not stimulate the economy nor prevent the coming meltdown, the Republican mantra still remains that taxes are job killers and that tax breaks will help to stimulate the economy.

So today we find ourselves in the middle of the Great Recession, with record unemployment, record numbers of children living in poverty and more than 50 million people without health insurance and we are still told that taxes and the debt are the real culprits. When in fact the only institution large enough to help us out from under is the federal government, and its only source of revenues are taxes. However, defying reality, the conversation has focused solely on cutting the debt. Not on creating jobs, supporting education, infrastructure improvements or clean energy. As long as the debate is on how to reduce the debt, the real problems facing everyday Americans will continue to be ignored. In the ongoing debate, government is the problem not the solution and all government programs that do not subsidize business or fund defense are on the chopping block. This means that the social welfare programs that prevent economic catastrophe for millions of American families and individuals have become expendable, seen as luxuries and not the legitimate role of a government that is responsible for the welfare of its citizens. As President Obama has so eloquently stated, the debate in Congress is “less about reducing the deficit than about changing the basic social compact in America.”

The Corporate Tax Index (or not sharing the tax burden while enjoying all the benefits of government services)

115 - The number of S&P 500 companies that pay less than 20% in taxes

35% - The official corporate tax rate

37 - The number of companies receiving more in tax credits than they paid

$17.587 billion - Boeing Corporation’s pretax income for 2010

-0.1% Per cent Boeing Corporation paid in US taxes in 2010

$3 million - Tax rebate earned by Boeing in 2010

$3.512 billion - Amazon’s pretax income for 2010

4.33% - Per cent Amazon paid in US taxes in 2010

$14.2 billion - General Electric’s earnings in 2010

$0 - Federal taxes paid by General Electric in 2010

$3.2 billion - Tax subsidy earned by General Electric in 2010

-64.0% General electric’s effective 2010 US tax rate

$10.8 billion - Google’s 2010 earnings

$0 - Federal taxes paid by Google in 2010

$19.7 billion - IBM’s earnings for 2010

$0 - Federal taxes paid by IBM in 2010

$190 million - Tax subsidy earned by IBM in 2010

$9.4 billion - Pfizer’s 2010 earnings

$0 - Federal taxes paid by Pfizer in 2010

$29.8 billion - Federal tax credits for R & D, mostly to pharmaceuticals

$7.419 billion - Exxon Mobil US profit in 2010

$0 - Federal taxes paid by ExxonMobil in 2010

$992 million - Federal tax subsidies earned by ExxonMobil in 2010

$26.5 billion - Federal subsidies to oil companies over last ten years

$952 billion - Big five oil company profits over last ten years

$ 6 billion - Federal subsidy for ethanol from corn

24% - Per cent of US corn crop devoted to ethanol

128% - Increase in price of bushel of corn in last year

$102 billion - Annual cost to federal government for corporate tax breaks

$100 billion - Proposed cut to federal Medicaid program

The Hiatus is Over

Hello Everybody.

I want to begin by thanking you for your patience in my absence. This is my first post since May 2011. I am shocked that the year went by so quickly, but glad to be back.

During my sabbatical from the blog I was involved in setting up a new Masters degree program and a new academic department.

I am happy to report that I am now the Chair of the Department of Leadership and Policy at Wheelock College, and that we have graduated our first class of Masters Students in Organizational Leadership.

Starting with today's post, I will be back posting regularly - hopefully at least once a week, addressing the policy issues that affect us all.

I hope you will join me once again and that I can provide information that will be helpful to you while I try to make sense out of very complex issues.

Cutting the Budget is Not the Answer

While President Obama and Congressional Republicans try to find common ground on how to reduce the deficit, the issue that does not get attention is the fact that in a recession such as we are experiencing, cutting the federal budget will not help create jobs or stimulate the economy. Congressional Republicans have demanded $2.4 trillion in budget cuts, and the Obama Administration is projecting cuts of $4 trillion over the next decade. To end the recession and create jobs, spending must increase. Budget cuts and deficit reduction measures only add to job loss and decreased spending thereby exacerbating an already serious economic situation.

There are two sides to any budget – income and expenses. Any serious effort to reduce the deficit should look at both sides of the federal budget. However the Congressional Republicans have signed a “no tax pledge” forbidding their members form considering any new taxes. Since the federal government gets its income solely from taxes, this pledge has taken the income side of the budget off the negotiating table. So the conversations between the Republican leadership and the White House are focusing on budget cuts to reduce the deficit. But it is current tax policy, formulated since the Reagan era that has reduced taxes on the wealthy while increasing the federal budget deficit.

In1980, the top 1% of the wealthiest Americans earned 10% of total income, today that number has increased to 20% of total income, during this same period they enjoyed a reduction in their tax rate from 70% to 35%. However since most of their income is not from wages but from investments, they pay a mere 15% capital gains rate on the bulk of their income, resulting in an effective tax rate of a approximately 17%.

However, the Republican mantra of cutting the deficit while not allowing any new revenue sources appears to be a smokescreen for gutting the already tattered social safety net. Take the recent extension of the Bush-era tax cuts for example. Fully fifty-five per cent of the benefits went to the top 10% of highest income households. The top 1% of income households received 38% of the benefits, and if that is not enough, the top .01% received an average of $520,000 in tax benefits as a result. Congressional Republicans held fast to their beliefs that letting these tax cuts for the wealthiest Americans expire would hurt he economy. This in spite of the fact that these tax cuts were awarded to wealthy Americans before the economic meltdown and did nothing to prevent it and may have been a factor contributing to the meltdown.

Candidate Obama pledged to let these onerous tax cuts for the wealthy expire when their authorization ran out in 2011, but President Obama caved into Republican demands and signed legislation extending the cuts. This is spite of the fact that in their first seven years during the Bush administration, these tax cuts contributed $1.7 trillion to the deficit. Just this one item alone, could account for almost half of the proposed budget cuts. In addition to these tax cuts favoring the wealthiest Americans, there are a host of tax loopholes and subsidies for corporations and wealthy Americans, that the Republicans are refusing to close while looking at the social safety net, supports for the most vulnerable among us, to make up the shortfall. In Republospeak, closing a tax loophole or ending a needless and wasteful corporate subsidy is the same as raising taxes. Preserve this tax largesse to the wealthiest among us while demonizing the poor and elderly so that they can be targeted for devastating cuts.

Take Medicaid for an example. The $100 billion proposed cut to Medicaid, the health insurance program for families living under the federal poverty level, will reduce the quality and availability of medical care for millions of low income families, placing a greater burden on states to maintain minimal levels of care. According to Families USA, in just one state, - California – the proposed Medicaid cuts will result in the loss of 187,610 jobs and more than $24 billion in state business. This does not include the increased cost of emergency room care when Medicaid recipients do not have proper preventive health care available. The New York Times has reported that children on Medicaid are more likely to be denied service by medical specialists, and when they are seen they must wait longer for appointments than those with other types of health insurance. As bad as this situation is, it will only get worse when the cuts are implemented.

In a display of political irony and callousness, Governor Walker of Wisconsin has proposed cutting Medicaid which serves 20% of the state’s population by $500 million, while at the same time proposing to increase payments to cover the cost of “burying Wisconsinites who die destitute.”

The current negotiations between the White House and the Republican leaders of Congress was never about the deficit, it is a poorly camouflaged attempt to roll back and gut services for low income and elderly citizens while ensuring increasing profits for the wealthiest Americans. And oh, by the way, while the Republicans scream about raising the debt ceiling and play a game of brinkmanship, it would be good to remember, that while President Bush was racking up the largest deficit spending in history the Republicans voted to raise the debt ceiling four times. Perhaps the real tragedy here is that President Obama has partially bought into their line of thinking.