Steve's Politics Blog

The Mother Jones article What’s Going on With the Fiscal Cliff? goes with the sub-head:

Why we’re not really going to fall off a cliff on January 1 and everything else you need to know about the upcoming budget talks.

That is why I think my headline is more appropriate.  Kevin Drum goes on to explain:

So when you add it all up, what’s the price tag for this stuff?

That’s where things get a little tricky. The whole fiscal-cliff metaphor is specifically designed to sound super scary, but it’s really kind of misleading. Here are two different ways of looking at it:

• The fiscal-cliff way: On January 1, about $400 billion in tax increases and $200 billion in spending cuts will take effect. That’s $600 billion, or 4 percent of GDP, and that would be a huge drag on the economy.
• The fiscal-staircase way: On January 1, total spending cuts and tax increases of about $1.6 billion will take effect. On January 2, another $1.6 billion. On January 3, another $1.6 billion. Etc.

You see? We’re not really going to fall off a cliff on January 1. The cumulative effect of all this stuff will be pretty small for the first few weeks. It’s only if it drags on forever that we really feel the hit.

The article goes into a lot more detail in a fairly humorous way.

The Politico article really titled Obama, left leaders discuss fiscal cliff campaign shows that perhaps, just perhaps Obama has finally figured out what it takes to be President.

Obama raised the possibility of a barnstorming tour to promote his position, while others in the room pledged to keep organizational pressure on Republicans to back Obama’s agenda.

Raised the possibility?  Maybe he isn;t as serious as I thought.    Maybe he will get some backbone if we  pressure him.

The invited union leaders said they will mobilize their members to push Obama’s agenda.

“We’re very, very committed to making sure that the middle class and workers don’t end up paying the tab for a party that we didn’t get to go to and the president is committed to that as well,” said Richard Trumka, president of the AFL-CIO.

That commitment, of course, is not unconditional. It comes with the expectation that Obama not cave on allowing cuts to entitlement programs like Medicare, Medicaid and Social Security and that he stick to his guns on refusing to allow an extension of the Bush tax cuts on annual income greater than $250,000.

Max Richtman, the president and CEO of the National Committee to Preserve Social Security & Medicare, said he was “reassured” by Obama that any deal will maintain current spending levels for key entitlement programs.

And Trumka said Obama made it clear that he will have the wealthy, not the middle class, pay down the nation’s debt.

“The president, like we are, is committed to preserving tax breaks for the middle class and making sure that rich people pay their fair share,” Trumka said.

This won’t happen unless we keep blogging, emailing, commenting, letter to the editor writing, contacting our Congress critters, and whatever else you can think of.

The actual Daily Ticker segment is headlined Fixing the Fiscal Cliff: Is Hiking Taxes on the Rich the Answer?

In this dialog, Henry Blodget is too right wing for me. He seems to be the more in agreement with Obama’s position than is Adam Task.

In his meetings this week, the president hopes to persuade Republicans in Congress to accept higher taxes on wealthy American while he works to persuade Democrats to agree to spending cuts in entitlement spending.

I’d like to see a lengthy trial of tax hikes for the wealthy being used to fund fiscal stimulus until the economy recovers. During this waiting period, there can be efforts made at finding ways to lower the costs of programs whose benefits people are contractually entitled to. There is absolutely no need to cut benefits.

The full scale Obamacare program before it got watered down by Congress would go a long way to solving the Medicare and general societal medical cost problem. There is some hope that in the ensuing years, enough voters and politicians would come to wake up to this fact and start reinstating some of the items that got lost the first time around.

As for Social Security, I have been promoting Franco Modigliani’s plan for putting Social Security on a firm financial footing with no decrease in benefits and no deficits in the plan. I know that I have been pushing for this since before 2005. See my old politics page section on Social Security.

Senator Ted Kennedy was supposed to get Franco Modigliani a hearing of his plan before Congress, but they both died before it could happen.

As long as the politicians are ignoring the two obvious fixes to our biggest potential budget-busters, then I am ignoring what the politicians suggest as alternatives.

The major cause of our economic stagnation is that the wealthy have no good place to invest their money in a down economy.  Therefore they suck the liquidity right out of the economy to “invest” it in cash or economically useless financial derivatives.

The only solution must include getting this money out of their hands and back into the economy.

Your task, Mr. Phelps, if you choose to accept it, is to find a way to accomplish the only thing that will get the economy moving again.

This blog post will not self destruct, so if you fail to take on this mission, it will be plain for everyone to see.

The Nation Of Change has the article How to Build a Grassroots Power Base.

For people fed up with bait-and-switch pitches from Democrats who talk progressive to get elected but then govern otherwise, the Occupy movement has been a compelling and energizing counterforce. Its often-implicit message: protesting is hip and astute, while electioneering is uncool and clueless. Yet protesters’ demands, routinely focused on government action and inaction, underscore how much state power really matters.

To escape this self-defeating trap, progressives must build a grassroots power base that can do more than illuminate the nonstop horror shows of the status quo. To posit a choice between developing strong social movements and strong electoral capacity is akin to choosing between arms and legs. [ssg: emphasis added] If we want to move the country in a progressive direction, the politics of denunciation must work in sync with the politics of organizing—which must include solid electoral work.
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Politicians like to envision social movements as tributaries flowing into their election campaigns. But a healthy ecology of progressive politics would mean the flow goes mostly in the other direction. Election campaigns should be subsets of social movements, not the other way around. Vital initiatives to break the cycles of capitulation and lack of accountability will come from the grassroots.

The article goes on to discuss several campaigns and lessons learned from them.

I just returned from a luncheon in Brimfield arranged by campaign activists MariaT and DickH where we struggled with ideas for how we are going to keep the activism alive in this part of Massachusetts.  I hope we can learn from other people’s experiences and come up with something that makes a difference.

The Nation of Change has published Robert Reich’s article The Next Game of Economic Chicken: Not on the Deficit But Over Taxing the Rich.

Some Democrats (and some White House strategists) figure they’ll have most bargaining leverage in next year’s deal if they do nothing now – allowing tax rates to rise automatically on everyone after the first of the year. Then they plan to offer Republicans a deal that reduces taxes on people earning less than $250,000 – which would be retroactive to January 1st.

Republicans would have to choose between a tax cut on the middle class or no tax cut at all. Democrats believe Republicans would have to take the deal. Even Grover Norquist would be hard-pressed to come up with an argument against it.
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So who blinks first? Democrats who don’t mind going over the cliff because they’ll get a better final deal – and the deal will be retroactive to January 1st so it’s not really a cliff at all but more like a little hill?

Keep that last part of the quote in mind always.  The fiscal cliff is only a cliff if the scheduled changes go into effect and the Congress never does anything in the ensuing decade to fix the problem.

This idea of the fiscal cliff fits right in as part of Naomi Klein’s thesis in The Shock Doctrine.

Based on breakthrough historical research and four years of on-the-ground reporting in disaster zones, The Shock Doctrine vividly shows how disaster capitalism – the rapid-fire corporate reengineering of societies still reeling from shock – did not begin with September 11, 2001.

The wealthy, the Republicans, and the media owned by the wealthy want to scare you so badly that you will put pressure on Congress to “do something, do anything, don’t just stand there, do something!”  What you should be saying to President Obama and the Democrats is, “Stand your ground.  Don’t cave to the scare tactics.  You have all the high cards, use them.  Call their bluff. Use the shock doctrine on them for a change.”

If you read the quotes I have chosen from Robert Reich’s article you can infer that I have left out the other side of the game of chicken.  Very clever of you.  Now go read the article to find out what the other side is.

President Obama’s full remarks are elaborated on the White House blog post President Obama: “Let’s Get to Work”.

President Obama makes a statement about the action we need to take to keep America’s economy growing, while at the same time reducing our deficits.

Here is the video of that presentation.

Where is the statement that taxes on the rich must be raised to stop their hoarding of the liquidity that the country needs to get moving again? Where is the refutation of Boner’s claim that raising taxes on the wealthy will slow the economy down? It is easy to do and it must be done that we remove all of Boner’s false claims as to why we should not raise taxes on the wealthy. It goes beyond fairness. It is a necessity to get the economy working again.

This lack is what prompted my tirade of yesterday in the post Obama Still Has No Clue On Being President – There Goes The Economy.

I am not making this up. WikiPedia has a nice explanation of the well known economic paradox called a Liquidity Trap. Well, I do have one bone to pick with the introduction to the page as quoted below. The issue is not that the injection of liquidity by the Fed fails to lower interest rates. It is that it fails to stimulate economic growth. It does not make much sense to say that “Signature characteristics of a liquidity trap are short-term interest rates that are near zero” after saying that “injections of cash into the private banking system by a central bank fail to lower interest rates”.

A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels.

It is about time that the administration start a campaign to educate voters about real economics as opposed to the false economics fostered by Boner. Don’t tell me that it is too complicated to explain. Boner does it every chance he gets.

Thanks to HankH for suggesting this video.  It is a clip from The Daily Show titled An Avalanche on Bulls#%t Mountain.

Karl Rove disputes Fox News’ Ohio electoral math, Megyn Kelly goes for a stroll, and Bill O’Reilly pronounces the election a victory for people who want stuff.

This is especially for the devotees of Faux Noise hereby renamed as BMN – Bulls#%t Mountain News – by Jon Stewart.

Also give a thought to what Bill O’Reilly said. Maybe it was a bit of a loss for people who have so much stuff already that they don’t know what to do with their money and power except to rape and pillage the poor just for sport.

But as President Obama has shown today, he’ll pretend to fight the losers, but will soon capitulate to them anyway.